NTN COMMUNICATIONS INC, 10-K, 2000-03-17

NTN COMMUNICATIONS INC
10-K, 2000-03-17
TELEVISION BROADCASTING STATIONS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-11460

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.)

5966 LA PLACE COURT, CARLSBAD, CALIFORNIA 92008
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(760) 438-7400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
COMMON STOCK, $.005 PAR VALUE
REDEEMABLE COMMON STOCK AMERICAN STOCK EXCHANGE
PURCHASE WARRANTS

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.

YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]

The aggregate market value of the Common Stock held by non-affiliates of
Registrant as of March 1, 2000, computed by reference to the closing sale price
of the Common Stock on the American Stock Exchange, was approximately
$116,318,582. For purposes of this computation, all directors and executive
officers of Registrant are considered affiliates.

As of March 1, 2000, Registrant had 30,242,559 shares of Common Stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable

================================================================================

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM PAGE

<S> <C> <C>
Part I
1. Business 1

2. Properties 10

3. Legal Proceedings 10

4. Submission of Matters to a Vote of Security Holders 11

Part II

5. Market for Registrant's Common Equity and Related Stockholder 12
Matters

6. Selected Financial Data 13

7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13

7A. Quantitative and Qualitative Disclosures About Market Risk 19

8. Consolidated Financial Statements and Supplementary Data 20

9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 20

Part III

10. Directors and Executive Officers of the Registrant 21

11. Executive Compensation 23

12. Security Ownership of Certain Beneficial Owners and Management 26

13. Certain Relationships and Related Transactions 27

Part IV

14. Exhibits, Consolidated Financial Statement Schedule, and Reports 29
on Form 8-K

Index to Consolidated Financial Statements and Schedule F-1
</TABLE>

<PAGE> 3

PART I

ITEM 1. BUSINESS

THIS REPORT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS THAT INCLUDE THE
WORDS "BELIEVES," "EXPECTS," "ANTICIPATES," "PLANS" OR SIMILAR EXPRESSIONS AND
STATEMENTS RELATING TO THE COMPANY'S STRATEGIC PLANS, CAPITAL EXPENDITURES,
INDUSTRY TRENDS AND PROSPECTS AND THE COMPANY'S FINANCIAL POSITION. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE
COMPANY TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT ITS PLANS,
INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH PLANS, INTENTIONS OR EXPECTATIONS
WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ARE SET FORTH IN THIS REPORT UNDER
THE CAPTION "RISK FACTORS THAT MAY AFFECT FUTURE RESULTS".

GENERAL

NTN Communications, Inc. ("NTN" or the "Company"), based in Carlsbad,
California, is a developer and distributor of interactive entertainment and owns
and operates the largest "out-of-home" interactive consumer marketing television
network in the United States.

NTN operates its businesses principally through two operating divisions:
BUZZTIME, Inc.(TM) ("BUZZTIME") and The NTN Network(R). BUZZTIME, NTN's
wholly-owned subsidiary was formed in December 1999 to distribute NTN's digital
trivia game show library and many unique "TV Play-along" sports games. The NTN
Network operates two interactive television (ITV) networks: its original NTN
Network and its new Digital Interactive Television ("DITV") Network. Both
networks broadcast daily a wide variety of popular interactive games,
advertisements and informational programming to consumers in approximately 3,300
restaurants, sports bars and taverns throughout North America.

In 1994, the Company formed LearnStar, Inc., which operated through June
1998 as a wholly-owned subsidiary of NTN. In June 1998, the Company sold an
82.5% interest in LearnStar, Inc. to NewStar Learning Systems, L.L.C. In 1994,
the Company also formed IWN, Inc. ("IWN"), which serves as the general partner
of IWN L.P., a limited partnership which was engaged in the development of
interactive technology for gaming applications. IWN has no business or
operations apart from its service as the general partner of IWN L.P. In August
of 1999, the assets of IWN L.P. were sold to eBet Limited for $1,227,000 in cash
and 4,000,000 shares of eBet Online stock.

Unless otherwise indicated, references herein to "NTN" or the "Company"
include NTN and its consolidated subsidiaries.

INDUSTRY SEGMENTS

The industry segment information contained in the Notes to the Consolidated
Financial Statements included in Item 14 of this report is incorporated herein
by reference.

THE NTN NETWORK

GENERAL

The NTN Network is North America's largest "out-of-home" interactive
television network. The unique private network is driven by Internet-enhanced
technology and broadcasts a variety of multi-player sports and trivia games 365
days a year to hospitality venues such as restaurants, sports bars, hotels,
clubs and military bases totaling approximately 3,300 locations in North America
("Locations"). 17.7 million games are played per month on over 12,000 public
television screens.

Locations pay NTN to use the Company's interactive technology, which
consists of a customized personal computer and an average of 15 wireless game
pads, or Playmakers(R), and to receive the Company's 17-hours-per-day
entertainment broadcast. The content is delivered to the sites by satellite and
through the Internet, usually during off-peak hours, and stored on the
customized NTN-computer. The game and advertising content is then replayed off a
standard time clock to simulate a "real-time" broadcast.

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The NTN Network is the only television network that is specifically
designed to entertain the out-of-home viewer. Where other television broadcasts
are produced for the home viewer who is passively watching from six feet away,
NTN's broadcast is easily viewed from a distance of over 15 feet. In addition,
the NTN content is not dependent upon audio, so it does not interfere with the
Locations' own sound system or patrons' conversations. NTN's content is designed
to promote social interaction and stimulate conversation among the patrons.

Since 1982, the Company has operated a DOS-based Network, now termed the
original NTN Network. In April 1999, the Company launched a new and second DITV
network which is now being deployed.

DITV contains many new features, including a Windows-based platform with
full-motion video capabilities and high-resolution graphics to allow more
compelling content and better advertising opportunities. In addition, the new,
more consumer friendly Playmaker keypads operate at 900 MHz to increase
transmission range and have a longer battery life. They also feature a much
larger, eight line LCD screen that displays sports scores and other ticker
information. They also enable electronic, text-based chat between patrons.

PRINCIPAL PRODUCTS AND SERVICES

ENTERTAINMENT PROGRAMMING

The NTN Network's principal product/service is the broadcast of a variety
of sports and interactive trivia games that entertain and challenge a players'
skill and knowledge while creating significant customer loyalty. Each Location
is furnished with NTN proprietary equipment (a "Location System"), including a
customized personal computer, a satellite data receiving unit (usually a small
satellite dish), and a minimum of five hand-held, portable Playmakers which
players use to enter their selections. During live interactive programs, players
participate in the play-along programs using two television screens. One screen
features the live broadcast from the television network (e.g., an NFL football
game), while the second screen displays the NTN Network program. Participants
play the game by entering their selection on Playmakers, which transmit a radio
signal to the on-site computer. At the conclusion of the broadcast, scores are
calculated and top scores are sent via phone lines to the NTN broadcast center
(the "Broadcast Center") in Carlsbad, California. Within minutes, rankings for
each Location are tabulated and displayed and rankings and scores for the top
Locations are transmitted back to all Locations via the NTN Network for display.
This allows players to compete not only with other patrons at their Location,
but against all players across the nation who are participating interactively on
the NTN Network. Customers generally have executed a one-year contract to obtain
the Company's services and pay a monthly fee ranging from $400 to $800.

While certain of the Company's sports games are available only during the
seasons when the respective sports are played, trivia game programs allow the
Company to offer year-round interactive programming. The NTN Network provides
trivia competitions during evening hours, when Locations, particularly
restaurants and taverns, tend to be busiest.

A unique feature of NTN Network's interactive programming is the players'
ability to compete in real-time within each Location and be ranked against
players in all Locations throughout North America. This enables each Location to
create on-premise promotions to increase patron loyalty as well as NTN to
capture national sponsors who want to use the competitions as a promotional
tool.

The programming is created to build a sense of community within each
Location by providing customers the opportunity to compete against one another
as well as consumers in other Locations across the country. The competition,
intellectual challenge and personal recognition received on the NTN Network
encourages patrons to stay longer at Locations and return more often, enabling
the Locations to increase sales.

The NTN Network presently features the following interactive sports games
programs:

NTN PLAY-ALONG GAMES - Interactive games played in conjunction with live,
televised events. Games include the following:

<TABLE>
<CAPTION>
GAME DESCRIPTION
------------- ------------------------
<S> <C>
QB1(R) NFL licensed interactive strategy game in
conjunction with live telecasts of
college and professional football games

NTN PowerPlay Interactive strategy game played in
conjunction with live televised Hockey games
</TABLE>

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NTN FANTASY GAMES - Fantasy league games played in conjunction with
sporting events or rotisserie leagues. Games include the following:

<TABLE>
<CAPTION>
GAME DESCRIPTION
------------------------ ------------------------------------------
<S> <C>
Brackets(TM) Basketball or hockey tournament prediction
game

Football Challenge(TM) Weekly selection of winners of
college and professional football games

Survivor(R) Weekly single elimination prediction game
for professional football
</TABLE>

The NTN Network presently features the following interactive trivia games
programs:

NTN PREMIUM TRIVIA GAMES - Promotion-oriented weekly game shows that
generally require 1-2 hours of participation. Prizes are awarded to the top
finishers, except where prohibited by law. Games include the following:

<TABLE>
<CAPTION>
GAME DESCRIPTION
------------------------ ------------------------------------------
<S> <C>
Passport Travel trivia

Playback(TM) Music trivia

Showdown(R) Advanced trivia challenge

SportsIQ(TM) Weekly sports trivia game

Sports Trivia Challenge(R) Advanced sports trivia covering
multiple topics

Spotlight(TM) Entertainment and media-based
trivia game (movies, music)

Glory Daze(TM) Trivia game focused on baby boomer
topics
</TABLE>

NTN TRIVIA GAMES - General-themed, standard games typically one-half hour
in length. Games include the following:

<TABLE>
<CAPTION>
GAME DESCRIPTION
------------------------ ------------------------------------------
<S> <C>
Brain Buster(R) Interactive trivia game covering
esoteric topics

Countdown(R) Interactive trivia game using word plays

Topix(TM) Theme-driven trivia game played under
controlled timing

Wipeout(TM) Interactive trivia game eliminating
incorrect answers

Nightside(R) Adult-oriented trivia

Sports Trivia(R) General trivia game covering
sports topics

Retroactive(TM) Pop-culture trivia with 60's,
70's and 80's content

Football Weekend Roundup(TM) Football trivia game

Abused News(TM) Humorous trivia game focused on
headline News

Appeteasers(TM) Shorter version of humorous
general trivia game

Jukebox(TM) Music trivia based on category
selected by player

Triviaoke(TM) Music trivia game
</TABLE>

CUSTOM GAMES - Interactive games created specifically for media companies
such as Capital Cities/ABC for simultaneous broadcast with their live telecasts.

<TABLE>
<CAPTION>
GAME DESCRIPTION
------------------------ ------------------------------------------
<S> <C>
NTN Awards Show(TM) Interactive game played in conjunction
with the Academy Awards Show

NTN Draft Show(TM) Interactive game played in conjunction
with the annual NFL draft
</TABLE>

INFORMATION PROGRAMMING

During the hours in which the NTN Network is not broadcasting interactive
games, the Company uses its broadcast network to transmit sports information as
well as NTN Network programming information. The Company obtains the majority of
its sports

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information (for which it pays a monthly fee) from Sportsticker wire service,
electronically formats the information and then retransmits it for broadcast to
Locations.

ADVERTISING

The NTN Network, in a manner similar to the television broadcast medium,
sets aside a number of minutes of a broadcast hour for sale for advertising,
promotional spots (promoting NTN Network's competitions and special events),
"tune-in spots" (promoting NTN Network programming schedule), and public service
announcements.

The Company has currently set aside 14 minutes each hour for advertising
spots, promotional spots and "tune-in spots." Each spot is designed to be 15
seconds in length for a total of 56 spots per hour. The Company can insert
advertising messages into its interactive sports and trivia programming at any
number of Locations. Further, messages can be broadcast over the NTN Network or
custom-tailored for a specific Location or several Locations. Sponsorships of
programs are also available and provide advertisers with specific premium
exposure within a sponsorship program.

