<PAGE>
As filed with the Securities and Exchange Commission on May 12, 1997
Reg. No. 333-14129
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1103425
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
The Campus
5966 La Place Court
Carlsbad, California 92008
(619) 438-7400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Gerald Sokol, Jr., 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered (1) per share (2) offering price (2) registration fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.005 par value... 565,000 shares $4.91(3) $2,774,150 $ 841(4)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $.005 par value... 587,550 shares $3.60(5) $2,115,180(5) $ 641(4)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $.005 par value... 40,000 shares $2.91(6) $ 116,400(6) $ 36
- ------------------------------------------------------------------------------------------------------------------------
Total........................... 1,192,550 shares $ $1,519
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</TABLE>
(1) Consists of shares underlying the warrants described herein. In accordance
with Rule 416 of the General Rules and Regulations under the Securities Act
of 1933, there are also being registered such indeterminate number of
additional shares of Common Stock as may become issuable pursuant to
antidilution provisions of such warrants.
(2) Estimated solely for the purpose of calculating the registration fees.
(3) Based, pursuant to Rule 457(c), on the average of the high and low sale
prices of the Common Stock as reported on the American Stock Exchange on
October 9, 1996.
(4) Previously paid.
(5) Based, pursuant to Rule 457(c), on the average of the high and low sale
prices of the Common Stock as reported on the American Stock Exchange on
January 9, 1997.
(6) Based, pursuant to Rule 457(c), on the average of the high and low sale
prices of the Common Stock as reported on the American Stock Exchange on
May 9, 1997.
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.
<PAGE>
EXPLANATORY NOTE
This Registration Statement relates to (i) 565,000 "Settlement Warrants"
and underlying shares of common stock described herein being offered for sale
by NTN Communications, Inc. (the "Company") and (ii) up to 627,550 shares of
common stock of the Company being offered for resale by certain selling
securityholders named herein, which are unrelated to the Company's offering of
the Settlement Warrants.
Following the Prospectus relating to the Company's offering of the
Settlement Warrants and underlying shares are alternate front and back cover
pages, an additional risk factor entitled "Concurrent Settlement of Class Action
Lawsuit," an alternate "Use of Proceeds" section, an additional section entitled
"Selling Securityholders" and an alternate "Plan of Distribution" section
relating to the offer of shares for resale by the named selling securityholders.
<PAGE>
PROSPECTUS
565,000 Shares
NTN COMMUNICATIONS, INC.
Common Stock
All of the 565,000 shares of Common Stock offered hereby are being offered
by NTN Communications, Inc. for issuance and sale upon the exercise of certain
Redeemable Common Stock Purchase Warrants (the "Settlement Warrants"). Unless
otherwise indicated herein, references herein to the "Company" mean NTN
Communications, Inc. and its business units and subsidiaries.
The Settlement Warrants are being distributed pursuant to a court-approved
settlement of a class-action lawsuit previously pending against the Company.
See "Plan of Distribution." Each Settlement Warrant entitles the holder thereof
to purchase one share of Common Stock at an exercise price of $_______ per
share. The exercise price and number of shares of Common Stock issuable upon
exercise of the Settlement Warrants are subject to adjustment under certain
circumstances. During the period from the second anniversary of the date of
issuance until the expiration of the Settlement Warrants, holders of Settlement
Warrants will have the right to require the Company to redeem their Settlement
Warrants for $3.25 per Settlement Warrant. This redemption right will expire,
however, if at any time during the exercise period the closing price per share
of Common Stock as reported on the American Stock Exchange ("AMEX") exceeds the
exercise price of the Settlement Warrants by more than $3.25 per share for any
seven trading days, whether or not consecutive. See "Description of Securities
- -- Settlement Warrants."
The Common Stock is traded on the AMEX under the symbol "NTN." As of
April 30, 1997, the last sale price for the Common Stock as reported on the
AMEX was $3.125. See "Price Range of Common Stock and Dividend Policy."
Prior to this offering, there has been no public market for the Settlement
Warrants. The Settlement Warrants have been approved for listing on the AMEX
under the symbol "NTNW", subject to official notice of issuance. See "Plan of
Distribution" for a description of how the exercise price and other terms of the
Settlement Warrants were determined.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 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.
<TABLE>
<CAPTION>
=================================================
Proceeds to
Price to Public the Company(1)
- -------------------------------------------------
<S> <C> <C>
Per Share... $ $
- -------------------------------------------------
Total....... $ $
=================================================
</TABLE>
(1) The amount shown is without deduction for offering expenses, estimated at
$46,000, payable by the Company. See "Use of Proceeds."
The date of this Prospectus is May 12, 1997.
<PAGE>
THE COMPANY
NTN Communications, Inc. ("NTN" or the "Company"), through its business
units and subsidiaries, develops, produces and distributes individual and multi-
player interactive programs to a variety of media platforms. These interactive
sports, trivia game and educational programs permit multiple viewers to
simultaneously respond to and participate with the programming content. The
Company has an exclusive licensing arrangement with the National Football
League, as well as nonexclusive arrangements or agreements with Major League
Baseball, the National Hockey League in Canada and others to provide interactive
play-along programming, such as the Company's proprietary QB1(R) football game,
in conjunction with live televised broadcasts. The Company broadcasts a wide
variety of popular games, trivia and informational programming to group viewing
locations such as hotels, sports bars and restaurants through its interactive
NTN Network. In addition, the Company brings multi-player interactive games
into consumer households through personal computer on-line services, the
Internet and interactive television services. Since the Company distributes its
programs via satellite, cable, telephone and wireless transmission technologies,
it is not dependent on any particular hardware or technical platform.
The Company currently provides its products and services to markets in
various stages of development. Each market is directly related to multi-player
interactive entertainment and education programs as follows:
Network Services ("Network Services", formerly referred to as
"Hospitality") -- Live interactive television network ("NTN Network") featuring
sports and trivia games which are broadcast to group environments.
Online/Internet Services ("Online/Internet Services", formerly referred to
as "Home") -- Live interactive sports and trivia games, including those
currently broadcast over the NTN Network, for the home consumer market provided
via third-party providers such as American On-Line, CompuServe and GTE
MainStreet.
LearnStar ("LearnStar") -- An interactive, multimedia, curriculum-based
educational system marketed to educational institutions. Marketed through the
Company's wholly-owned subsidiary, LearnStar, Inc.
IWN ("IWN") -- Interactive and transaction processing software and
technology for the gaming industry. Developed through the Company's IWN, Inc.
subsidiary and IWN, L.P.
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 and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed by
the Company 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. Such
materials also may be obtained electronically at the Commission's site on the
World Wide Web at http:/www.sec.gov. The Common Stock is listed on the AMEX,
and the Company's reports, proxy and information statements and other
information
2
<PAGE>
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, the Settlement Warrants and
the shares of Common Stock offered hereby is contained in the Registration
Statement of which this Prospectus forms 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 such
securities, 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 or obtained electronically at
the Commission's World Wide Web site referred to above. 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, 1996, which contains consolidated financial statements of the
Company for the year then ended; (b) Amendment No. 1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, filed with the
Commission on April 30, 1997; and (c) the description of the Company's Common
Stock contained in its Registration Statement on Form 8-A (File No. 0-19383)
filed with the Commission on July 31, 1991.
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 securities 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 Gerald Sokol, Jr., Chief Financial Officer, NTN
Communications, Inc., The Campus, 5966 La Place Court, Carlsbad, California
92008. Telephone requests may be directed to Mr. Sokol at (619) 438-7400.
3
<PAGE>
RISK FACTORS
The Settlement Warrants and the underlying shares of Common Stock 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 securities offered hereby.
HISTORY OF SIGNIFICANT LOSSES; RECENT RESULTS OF OPERATIONS
The Company has a history of significant losses and had an accumulated
deficit of $46,139,000 as of December 31, 1996. The Company reported a net loss
of $22,952,000 for the year ended December 31, 1996, as compared to net loss of
$3,948,000 for the prior fiscal year. The 1996 results included substantial
charges related to the resignation and termination of the Company's former
executive officers and the reduction in workforce referred to below, the
cancellation of notes receivable from the former executives, write-downs of
assets associated with discontinued business activities and obsolete inventory
and equipment, and accruals for litigation costs and expenses, and charges
pursuant to newly-adopted Statement of Financial Accounting Standards No. 123
for stock-based compensation issued in 1996. There can be no assurance that the
Company will not incur similar charges in the future or that it will ever
operate profitably. See "Selected Consolidated Financial Data."
UNCERTAINTY AS TO ABILITY TO CONTINUE AS A GOING CONCERN.
The audit report on the Company's consolidated financial statements for
the year ended December 31, 1996 includes an explanatory paragraph that states
that the Company has suffered recurring losses from operations and has a net
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
See "Experts."
RECENT DEVELOPMENTS
In March 1997, the Company announced a reorganization of its executive
management personnel in which Patrick J. Downs resigned as Chief Executive
Officer and Chairman of the Board of the Company and Daniel C. Downs resigned as
the Company's President. As part of the management change, Ronald E. Hogan
resigned as Senior Vice President and Gerald McLaughlin, formerly Executive
Vice President of the Company, and Michael Downs, formerly President of the
Company's Learnstar subsidiary, were terminated. The Company has entered into
separate agreements with each of the former officers setting out the terms on
which their existing employment contracts were settled. Under these agreements,
the Company will continue to pay the former executives their prior annual
salaries and other benefits for the remaining terms of their respective
employment agreements with the Company. These payments will total approximately
$1,711,000 in 1997, $1,350,000 in 1998, and $1,269,000 in 1999, and are expected
to be funded from on-going operations. See "Need for Additional Financing"
below. Charges for severance related to resignations or terminations amounted to
$840,000 for 1996. Additional severance charges in the first quarter of 1997
will be approximately $4,578,000.
Most of the former executives, along with Donald Klosterman and Alan P.
Magerman, directors of the Company, were indebted to the Company for certain
loans that were made in previous years. By their terms, these loans were
cancelable under certain circumstances in connection with the termination of the
officer's employment. Accordingly, in conjunction with the management
reorganization, all outstanding notes receivable from the former officers and
Messrs. Klosterman and Magerman were canceled, resulting in a charge for 1996 of
$4,252,000 for principal and accrued interest. Included in the loans canceled
were personal loans made to Mr. Magerman and Patrick J. Downs of approximately
$185,000 and $251,000 respectively.
In the fourth quarter of 1996 the Company laid off approximately 16% of
its workforce as a cost-cutting measure. Severance payments related to the lay-
off will not effect the Company's future liquidity, since the majority of the
related severance and other benefit payments were made in 1996.
In 1996, the Company also discontinued selling and leasing back the
equipment utilized at its Network Services locations and repurchased certain
equipment that was the subject of prior sale-leaseback transactions. Although
the discontinuance of the sale-leaseback transactions and the repurchase of
equipment is expected to result in improved cash flow in future periods, the
Company reported a charge related to the repurchase transactions of
approximately $2,007,000 for the fourth quarter of 1996. The Company may enter
into similar repurchases in the future, which depending on the terms of
repurchase, may also result in losses during the periods in which they occur.
PRIOR SUSPENSION OF SHIPMENTS OF PLAYMAKER(R) KEYPADS; RECENT EQUIPMENT
PROBLEMS
In October 1996, the Company announced that it had temporarily suspended
shipments of its Playmaker(R) keypads to new Network Services locations pending
approval of the Playmaker(R) by the United States Federal Communications
Commission ("FCC"). The Company's application for approval was subsequently
submitted to the FCC and was approved by the FCC on January 15, 1997. The
temporary suspension did not affect broadcasts to existing Network Services
locations and shipments of Playmakers(R) to new locations, including
approximately 290 sites which were previously awaiting installation, resumed
immediately following the FCC approval and installation has been completed on
the backlogged sites.
New locations signed up by the Company during the suspension of
Playmaker(R) shipments were granted one day of credit by the Company against
future billings for each day the sites could not utilize the NTN system. The
Company estimates the temporary suspension of Playmaker(R) shipments and the
credits extended by the Company to backlogged locations will result in reduced
cash flow of approximately $350,000 during the first half of fiscal 1997 from
all affected locations.
The Playmakers(R) are handheld radio frequency devices that contain
rechargeable batteries. Recently manufactured Playmakers(R) have experienced
problems related to noise sensitivity and recharging performance. The Company
has modified the circuit board to address the problems, and it is in the process
of upgrading the approximately 14,000 affected Playmakers(R). The Company
believes the modifications will be completed by August 1997. These problems have
negatively affected the number of new Network Services customers signed up by
the Company and have caused an increase in the number of "disconnects" -
customers terminating service and an increase in accounts receivable from
dissatisfied customers.
IMMEDIATE NEED FOR ADDITIONAL FINANCING
The Company had a working capital deficiency of $2,120,000 at December 31,
1996, compared to working capital of $19,468,000 at December 31, 1995. The
reduction in working capital during 1996 was due primarily to the substantial
charges incurred in 1996 as described above and to the use of cash on hand and
other current assets to fund the Company's ongoing losses from operations. There
can be no assurance that the Company's currently available resources will be
sufficient to support the Company's operations until such time, if any, as the
Company is able to operate profitably, and the Company will require additional
financings to fund its ongoing operations. There can be no assurance as to
whether or on what terms such financing may be available to the Company.
In December 1995, the Company entered into an agreement ("Agreement") with
Symphony IWN Investment LLC ("Symphony"), an unaffiliated company, under which
Symphony invested $3,000,000 for a 10% interest in IWN, Inc. and a limited
partner interest in IWN, L.P., a limited partnership of which IWN, Inc. is the
general partner. The accounts and results of operations of IWN, L.P., including
a 1996 operating loss of $2,961,000, are included in the Company's consolidated
financial statements. The Agreement included a provision (the "Put Option")
entitling Symphony to elect to cause the Company to repurchase Symphony's shares
of IWN, Inc. and limited partner interest in IWN, L.P. at any time during the
period from April 1, 1997 through December 1, 1997 for specified consideration.
At December 31, 1996, the amount which would be payable by the Company on
exercise of the Put Option was $3,045,000, which amount was recorded as a short-
term borrowing in the Company's consolidated balance sheet at December 31, 1996.
In April 1997, Symphony notified the Company of its election to exercise
the Put Option, which is to close within 60 days from the notice of exercise.
The Company is discussing with Symphony the terms on which the Put Option will
be satisfied. Unless Symphony otherwise agrees, the exercise price of the Put
Option is payable by the Company in cash or in shares of Common Stock, or a
combination of cash and shares, at Symphony's election. Alternatively, Symphony
can elect to accept the Company's promissory note with a term of up to two years
and bearing interest at 27.5% per annum. There can be no assurance that Symphony
will agree to other terms. Depending on the amount of the cash payment to be
made to Symphony, the Company may seek to finance its obligations to Symphony.
The Company has no commitment or agreement with respect to any such financing,
however, and there can be no assurance that such financing will be available on
terms acceptable to the Company, or at all. Assuming the closing of the Put
Option occurs on May 31, 1998, the Company's obligation to Symphony will total
approximately $3,500,000.
4
<PAGE>
SALE OF NEW WORLD
In June 1996, the Company sold to The 3DO Company ("3DO") substantially all
of the assets of the Company's New World Computing, Inc. subsidiary ("New
World"). The Company no longer sells or distributes any products formerly sold
and distributed by New World and has no intention of doing so in the future. In
connection with the sale of New World, the Company entered into a Noncompetition
Agreement with 3DO, under which the Company agreed, during the period ending
June 30, 1999, not to engage in the development, marketing or distribution of
consumer entertainment software in CD-ROM format other than in conjunction with
other products developed or distributed by NTN. The Company is not restricted by
the Noncompetition Agreement with 3DO from carrying on its other businesses or
from marketing or distributing CD-ROM versions of its sports or trivia games or
other products developed for distribution in other media.
PENDING LITIGATION
On April 18, 1995, a class action lawsuit was filed in the United States
District Court for the Southern District of California (San Diego) against the
Company and certain of its former executive officers. The complaint alleges
violations of federal securities laws based upon the Company's projections for
the fourth quarter of 1994 and for the 1994 fiscal year, and further alleges
that certain of the Company's insiders sold stock on information not generally
known to the public. The Company, which has assumed the defense of this matter
on behalf of all defendants, has denied liability based upon the allegations
contained in the complaint. Plaintiffs have claimed to be entitled to damages
between $8 million and $10 million. The Company believes, based in part on the
advice of outside counsel, that the actual damages, if any, would be
substantially less than such amount. This lawsuit has been scheduled for trial
to commence in October 1997. The Company believes there is no basis for the
claimants' allegations. Nonetheless, to avoid the expense and disruption of
protracted litigation, the Company may attempt to settle the case. In light of
potential settlement costs, including the legal costs and expenses associated
with litigation of this nature and other costs necessary to prepare to defend
this case at trial and perhaps through the appeals process, the Company's long-
term liabilities on its balance sheet at December 31, 1996 include a reserve for
such costs and expenses.
On July 3, 1995, a single shareholder filed a separate lawsuit in the
United States District Court for the Northern District of Texas containing
allegations essentially identical to those raised in the shareholder lawsuit in
April 1995. Upon the Company's motion, the case was transferred from Texas to
California. The initial discovery and other proceedings of this action were
coordinated with the class-action lawsuit referred to in the immediately
preceding paragraph, and upon the parties' motion this separate action was
dismissed without prejudice in January 1997.
There can be no assurance that any or all of the foregoing claims will be
decided in favor of the Company, which is not insured against the claims made.
During the pendency of such claims, the Company will continue to incur the costs
of defense of same. If the shareholder litigation is decided in a manner adverse
to the Company, it could result in liabilities to the Company which could have a
material effect on the Company's financial condition and result of operations.