FREQUENT PLAYER PROGRAM

The NTN Network's Players Plus(R) ("Players Plus") frequent player club,
numbering over 500,000 current members, offers advertisers an effective tool for
market research. Players Plus members join by entering their name, address, zip
code and identification number into a Playmaker, which is then captured at the
Broadcast Center. Members earn points each time they play and also a chance to
win prizes in the monthly Players Plus sweepstakes. Sponsors are capable of
receiving feedback through interaction with customers in the form of customer
surveys on the NTN Network or via email.

INTERNET GAME STATION BUSINESS

In April 1999, the Company acquired the assets and rights to certain
technology, hardware and video games used in the Internet game business from
Sikander, Inc. The technology enables NTN to link the viewer/participants on its
existing network to coin-operated Internet stations, thus providing out-of-home
access to the Web and video games for patrons in restaurants, hotels and other
public venues. The Company is currently deploying Internet stations to various
Locations in Southern California and Texas for beta testing. No assurance can
be given that a market will develop for this technology and game format.

DISTRIBUTION

The NTN Network presently features from 14 to 17 hours, depending on the
time zone, of interactive sports and entertainment trivia game programming on
weekdays, with extended programming hours on weekends. The balance of broadcast
time is devoted to a non-audible graphics-based service transmitting
information, including sports scores and upcoming program promotions.

Original programming is developed and produced at the Company's corporate
offices in Carlsbad, California, for distribution to Locations. The Company's
facilities are equipped with video, satellite and communications equipment, and
multimedia computers. The Company can provide simultaneous transmission of up to
16 live events for interactive play and a multitude of interactive games and
other programs, allowing distribution of different programs to customers in
different geographical locations.

The Company uses two independent services to distribute NTN programming via
satellite to customers, although it is not dependent upon either service because
there are several other providers that offer similar services. The Company
attempts to use the most effective and least expensive multiple data
transmission techniques to distribute data from the Company's facilities to
customers, including Internet transmission and direct satellite broadcast.

NTN has granted an exclusive license to Networks North, Inc., a Canadian
Company, to conduct all business relating to NTN's content and hardware products
throughout Canada. This Canadian licensee currently broadcasts to approximately
500 hospitality venues.

NTN has also granted an exclusive license to eBet Limited, an Australian
Company, to distribute NTN's games in commercial establishments and other public
places throughout Australia and New Zealand via eBet Limited's own licensed
network. This Australian licensee currently broadcasts to approximately 40
hospitality venues.

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MARKETING

The NTN Network markets its services to customers primarily through
advertising in national trade periodicals, national and regional industry trade
shows, telemarketing, direct mail and direct contact through field
representatives. All sales prospects are organized and tracked through shared
database software. Currently, services are sold through a regional-based
management team that utilizes direct salespersons, as well as independent
representatives.

The Company believes that the DITV Network will be a growth vehicle for the
NTN Network. The additional appeal of the games and on-screen look are expected
to lead to greater customer satisfaction and an even longer product life cycle,
thereby extending the revenue stream from each Location.

The ability to broadcast full-motion video ads is expected to provide new
advertising opportunities. For the first time, advertisers will be able to
assimilate existing video footage into their NTN advertisements and avoid much
of the extra work needed to produce less compelling static ads that are
broadcast on the original NTN Network.

The Company is enhancing its frequent player program, PlayersPlus, to
enable registration of more players and increase its database of names, email
addresses and demographic information. This information can be used to target
direct marketing opportunities, as well as to drive players to NTN's other
businesses. NTN currently has approximately 500,000 members who accumulate
points for playing. Achieving higher point levels earns the PlayersPlus member a
higher status on the Network and their name is broadcast inside their "home"
Location and, if they score high enough, the entire country. NTN is currently
developing a common database that will enable cross promotions between all NTN
interactive platforms, whether they are in or out of the home.

Currently, NTN is placing prototype Internet Stations in various Southern
California and Texas Locations as its next phase of testing. The Company plans
to expand the test to 50 locations in the near future. The Company is
aggressively attending trade shows for the purpose of creating awareness and
establishing its brand as the industry leader. NTN intends to use the Internet
Stations to expand the Company's reach to Locations not currently suitable for
the interactive NTN Network (primarily due to its cost). The Internet stations
will also be valuable as a stand-alone product in many public locations that do
not have televisions or sit-down customers.

RAW MATERIALS

The Location System is assembled from off-the-shelf components available
from a variety of sources, except for the Playmaker package. The Company is
responsible for the installation and maintenance of the Location Systems. The
DITV Playmaker is a hand-held, 900-megahertz radio frequency device used to
enter choices and selections by players of QB1 and our other games and
programming is broadcast via the NTN Network and is currently manufactured by a
non-affiliated manufacturer in Taiwan.

SEASONAL BUSINESS

Overall, the Company's business generally is not seasonal. Revenue is
billed monthly as service is provided to customers. However, sales of new
Locations have traditionally been higher in the summer and early fall months
compared to the rest of the year. This trend coincides with the start of the NFL
season in August.

The hospitality industry has historically experienced a relatively high
business failure rate. Likewise, the Company has lost customers due to the
failure of customer businesses, change in ownership and non-renewal of
contracts, collectively referred to as "churn". The Company's historical churn
experience has also been seasonal in that the percentage of churn has been
highest following the completion of the NFL season in February, although churn
occurs in all months. During the Company's operating history, approximately 25%
to 30% of the existing NTN Network customers at the beginning of a year have
churned by the end of that year. The Company believes that a significant portion
of the historical churn rate is attributable to customer dissatisfaction with
the 49 MHz technology. The introduction of the new DITV Network is expected to
reduce the churn rate once the entire network of customers has been converted to
the DITV system; however, no assurance can be given that the improved DITV
technology will be successful in reducing the churn rate.

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SIGNIFICANT CUSTOMERS

The Company's customers are diverse and varied in size as well as location.
The Company is not dependent on any one customer. The Company does not have any
individual customer, including chain locations, who accounted for 10% or more of
its consolidated revenues in 1999, 1998 or 1997.

BACKLOG

The Company historically has not had a significant backlog at any time
because the Company normally can deliver and install new Location Systems within
the delivery schedule requested by customers (generally, within two to three
weeks). With the introduction of the DITV Network, however, a backlog of sales
ranging from 100 to 500 contracts existed from April 1999 to October 1999. As of
November 1999, the Company returned to its normal delivery schedule.

COMPETITION

Currently, the NTN Network has no competitors that furnish live,
multi-player interactive entertainment similar in scope and nature. Although the
Company has no direct competitors in this area, it does compete for total
entertainment dollars in the marketplace. Other forms of entertainment provided
in public eating and drinking establishments include music-based systems and
cable and pay-per-view television. However, informal feedback provided by
customers indicates that patrons are inclined to stay longer and consume more
food and drink when NTN Network interactive games are offered as the main source
of entertainment. Accordingly, NTN Network customers generally tend to view
these services as a profit generator rather than a cost center.

BUZZTIME

GENERAL

BUZZTIME is a wholly-owned subsidiary of NTN incorporated in the state of
Delaware in December 1999. BUZZTIME currently is the exclusive distributor of
the Company's largest known digital trivia game show library and many unique "TV
Play-along" sports games. BUZZTIME is also expected to launch BUZZTIME.com(TM)
as a new game website in the spring of 2000.

BUZZTIME will function as a game website as well as a developer and a
distributor of game content. As a developer, it will continue to augment the
Company's expansive interactive game library. As a distributor, BUZZTIME intends
to broadcast live play-along game shows to a broad array of interactive
platforms under a "BUZZTIME Everywhere" campaign. The Company's mission is to
take the BUZZTIME brand beyond BUZZTIME.com and online services to a multitude
of interactive platforms that will include Interactive Television (ITV) and
hand-held interactive devices. There can be no assurance that the Company will
be successful in executing this strategy.

PRINCIPAL PRODUCTS/SERVICES AND DISTRIBUTION

BUZZTIME offers a broad range of interactive entertainment and programming
which it delivers through many distribution channels. As the exclusive
distributor of the NTN interactive game library, BUZZTIME is the primary game
distributor to the NTN Network. In the spring of 2000, BUZZTIME will launch its
game website, BUZZTIME.com, which will feature its trivia content with a focus
on fun, community, competition and player rewards with the introduction of a
player reward program. BUZZTIME.com will feature popular, branded interactive
trivia games and consumer marketing promotions and contests. BUZZTIME will also
host and distribute the Company's unique interactive TV play-along sports games
which add an interactive, "Play-Along" layer to live sports television
broadcasts.

During 1999, BUZZTIME entered into key distribution agreements as follows:

FOXSPORTS.COM
BUZZTIME has an agreement with FOXSports.com through the 2000-2001 NFL
season providing for the production and hosting of a customized, co-branded
version of QB1 and live sports trivia game shows. Under this revenue-sharing
agreement, the games will be provided to end users via FOXSports Online and the
NTN Network. Additionally, Fox has agreed to provide on-air promotion during
Fox-televised professional football games.

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AT&T
BUZZTIME was selected in December 1999 as AT&T's first content provider in
conjunction with AT&T's initiative to deploy DCT-5000 set-top boxes scheduled to
begin in mid-2000. BUZZTIME has agreed to provide its multi-player interactive
trivia games and interactive play-along applications via AT&T's interactive
television service. The agreement with AT&T is a five-year agreement which
provides for revenue sharing opportunities through sponsorship, advertising and
e-commerce.

AMERICA ONLINE
In December 1999, NTN signed a one-year nonexclusive content agreement with
America Online that made NTN's BUZZTIME.com trivia games available to AOL's more
than 21 million members. In contrast to NTN's previous agreement with AOL, the
BUZZTIME content will be available on each of AOL's 13 channels. There will be
one game per channel, but an option to play more BUZZTIME trivia will be
available to consumers that if selected will take the consumers to BUZZTIME.com
where registrations and transactional activities will be between BUZZTIME and
the consumer. Under the previous agreement with AOL, over 500,000 unique players
played the Company's games each month and there were over two million monthly
entries averaging 14 minutes per visit according to AOL usage reports.

MIDWAY AMUSEMENT GAMES
BUZZTIME entered into a branding license agreement with Midway Amusement
Games whereby BUZZTIME's trivia questions and answers are to be provided via
Midway's "Touchmaster", a coin-operated video game and amusement machine.
BUZZTIME will be paid a royalty fee based on sales of the licensed products.

Management believes that the combination of multiple cross-promotional
distribution channels that currently exist together with those expected to be
established in 2000 will give BUZZTIME broad consumer exposure as an emerging
leader in the interactive game space.

MARKETING

The Company is aggressively implementing a plan to market interactive game
shows available for play 24-hours per day on multiple interactive platforms,
simultaneously, by hundreds of thousands of individuals. The platforms will
include interactive television, the Internet, online services (such as AOL), the
NTN Network, and even hand-held portable devices. Key to BUZZTIME's marketing
strategy is not only traditional website promotion but also the targeted
promotion to hundreds of thousands of its loyal AOL game players and millions of
dedicated out-of-home hospitality players. The NTN Network currently hosts 17
million games played each month in 3,300 restaurants and sports bars in North
America, and will be a key element in promoting the new brand.

The Company intends to grow revenues through a combination of advertising,
game sponsorships, e-commerce and pay-to-play models. The BUZZTIME business
model is supported by the emergence of strong market demand for compelling
content on the Internet; the installation of digital interactive cable set-top
boxes by Multiple Systems Operators; and content which will enable BUZZTIME
games to be played across all interactive platforms, including cell phones and
mobile devices, in the near future.

Key to revenue growth will be the Company's ability to register a large
number of users at little cost, and turn these registrations into revenue
through sponsorship, ad revenues and e-commerce. While our competitors must
spend millions of dollars per year to expose their brands to new players,
BUZZTIME is expected to have three powerful self-branding entities. These
include the millions of game players each month found playing its out-of-home
game network and the upcoming introductions to hundreds of thousands of BUZZTIME
players on both the AOL and interactive television platforms.

Revenues also are expected to be generated by creating a cross-platform
player rewards program with hundreds of rewards/distribution partners.
E-commerce partners will pay a "bounty" to gain direct access to BUZZTIME's
registered players. Players will receive redemption points, "Buzz Points," for
participating in the marketing promotion.

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RAW MATERIALS

For media platforms such as online services, the Company distributes its
programs to the recipients who maintain their own receiving, translation and
re-broadcasting equipment. Accordingly, the Company has no raw materials or
equipment needs for these customers beyond its own back-end servers.

SEASONAL BUSINESS

The Company's Internet game site is subject to industry trends that affect
Internet providers generally, including seasonality and user inactivity. User
traffic on web sites has typically declined during summer and year-end vacation
and holiday periods.

COMPETITION

In the Online/Internet Services market, the consumer has many entertainment
options from which to choose, ranging from cable television to telephone based
services to computer online providers and the Internet. The Company offers live,
multi-player games and services which are available to multiple interactive
platforms in the home. Also, the Company competes for a share of the total home
entertainment dollars against broadcast television, pay-per-view and other
content offered on cable television. The Company also competes with other
programming available to consumers through online services such as AOL. Cable
television, in its various forms, provides consumers the opportunity to make
viewing selections from anywhere between 30 to 100 free and pay channels, thus
limiting the amount of time devoted to any particular channel. For the most
part, cable television is predominantly a passive medium, and does not offer the
viewer the opportunity to participate in its programming, and even less
frequently, does it offer programming designed for active participation. Online
providers, such as AOL, can provide literally thousands of options for content
and entertainment; however, such online services have traditionally been
confined to that company's subscriber base. Interaction among viewers is thus
limited to the particular program as offered only on the specific online
service. NTN offers consumers the opportunity to participate and compete against
other viewers who are seeing the identical program over several different
technological media, including interactive television, personal computers and/or
the NTN Network.

Within the Online/Internet service market is the competitive set for
BUZZTIME.com, which are those sites which offer either trivia game play or
similarly styled social, non-violent game play such as board or card games,
games of chance, and strategy games. The competitive market for Internet game
sites is relatively new, intensely competitive and rapidly changing. The number
of Internet games sites competing for consumers' attention and spending has
proliferated in recent years, and the Company expects the competition to
continue to intensify. The Company competes directly and indirectly for
advertisers, registrants and players. Registration data, number of users per
month and the amount of time a user spends on a site per month (stickiness) are
all important metrics by which advertising revenue is attracted. The Company
believes that the principal competitive factors in attracting and retaining
users and registrants is the ability to offer compelling and entertaining
content and brand recognition.

SOURCES OF REVENUE

The following table sets forth certain information with respect to the
principal sources of the Company's revenues during the years ended December 31,
1999, 1998 and 1997.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
(IN THOUSANDS)
1999 1998 1997
---- ---- ----

<S> <C> <C> <C>
Hospitality Revenues $ 22,250 $ 20,973 21,018
Internet Revenues 383 1,131 694
America Online Fees 600 883 2,632
Equipment Sales, net 84 499 475
Other Revenue 431 708 1,042
</TABLE>

8
<PAGE> 11

LICENSING, TRADEMARKS, COPYRIGHTS AND PATENTS

The Company's sports games make use of simultaneous telecasts of sporting
events. Where the Company has licenses with various sporting leagues, the
Company is also permitted to utilize the trademarks and logos of national teams
and leagues in connection with the playing of an interactive game.

The Company is party to an agreement with the NFL which will, unless
renewed, expire March 31, 2000. The NFL agreement grants the Company the
exclusive data broadcast rights to conduct interactive games in conjunction with
the broadcast of NFL football games, for which the NFL receives a royalty based
on revenues billed by the Company in connection with QB1 play. The Company's
rights under the agreement include certain approved online services to all
territories in which such online services are accessible and significantly
includes the Internet. The Company is currently negotiating with the NFL for a
new agreement, but is not assured that a new agreement will be reached.

The Company keeps confidential as trade secrets the software used in the
production of its programs. The hardware used in the Company's operations is
virtually off-the-shelf, except for the Playmaker keypads. The Company owns
copyrights to all of its programs and software. In addition to the registration
of the trademark for QB1, the Company has either received, or is presently
applying for, trademark protection for the names of its other proprietary
programming, to the extent that trademark protection is available for them. The
Company's intellectual property assets are important to the Company's business
and, accordingly, the Company maintains a program directed to the protection of
its intellectual property assets.

GOVERNMENT CONTRACTS

The Company provides its broadcast services through the NTN Network to a
small number of government agencies (usually military base recreation units);
however, the number of government customers is small compared to the Company's
overall customer base. Contracts with government agencies are provided under
substantially the same terms and conditions as other corporate customers.

RESEARCH AND DEVELOPMENT

During 1999, 1998 and 1997, the Company incurred approximately $842,000,
$714,000, and $1,600,000, respectively, related to Company-sponsored research
and development projects, including projects performed by consultants for the
Company. In 1999, research and development efforts related to the development of
the second generation of the DITV Network, Internet stations and future Internet
websites.

The Company has previously experienced problems in the performance of its
49 megahertz Playmaker device. In an effort to address these equipment function
problems, the Company developed a new 900 megahertz Playmaker. The new device
has been more reliable as it has been deployed commercially with the launch of
NTN's DITV Network. Further, the Company has developed enhancements to its
interactive software including a migration to a Windows-based platform and
continued research into new and enhanced graphics. The Company continuously
evaluates various methods of transmitting its programs and services. Research
and development is also underway to migrate the current Network technology to
off-the-shelf Internet technology. By doing so, third-party content, technology
and hardware solutions can be easily integrated into the Network systems. The
goal is to transform the previously entertainment-based service into a Public
Portal to the Internet(TM), enabling popular online services such as e-mail,
chat, instant messaging and real-time informational services. In an effort to
prepare for the launch of the Company's new game website, BUZZTIME.com, the
Company performed beta testing for Internet based engines and content delivery
mechanisms for trivia gaming. The Company also investigated various hardware and
software platforms to determine the environment that will best serve the live
sport play-along games.

In 1999, the Company incurred approximately $60,000 in research and
development expenses for the development and testing of its coin-operated
Internet stations.

There is no assurance that the Company will successfully complete current
or planned development projects or will do so within the prescribed time
parameters and budgets. There can be no assurance, furthermore, that a market
will develop for any product successfully developed.

The Company works closely with independent user groups in an attempt to
develop new and enhanced services and products in response to customer needs.

9
<PAGE> 12

GOVERNMENT REGULATIONS

The cost of compliance with federal, state and local laws has not had a
material effect upon the Company's capital expenditures, earnings or competitive
position to date.

On June 16, 1998 the Company received FCC approval for its new 900 MHz
Playmaker keypad. The 900 MHz Playmaker is an integral component of the
Company's DITV Network.

EMPLOYEES

The Company employs approximately 188 people on a full-time basis and 35
people on a part-time basis, and also utilizes independent contractors for
specific projects. In addition, the Company retains a number of non-affiliated
programming and systems consultants. It is expected that as the Company expands,
additional employees and consultants will be required. The Company believes that
its present employees and consultants have the technical knowledge necessary for
the operation of the Company and that it will experience no particular
difficulties in engaging additional personnel with the necessary technical
skills when required. None of the Company's employees are represented by a labor
union, and the Company believes its employee relations are satisfactory.

ITEM 2. PROPERTIES

The Company leases space in a three-building complex known as The Campus
pursuant to a six-year lease for approximately 39,000 square feet of office and
warehouse space. The lease expires in June 2001 and the monthly rent is
approximately $38,000. In September 1998, the Company, as sublessor, entered
into a sublease agreement for office space in The Campus with WinResources
Computing, Inc., as sublessee. The sublease expires in June 2001 and the monthly
rent is approximately $13,000.

The Company also leased approximately 3,600 square feet of warehouse space
near the corporate headquarters in December 1999. The lease expires in December
2001 and the monthly rent is approximately $3,400 per month.

The Company also leased approximately 2,900 square feet of office space
near the corporate headquarters in February 2000. The lease expires in June 2001
and the monthly rent is approximately $5,300.

With continued growth, the Company anticipates having to lease additional
space in the near future. The Company believes it will be able to do so as the
need arises.

ITEM 3. LEGAL PROCEEDINGS

On June 11, 1997, the Company was included as a defendant in a class-action
lawsuit, entitled Eliot Miller and Jay Iyer, shareholders on behalf of
themselves and all others similarly situated vs. NTN Communications, Inc.,
Patrick J. Downs, Daniel C. Downs, Donald C. Klosterman, Ronald E. Hogan, Gerald
P. McLaughlin and KPMG Peat Marwick LLP, filed in the United States District
Court for the Southern District of California. The complaint alleges violations
of state and federal securities laws based upon purported omissions from the
Company's filings with the Securities and Exchange Commission. More
particularly, the complaint alleges that the directors and former officers
devised an "exit strategy" to provide themselves with undue compensation upon
their resignation from the Company. The plaintiffs further allege that
defendants made false statements about, and failed to disclose, contingent
liabilities (guaranteed compensation to management and the right of an investor
in IWN to require the Company to repurchase its investment during 1997) and
phantom assets (loans to management) in the Company's financial statements and
KPMG LLP's audit reports, all of which served allegedly to inflate the trading
price of the Company's Common Stock.

On November 7, 1997, the court granted KPMG LLP's motion to dismiss the
plaintiffs' claims against it pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure for failure to state a claim upon which relief may be granted.

10
<PAGE> 13

summary judgment in the Fourth Appellate District of the Court of Appeals for
the State of California. The Company will file its reply to the appeal on or
before March 30, 2000. In the Company's opinion, the claim in the Dorman
litigation is covered by directors and officers liability insurance. The Company
has submitted this claim to its directors and officers liability insurance
underwriters, who have accepted such claims subject to reservation of rights.
The Company's deductible under the insurance policy is $200,000, which has been
satisfied.

In November 1999, the Company reached a tentative settlement agreement with
the class of plaintiffs in the Miller litigation whereby the Company would pay
$3,250,000 upon approval by the court. The settlement payment is fully covered
by the Company's liability insurance. A settlement hearing is scheduled to take
place in April 2000 for the purpose of seeking court approval of the proposed
settlement and plan of allocation of the settlement funds. Assuming court
approval is obtained, the litigation will be dismissed as to all defendants.

In September 1998, the Company received correspondence from counsel to
Microsoft Corporation and related inquiries from the Business Software Alliance
and Software Publishers Association, two industry associations, requesting
information regarding the Company's use of the MS-DOS operating system in
connection with its Playmaker(R) systems which at the time were installed in
over 2,800 hospitality locations throughout the United States. In response, the
Company conducted an internal audit and produced the results to counsel to the
three entities. Based on the audit results, it was determined that the Company
had insufficient licensing for the MS-DOS in use in the hospitality locations.
In November 1999, the Company entered into a Settlement Agreement with the
Business Software Alliance ("BSA") pursuant to which the Company will pay the
BSA a total of $339,864 in ten equal monthly installments. The Company will also
be required to deliver to BSA a Certification of Compliance certifying the
accuracy of the software audit results and that all copies of the relevant
software products used by NTN in the course of business are licensed to NTN and
are used solely in accordance with such licenses. In addition, in December 1999,
the Company entered into a Settlement Agreement with the Software Publishers
Association pursuant to which the Company was liable for a total of $25,000 to
the Software Publishers Association in two equal installments and purchased
sufficient copies of the software to replace infringing copies as needed. The
Company had previously reserved an amount sufficient to cover the expense of
both settlements.

The Company has been involved as a plaintiff or defendant in various
previously reported lawsuits in both the United States and Canada involving
Interactive Network, Inc. ("IN"). With the court's assistance, the Company and
IN reached a resolution of all pending disputes in the United States and agreed
to private arbitration regarding any future licensing, copyright or infringement
issues which may arise between the parties. There remain two lawsuits involving
the Company, its unaffiliated Canadian licensee and IN, which were filed in
Canada in 1992. No action was taken in the Canadian litigation until May 1998,
when IN gave notice of its intention to proceed. In November 1998, the Company
and its Canadian licensee filed a counterclaim against IN. 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. In January
2000, the Court ordered the parties to complete discovery in the matter in May
2000. Although they cannot be estimated with certainty, any damages the Company
might incur are not expected to be material.

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 all claims made.
During the pendency of such claims, the Company will continue to incur the costs
of defense of same. Other than set forth above, there is no material litigation
pending or threatened against the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held a special meeting of stockholders on January 7, 2000. The
following matters were voted upon at such meeting:

1. To amend the Company's Restated Certificate of Incorporation to increase
the authorized number of shares of Common Stock from 50,000,000 to
70,000,000 shares.

Votes In Favor: 23,837,350
Votes Against: 923,470
Abstentions*: 97,021

The proposal was approved.

2. To amend the Company's 1995 Stock Option Plan to increase the aggregate
number of shares of Common Stock that may be issued under the plan by
5,000,000 shares.