Until recently, the Company was involved as a plaintiff or defendant in
various previously reported lawsuits in Federal courts in both the United States
and Canada involving Interactive Network, Inc. ("IN"). With the court's
assistance, the Company and IN have been able to reach a resolution of all
pending disputes in the United States and have agreed to private arbitration
regarding any future licensing, copyright or infringement issues which may arise
between the parties. There remain two lawsuits among the Company, its
unaffiliated Canadian licensee and IN, which were filed in Canada in 1992. No
substantive action has been taken in furtherance of either action. These
actions affect only the Canadian operations of the Company and its Canadian
licensee and do not extend to the Company's operations in the United States or
elsewhere. Although they cannot be estimated with certainty, any damages the
Company might incur in the event the actions are determined adversely to the
Company are not expected to be material to the Company.
Other than as set forth above, there is no material litigation pending or
threatened against the Company.
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 and hockey games. 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 exclusive license with National Football League Properties, Inc.
("NFLP") for QB1(R) was
5
<PAGE>
recently renewed by the NFLP until March 2000. 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. The Company's agreement with Major League Baseball
Properties, Inc. ("MLBP") for the Company's proprietary interactive baseball
game Diamondball(R) expired December 31, 1996. Although the Company currently is
in the process of discussing a renewal of its licenses with the MLBP, there can
be no assurance as to whether or on what terms it will be renewed.
The Company currently is broadcasting QB1(R) 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 or other events for which the Company has no license, if determined
adversely to the Company, could have the effect of precluding the Company from
broadcasting its games in connection with these events or could result in an
award of monetary damages against the Company. To date, the Company has not
experienced any such legal action.
RELIANCE ON INDEPENDENT DISTRIBUTORS
The Company relies 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 operate in 49 states. The Company has no long-
term agreements with any of its distributors, and 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.
COMPETITION
The interactive entertainment industry is in its formative stage, but
currently may be divided into three major segments: (i) media distribution
services such as on-line services, telephone companies and cable television
companies and the NTN Network; (ii) equipment providers such as computer and
peripheral equipment manufacturers; and (iii) content and programming providers,
such as movie studios and software publishers. The Company does not act as a
direct provider of equipment to consumers. The Company operates as a media
distribution service through its NTN Network. Also, the Company is a program
provider to an array of other media distribution services to consumers utilizing
a variety of equipment.
The Company has a growing number of competitors in the programming segment
of the interactive entertainment industry. The Company's programming content is
not dependent upon, and consequently not bound by any particular technology or
method of distribution to the consumer. The Company's programming is,
therefore, readily available to consumers on a wide variety of entertainment and
media services including: the NTN Network; on-line services including America
Online, Genie, and The ImagiNation Network; and cable television, including GTE
MainStreet, which is available to households in certain regions.
The Company's programming competes generally with broadcast television,
pay-per-view, and other content offered on cable television. In other mediums,
the Company competes with other content and services available to the consumer
through on-line services such as America Online and Prodigy. Presently, the
technological capabilities of transmitting entertainment products to the
consumer exceed the supply of quality programming and services available on the
existing delivery systems.
With the entrance of motion picture, cable and TV companies, competition in
the interactive entertainment and multimedia industries will likely intensify in
the future. Moreover, the expanded use of on-line networks and the Internet
provide computer users an increasing number of alternatives to video games and
entertainment software. The Company seeks to compete by providing high quality
products at reasonable prices, thereby establishing a favorable reputation among
frequent buyers in order to achieve repeat sales on sequels and other
6
<PAGE>
products developed or distributed by the Company. There can be no assurance,
however, that the Company can compete effectively.
POTENTIAL FOR TECHNOLOGICAL OBSOLESCENCE
The computer industry and related businesses have been marked by rapid and
significant technological development and change. There can be no assurance
that ongoing technological developments will not render the Company's
interactive technology and services obsolete, or that the Company will have the
resources to respond to such technological change.
UNCERTAIN PROPRIETARY PROTECTION
The Company regards the Playmaker(R) keyboard and other technology utilized
in the NTN Network as proprietary and relies primarily on a combination of
trademark, copyright and trade secret laws and employee and third-party
nondisclosure agreements to protect its propriety rights. The Company has two
patent applications pending for its proprietary interactive technology. No
assurance can be given that any of the Company's patent applications will issue
as patents, or that any issued patents will provide the Company with significant
competitive advantages. It is the Company's policy that all employees and
consultants involved in research and developmental activities sign nondisclosure
agreements; however, this may not afford the Company sufficient protection for
its know-how and proprietary information and products. Other parties may
independently develop similar or more advanced technologies. As a number of
software products in the interactive television industry increases and
increasingly become available in new delivery formats, software developers and
publishers may increasingly become subject to infringement claims. Any such
future claims or litigation against the Company may be costly and could have an
adverse effect on the businesses of the Company. The Company currently is
involved in litigation concerning the enforceability, scope and validity of
proprietary rights. See "Risk Factors - Pending Litigation."
INFLUENCE OF MANAGEMENT
The Company's officers and directors and their affiliates owned, in the
aggregate, approximately 4% of the outstanding Common Stock as of April 30,
1997, and have the right, through the exercise of currently exercisable options
and warrants to purchase shares of Common Stock, to increase their percentage
ownership to approximately 15%. 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; TERMS OF EMPLOYMENT AGREEMENTS
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
7
<PAGE>
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."
TERMS OF SETTLEMENT WARRANTS
The exercise price and other terms of the Settlement Warrants were
determined as a result of settlement negotiations between the Company and
representatives of the plaintiffs in the class-action lawsuit described under
"Plan of Distribution." The exercise price does not necessarily bear any
relationship to the financial condition, results of operations or business or
financial prospects of the Company, or any other recognized investment criteria,
and should not be considered an indication of the actual value of the Company's
Common Stock. See "Plan of Distribution."
POSSIBLE FUTURE DELISTING OF THE SETTLEMENT WARRANTS
The Settlement Warrants have been approved for listing on the AMEX, subject
to official notice of issuance. Under current AMEX guidelines, to remain
eligible for trading on the AMEX the Settlement Warrants either must continue to
be held by at least 300 holders, or the number of Settlement Warrants publicly
held (i.e., exclusive of holdings by directors, officers and control persons)
generally must exceed at 200,000. If, by reason of the exercise of Settlement
Warrants or otherwise, these requirements are not met at any time, the
Settlement Warrants may be delisted from trading on the AMEX. Delisting would
be likely to reduce investor interest in the Settlement Warrants and materially
adversely effect the trading market and trading prices for the Settlement
Warrants.
VOLATILITY OF STOCK PRICE; RECENT TRADING PRICES
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, including factors such as
analysts' expectations which are beyond the Company's control. 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.
The recent trading prices of the Company's Common Stock have been at or
near the 52-week low trading price, and there can be no assurance that the
trading price will not decline from its 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 April 30, 1997, there were 6,443,500 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 $7.25 per share, of
which options to purchase 3,629,967 shares were exercisable as of that date.
As of April 30, 1997, the Company also had outstanding warrants,
including the Settlement Warrants described herein, to purchase an aggregate of
5,586,165 shares of Common Stock at exercise prices
8
<PAGE>
ranging from $2.00 to $8.00 per share, of which warrants to purchase
approximately 4,021,165 shares were exercisable as of that date. Substantially
all of the underlying shares of such warrants are subject to currently effective
registration statements covering the resale of the underlying warrant shares by
the holders. The Company also had outstanding as of April 30, 1997 161,112
shares of preferred stock which entitle holders thereof, upon surrender of the
shares of preferred stock, to receive 45,129 shares of Common Stock.
The foregoing 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 dilative
effect on the Company's stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
Approximately 5,820,000 shares of Common Stock outstanding as of the date
of this Prospectus, and 782,500 shares of Common Stock underlying currently
exercisable warrants 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 one year has
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 two 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.
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
upon exercise of the Settlement Warrants will be realized only if and to the
extent any of the Settlement Warrants are exercised. The holders of the
Settlement Warrants are not obligated to exercise the Settlement Warrants, and
there can be no assurance that the holders will choose to exercise the
Settlement Warrants in whole or in part. The Settlement Warrants are redeemable
under certain circumstances at the option of the holders. See "Description of
Securities - Settlement Warrants." The estimated net proceeds to the Company in
the event that the Settlement Warrants are exercised in full would be
$__________.
The Company intends to apply any net proceeds it receives from the exercise
of the Settlement Warrants to augment its working capital and for general
corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Prior to this offering, there has been no public market for the Settlement
Warrants. 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>
1995
----
First Quarter.............................. $5-5/8 $8-1/4
Second Quarter............................. 4-7/16 5-13/16
Third Quarter.............................. 4-3/8 6-1/8
Fourth Quarter............................. 4-1/8 5-3/16
1996
----
First Quarter.............................. $3-1/8 $4-7/8
Second Quarter............................. 3-7/8 5-1/8
Third Quarter.............................. 4-9/16 6-1/8
Fourth Quarter............................. 3-7/16 5-3/16
1997
----
First Quarter.............................. $3-3/8 $4-7/16
Second Quarter (through April 30, 1997).... 2-5/16 4-3/4
</TABLE>
For a recent closing price for the Common Stock as reported on the AMEX
see the cover page of this Prospectus. As of April 30, 1997, there were
approximately 4,000 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.