11
<PAGE> 14

Votes In Favor: 5,906,341
Votes Against: 1,789,705
Abstentions*: 345,904

The proposal was approved.

* Abstentions include "broker non-votes", which are abstentions by nominee
holders on behalf of beneficial owners who have given no instruction to the
nominee holder. When no such instructions are received, such nominee holders
have no authority to vote even though present or represented at the meeting.
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock and Redeemable Common Stock Purchase Warrants
are listed on the American Stock Exchange ("AMEX") under the symbols "NTN" and
"NTN/WS", respectively. Trading of the Company's redeemable Common Stock
purchase warrants commenced on the AMEX in February 1998. Set forth below are
the high and low sales prices for the Common Stock and warrants as reported by
the AMEX for the two most recent fiscal years:

<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------ --------

2000 LOW HIGH LOW HIGH
- ---- --- ---- --- ----
<S> <C> <C> <C> <C>
First Quarter $2.3130 $4.5000 $2.7500 $3.3750
(through 3/1/00)

1999
- ----
First Quarter $0.5625 $2.0000 $1.3750 $2.5000
Second Quarter $0.6250 $1.0000 $1.8750 $2.2500
Third Quarter $1.0625 $1.3750 $2.0630 $2.6250
Fourth Quarter $1.1875 $4.7500 $2.5000 $3.8130

1998
- ----
First Quarter $0.3125 $1.0625 $0.8750 $1.3125
Second Quarter $0.6875 $2.6250 $0.5000 $1.8750
Third Quarter $0.6250 $1.2500 $1.0625 $1.2500
Fourth Quarter $0.3125 $0.8125 $1.0625 $1.5000
</TABLE>

On March 1, 2000, the closing price for the Common Stock as reported on the
AMEX was $4.25.

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 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. Pursuant to the terms of the Company's line of credit, the
Company may not pay or declare dividends without the prior written consent of
the Lender.

As of March 1, 2000, there were approximately 1,952 holders of Common
Stock.

12
<PAGE> 15

ITEM 6. SELECTED FINANCIAL DATA

The following tables furnish information with respect to selected
consolidated financial data of the Company over the past five years.

STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Total revenue $ 23,748 $ 24,194 25,861 25,711 20,082
Total operating expenses 27,549 27,641 38,668 51,566 25,508
------------ ---------- -------- -------- -------
Operating income (loss) (3,801) (3,447) (12,807) (25,855) (5,426)
Other income, net 1,303 1,654 350 1 1,409
------------ ---------- -------- -------- -------
Net loss from continuing
operations (2,498) (1,793) (12,457) (25,855) (4,017)
Net income (loss) from
discontinued operations -- -- -- (1,317) 69
Gain on sale of discontinued
operations -- -- -- 4,219 --
Income taxes -- -- -- -- --
------------ ---------- -------- -------- -------
Net loss $ (2,498) $ (1,793) (12,457) (22,952) (3,948)
============ ========== ======= ======= ======
Accretion of beneficial conversion
feature of preferred stock -- (758) -- -- --
------------ ---------- -------- -------- -------
Net loss available to
common shareholders $ (2,498) $ (2,551) (12,457) (22,952) (3,948)
============ ========== ======= ======= ======
Basic and diluted net loss
per common share:
Continuing operations $ (.09) $ (.10) (0.55) (1.15) (0.19)
Discontinued operations -- -- -- 0.13 --
------------ ---------- -------- ------- -------
Net loss $ (.09) $ (.10) (0.55) (1.02) (0.19)
============ ========== ======= ======= ======

Weighted-average
shares outstanding 28,470 26,078 22,696 22,568 20,301
============ ========== ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
BALANCE SHEET DATA
(IN THOUSANDS)

DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total current assets $ 6,387 $ 8,131 $ 8,390 $ 10,655 $ 26,009
Total assets $ 17,287 $ 16,767 20,271 28,504 41,221
Total current liabilities $ 5,466 $ 5,731 8,373 12,775 6,541
Total liabilities $ 15,066 $ 8,442 11,545 18,282 7,770
Shareholders' equity $ 2,221 $ 8,325 8,726 10,222 33,451
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the selected financial data and
the consolidated financial statements and notes thereto included elsewhere
herein.

13
<PAGE> 16

RESULTS OF OPERATIONS

Following is a comparative discussion by fiscal year of the results of
operations for the three years ended December 31, 1999. The Company believes
that inflation has not had a material effect on its results of operations for
the periods presented.

YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Operations for the year ended December 31, 1999 resulted in a net loss of
$2,498,000 compared to net loss of $1,793,000 for the year ended December 31,
1998. The operating results for the year ended December 31, 1999 included a gain
of $2,254,000 related to the sale of the assets of the Company's wholly-owned
subsidiary, IWN, L.P., to eBet Limited for $1,227,000 in cash and 4,000,000
shares of eBet Online stock. The operating results for the year ended December
31, 1998 included a gain of $1,643,000 related to the sale of a majority
interest in one of the Company's subsidiaries.

Total revenues decreased 2% to $23,748,000 for the year ended December 31,
1999 from $24,194,000 for the year ended December 31, 1998. This occurred
primarily due to decreases in Internet revenues, America Online fees, equipment
sales and other revenues which were partially offset by increases in Hospitality
revenues.

Hospitality revenues increased 6% to $22,250,000 for the year ended December
31, 1999 from $20,973,000 for the year ended December 31, 1998. This increase is
primarily due to an increase in fees charged for the setup, installation and
training for the DITV Network as compared to the original NTN Network. During
the year ended December 31, 1999, approximately 1,500 DITV systems were
installed.

Internet revenues decreased 66% to $383,000 for the year ended December 31,
1999 from $1,131,000 for the year ended December 31, 1998. The decrease was
largely due to the expiration of the trials the Company performed for Bell
Canada in 1998 which generated $670,000 in 1998 that did not occur in 1999.

America Online fees decreased 32% to $600,000 for the year ended December
31, 1999 from $883,000 for the year ended December 31, 1998. The Company entered
into a new contract in the second quarter of 1998 with its Internet partner,
America Online. The new contract, which expired December 1, 1999, provided for a
flat monthly fee rather than fees based on AOL member usage of the Company's
content, which resulted in a reduction of revenue from this source of $283,000
for the year ended December 31, 1999 compared to the year ended December 31,
1998.

Equipment sales decreased 83% to $84,000 for the year ended December 31,1999
from $499,000 for the year ended December 31, 1998. This decrease was due to the
conclusion of the recognition of deferred revenue associated with prior
equipment sale-leasebacks and also a result of no equipment being sold in 1999.

Other revenue decreased 39% to $431,000 for the year ended December 31,
1999 from $708,000 for the year ended December 31, 1998. Other revenue for the
year ended December 31, 1998 included $125,000 in sales generated by LearnStar,
Inc. As a result of the sale of an 82.5% interest in LearnStar in June 1998, no
such revenue was recorded for the year ended December 31, 1999. Additionally,
due to the curtailment of operations related to IWN, Inc. in 1998, other revenue
decreased by approximately $191,000 for IWN, Inc. for the year ended December
31, 1999 as compared to the year ended December 31,1998.

Direct operating costs increased 27% to $5,982,000 for the year ended
December 31, 1999 from $4,715,000 for the year ended December 31, 1998. This
increase was due to aggregate expenses of approximately $600,000 associated with
an increase in the number of sites installed, increased freight expenses
associated with shipping equipment to the sites and an increase in the number of
sales commissions paid in connection with the roll-out of the DITV Network in
1999. Satellite transmissions costs and ISP charges increased $884,000 due to
additional services needed to support the DITV Network for the year ended
December 31, 1999. These increases were partially offset by the settlement of an
accrued liability for license fees that was less than had been estimated. As a
result, the Company reduced the accrued expenses and direct operating costs by
approximately $180,000 related to the settlement in 1999. The results for the
year ended December 31, 1998 included approximately $360,000 in costs related to
the realignment of the satellite dishes at hospitality locations in order to
receive broadcast transmissions from the Galaxy III-R satellite when the
PanAmSat Galaxy IV satellite failed to operate in May 1998.

Selling, general and administrative expenses increased 1% to $11,920,000 for
the year ended December 31, 1999 from $11,767,000 for the year ended December
31, 1998. Selling, general and administrative expense for the year ended
December 31, 1999 included consulting expenses of approximately $415,000
relating to Year 2000 remediation efforts. Additionally, marketing expenses
increased approximately $343,000 related to the new DITV Network which was
introduced during the year ended December 31, 1999. Approximately $276,000 in
selling, general and administrative expenses were incurred by LearnStar for the
year ended December 31, 1998. As a result of the sale of an 82.5% interest in
LearnStar in June 1998, no such expenses were recorded for the year ended

14
<PAGE> 17

December 31, 1999. Selling, general and administrative expenses incurred by IWN
also decreased by approximately $235,000 in 1999 as a result of the sale of
assets of IWN, L.P. in August 1999. Additionally, office lease
expense decreased approximately $135,000 due to the sublet of office space
beginning in September 1998.

Litigation, legal and professional fees decreased to $558,000 for the year
ended December 31, 1999 from $1,658,000 for the year ended December 31, 1998
partially due to the settlement of litigation for which the Company had accrued
a liability of $500,000 and the litigation was settled for approximately
$340,000. As a result, the Company reduced the accrued expenses and litigation,
legal and professional fee expenses by approximately $160,000 related to the
settlement. Expenses for 1998 include legal expenses incurred in the ordinary
course of business, as well as certain litigation expenses which did not recur
in 1999.

Equipment lease expense decreased 30% to $652,000 for the year ended
December 31, 1999 from $932,000 for the year ended December 31, 1998 due to the
payoff of such leases during the year ended December 31, 1999.

Stock-based compensation expense decreased 17% to $292,000 for the year
ended December 31, 1999 compared to $353,000 for the year ended December 31,
1998. The 1999 and 1998 charges resulted from the issuance of warrants and
options to employees and non-employees and can vary from period-to-period.

Research and development expenses decreased 18% to $842,000 for the year
ended December 31, 1999 compared to $714,000 for the year ended December 31,
1998. The current period expenses result from the Company's research and
development efforts related to the second generation of the DITV Network,
Internet stations, and future Internet web sites. For the year ended December
31, 1998, the Company's research and development efforts focused primarily on
the upgrade of the NTN Network to DITV.

Interest expense increased 263% to $1,050,000 for the year ended December
31, 1999 from $289,000 for the year ended December 31, 1998. The increase was
primarily due to interest expense recorded in 1999 related to the 7% senior
subordinated convertible notes issued in 1999. The Company also incurred
increased interest expense related to a new revolving line of credit, other
notes payable and additional capital leases for equipment acquisitions that did
not exist in 1998.

YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

The Company incurred a net loss of $1,793,000 for the year ended December
31, 1998 as compared to a net loss of $12,457,000 for the year ended December
31, 1997. The 1998 results includes an operating loss of $3,447,000 which was
partially offset by a gain of $1,643,000 from the sale of an 82.5% interest in
the Company's LearnStar subsidiary. The 1997 results included charges totaling
$4,998,000 related to a management reorganization, a $2,543,000 charge related
to shrinkage and obsolete equipment and a $905,000 gain from the sale of an
interest in real estate.

Total revenues decreased 6% to $24,194,000 in 1998 from $25,861,000 in 1997
due to declines in Hospitality revenues, Internet revenues, America Online
fees, and other revenue.

Hospitality revenues decreased 1% to $20,973,000 in 1998 from $21,018,000
in 1997 due primarily to a reduction in average billing rates during 1998,
which is offset by an increase in advertising revenue due to an increase in the
number of commercial spots sold.

Internet revenues increased 63% to $1,131,000 in 1998 from $694,000 in 1997
partially due to the trials the Company performed for Bell Canada which resulted
in an increase in revenue from this source of $290,000 in 1998. Also included in
1998 is revenue related to GTE Mainstreet which did not exist in 1997.

America Online fees decreased 66% to $883,000 in 1998 from $2,632,000 in
1997 largely due to non-recurring revenue of $1,000,000 in 1997 from AOL related
to AOL's termination of its prior contract with the Company and the recognition
of revenue for production services in 1997 that did not recur in 1998.

Equipment sales increased 5% to $499,000 in 1998 from $475,000 in 1997.
Equipment sales in the past have included sales to foreign licensees, which are
subject to outside influences and can occur unevenly throughout the year.