10
<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, 1996, are derived from the consolidated financial statements
of NTN and its subsidiaries, which financial statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of December 31, 1996 and 1995, and for each
of the years in the three-year period ended December 31, 1996, and the report
thereon, are incorporated by reference in this Prospectus. The selected data
should be read in conjunction with the consolidated financial statements for the
three-year period ended December 31, 1996, the related notes and the independent
auditors' report, which contains an explanatory paragraph that states that the
Company has suffered recurring losses from operations and has a net working
capital deficiency that raise substantial doubt about its ability to continue as
a going concern which report is incorporated by reference in this Prospectus.
The consolidated financial statements and selected consolidated data do not
include any adjustments that might result from the outcome of this uncertainty.
The following data should be read in conjunction with "Management's Discussion
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>
Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Total revenues............................... $ 25,711 $20,082 $16,146 $ 11,123 $ 6,047
Total operating expenses..................... 51,566 25,508 16,102 13,210 8,466
-------- ------- ------- -------- --------
Operating income (loss)...................... (25,855) (5,426) 44 (2,087) (2,419)
Other income, net ........................... 1 1,409 412 457 24
-------- ------- ------- -------- --------
Earnings (loss) from continuing operations... (25,854) (4,017) 456 (1,630) (2,395)
Earnings (loss) from discontinued operations. (1,317) 69 251 329 155
Gain from discontinued operations............ 4,219 -- -- -- --
-------- ------- ------- -------- --------
Net earnings (loss).......................... (22,952) (3,948) 707 (1,301) (2,240)
-------- ------- ------- -------- --------
Earnings (loss) per share:
Continuing operations...................... $ (1.15) $ (0.19) $ 0.02 $ (0.10) $ (0.21)
Discontinued operations.................... 0.13 -- 0.01 0.02 --
-------- ------- ------- -------- --------
Net earnings (loss) per share................ $ (1.02) $ (0.19) $ 0.03 $ (0.08) $ (0.20)
Weighted average equivalent shares
outstanding................................ 22,568 20,301 21,124 17,135 11,344
</TABLE>
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total current assets......... $ 10,655 $ 26,009 $ 18,844 $ 23,102 $ 9,004
Total assets................. 28,504 41,221 31,239 27,240 10,171
Total current liabilities.... 12,775 6,541 4,958 2,933 2,554
Total liabilities............ 18,282 7,770 5,782 3,587 2,379
Accumulated deficit.......... (46,139) (23,187) (19,239) (19,946) (18,645)
Shareholders' equity......... 10,222 33,451 25,457 23,653 7,432
</TABLE>
11
<PAGE>
PLAN OF DISTRIBUTION
The Settlement Warrants are being offered and distributed in an offering
exempt from registration under the Securities Act pursuant to Section 3(a)(10)
thereof, in settlement of a class-action lawsuit (the "Action"). The Action,
originally filed by various shareholders of the Company in June 1993 in the
United States District Court for the Southern District of California (San Diego)
(the "Court"), was a consolidation of four lawsuits seeking class action status
to recover damages for a drop in the market price of the Company's Common Stock
following an announcement that an anticipated agreement under which the Company
would sell certain equipment and services to an arm of the Mexican Government
may be put out for bid. While the Company denies any wrongdoing or liability,
it agreed to the settlement in order to avoid substantial expenses and the
inconvenience and distraction of burdensome and protracted litigation. The
settlement was entered into by the parties on June 18, 1996, and approved by the
Court, after a hearing, by order dated and entered on September 23, 1996.
Pursuant to the settlement, the Company has established a settlement fund
consisting of $400,000 in cash plus the Settlement Warrants to purchase an
aggregate of 565,000 shares of the Company's Common Stock. For a description of
the terms of the Settlement Warrants, see "Description of Securities --
Settlement Warrants." Claimants submitting claims to the administrator
administering the settlement which are timely filed and satisfactorily
demonstrate proof of loss are considered approved claimants under the terms of
the settlement. Approved claimants are entitled to participate in a
distribution of the settlement fund (which includes the Settlement Warrants) in
proportion to their recognized loss. The Company anticipates that there will be
approximately 1,400 initial holders of record of the Settlement Warrants
immediately upon their issuance.
The exercise price and other terms of the Settlement Warrants were
determined as a result of settlement negotiations among the Company and its
counsel in its Action and representatives of the plaintiffs in the Action. The
exercise price does not necessarily bear any relationship to the financial
condition, results of operations, or business or financial prospects of the
Company, or any other recognized investment criteria, and should not be
considered an indication of the actual value of the Company's Common Stock.
Holders of the Settlement Warrants may sell the shares of Common Stock
issuable upon exercise of such Settlement Warrants directly or through brokers
in negotiated transactions or in one or more transactions on the AMEX, or
otherwise, at prices prevailing at the time of sale.
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 April 30, 1997, there were approximately 23,314,000 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
12
<PAGE>
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 April 30, 1997, there were 161,112 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 currently 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 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.
SETTLEMENT WARRANTS
The Settlement Warrants will be issued in registered form, and will be
subject to the terms and conditions of a Warrant Agreement between the Company
and American Stock Transfer & Trust Company, as Warrant Agent. The following
description of the Settlement Warrants is not complete and is qualified in all
respects by the Warrant Agreement, the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
Each Settlement Warrant will entitle the holder thereof to purchase one
share of Common Stock at an exercise price equal to $__________, which equalled
the average closing price of the Company's Common Stock as reported on the AMEX
during the 20 trading days immediately preceding the date the Settlement
Warrants were mailed to authorized claimants. The Settlement Warrants will be
exercisable for a period of three years from the date of issuance, and during
the period from the second anniversary of the date of issuance until the
expiration of the Settlement Warrants, the holders will have the right (but will
not be obligated) to require the Company to redeem the Settlement Warrants for
cash at a price of $3.25 per Settlement Warrant unless the Settlement Warrants
have previously been exercised. The redemption right will expire, however, if
at any time during the exercise period the closing price per share of Common
Stock as reported on the AMEX exceeds the exercise price by more than $3.25 per
share for any seven trading days, whether or not consecutive. In the event the
Company is required to redeem all or a portion of the Settlement Warrants, there
can be no assurance that the Company will have available funds sufficient to pay
for the redemption price of the Settlement Warrants so tendered for redemption.
The cost to the Company to redeem all of the Settlement Warrants would be
$1,836,250. Upon expiration of the redemption right, NTN will have no further
obligation to repurchase the Settlement Warrants. On and after the expiration
date, the Settlement Warrants become wholly void and of no value.
The Settlement Warrants contain antidilution provisions to avoid dilution
of the equity interest represented by the underlying shares upon the occurrence
of certain events such as share dividends or splits, reorganizations,
consolidations, mergers or like occurrences.
13
<PAGE>
Pursuant to the settlement of the Action, the Company has agreed to file
the Registration Statement of which this Prospectus is a part in order to
register the issuance of the shares of Common Stock underlying the Settlement
Warrants. The Company will use its best efforts to keep the Registration
Statement and any registration or qualification required under state securities
laws with respect to the shares of Common Stock offered hereby effective during
the term of the Settlement Warrants. The Settlement Warrants may not be
exercised during any period in which any such registration or qualification is
required but is not in effect.
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 divide the Board of Directors into three
classes, each class to be nearly equal in number as possible, each class serving
staggered three-year terms. Approximately two-thirds of the 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.
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
14
<PAGE>
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
On April 30, 1997, there were approximately 23,314,000 shares of Common
Stock outstanding. Approximately 5,820,400 of such shares of Common Stock and
782,500 shares of Common Stock underlying the Company's outstanding warrants,
are "restricted securities" within the meaning of Rule 144 of the regulations
promulgated under the Securities 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 the
registration statements remain effective. 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 Securities 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 one year. 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 two 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 prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
15
<PAGE>
As of April 30, 1997, there were 6,443,000 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 $7.25 per
share, of which options to purchase 5,629,967 shares were exercisable as of
that date.
As of April 30, 1997, the Company also has outstanding warrants, including
the Settlement Warrants, to purchase an aggregate of 5,586,165 shares of Common
Stock at exercise prices ranging from $2.00 to $8.00 per share, of which
warrants to purchase approximately 4,021,165 shares were exercisable as of that
date. The Company also currently has effective registration statements covering
the resale of substantially all of such warrants and the shares issuable upon
exercise of such warrants by the holders. The Company also had outstanding as of
April 30, 1997 161,112 shares of preferred stock, which entitle holders thereof
to receive, upon surrender of the shares of preferred stock, 45,129 shares of
Common Stock.
The foregoing 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 dilative effect on the Company's securityholders.
TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent for the Common Stock and Warrant Agent for the
Settlement Warrants 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 of Common Stock offered
hereby, when issued and paid for as provided in the Settlement Warrants, will be
duly and validly issued, fully paid and nonassessable. Such counsel owns
5,671 shares of Common Stock as of the date of this Prospectus with a current
value of $17,722, based on the last sale price of the Common Stock as
reported on the AMEX on April 30, 1997.
EXPERTS
The financial statements and schedules of NTN Communications, Inc. as of
December 31, 1996, and for each of the years in the three-year period ended
December 31, 1996, have been incorporated by reference herein 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, 1996 financial
statements contains an explanatory paragraph that states that the Company has
suffered recurring losses from operations and has a net working capital
deficiency that raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
16
<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. 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................ 3
Risk Factors........................... 4
Recent Developments....................
Use of Proceeds........................ 9
Price Range of Common Stock
and Dividend Policy................... 10
Selected Consolidated Financial Data... 11
Plan of Distribution................... 12
Description of Securities.............. 12
Legal Matters.......................... 16
Experts................................ 16
</TABLE>
================================================================================
================================================================================
COMMON STOCK
NTN COMMUNICATIONS, INC.
565,000 SHARES
____________
PROSPECTUS
____________
May 12, 1997
================================================================================
<PAGE>
PROSPECTUS
627,550 Shares
NTN COMMUNICATIONS, INC.
Common Stock
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 627,550 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 business units and subsidiaries.
All of the Shares of Common Stock offered hereby are issuable upon the
exercise of certain outstanding warrants (the "Warrants") to purchase Common
Stock of the Company. See "Selling Securityholders."
The Common Stock is traded on the AMEX under the symbol "NTN." As of
____________, 1997, the last sale price for the Common Stock as reported on the
AMEX was $ . See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 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.
<TABLE>
<CAPTION>
===========================================================
Proceeds to
Selling
Price to Public(1) Securityholders(1)
- -----------------------------------------------------------
<S> <C> <C>
Per Share... $ $
- -----------------------------------------------------------
Total....... $ $
===========================================================
</TABLE>
(1) Based on the last reported sale price of the Common Stock as reported on
the AMEX on ________, 1997.
(2) All proceeds from the sale of the Shares offered hereby will be received by
the Selling Securityholders. The amount shown is without deduction for
offering expenses, estimated at $65,000, payable by the Company. See "Use
of Proceeds."
The date of this Prospectus is May , 1997.
<PAGE>
CONCURRENT SETTLEMENT OF CLASS ACTION LAWSUIT
On or about the date of this Prospectus, the Company is distributing
Redeemable Common Stock Purchase Warrants (the "Settlement Warrants") to
purchase 565,000 shares of Common Stock at a price of $_______ per share. The
Settlement Warrants were offered and are being distributed in an offering exempt
from registration under the Securities Act pursuant to Section 3(a)(10) thereof,
in settlement of a class-action lawsuit (the "Action"). The Action, originally
filed by various shareholders of the Company in June 1993 in the United States
District Court for the Southern District of California (San Diego) (the
"Court"), was a consolidation of four lawsuits seeking class action status to
recover damages for a drop in the market price of the Company's Common Stock
following an announcement that an anticipated agreement under which the Company
would sell certain equipment and services to an arm of the Mexican Government
may be put out for bid. While the Company denies any wrongdoing or liability,
it agreed to the settlement in order to avoid substantial expenses and the
inconvenience and distraction of burdensome and protracted litigation. The
settlement was entered into by the parties on June 18, 1996, and approved by the
Court, after a hearing, by order dated and entered on September 23, 1996.
Pursuant to the settlement, the Company has established a settlement fund
consisting of $400,000 in cash plus the Settlement Warrants to purchase an
aggregate of 565,000 shares of the Company's Common Stock. For a description of
the terms of the Settlement Warrants, see "Description of Securities --
Settlement Warrants." The exercise price and other terms of the Settlement
Warrants were determined as a result of settlement negotiations among the
Company and its counsel in the Action and representatives of the plaintiffs in
the Action. The exercise price does not necessarily bear any relationship to
the financial condition, results of operations, or business or financial
prospects of the Company, or any other recognized investment criteria, and
should not be considered an indication of the actual value of the Company's
Common Stock.
2
<PAGE>
USE OF PROCEEDS
Other than the exercise price of the Warrants (to the extent they are
exercised), the Company will not receive any of the proceeds from the sale of
the Shares offered hereby. The holders of the Warrants are not obligated to
exercise them, and there can be no assurance that the holders will choose to
exercise the Warrants in whole or in part. The gross proceeds to the Company in
the event that the Warrants are exercised in full would be approximately
$2,877,000.
The Company intends to apply any net proceeds it receives from the exercise
of the Warrants to augment its working capital and for general corporate
purposes.
3
<PAGE>
SELLING SECURITYHOLDERS
PATRICOF & CO.
Of the Shares offered hereby, 300,000 are issuable upon the exercise of
outstanding Class WCA Warrants which were originally issued to Patricof & Co.
Capital Corp. ("Patricof") pursuant to the terms of a letter agreement, dated
May 2, 1996, between the Company and Patricof. By the terms of the letter
agreement, Patricof was retained as a financial advisor to the Company to assist
the Company in developing and evaluating proposals from strategic partners,
merger or acquisition candidates or acquirors. The agreement provided for the
Company's grant to Patricof of warrants, including the Warrants described
herein, to purchase an aggregate of 900,000 shares of Common Stock and payment
of certain fees and expenses in the event of a successful transaction. The
letter agreement was terminated by the Company as of October 19, 1996. These
Warrants have since been transferred by Patricof to certain of the Selling
Securityholders identified below.
The Warrants originally issued to Patricof are exercisable at the price of
$4.625 per share, which equalled the market price of the Company's Common Stock
on the date the Warrants were granted. The Warrants are exercisable, in whole
or in part, at any time on or before May 2, 2001, contain antidilution
provisions that require adjustments in the event of a stock dividend,
subdivision or combination of the outstanding shares of Common Stock,
recapitalization of the Company and certain similar events, and provide for
piggyback registration rights. The terms of the Warrants were determined as a
result of arm's-length negotiations between the Company and Patricof.
ASSOCIATED VENTURES MANAGEMENT CORP.
An aggregate of 287,500 Shares offered hereby are issuable upon the
exercise of outstanding Class WCA Warrants held by Joel Magerman and Selig
Zises. Mr. Magerman, the son of Alan P. Magerman, a director of the Company, is
the President of Associated Ventures Management Corp. ("Associated Ventures"),
and he and Mr. Zises are its sole stockholders. In December 1995, the Company
sold 45% of the common stock of its LearnStar, Inc. subsidiary to Associated
Ventures for $2,500,000, payable by means of a non-interest bearing promissory
note of Associated Ventures. The promissory note was secured by the shares of
LearnStar, Inc. purchased by Associated Ventures, but was otherwise nonrecourse
to Associated Ventures. In connection with this transaction, the Company granted
Messrs. Zises and Magerman Class WCA Warrants to purchase 240,000 shares and
60,000 shares, respectively, of Common Stock at an exercise price of $4.44 per
share, which equalled the market price of the Company's Common Stock on the date
of grant of the Warrants.
The sale to Associated Ventures of LearnStar common stock was rescinded by
the parties in September 1996. In connection with the rescission, Messrs. Zises
and Magerman agreed to surrender to the Company the Class WCA Warrants granted
to them as part of the original sale transaction in exchange for new Class WCA
Warrants to purchase 160,000 shares and 40,000 shares, respectively, at the same
exercise price and other terms contained in their original Warrants. The newly
granted warrants held by Messrs. Zises and Magerman are exercisable at the price
of $4.44 per share and may be exercised, in whole or in part, at any time on or
before December 21, 2000.
In January 1997, the Company also granted to Messrs. Zises and Magerman
Class WCA Warrants to purchase 40,000 shares and 10,000 shares, respectively, of
Common Stock at an exercise price of $5.25 per share. These Warrants are
exercisable, in whole or in part, at any time on or before August 5, 2001. In
January 1997, the Company granted Messrs. Zises and Magerman additional Class
WCA Warrants to purchase 30,200 shares and 7,550 shares, respectively, of Common
Stock at an exercise price of $4.75 per share, which Warrants may be exercised,
in whole or in part, on or before September 5, 2001. All of these Warrants were
issued pursuant to a consulting agreement dated July 1, 1995 between the Company
and Associated Ventures. Under the terms of the agreement, the Company agreed
to pay Associated Ventures a consulting fee of $120,000, payable in 12 monthly
installments, and to grant it warrants to purchase 5,000 shares of Common Stock
at the then-current market price for each $100,000 of net proceeds from
financing
4
<PAGE>
transactions entered into between the Company and parties introduced by
Associated Ventures. The respective exercise prices of these Warrants equalled
the market price of the Company's Common Stock at the time of the financings to
which they relate.
All of the foregoing Warrants held by Messrs. Zises and Magerman contain
antidilution provisions that require adjustments in the event of a stock
dividend, subdivision or combination of the outstanding shares of Common Stock,
recapitalization of the Company and certain similar events, and provide for
piggyback registration rights. The terms of the Warrants were determined as a
result of arm's-length negotiations between the Company and Associated Ventures.