Direct operating costs decreased 28% to $4,715,000 in 1998 from $6,565,000
in 1997. The decrease relates to a reduction in site visit fees, commissions and
other field expenses due to (i) the Company's decreased reliance on independent
representatives in favor of employed field and marketing personnel and (ii) a
revision, effective January 1, 1998, in the Company's commission and bonus
structure for all field personnel.

Selling, general and administrative expenses decreased 28% to $11,767,000 in
1998 from $16,244,000 in 1997. Included in selling, general and administrative
expenses for 1997 were charges for the reorganization of the Company's
management totaling $3,363,000

15
<PAGE> 18

and costs associated with the abandoned merger with GTECH Corporation of
$376,000. Exclusive of these charges, selling, general and administrative
expenses decreased $738,000 or 6%. This decrease is primarily due to a reduction
in advertising and promotion expense, the sale of LearnStar, Inc. and a
significant reduction in IWN, LP business activity which collectively reduced
selling, general and administrative expenses.

Litigation, legal and professional fees increased to $1,658,000 in 1998 from
$808,000 in 1997. In the fourth quarter of 1997, the Company reduced the accrual
for a legal settlement which reduced legal expense by $1,350,000. Expenses for
1998 included legal expenses incurred in the ordinary course of business, as
well as litigation expenses and accruals which included $500,000 to cover the
potential liability related to insufficient licensing for MS-DOS.

Stock-based compensation decreased 89% to $353,000 in 1998 from $3,205,000
in 1997. Stock-based compensation charges result from the issuance, extension or
modification of warrants or options to non-employees and can vary from period to
period. Charges in 1997 included $1,450,000 that resulted from extension of the
exercise period and reductions in the exercise price of warrants owned by
certain former officers pursuant to the management reorganization in 1997.

Depreciation and amortization expense increased 21% to $6,412,000 in 1998
from $5,305,000 in 1997 due to additions of broadcast equipment and fixed
assets.

Bad debt expense decreased 42% to $850,000 in 1998 from $1,462,000 in 1997.
The Company began to experience reliability problems with its equipment in NTN
Network Locations. These problems led to an increase in bad debt expense in 1996
and 1997. In 1998, the equipment problems stabilized, resulting in a lower bad
debt expense.

Equipment charges decreased 91% to $240,000 in 1998 from $2,543,000 in 1997.
Equipment charges consist of charges for obsolescence and shrinkage of the
Company's stock of broadcast equipment. The Company performs periodic reviews of
its broadcast equipment. In connection with these reviews, the Company
identified equipment shrinkage and obsolescence primarily related to terminated
sites.

Research and development expenses decreased 55% to $714,000 in 1998 from
$1,600,000 in 1997. The decrease was due to certain research and development
endeavors which began in early 1997 that were completed by the end of 1997.
These efforts included initial design and implementation of the Company website,
redesign of the America Online site and content and other production for third
parties. For 1998, the Company's research and development efforts related
primarily to the upgrade of the NTN network to DITV.

Other income (expense) increased to $1,654,000 in 1998 from $350,000 in
1997. Other income in 1998 included a gain of $1,643,000 related to the sale of
an 82.5% interest in LearnStar in June 1998. Other income in 1997 included a
gain of $905,000 related to the sale of the Company's interest in an office
building. Interest expense decreased 64% to $289,000 in 1998 from $793,000 in
1997 due primarily to interest expense recorded in 1997 in conjunction with the
repurchase of a limited partnership interest in IWN, L.P. in 1997.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, the Company had cash and cash equivalents of
$1,044,000 and working capital (current assets in excess of current liabilities)
of $921,000 compared to cash and cash equivalents of $4,560,000 and working
capital of $2,400,000 at December 31, 1998. Net cash provided by operations was
$431,000 and $1,120,000 for the twelve months ended December 31, 1999 and 1998,
respectively. The principal uses of cash in 1999 were to fund the Company's net
loss from operations, to fund prepaid expenses and to fund severance payments
totaling $925,000 in compliance with reorganization agreements with former
officers. These uses were more than offset by depreciation, amortization and
other noncash charges. Net cash used in investing activities was $5,472,000 for
the twelve months ended December 31, 1999 and $1,220,000 for the twelve months
ended December 31, 1998. Included in net cash used in investing activities for
the twelve months ended December 31, 1999 were approximately $6,814,000 in
capital expenditures, which were partially offset by proceeds from the sale of
assets of a subsidiary of approximately $1,227,000. Net cash provided by
financing activities was $1,525,000 for the year ended December 31, 1999. Net
cash used in financing activities was $104,000 for the year ended December 31,
1998. Net cash provided by financing activities for the year ended December 31,
1999 included borrowings under a new revolving line of credit of approximately
$11,175,000, offset by principal payments on the revolving line of credit and
other debt of approximately $8,872,000, and $1,125,000 of principal payments on
capital leases.

16
<PAGE> 19
As of December 31, 1999, the Company has outstanding 7% senior subordinated
convertible notes (convertible notes) of approximately $4,705,000, payable
February 1, 2001 and bearing interest at 7% per annum. If the Company defaults
under the convertible notes, in the discretion of the holders of the convertible
notes, the entire outstanding principal amount of the convertible notes and all
accrued and unpaid interest will become immediately due and payable in full. On
November 20, 1999, $1,000,000 of principal plus accrued interest was converted
into approximately 793,000 shares of Common Stock.

In August 1999, the Company entered into an agreement with Coast Business
Credit for a revolving line of credit not to exceed $4,000,000. Interest is
charged on the outstanding balance at a rate equal to the Prime Rate plus 1.5%
per annum, but cannot be less than 9% per annum. The line of credit is secured
by substantially all of the Company's assets. Total loan fees of $120,000 are
payable in three annual installments and are being amortized over the life of
the loan, which matures on August 31, 2002. The line of credit is expected to be
used primarily for capital expenditures related to the launch of the DITV
Network.

In February 1998, pursuant to the settlement of a class-action lawsuit
pending against the Company since 1993, the Company issued 565,000 warrants to
purchase Common Stock of the Company ("Settlement Warrants"). Each Settlement
Warrant has a term of three years beginning February 18, 1998. The Settlement
Warrants entitle the holder of a Settlement Warrant to purchase a share of
Common Stock of the Company at a price of $0.96. During the period from February
18, 2000 to February 18, 2001, the holders of Settlement Warrants were to have
the right, but not the obligation, to cause the Company to redeem the Settlement
Warrants for a redemption price of $3.25 per Settlement Warrant (the "Put
Right"); however, this Put Right expired by its terms on February 17, 2000 when
the closing price per share of the Company's Common Stock on the American Stock
Exchange reached $4.22 or above for the seventh trading day. The Company has no
further obligation to repurchase the Settlement Warrants or the underlying
Common Stock. The right of holders to exercise the Settlement Warrants to
purchase shares of Common Stock of the Company at $0.96 per share continues
through February 18, 2001.

The Company believes that its cash on hand, anticipated cash flows from its
operations and borrowings under its line of credit will be sufficient to meet
its immediate operating needs. If cash flow is less than anticipated, however,
or if the Company incurs unexpected expenses, the Company may need additional
funding in order to maintain its current level of operations of business
activities. It also is likely the Company will need to raise additional capital
in future periods through public or private financing or other arrangements to
expand the BUZZTIME Internet strategy, convert its entire existing customer base
to the DITV Network, to expand the DITV Network and to implement the Company's
Internet station strategy. The Company has no agreement or commitment for any
such additional financing and there can be no assurance whether, or on what
terms, such financing will be available to the Company. If the Company is unable
to obtain any needed financing, it would have to curtail certain business
activities.

YEAR 2000 COMPLIANCE

The Company's computer systems and equipment successfully transitioned to
the Year 2000 with no significant issues. The Company continues to keep its Year
2000 project management in place to monitor latent problems that could surface
at key dates or events in the future. It is not anticipated that there will be
any significant problems related to these events. All costs associated with the
Year 2000 remediation efforts were expensed or capitalized in accordance with
appropriate accounting policies.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company's business, results of operation and financial condition would
be adversely affected by a number of factors, including the following:

HISTORY OF SIGNIFICANT LOSSES; RECENT RESULTS OF OPERATIONS.

The Company has a history of significant losses, including net losses of
$2,498,000, $1,793,000 and $12,457,000 for each of the three years ended
December 31, 1999, and an accumulated deficit of $63,645,000 as of December 31,
1999. The results of operations during these periods included substantial
charges related to the resignation or termination of certain former executive
officers, write-downs of assets associated with discontinued business activities
and shrinkage and obsolescence of equipment, accruals for litigation settlement
costs and other litigation expenses, charges relating to stock-based
compensation, charges related to Year 2000 compliance, as well as charges
related to the rollout of the new DITV Network and the development of the
Company's Internet strategies. The Company expects to incur significant
additional charges in the future in connection with the deployment of the
Company's Internet strategies. There is no assurance that the Company will ever
operate profitably. See "Liquidity and Capital Resources" and "Selected
Consolidated Financial Data" for more information regarding the Company's
financial condition and need for financing.

17
<PAGE> 20

BRAND AWARENESS

Enhancing the BUZZTIME brand is critical to the Company's ability to expand
its user base and revenues and potential future profitability. The Company
believes that the importance of brand recognition will increase as the number of
entertainment Web sites grows and has therefore launched its "BUZZTIME
Everywhere" campaign. In order to attract and retain users and advertisers, the
Company intends to increase expenditures for creating and maintaining brand
loyalty. There is no assurance that the Company will be successful in building
or maintaining its brand. The Company's success in promoting and enhancing the
BUZZTIME brand will also depend on its success in providing high quality
content, features and functions that are attractive and entertaining to users of
online game shows and multi-player games. If visitors to the Company's websites
or advertisers do not perceive the services to be of high quality, the value of
the BUZZTIME brand could be diminished and this could adversely affect the
Company's business, financial condition and results of operations.

PENDING LITIGATION PROCEEDINGS

See "Legal Proceedings" for a discussion of pending legal proceedings. The
Company could become subject to similar legal proceedings in the future.

RECENT EQUIPMENT PROBLEMS

The 49 megahertz Playmaker, a hand-held, radio frequency device used to
enter choices and selections by players of QB1 and other games and programming
broadcast via the NTN Network is still being used in approximately 40% of NTN's
hospitality locations as of December 31, 1999. Customers have experienced
certain recurring problems with 49 megahertz Playmakers related to noise
sensitivity and performance of the Playmaker's rechargeable batteries.
Management believes these equipment problems contributed to a high rate of churn
in 1999, 1998 and 1997. To address these problems, the Company introduced a 900
megahertz Playmaker in April 1999. The 900 megahertz Playmaker is manufactured
by the manufacturer of the 49 megahertz Playmaker. To date, there have been no
significant equipment problems with the 900 megahertz Playmakers, however, there
is no assurance that such problems won't occur in the future, which could
adversely affect our results of operations.

ADDITIONAL PERSONNEL

The Company plans to expand its employee base to manage its anticipated
growth. Most importantly, the Company intends to hire additional members of its
technical and Internet sales and marketing teams. Competition for personnel,
particularly for employees with technical and Internet sales and marketing
expertise is intense. The success of execution of our Internet strategy is
dependent on hiring and retaining suitable personnel.

COMPETITION

The Company's programming competes generally with broadcast television,
direct satellite programming, pay-per-view and other content offered on cable
television. With the entrance of motion picture, cable and TV companies,
competition in the interactive entertainment and multimedia industries will
likely intensify in the future. In 1999, for example, The Walt Disney Company
introduced interactive programming broadcast in conjunction with live sporting
and other events which may compete directly with QB1 and our other programming.

The Company competes with other content and services available to the
consumer on the Internet, through America Online and other online services.
Moreover, the expanded use of online networks and the Internet provide computer
users an increasing number of alternatives to video games and entertainment
software. NTN seeks to compete by providing its content via a variety of media
platforms in addition to maintaining high quality content, features and
functions that are attractive and entertaining to users of online game shows and
multi-player games, thereby establishing a favorable reputation among frequent
users. There can be no assurance, however, that the Company can compete
effectively.

GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES

The laws governing Internet use and related transactions remain largely
unknown. The adoption and modification of laws and regulations relating to the
Internet could increase costs and administrative burdens. It may take years to
determine what existing laws such as those governing intellectual property,
privacy, consumer protection and taxation apply to the Internet. Laws and
regulations

18
<PAGE> 21

directly applicable to communications or commerce over the Internet are becoming
more prevalent. The Company must comply with new regulations in the United
States and other countries where it conducts business. Non-compliance with any
newly adopted laws or regulations could expose the Company to significant
liabilities.

POTENTIAL FOR TECHNOLOGICAL OBSOLESCENCE

The computer industry and related businesses are marked by rapid and
significant technological development and change. It is possible that the
Company's interactive technology and services will be rendered obsolete by
ongoing technological developments. There also is no assurance that NTN will be
able to respond effectively to technological changes.

DEPENDENCE ON SOLE SOURCE OF SUPPLY OF PLAYMAKERS

The Company currently purchases Playmaker keyboards from a single,
unaffiliated Taiwanese manufacturer. NTN is dependent on the current sole source
of supply of the Playmakers.

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 operating results, announcements regarding
litigation, technological innovations or new products introduced by NTN or our
competitors, general industry conditions and other events or factors, which are
beyond management's control. In addition, in recent years and months, broad
stock market indices, in general, and the securities of "small cap" companies
such as NTN, in particular, have experienced substantial price fluctuations.
Such broad market fluctuations also may adversely affect the future trading
price of the Common Stock. See "Market For Registrant's Common Equity and
Related Stockholder Matters" for more information on historical trading prices
of the Common Stock.

EFFECT OF OUTSTANDING OPTIONS AND WARRANTS

At March 1, 2000, there were approximately 7,011,104 shares of Common Stock
reserved for issuance upon the exercise of outstanding stock options at exercise
prices ranging from $0.5625 to $6.37 per share. At March 1, 2000, there were
also outstanding warrants to purchase an aggregate of approximately 3,008,238
shares of Common Stock at current exercise prices ranging from $0.6875 to $6.125
per share. Substantially all of the shares underlying these outstanding warrants
are subject to currently effective registration statements covering the resale
of the underlying warrant shares by the holders.

The foregoing options and warrants could adversely affect our ability to
obtain future financing or engage in certain mergers or other transactions,
since the holders of those options and warrants can be expected to exercise them
at a time when we would be able to obtain additional capital through a new
offering of securities on terms more favorable than those provided by such
options and warrants. For the life of such options and warrants, the holders are
given the opportunity to profit from a rise in the market price of the Common
Stock without assuming the risk of ownership. To the extent the trading price of
the Common Stock at the time of exercise of any such options or warrants exceeds
the exercise price, such exercise will also have a dilutive effect on our
stockholders, including purchases of the offered shares.

SHARES ELIGIBLE FOR FUTURE SALE

No predictions can be made with respect to the effect 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 NTN's ability to raise capital through the sale of
equity securities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to risks related to currency exchange rates, stock
market fluctuations, and interest rates. As of December 31, 1999, the Company
owned Common Stock of an Australian Company that is subject to market risk. At
December 31, 1999, the Company recorded an unrealized loss of $360,000
associated with the investment. The Company does not have derivative financial
instruments. The Company has outstanding convertible notes which bear interest
at 7% per annum and line of credit borrowings which bear a rate equal

19
<PAGE> 22

to the Prime Rate plus 1.5% per annum, which cannot be less than 9% per annum. A
significant increase in interest rates could have an adverse affect on the
Company's financial condition or results of operations.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Consolidated Financial Statements and Schedule on page F-1, for
a listing of the Consolidated Financial Statements and Schedule filed with this
report, which are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

20
<PAGE> 23

PART III
MANAGEMENT

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth as of March 1, 2000 certain information
regarding the directors and executive officers of the Company:

<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM
NAME AGE POSITION(S) HELD SINCE EXPIRES
--------------------------- --- --------------------------------- ----- -------
<S> <C> <C> <C> <C>
Stanley B. Kinsey(3) 46 Chief Executive Officer and 1997 2002
Chairman of the Board
Barry Bergsman(1) 63 Director 1998 2002
Robert M. Bennett(1) 73 Director 1997 2001
Donald C. Klosterman(2) 70 Director 1985 2002
Esther L. Rodriguez(2) 58 Director 1997 2001
Gary Arlen(3) 55 Director 1999 2000
Vincent A. Carrino(3) 43 Director 1999 2000
V. Tyrone Lam 37 President, BUZZTIME, Inc.
Kendra Berger 33 Chief Financial Officer and Secretary
Robert L. Anderson 42 President and General Manager, NTN Network
Bennett Letwin 33 Vice President - Interactive Technologies and
Business Systems
</TABLE>

(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Board of Directors, BUZZTIME, Inc.

The following biographical information is furnished with respect to the
directors and executive officers:

Stanley B. Kinsey has served as Chairman and Chief Executive Officer of the
Company since October 1998. Mr. Kinsey was appointed as a director in November
1997. From 1980 to 1985, Mr. Kinsey was a senior executive with The Walt Disney
Company. In 1985, Mr. Kinsey left his position as senior vice president of
operations and new technologies for The Walt Disney Studio to co-found IWERKS
Entertainment, a high-technology entertainment company. Mr. Kinsey was chairman
and Chief Executive Officer from inception until 1995, when he resigned.

Barry Bergsman has been a director since August 1998. From 1985 to the
present, Mr. Bergsman has been president of Intertel Communications, Inc., a
company that pioneered the use of the telephone and interactive technology for
promotion, entertainment and information. Prior to 1985, Mr. Bergsman held
positions as president of a television production and syndication company and as
an executive with CBS.

Robert M. Bennett has been a director since August 1996. Since 1989, Mr.
Bennett has been Chairman of the Board of Bennett Productions, Inc., a
production company with experience in virtually all areas of production
including syndicated sports and specialty programming, music videos, commercial
productions, home video, corporate communications and feature films.

Donald C. Klosterman has been a director of the Company (or its predecessor)
since 1985. He served as the President of Pacific Casino Management, Inglewood,
California from June 1994 to November 1995 and is currently a director of Aldila
Shaft Manufacturer. Mr. Klosterman served as Chairman of the Board of the
Company from 1985 until April 1994. From 1990 until December 1999, he also acted
as a consultant to the Company.

Esther L. Rodriguez was appointed as a director of NTN in September 1997.
She retired as a vice president of Next Level Systems, Inc. (formerly General
Instrument), a telecommunications company, in November 1996 after having served
in various executive capacities since joining General Instrument in 1987. For
the two years prior to her retirement, Ms. Rodriguez served as head of worldwide
business development and sales teams for private commercial business and
educational network systems. Following her retirement, she founded and has
served as Chief Executive Officer of Rodriguez Consulting Group, a private
management consulting firm. Ms. Rodriguez has over 25 years' experience in
general management, business development and marketing, including 17 years'
experience in worldwide telecommunications.

21
<PAGE> 24

Gary Arlen was appointed to the board of directors in August 1999. Since
1980, he has been president of Arlen Communications, Inc., a research and
consulting firm specializing in interactive information, transactions,
telecommunications and entertainment. In 1981, Mr. Arlen founded the Internet
Alliance, which represents the interest of online content and service suppliers.

Vincent A. Carrino was appointed as a director in September 1999. Mr.
Carrino is president of Brookhaven Capital Management, LLC, a private investment
firm focusing on technology companies, founded by him in 1985. Prior to the
establishment of Brookhaven Capital Management, LLC, Mr. Carrino was an analyst
with Alliance Capital. Mr. Carrino serves on the Board of Directors of Rent-Way,
Inc., Cash Technologies, Intrenet, and Showpower.

V. Tyrone Lam was appointed President of BUZZTIME, Inc. in December 1999,
after serving as Executive Vice President of the Company since September 1998.
He was appointed Vice President and General Manager of the NTN Network in
September 1997. Prior to this time he served as Associate Vice President of
Marketing from February 1997. Mr. Lam joined NTN in December 1994 in a marketing
position. From April 1992 to December 1994, Mr. Lam managed the interactive
television sports and games development for the EON Corporation and has held
other sales and marketing positions in the computer software industry.

Kendra Berger has served as the Company's Chief Financial Officer and
Corporate Secretary since February 1999. She joined the Company in July 1998 as
Vice President, Finance and Controller. Ms. Berger previously served as a
controller for FPA Medical Management, Inc., a public national healthcare
company. From August 1989 to July 1996, Ms. Berger, certified public accountant,
held key positions with the public accounting firm, Price Waterhouse LLP.

Robert L. Anderson was appointed President of the NTN Network, the Company's
hospitality division, in September 1999. He previously led Anderson Management
Consultants, offering strategic marketing and general management services to the
consumer products segment of the hospitality industry. From 1987 to 1998, he
held positions with United Distillers & Vintners, the largest global marketer of
adult beverages. Prior to that time, Mr. Anderson held management positions with
E&J Gallo Winery and the Procter & Gamble Company.

Bennett Letwin joined NTN in November 1998 as Vice President of Interactive
Technologies and Business Systems. Prior to that time, Mr. Letwin was the
architect for some of the earliest electronic malls, electronic software
distribution systems, and live Internet video broadcast platform for Global 2000
clients at General Electric Information Services, a division of the General
Electric Company, USA, an NYSE-listed company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the federal securities laws, the Company's directors and officers and
any persons holding more than 10% of the Company's Common Stock are required to
report their ownership of the Company's Common Stock and any changes in that
ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established, and the Company is required to report any
failure to file by these dates. During 1999, its directors, officers and 10%
stockholders satisfied all of these filing requirements except as follows:

In October 1999, Mr. Bergsman filed an amendment to a previously filed Form
4, Statement of Changes in Beneficial Ownership for August 1999, to include an
August transaction not reported on the document when originally filed. In making
these statements, the Company has relied upon a review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company pursuant to Rule 16a-3 under the
Exchange Act during fiscal 1999 and the written representations of its directors
and officers.

22
<PAGE> 25

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table shows the compensation paid or
accrued as of each of the last three fiscal years to all individuals who served
as the Chief Executive Officer of the Company during 1999 and the three other
most highly compensated executive officers of the Company who were serving as
executive officers at the end of 1999 whose salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers"):

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTION
- --------------------------- ---- --------- ----- ------------ ------
<S> <C> <C> <C> <C> <C>
Stanley B. Kinsey(2) 1999 $286,835 $32,500(3) --(4) 500,000
Chief Executive Officer 1998 63,577 -- -- 1,300,000
and Chairman of the 1997 -- -- -- --
Board

V. Tyrone Lam(5) 1999 $175,000 -- --
President, BUZZTIME, Inc. 1998 147,115 2,959 -- 285,000
1997 105,367 -- $ 4,575(6) 165,000
Kendra Berger(7) 1999 138,000 -- -- 100,000
Chief Financial Officer 1998 42,307 1,233 -- 50,000
1997 -- -- -- --

Bennett Letwin(8) 1999 120,000 -- -- --
Vice President, Business 1998 -- -- -- 75,000
Systems and Technologies 1997 -- -- -- --
</TABLE>

(1) Includes amounts, if any, deferred under the Company's 401(k) Plan.
(2) Mr. Kinsey was appointed Chief Executive Officer of the Company in October
1998.
(3) Represents vested value of options granted October 7, 1999 at below market
exercise price, pursuant to the Employment Agreement and related bonus
program between Mr. Kinsey and the Company.
(4) Mr. Kinsey has waived compensation for serving as a director of the Company.
(5) In December 1999, Mr. Lam was appointed President of the Company's
wholly-owned subsidiary, BUZZTIME, Inc.
(6) Includes group medical insurance premiums.
(7) Ms. Berger joined the Company in 1998 and was appointed Chief Financial
Officer in February 1999.
(8) Mr. Letwin joined the Company in November 1998 as Vice President,
Interactive Technologies and Business Systems.

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning grants of stock options
during fiscal 1999 with respect to the Named Executive Officers:

23
<PAGE> 26

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
NUMBER OF
SHARES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO MARKET VALUE OF GRANT
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION AT DATE OF
NAME GRANTED IN FISCAL YEAR PRICE ON DATE OF GRANT DATE GRANT(1)
- ------------------ ---------- ------------------ -------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stanley B. Kinsey 500,000(2) 16% $ 0.98 $ 1.50 10/06/09 $575,000

V. Tyrone Lam -- -- -- -- -- --

Kendra Berger 100,000(3) 3% $ 0.625 $ 0.625 04/22/09 50,400

Bennett Letwin -- -- -- -- -- --

Robert L. Anderson 432,000(4) 14% $ 1.1875 $1.1875 09/26/09 361,152
</TABLE>

(1) The value of grant at date of grant was estimated using the Black Scholes
option-pricing model with the following weighted average assumptions:
dividend yield 0%, risk-free interest rates 5.455%, expected volatility
129.34%, and expected option lives of 2.58 years.