OTHER SELLING SECURITYHOLDERS
The remaining 40,000 Shares offered hereby are issuable upon the exercise
of Class WCA Warrants held by SRG Associates and Lyon Securities. The Warrants
are exercisable at a price of $4.00 per share, which equalled the market price
of the Company's Common Stock on the date the Warrants were granted. The
Warrants are exercisable, in whole or in part, at any time on or before February
1, 2001, contain antidilution provisions that require adjustments in the event
of a stock dividend, subdivision or combination of the outstanding shares of the
Company, recapitalization of the Company and certain similar events, and
provide for piggyback registration rights. The Warrants were granted to these
Selling Securityholders in February 1996 in consideration of financial
consulting services rendered to the Company, and the terms of the Warrants were
determined as a result of arm's-length registrations between the Company and the
Selling Securityholders.
All of the Warrants held by the Selling Securityholders constitute
"restricted securities" within the meaning of Rule 144 of the regulations
promulgated under the Securities Act of 1933 (the "Securities Act"). As such,
they generally are not currently transferable. However, the shares of Common
Stock issuable upon exercise of such Warrants and being offered hereby (other
than any such shares as may be acquired by an affiliate of the Company), when
issued upon exercise of the Warrants and sold pursuant to this Prospectus, will
be freely tradeable without restriction under the Securities Act.
SELLING SECURITYHOLDERS TABLE
The following table sets forth as of April 30, 1997 the number and percent
of shares of Common Stock owned beneficially 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 owned by each
of them after the conclusion of this offering:
<TABLE>
<CAPTION>
Before Offering After Offering
------------------------------ ------------------------------
Number of Number of Number of
Shares Shares Shares
Selling Beneficially Being Beneficially
Securityholder Owned Percent(1) Offered(2) Owned Percent(1)
- --------------------- --------------- ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Game L.P.(3)....... 270,000 1.15% 270,000 -0- 0%
David Jordon......... 66,250(4) * 11,250 55,000 *
Barry W. Zelin....... 41,250(5) * 11,250 30,000 *
J.W. Charles Corp.... 17,500(6) * 7,500 10,000 *
Selig Zises.......... 361,700(7) 1.55% 230,200 131,500 *
Joel Magerman........ 93,500(8) * 57,550 36,000 *
SRG Associates....... 30,000(9) * 30,000 -0- *
Lyon Securities...... 10,000(10) * 10,000 -0- *
========= ==== ======= ======= =
</TABLE>
- ----------------------
(1) Included as outstanding for purposes of this calculation are 23,314,000
shares of Common Stock outstanding as of April 30, 1997 plus, in the case
of a particular selling securityholder, the number of shares of Common
Stock subject to currently exercisable options, warrants and other
instruments (including those which may become exercisable within 60 days
after April 30, 1997) held by such securityholder, which are specified by
footnote. Shares issuable as part of or upon exercise of outstanding
options, warrants or instruments other than as described in the preceding
sentence are not deemed to be outstanding for this purpose. An asterisk
denotes beneficial ownership of less than 1%.
(2) All of the shares offered hereby consist of shares of Common Stock issuable
upon exercise of the Warrants described in this Prospectus.
(3) Game L.P. is a limited partnership whose general partners are Arthur D.
Kowoloff and Robert B. Machinist. As general partners, Messrs. Kowoloff
and Machinist exercise investment discretion with respect to the Warrants
held by Game L.P. and, as such, may be deemed to be beneficial owners of
such Warrants.
(4) Includes 11,250 shares of Common Stock underlying the Warrants described
herein and being offered hereby and 55,000 shares underlying other
currently exercisable warrants.
5
<PAGE>
(5) Includes 11,250 shares of Common Stock underlying the Warrants described
herein which are being offered hereby and 30,000 shares underlying other
currently exercisable warrants.
(6) Consists of 7,500 shares of Common Stock underlying the Warrants described
herein which are being offered hereby and 10,000 shares underlying other
currently exercisable warrants.
(7) Consists of 230,200 shares of Common Stock underlying the Warrants
described herein which are being offered hereby and 131,500 shares
underlying other currently exercisable warrants.
(8) Includes 57,550 shares of Common Stock underlying the Warrants described
herein which are being offered hereby and 36,000 shares underlying other
currently exercisable warrants.
(9) Consists of 30,000 shares of Common Stock underlying the
Warrants described herein which are being offered hereby.
(10) Consists of 10,000 shares of Common Stock underlying the
Warrants described herein which are being offering hereby.
CERTAIN RELATIONSHIPS
Messrs. Zelin and Jordan and J.W. Charles Corp., or affiliated companies,
have from time to time rendered financial consulting services to the Company for
which they were previously granted warrants to purchase Common Stock.
In addition to the grants of Warrants described above, in March, 1996, the
Company issued to Selig Zises, Joel Magerman and Tim and Pamela Keenan, in
consideration of equipment sale-leaseback financing arranged by Associated
Ventures, warrants to purchase 84,000, 21,000 and 7,500 shares of Common Stock
at an exercise price of $4.00 per share, respectively. Each of these
individuals is a principal or officer of Associated Ventures. These warrants
were granted pursuant to the previously described consulting agreement between
the Company and Associated Ventures.
Except as described herein, no Selling Securityholder or its affiliates has
any position, office or other material relationship with the Company.
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
antimanipulation 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.
6
<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. 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............... 3
Risk Factors........................... 4
Recent Developments.................... 4
Use of Proceeds........................ 9
Price Range of Common Stock
and Dividend Policy.................. 10
Selected Consolidated Financial Data... 11
Selling Securityholders................ 12
Description of Securities.............. 12
Legal Matters.......................... 16
Experts................................ 16
</TABLE>
================================================================================
================================================================================
COMMON STOCK
NTN COMMUNICATIONS, INC.
627,550 SHARES
____________
PROSPECTUS
____________
May 8, 1997
================================================================================
<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:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 1,519
Printing expenses................................................. 2,000
Accounting fees and expenses...................................... 10,000
Legal fees and expenses........................................... 45,000
Fees and expenses for qualification under state securities laws... 2,000
Miscellaneous..................................................... 4,481
-------
Total............................................................ $65,000
=======
</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 Company has entered into indemnity agreements with certain of its
outside directors. Pursuant to such indemnity agreements, the Company has
agreed 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 Warrant Agreement between NTN Communications, Inc. and American
Stock Transfer & Trust Company, including Specimen Warrant Certificate*
4.3 Specimen form of Class WCA Warrant.**
5.1 Opinion of Troy & Gould Professional Corporation.**
23.1 Consent of Troy & Gould Professional Corporation (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP (included on page II-5 hereof)**
24 Power of Attorney*
- ------------------------------------
* Previously filed.
** Included herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, 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; and
(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
II-2
<PAGE>
to be a new 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.
(d) The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new 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.
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. 2 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 May 12, 1997.
NTN COMMUNICATIONS, INC.
/s/ Gerald Sokol, Jr.
By:_______________________________
Gerald Sokol, Jr.
President and Chief Operating Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Edward C. Frazier Chairman of the Board May 12, 1997
- -----------------------------------
Edward C. Frazier
/s/ Gerald Sokol, Jr. President and Chief Operating May 12, 1997
- ------------------------------------ Officer and Senior Vice
Gerald Sokol, Jr. President Finance (Principal
Financial and Accounting
Officer)
/s/ Robert M. Bennett Director May 12, 1997
- -----------------------------------
Robert M. Bennett
/s/ Patrick J. Downs Director May 12, 1997
- -----------------------------------
Patrick J. Downs
/s/ Daniel C. Downs Director May 12, 1997
- -----------------------------------
Daniel C. Downs
/s/ Donald C. Klosterman Director May 12, 1997
- -----------------------------------
Donald C. Klosterman
/s/ Alan P. Magerman Director May 12, 1997
- -----------------------------------
Alan P. Magerman
</TABLE>
II-4
<PAGE>
EXHIBIT 23.2
------------
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 April 10, 1997 contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations and has a
net working capital deficiency that raise substantial doubt about its ability
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
San Diego, California
May 12, 1997
II-5
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
------- ----------- ----------
<S> <C> <C>
4.1 Specimen Common Stock Certificate (previously filed as an exhibit to the N/A
Company's Registration Statement on Form 8-A, File No. 0-19383, and
incorporated herein by reference)
4.2 Form of Warrant Agreement between NTN Communications, Inc. and N/A
American Stock Transfer & Trust Company, including Specimen Warrant
Certificate*
4.3 Specimen form of Class WCA Warrants**
5.1 Opinion of Troy & Gould Professional Corporation** N/A
23.1 Consent of Troy & Gould Professional Corporation (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP (included on page II-5 hereof)**
24 Power of Attorney* N/A
- --------------------------
</TABLE>
* Previously filed.
** Included herewith.
<PAGE>
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
Warrant to Purchase
1- 2-
Shares
NTN COMMUNICATIONS, INC.