(2) Represents options granted under NTN's 1995 Option Plan pursuant to Mr.
Kinsey's Employment Agreement with the Company, which become exercisable as
to 1/24 of the total shares on the last business day of each calendar month
immediately following the date of grant, subject to Mr. Kinsey's continuous
employment by the Company. The options were granted to Mr. Kinsey at a
preferred price in lieu of a cash bonus. The options are subject to
immediate vesting upon the occurrence of a "Change of Control Event". See
"Compensation Committee Report on Executive Compensation".

(3) Represents options granted under NTN's 1995 Option Plan which become
exercisable as to 25% of the total shares on the first anniversary of the
date of grant and will become exercisable as to an additional 1/36 of the
remaining shares on the last day of each of the thirty-six (36) calendar
months immediately following the first anniversary of the grant date.

(4) Represents options granted under NTN's 1995 Option Plan which become
exercisable as to 25% of the total shares on the first anniversary of the
date of grant and will become exercisable as to an additional 1/24 of the
remaining shares on the last day of each of the twenty-four (24) calendar
months immediately following the first anniversary of the grant date.

FISCAL YEAR-END OPTION VALUES

The following table contains information concerning stock options which were
unexercised at the end of fiscal 1999 with respect to the Named Executive
Officers. No stock options were exercised in 1999 by any Named Executive
Officer.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
-------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stanley B. Kinsey 562,500 1,337,500 $1,535,885 $3,736,615

V. Tyrone Lam 140,521 359,479 382,267 964,108

Kendra Berger 16,667 133,333 44,793 395,832

Bennett Letwin 20,313 54,687 54,591 146,971
</TABLE>

(1) Represents the amount by which the aggregate market price on December 31,
1999 of the shares of the Company's Common Stock subject to such options
exceeded the respective exercise prices of such options.

DIRECTOR COMPENSATION

During 1999, directors were entitled to receive compensation of $2,100 per
month for their services as directors, payable in either cash or shares of
Common Stock. Further, directors who serve on either the audit or compensation
committees or the board of directors of BUZZTIME, Inc. were entitled to receive
an additional $3,000 annually. In April 1999, the Board elected to pay the first
quarter 1999 fees in shares of Common Stock which were valued for this purpose
at $.50 per share. Compensation for the remaining three

24
<PAGE> 27

calendar quarters of 1999 was paid in cash. Directors are also eligible for the
grant of options or warrants to purchase Common Stock from time to time for
services in their capacity as directors.

Upon joining the Board in August 1999 and September 1999, respectively,
Messrs. Arlen and Carrino were each granted options to purchase 100,000 shares
of Common Stock at an exercise price of $1.125 per share. These options will
become vested as to one-third of the shares covered thereby on the first
anniversary of grant date and will become vested and exercisable as to the
balance of the covered shares in two equal installments on the second and third
anniversaries of the grant date, subject to Messrs. Arlen and Carrino remaining
as directors. The options provide for immediate vesting in full in the event of
a "Change of Control Event" as defined.

OTHER EXECUTIVE COMPENSATION MATTERS

All compensation determinations for 1999 for NTN's executives were made by
the Board of Directors of NTN as a whole upon the recommendation of the
Compensation Committee of the Board. During the entire fiscal year 1999, Ms.
Rodriguez and Mr. Klosterman served as members of the Compensation Committee.
None of the directors or executive officers of NTN has served on the Board of
Directors or the compensation committee of any other company or entity, any of
whose officers served either on the Board of Directors or on the Compensation
Committee of the Board.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

During 1999, the Compensation Committee established policies and practices
relating to matters of executive compensation for action by the Board of
Directors as a whole. The Company's executive compensation policy is intended to
foster job satisfaction and encourage continuous service by NTN's executive
officers by providing reasonable short-term cash compensation and long-term
stock-based incentives. NTN's policies apply equally to its Chief Executive
Officer and other executives. A summary of NTN's executive compensation policy
is described below:

NTN has established a 401(k) Plan. NTN may, at the Board's discretion, make
annual contributions to the 401(k) Plan, subject to applicable limitations, but,
to date, it has never made any such contributions.

Short-term cash compensation to executives for 1999 consisted primarily of
salaries, subject to any written employment agreement between the Company and
any executive.

Equity compensation, in the form of stock options, constitute the principal
element of long-term compensation for the Company's executive officers. The
grant of stock options increases management's potential equity ownership in the
Company with the goal of ensuring that the interests of management remain
closely aligned with those of the Company's stockholders. Accordingly,
commensurate with Mr. Kinsey's appointment as Chief Executive Officer of the
Company in October 1998 and pursuant to his Employment Agreement, the Board
granted him options to purchase 500,000 shares of Common Stock at an exercise
price of $0.98 per share in October 1999. In addition, the Board granted Ms.
Berger options to purchase 100,000 shares of Common Stock at an exercise price
of $0.625 per share and granted Mr. Anderson options to purchase 432,000 shares
of Common Stock at an exercise price of $1.1875 per share. Attaching vesting
requirements to stock options also creates an incentive for executive officers
to remain with NTN for the long term. In appropriate circumstances, the Board
also will consider repricing previously granted stock options if necessary so
that the options continue to afford realistic incentives to executives. No
repricings occurred in 1999.

In October 1998, the Company entered into a written Employment Agreement
with Mr. Kinsey pursuant to which Mr. Kinsey is to receive a bonus under a bonus
program that was to be agreed upon by and between Mr. Kinsey and the
Compensation Committee of the Board of Directors. On October 7, 1999, the
Company and Mr. Kinsey entered into an Addendum to the Employment Agreement
setting forth the terms of the bonus program ("Bonus Program"). Pursuant to the
Bonus Program, the options granted to Mr. Kinsey in October 1999 were granted at
a preferred, below market, price of $0.98 per share, the average closing price
of the Company's Common Stock during the three calendar quarters immediately
prior to the grant date. The options were granted to Mr. Kinsey pursuant to the
NTN 1995 Stock Option Plan and are subject to immediate vesting upon the
occurrence of a Change of Control Event.

Compensation to NTN's executive officers is subject to a $1,000,000
compensation deduction cap pursuant to Section 162(m) of the Internal Revenue
Code, as amended. In 1999, no executive officer received aggregate compensation
of $1,000,000 or more. However, the Board is aware that the grant of stock
options to the executive officers may subject NTN to the deduction cap in
subsequent years. With respect to incentive stock options, the Board does not
anticipate NTN taking a deduction in the absence of a disqualifying disposition
by an executive officer. With respect to nonqualified options, the Board is
aware that any deduction that

25
<PAGE> 28

NTN may have at the time of exercise will be subject to the $1,000,000 cap. The
Board does not anticipate that the compensation deduction cap will significantly
affect its executive compensation policies.

CHIEF EXECUTIVE OFFICER COMPENSATION

As indicated above, subject to any written employment agreement, the factors
and criteria upon which the compensation of NTN's Chief Executive Officer is
based are identical to the criteria used in evaluating the compensation packages
of the other executive officers of the Company.

TERMINATION OF EMPLOYMENT

In January 1999, Gerald Sokol, Jr., the Company's President and Chief
Financial Officer, resigned as an executive officer and director of the Company.
The Company entered into a Resignation and General Release Agreement
("Resignation Agreement") with Mr. Sokol pursuant to which Mr. Sokol's
Employment Agreement, dated July 1, 1998, was terminated.

Pursuant to the Resignation Agreement, the Company paid $205,850 to Mr.
Sokol in settlement of his prior Employment Agreement and in consideration of
his agreement not to compete with the Company for a period of one year. In
further consideration, the Company paid Mr. Sokol an earned 1998 bonus of
$128,500.

As provided by the Resignation Agreement, Mr. Sokol's February 2, 1998
Option Agreement which granted him the option, vesting over a period of four
years, to purchase an aggregate of 500,000 shares of common stock at an exercise
price of $1.00, was modified to provide him with the fully vested right and
option to purchase those shares that had vested as of the effective date of the
Resignation Agreement. These 125,000 options were exercisable by Mr. Sokol at
any time prior to 12 months after the January 19, 1999 termination of Mr.
Sokol's employment with the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 1, 2000 the number and percentage
ownership of Common Stock by (i) all persons known to the Company to own
beneficially more than 5% of the outstanding shares of Common Stock based upon
reports filed by each such person with the Securities and Exchange Commission
("Commission"), (ii) each director of the Company, (iii) each of the Named
Executive Officers, and (iv) all of the executive officers and directors of the
Company as a group. Except as otherwise indicated, and subject to applicable
community property and similar laws, each of the persons named has sole voting
and investment power with respect to the shares of Common Stock shown. An
asterisk denotes beneficial ownership of less than 1%.

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OWNED COMMON STOCK (1)
- ---------------------------------- ---------------- ----------------
<S> <C> <C>
Gary Arlen 1,000 *
Robert M. Bennett(2) 192,000 *
Barry Bergsman(3) 108,333 *
Vincent A. Carrino(4) 4,530,000 14.9%
Donald C. Klosterman(5) 903,749 3.0%
Esther L. Rodriguez(6) 108,100 *
Stanley B. Kinsey(7) 713,666 2.4%
V. Tyrone Lam(8) 161,355 *
Kendra Berger(9) 77,086 *
Bennett Letwin(10) 28,126 *
Tudor Investment Corporation(11) 1,956,910 6.5%
Paul Tudor Jones, II(12) 2,065,400 6.8%
All executive officers and
directors of the Company as a group
(11 persons)(12) 4,331,215 14%
</TABLE>

(1) Included as outstanding for purposes of this calculation are 30,242,559
shares of Common Stock (the amount outstanding as of March 1, 2000) plus, in
the case of each particular holder, the shares of Common Stock subject to
currently exercisable options, warrants, or other instruments exercisable
for or convertible into shares of Common Stock (including such instruments
exercisable

26
<PAGE> 29

within 60 days after March 1, 2000) held by that person, which instruments
are specified by footnote. Shares issuable as part or upon exercise of
outstanding options, warrants, or other instruments other than as described
in the preceding sentence are not deemed to be outstanding for purposes of
this calculation.

(2) Includes 100,000 shares subject to currently exercisable options held by Mr.
Bennett.

(3) Includes 33,333 shares subject to currently exercisable options and 36,000
shares subject to currently exercisable warrants held by Mr. Bergsman.

(4) All of the shares are owned, directly or indirectly, by investment advisory
clients of Brookhaven Capital Management, LLC, which in some cases has sole
voting and investment discretion over such shares. Mr. Carrino is the sole
owner and the Manager of Brookhaven Capital Management, LLC and, as such, in
some cases he may be deemed to beneficially own such shares. Mr. Carrino
disclaims such beneficial ownership. Brookhaven Capital Management is
located at 3000 Sand Hill Road, Menlo Park, CA 94205.

(5) Includes 200,000 shares subject to currently exercisable warrants and
150,000 shares subject to currently exercisable options held by Mr.
Klosterman.

(6) Includes 66,667 shares subject to currently exercisable options held by Ms.
Rodriguez. Also includes 1,000 shares owned by the Rodriguez Family Trust,
of which Ms. Rodriguez is a co-trustee with members of her immediate family.
As co- trustee, Ms. Rodriguez shares voting and investment power with
respect to the shares.

(7) Includes 604,167 shares subject to currently exercisable options held by Mr.
Kinsey.

(8) Represents shares subject to currently exercisable options held by Mr. Lam.

(9) Represents shares subject to currently exercisable options held by Ms.
Berger.

(10)Represents shares subject to currently exercisable options held by Mr.
Letwin.

(11)Of the shares shown, 281,610 shares are owned of record by Tudor Investment
Corporation and 1,675,300 are owned of record by The Raptor Global
Portfolio, Ltd. (1,173,720 shares), Tudor BVI Futures, Ltd. (409,080
shares), The Upper Mill Capital Appreciation Fund Ltd. (88,660 shares), and
The Altar Rock Fund, L.P. (3,820 shares). Tudor Investment Corporation is
the sole general partner of Altar Rock and provides investment advisory
services to the other entities referred to above and shares voting and
investment discretion with respect to such shares. As such, it may be deemed
the beneficial owner of the shares owned of record by Altar Rock and the
referenced entities. Tudor Investment Corporation disclaims such beneficial
ownership of such shares. See Note (12) below. Tudor Investment Corporation
is located at 600 Steamboat Road, Greenwich, CT 06830.