(Incorporated under the laws of the State of Delaware)
WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.005 PAR VALUE COMMON STOCK OF NTN COMMUNICATIONS, INC.
EXERCISABLE ONLY AFTER 3-, AND VOID AFTER 4-.
Warrant Price: $_- per share.
1. THIS IS TO CERTIFY that, for value received, 6- or its registered
assigns (either or both of whom are referred to herein as the "Holder"), is
entitled to purchase, subject to the terms and conditions hereinafter set forth,
at anytime from and after 3-, and on or before 4- (the "Warrant Period"), up to
2- shares of the $.005 par value common stock ("Common Stock") of NTN
Communications, Inc. (the "Company"), and to receive certificate(s) for the
Common Stock so purchased. This warrant may be exercised in whole or in part.
Such exercise shall be accomplished by tender to the Company of the purchase
price set forth above as the warrant price (the "Warrant Price"), either in cash
or by certified check or bank cashier's check, payable to the order of the
Company, together with presentation and surrender to the Company of this Warrant
with an executed subscription in substantially the form attached hereto as
Exhibit A. Fractional shares of the Company's Common Stock will not be issued
upon the exercise of this Warrant.
2. The Company agrees at all times to reserve and hold available out of
the aggregate of its authorized but unissued Common Stock the number of shares
of its Common Stock issuable upon the exercise of this and all other Warrants of
like tenor then outstanding. The Company further covenants and agrees that all
shares of Common Stock that may be delivered upon the exercise of this Warrant
will, upon delivery, be fully paid
1.
<PAGE>
and nonassessable and free from all taxes, liens and charges with respect to the
purchase thereof hereunder.
This Warrant and the Common Stock issuable upon the exercise hereof may
not be sold, transferred, pledged or hypothecated unless the Company shall have
been supplied with evidence reasonably satisfactory to it that such transfer is
not in violation of the Securities Act of 1933, as amended (the "Act") and any
applicable state laws. Subject to the satisfaction of the aforesaid condition,
this Warrant shall be transferable by the Holder.
If this Warrant is transferred, in whole or in part, upon surrender of this
Warrant to the Company, the Company shall deliver to each transferee a Warrant
evidencing the rights of such transferee to purchase the number of shares of
Common Stock that such transferee is entitled to purchase pursuant to such
transfer.
The Company may place a legend on this Warrant or any replacement Warrant
and on each certificate representing shares issuable upon exercise of this
Warrant as to which the Company has not been supplied evidence that the transfer
of such security would not be in violation of the Act and any applicable state
laws.
Only the registered Holder may enforce the provisions of this Warrant
against the Company. A transferee of the original registered Holder becomes a
registered Holder only upon notice to the Company substantially in the form set
forth in Exhibit B hereto.
3. This Warrant does not entitle the Holder to any voting rights or other
rights as a stockholder of the Company, nor to any other rights whatsoever
except the rights herein set forth, and no dividend shall be payable or accrue
by reason of this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that, this
Warrant is exercised.
This Warrant is exchangeable upon its surrender by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the Holder at the time of such surrender.
At such time as the Common Stock is listed on any registered national
securities exchange, the Company shall, upon issuance of any shares for which
this Warrant is exercisable,
2.
<PAGE>
at its expense, promptly obtain and maintain the listing of such shares.
The Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended, for so long as and to
the extent that such requirements apply to the Company.
4. The Warrant Price and the number of shares purchasable upon the
exercise of this Warrant are subject to adjustment from time to time upon the
occurrence of any of the events specified in this Section 4.
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into smaller number of shares of Common Stock, or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of shares of Common Stock purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder of this Warrant
shall be entitled to receive the kind and number of shares of Common Stock or
other securities of the Company that he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Warrant Price
shall be adjusted by multiplying such Warrant Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of shares
of Common Stock purchasable upon the exercise of this Warrant immediately prior
to such adjustment, and of which the denominator shall be the number of shares
of Common Stock so purchasable immediately thereafter.
(c) For the purpose of this Section 4, the term shares of Common Stock
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Warrant, or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting solely of
change in par value, or from par value to no par value, or from no par value to
par value.
3.
<PAGE>
(d) If during the Warrant Period the Company consolidates with or
merges into another corporation or transfers all or substantially all of its
assets the Holder shall thereafter be entitled upon exercise hereof to purchase,
with respect to each share of Common Stock purchasable hereunder immediately
prior to the date upon which such consolidation or merger becomes effective, the
securities or property to which a holder of shares of Common Stock is entitled
upon such consolidation or merger, without any change in, or payment in addition
to the Warrant Price in effect immediately prior to such merger or
consolidation, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to ensure that all of the provisions
of this Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of this Warrant. The Company shall not effect any such consolidation,
merger or asset transfer unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting therefrom shall assume by
written agreement executed and mailed to the registered Holder at his address
shown on the books and records of the Company, the obligation to deliver to such
Holder any such securities or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
(e) Upon the happening of any event requiring an adjustment of the
Warrant Price, the Company shall forthwith give written notice thereof to the
registered Holder of this Warrant, stating the adjusted Warrant Price and the
adjusted number of shares of Common Stock or other securities or property
purchasable upon the exercise hereof resulting from such event and setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Board of Directors of the Company shall determine the
adjusted Warrant Price and the securities or property purchasable upon exercise.
If any voluntary or involuntary dissolution, liquidation, or winding up of the
Company is pro posed, the Company shall give at least 20 days prior written
notice of such proposal to the registered Holder hereof stating the date on
which such event is to take place and the date (which shall be at least 20 days
after giving of such notice) as of which the holders of shares of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such dissolution, liquidation or winding up.
This Warrant and all rights hereunder shall terminate as of the date on which
such dissolution, liquidation, or winding up takes place. The notices pursuant
to this paragraph shall be given by first class mail, postage prepaid, addressed
to the registered
4.
<PAGE>
Holder of this Warrant at his address appearing in the records of the Company.
(f) Irrespective of any adjustments pursuant to this Section 4 to the
Warrant Price or to the number of shares or other securities or other property
obtainable upon exercise of this Warrant, this Warrant may continue to state the
Warrant Price and the number of shares obtainable upon exercise, as the same
price and number of shares stated herein.
5. (a) In the event that the Company proposes, at any time subsequent to
3-, but prior to 4-, whether or not this Warrant has yet been exercised in whole
or in part, to file a registration statement on a general form of registration
under the Act relating to securities issued or to be issued by it, then it shall
give written notice of such proposal to the record owners of the Warrants and
any shares of Common Stock issued upon the exercise thereof. If, within 15 days
after the giving of such notice, the record owners of any of the Warrants or
shares of Common Stock issued or issuable upon their exercise shall request in
writing that all or any of the shares of Common Stock issued or issuable upon
exercise of the Warrants be included in such proposed registration, the Company
will, at its own expense (except as set forth below), also register such shares
of Common Stock as shall have been so requested in writing; provided, however,
that
(i) the Company shall not be required to include any of such
shares of Common Stock if, by reason of such inclusion, the Company shall
be required to prepare and file a registration statement on a form
promulgated by the Securities and Exchange Commission different from that
which the Company otherwise would use;
(ii) such owners shall cooperate with the Company in the
preparation of such registration statement to the extent required to
furnish information concerning such owners therein; and
(iii) if any underwriter or managing agent is purchasing or
arranging for the sale of the securities then being offered by the Company
under such registration statement, then such owners (A) shall agree to have
the securities being so registered sold to or by such under writer or
managing agent on terms substantially equivalent to the terms upon which
the Company is selling the securities so registered, or (B) shall delay the
sale of such securities for the 90 day period commencing with the effective
date of the registration statement.
5.
<PAGE>
(b) In connection with the filing of a registration statement pursuant
to subsection 5(a), the Company shall:
(i) notify such owners as to the filing thereof and of all
amendments thereto filed prior to the effective date of said registration
statement;
(ii) notify such owners, promptly after it shall have received
notice thereof, of the time when the registration statement becomes
effective or any supplement to any prospectus forming a part of the
registration statement has been filed;
(iii) prepare and file without expense to such owners any
necessary amendment or supplement to such registration statement or
prospectus as may be necessary to comply with Section 10(a)(3) of the Act
or advisable in connection with the proposed distribution of the securities
by such owners;
(iv) take all reasonable steps to qualify the shares of Common
Stock being so registered for sale under the securities or blue sky laws in
such states, but only in such states, as the Company would qualify the
sales of its securities absent any registration of the shares of Common
Stock issued or issuable hereunder;
(v) notify such registered owners of any stop order suspending
the effectiveness of the registration statement and use its reasonable best
efforts to remove such stop order; and
(vi) undertake to keep said registration statement and
prospectus effective until the earlier of (A) six months from the effective
date thereof (provided, that if the Holders are required to delay the sale
of the securities pursuant to Section 5(a)(iii)(B) hereof, then such period
shall be extended by the amount of such delay), or (B) the date the shares
of Common Stock are sold or become available for public sale without
restriction under the Act.
(c) The record owners of the shares of Common Stock being registered
under this Section 5 agree to pay all of the underwriting discounts and
commissions, registration fees and their own counsel fees with respect to the
securities owned by them and being registered. The Company agrees that the
costs and expenses which it is obligated to pay in connection with a
registration statement to be filed pursuant to subsection 5(a) hereof include,
but are not limited to, the fees and expenses of counsel for the Company, the
fees and expenses of
6.
<PAGE>
its accountants and all other costs and expenses incident to the preparation,
printing and filing under the Act of any such registration statement, each
prospectus and all amendments and supplements thereto, the costs incurred in
connection with the qualification of such securities for sale in a reasonable
number of states, including fees and disbursements of counsel for the Company,
and the costs of supplying a reasonable number of copies of the registration
statement, each preliminary prospectus, final prospectus and any supplements or
amendments thereto to such registered owners.
6. In connection with the obligation of the Company to register shares of
Common Stock pursuant to the provisions of Section 5 hereof, the Company and
each Holder agree as follows:
(a) The Company hereby agrees to indemnify and hold harmless each
Holder and each person who controls each Holder within the meaning of Section 15
of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages,
liabilities or actions to which each Holder or they or any of them may become
subject under the Act, the Exchange Act or otherwise and to reimburse the
persons indemnified above for any legal or other expenses (including the cost of
any investigation and preparation) reasonably incurred by them in connection
with any litigation or proceeding or threatened litigation or proceeding,
whether or not resulting in any liabilities, but only insofar as such losses,
claims, damages, liabilities or actions arise out of, or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement with respect to the shares of Common Stock (or
incorporated therein by reference) or any amendment or supplement thereto (such
registration statement, together with any such amendments or supplements, is
referred to herein as the "Registration Statement"), or the omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the employment
of the Company of any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the sale pursuant to the
Registration Statement of any of the securities registered thereby; provided,
however, that the indemnity agreement contained in this paragraph (a) shall not
extend to any indemnified person in respect of any such losses, claims, damages,
liabilities or actions arising out of, or based upon,
7.
<PAGE>
any such untrue statement or alleged untrue statement or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by such person specifically for
use in connection with the preparation of the Registration Statement. The
Company agrees to pay any legal and other expenses for which it is liable under
this paragraph (a) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(b) Each Holder agrees to indemnify and hold harmless the Company, its
directors, its officers who shall have signed the registration statement, each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Holder but in each case to the extent, and
only to the extent, that any statement in or omission from or alleged omission
from the registration statement, any preliminary prospectus, the prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such Holder specifically for use in
connection with the preparation of the registration statement, any preliminary
prospectus or the prospectus or any such amendment or supplement thereto. Each
Holder agrees to pay any legal and other expenses for which it is liable under
this paragraph (b) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(c) If any action is brought against a person entitled to
indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified
Party") in respect of which indemnity may be sought against a person granting
indemnification (an "Indemnifying Party") pursuant to such subsections, such
Indemnified Party shall promptly notify such Indemnifying Party in writing of
the commencement thereof; but the omission so to notify the Indemnifying Party
of any such action shall not release the Indemnifying Party from any liability
it may have to such Indemnified Party otherwise than on account of the indemnity
agreement contained in paragraphs (a) or (b). In case any such action is
brought against an Indemnified Party and it notifies an Indemnifying Party of
the commencement thereof, the Indemnifying Party against which a claim is to be
made will be entitled to participate therein, and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party, provided, however, that if the defendants in any such
action include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded based upon advice of counsel
that there may be legal defenses available to it and/or other Indemni-
8.
<PAGE>
fied Parties which conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right to select separate counsel to assume such
legal defenses and otherwise to participate in the defense of such action on
behalf of such Indemnified Party or Parties. Upon receipt of notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense of such action and approval by the Indemnified Party of counsel, the
Indemnifying Party will not be liable to such Indemnified Party under this
agreement for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one separate counsel), (ii)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of commencement of the action or (iii) the Indemnifying Party
has authorized the employment of such counsel for the Indemnified Party at the
expense of the Indemnifying Party. An Indemnifying Party shall not be liable
for any settlement of any action or proceeding effected without its written
consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in paragraph (a) is
unavailable to a Holder in accordance with its terms, the Company and each
Holder shall contribute to the aggregate losses, claims, damages and liabilities
of the nature contemplated by said indemnity agreement incurred by each Holder
based on the relative fault of the Company on the one hand, and each Holder on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages and liabilities. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact, such statement or omission relates to
information supplied by the Company or such Holder and the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by the Indemnified
Party as a result of the losses, claims, damages, or liabilities referred to
above in this paragraph shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending against or appearing as a third party witness in any such action
or claim. Notwithstanding the provisions of this paragraph, if a Holder is
found to be guilty of
9.
<PAGE>
fraudulent misrepresentation within the meaning of Section 11(f) of the Act, it
shall not be entitled to contribution from the Company unless the Company is
also found to be guilty of such fraudulent misrepresentation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officers, and the corporate seal hereunto affixed.
DATED: 7- NTN COMMUNICATIONS, INC.
By:____________________________
Gerald Sokol, Jr.
President and
Chief Financial Officer
[seal]
10.
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder to Exercise the Rights To Purchase
Common Stock Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for ________ shares (the
"Stock") of the Common Stock of NTN COMMUNICATIONS, INC. (the "Company")
pursuant to and in accordance with the terms and conditions of the attached
Warrant and hereby makes payment of $___________ therefor, and requests that a
certificate for such shares be issued in the name of the undersigned and be
delivered to the undersigned at the address stated below. If such number of
shares is not all of the shares purchasable pursuant to the attached Warrant,
the undersigned requests that a new Warrant of like tenor for the balance of the
remaining shares purchasable thereunder be delivered to the undersigned at the
address stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and not
with a view to, or for resale in connection with, a distribution of the shares
within the meaning of the Securities Act of 1933, as amended (the "Act"). I
also understand that the Company has not registered the Stock under the Act or
the California Corporate Securities Law of 1968, as amended (the "Law"), in
reliance upon exemptions from such registration, and that such reliance is based
in part upon my representations.
I understand that because the Stock has not been registered under the Act
or qualified under the Law, I must hold such Stock indefinitely unless such
Stock is subsequently registered and qualified under such statutes or is exempt
from such registration and qualification. Before I make any transfer or
disposition of any shares of the Stock, I agree to give to the Company written
notice of my intention to do so and to describe briefly the manner of such
proposed transfer or disposition. I shall make no such transfer or disposition
unless (a) such transfer or disposition can be made without registration under
the Act and qualification under the Law by reason of specific exemptions from
such registration and such qualification, or (b) a registration statement has
been filed pursuant to the Act and has been declared effective with respect to
such disposition, and an Application to Qualify Securities has been filed
pursuant to the Law and an appropriate permit or order respecting such
Application shall have been issued.
I agree that each certificate representing the Stock delivered to me shall
bear substantially the following legend:
A-1
<PAGE>
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares may not be sold or
transferred in the absence of such registration or an exemption therefrom
under said Act."
I further agree that the Company may place stop orders on the certificates
evidencing the Stock with the transfer agent, if any, to the same effect as the
above legend. The legend and stop transfer notice referred to above shall be
removed only upon my furnishing to the Company an opinion of counsel (reasonably
satisfactory to the Company) to the effect that such legend may be removed.
Date:________________ Signed:________________________
Address: _____________________
_____________________
_____________________
SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL
SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY,
AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR
ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
A-2
<PAGE>
ASSIGNMENT
(To be Executed by the Registered Holder to Effect Transfer of the Within
Warrant)
For Value Received _______________ hereby sells, assigns and transfers to
____________________ this warrant and the rights represented hereby to purchase
Common Stock in accordance with the terms and conditions hereof, and does hereby
irrevocably constitute and appoint _____________________________________ as
attorney to transfer this warrant on the books of the Company with full power of
substitution.
Dated:________________ Signed:_______________________
Please print or typewrite Please insert Social Security
name and address of or other Tax Identification
assignee: Number of Assignee:
_________________________ ____-_________-_________
_________________________
_________________________
_________________________
Zip
<PAGE>
EXHIBIT 5.1
-----------
[Letterhead of Troy & Gould]
May 12, 1997
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
(the "Registration Statement"), of NTN Communications, Inc. (the "Company"), as
amended by Amendment No. 2 thereto (as so amended, the "Registration
Statement"), which has been prepared for filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), relating to
an aggregate of 1,192,550 shares of Common Stock of the Company (the "Shares")
issuable upon exercise of the warrants described therein. Capitalized terms not
defined herein shall have the definitions ascribed to them in the Registration
Statement.
We are familiar with the corporate proceedings heretofore taken or proposed
to be taken by the Company in connection with the issuance 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, when issued and paid for as provided in the warrants
relating thereto, will be duly and validly issued, fully paid and nonassessable.
We consent to the use of our name under the caption "Legal Matters" in the
Registration Statement and the Prospectuses made part thereof, 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 Act, 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 the Act.
Very truly yours,
/s/ TROY & GOULD
Professional Corporation