(12)Includes the shares shown in Note (11) as being owned beneficially by Tudor
Investment Corporation, of which Mr. Jones is the controlling shareholder.
Also includes 92,240 shares owned of record by Tudor Proprietary Trading,
L.L.C., of which Mr. Jones is the indirect controlling equity holder. Mr.
Jones disclaims beneficial ownership of such shares. Also includes 297,680
shares owned of record by Mr. Jones. Paul Tudor Jones is located in care of
Tudor Investment Corporation at 600 Steamboat Road, Greenwich, CT 06830.

(13)Includes 1,220,734 shares subject to currently exercisable options and,
236,000 shares subject to currently exercisable warrants held by executive
officers and directors, including those described in notes (2) through (10)
above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONSULTING ARRANGEMENTS

On February 1, 1999, NTN entered into a Consulting Agreement with Barry
Bergsman pursuant to which Mr. Bergsman was engaged to actively provide
consulting services to the Company under the direction of the Company's Chief
Executive Officer. For Mr. Bergsman's services under the Consulting Agreement,
NTN granted Mr. Bergsman a warrant to purchase 36,000 shares of Common Stock at
an exercise price of $0.6875 per share. The warrant is exercisable as to 3,000
shares on the first day of each of the twelve consecutive months commencing
March 1, 1999. In addition, Mr. Bergsman will receive cash compensation of
$3,500 per month. The Consulting Agreement expired on January 31, 2000.

27
<PAGE> 30

On March 14, 1997, the Company entered into a Consulting Agreement with
Donald Klosterman pursuant to which Mr. Klosterman was engaged to perform
consulting services for the Company regarding the Company's marketing plans and
the Company's relationship with the National Football League. The Consulting
Agreement expired on December 31, 1999. In lieu of compensation for Mr.
Klosterman's services pursuant to the Consulting Agreement, the Company
extended the expiration date of warrants previously granted to Mr. Klosterman
from June 15, 1997 to June 15, 2002. In further consideration, the Company
repriced options to purchase 100,000 shares at $8.25 per share and 50,000
options at $5.75 per share held by Mr. Klosterman so as to be exercisable at
$4.00 per share and the terms of all such options were extended to January 1,
2002.

In March 1997, NTN entered into a separate Consulting Agreement with Mr.
Frazier, under which he agreed to spend on average seven days a month consulting
with management of NTN regarding NTN's operations and serving as a consultant to
NTN's President and as a member of NTN's Executive Advisory Board, which had
just been created by NTN's Board of Directors. The Executive Advisory Board was
subsequently disbanded. The Consulting Agreement was to expire in March 1999,
unless sooner terminated. In consideration for his services under the foregoing
Consulting Agreement, Mr. Frazier was granted a five-year, nonqualified stock
option to purchase 250,000 shares of Common Stock at an exercise price of $4.50
per share, which was to vest in 24 monthly installments of approximately 10,416
shares each, subject to Mr. Frazier remaining as a consultant, and was to become
exercisable on and after February 28, 1999. NTN also agreed to reimburse Mr.
Frazier for certain expenses relating to his consulting services. In May 1997,
Mr. Frazier's option was amended to reduce the exercise price to $2.81 and to
provide that it would become immediately exercisable in full in the event of a
"Change of Control" (as defined) of NTN. In January 1998, the Board of Directors
cancelled the Consulting Agreement and reduced the compensation to 104,167
options, which are 100% vested at March 31, 1998. In connection with the option
granted to Mr. Frazier under the Consulting Agreement, NTN recorded a charge
pursuant to SFAS No. 123 of $224,000 in 1997. An additional charge of $58,000
was recorded in 1998.

In April 1997, NTN entered into another Consulting Agreement with
Frazier/King, under which Frazier/King was engaged to review and consult with
management of NTN regarding NTN's strategic business plan, current operations
and future development and to devise and structure an appropriate plan to secure
future financing for NTN. The Consulting Agreement was terminable by NTN any
time upon ten days notice to Frazier/King in the event the Board of Directors as
a whole determined in good faith that Frazier/King had failed materially to
perform, or had breached its duties, under the Consulting Agreement.

For Frazier/King's services under the foregoing Consulting Agreement, NTN
granted Frazier/King a warrant to purchase 1,000,000 shares of Common Stock at
an exercise price of $2.81, the approximate market value of the Common Stock on
the date of the Consulting Agreement, and agreed to reimburse Frazier/King for
expenses (other than normal operating expenses) incurred by it in performing its
consulting services. Frazier/King's warrant was immediately vested and
exercisable as to 200,000 shares of Common Stock covered thereby and was to
become vested and exercisable as to the balance of 800,000 covered shares in
quarterly installments of 100,000 shares each as of the 15th day of each July,
October, January and April commencing July 15, 1997 and ending April 15, 1999,
provided that the Board of Directors of NTN has determined that Frazier/King was
performing satisfactorily under the Consulting Agreement. In January, 1998, the
Board and Frazier/King agreed to terminate this consulting agreement and the
number of warrants granted was reduced to 500,000, which were immediately
vested. In connection with the warrant granted to Frazier/King, NTN recorded a
charge pursuant to SFAS No. 123 of $1,401,000, in 1997.

INDEMNITY AGREEMENTS

The Company has entered into indemnity agreements with each of its directors
and executive officers. The indemnity agreements provide that the Company will
indemnify these individuals under certain circumstances against certain
liabilities and expenses they may incur in their capacities as directors or
officers of the Company. The Company believes that the use of such indemnity
agreements is customary among corporations and that the terms of the indemnity
agreements are reasonable and fair to the Company, and are in its best interests
to retain experienced directors.

28
<PAGE> 31

PART IV

ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K

(a) The following documents are filed as a part of this report:

1.2. Consolidated Financial Statements and Schedule. The consolidated financial
statements and schedule of the Company and its consolidated subsidiaries are set
forth in the "Index to Consolidated Financial Statements and schedule" on page
F-1.

3. Exhibits. The following exhibits are filed as a part of this report:

10.1 Amended and Restated Certificate of Incorporation of the Company, as
amended (7)

10.2 By-laws of the Company (2)

10.3 License Agreement with NTN Canada (3)

10.4 National Football League License Agreement (3)

10.5 Lease of Office with The Campus L.L.C. (4)

10.6* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Patrick J.Downs. (5)

10.7* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Daniel C. Downs. (5)

10.8* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Ronald E. Hogan (5)

10.9* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Gerald P. McLaughlin. (5)

10.10* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Michael J. Downs. (5)

10.11* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Robert Klosterman. (5)

10.12* Letter agreement, dated March 4, 1997, between NTN and Alan
Magerman.(5)

10.13* Consulting Agreement, dated as of December 31, 1996, between NTN
Communications Inc. and Patrick J. Downs. (5)

10.14* Consulting Agreement, dated as of December 31, 1996, between NTN
Communications Inc. and Daniel C. Downs. (5)

10.15* Consulting Agreement, dated as of December 31, 1996, between NTN
Communications Inc. and Ronald E. Hogan. (5)

10.16* Consulting Agreement, dated as of December 31, 1996, between NTN
Communications Inc. and Gerald P. McLaughlin. (5)

10.17* Consulting Agreement, dated as of March 14, 1997, between NTN
Communications Inc. and Donald Klosterman. (5)

10.18* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Patrick J Downs. (5)

29
<PAGE> 32

10.19* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Daniel C. Downs. (5)

10.20* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Ronald E. Hogan. (5)

10.21* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Gerald P. McLaughlin. (5)

10.22* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Michael J. Downs. (5)

10.23* General Release, dated as of December 31, 1996, between NTN
Communications Inc. and Robert Klosterman. (5)

10.24* Special Stock Option dated August 18, 1996 between NTN Communications,
Inc. and Gerald Sokol, Jr.(5)

10.25* Special Stock Option dated August 25, 1996 between NTN Communications,
Inc. and Robert Bennett (5)

10.26* Special Stock Option dated August 30, 1996 between NTN Communications,
Inc. and Edward C. Frazier (5)

10.27* Amendment to Nonqualified Stock Option Agreement, dated as of April 14,
1997, between NTN Communications, Inc. and Edward C. Frazier. (6)

10.28 Warrant Agreement, dated as of February 18, 1998 between NTN
Communications, Inc. and American Stock Transfer and Trust Company, as
warrant agent, including a form of warrant certificate. (7)

10.29* Performance Incentive Stock Option Agreement dated November 4, 1996 by
and between NTN Communications, Inc. and Gerald Sokol, Jr. (7)

10.30* Nonqualified Stock Option Agreement dated May 14, 1997 by and between
NTN Communications, Inc. and Gerald Sokol, Jr. (7)

10.31* Modification to Resignation Agreement, dated as of March 9, 1998 by and
between NTN Communications, Inc. and Daniel C. Downs (7)

10.32* Modification to Resignation Agreement, dated as of March 9, 1998 by and
between NTN Communications, Inc. and Patrick J. Downs (7)

10.33* Modification to Resignation Agreement, dated as of March 20, 1998 by
and between NTN Communications, Inc. and Ronald E. Hogan (7)

10.34* Employment Agreement, dated July 1, 1998, by and between NTN
Communications, Inc. and Gerald Sokol, Jr. (8)

10.35* Employment Agreement, dated October 7, 1998, by and between NTN
Communications, Inc. and Stanley B. Kinsey (9)

10.36* Stock Option Agreement, dated October 7, 1998, by and between NTN
Communications, Inc. and Stanley B. Kinsey (9)

10.37* Resignation and Release Agreement, dated February 18, 1999, by and
between NTN Communications, Inc. and Gerald Sokol, Jr. (9)

10.38 Exchange Agreement, dated October 5, 1998, by and between NTN
Communications, Inc. and the Buyers as defined) (7)

10.39 Loan and Security Agreement, dated August 6, 1999, by and between NTN
Communications, Inc. and Coast Business Credit, a division of Southern
Pacific Bank. (10)

10.40 Settlement Agreement, dated November 1, 1999, by and between the
Business Software Alliance and NTN Communications, Inc. (10)

30
<PAGE> 33

10.41* Stock Option Agreement, dated October 7, 1999, by and between NTN
Communications, Inc. and Stanley B. Kinsey (1)

23.00 Consent of KPMG LLP. (1)

27.00 Financial Data Schedule. (1)

* Management Contract or Compensatory Plan.

(1) Filed herewith.

(2) Previously filed as an exhibit to the Company's registration statement on
Form S-8, File No. 33-75732, and incorporated by reference.

(3) Previously filed as an exhibit to the Company's report on Form 10-K for the
year ended December 31, 1990, and incorporated by reference.

(4) Previously filed as an exhibit to the Company's report on Form 10-K for the
year ended December 31, 1994, and incorporated herein by reference.

(5) Previously filed as an exhibit to the Company's report on Form 8-K dated
March 5, 1997 and incorporated by reference. (6) Previously filed as an
exhibit to the Company's report on Form 10-K dated December 31, 1996 and
incorporated by reference.

(7) Previously filed as an exhibit to the Company's registration statement on
Form S-3, File No. 333-69383, and incorporated by reference.

(8) Previously filed as an exhibit to the Company's report on Form 10-Q dated
September 30, 1998 and incorporated herein by reference.

(9) Previously filed as an exhibit to the Company's report on Form 10-K dated
December 31, 1998 and incorporated by reference.

(10) Previously filed as an exhibit to the Company's report on Form 10-Q dated
September 30, 1999 and incorporated herein by reference.

31
<PAGE> 34

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as December 31, 1999 and 1998 F-3

Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4

Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997 F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6

Notes to Consolidated Financial Statements F-8

Financial Statement Schedule II - Valuation and Qualifying Accounts F-24
</TABLE>

F-1
<PAGE> 35

Independent Auditors' Report

The Board of Directors
NTN Communications, Inc.:

We have audited the consolidated financial statements of NTN Communications,
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NTN Communications,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

/s/ KPMG LLP

San Diego, California
March 9, 2000

F-2

<PAGE> 36

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1999 and 1998

<TABLE>
<CAPTION>
1999 1998
------------ ------------

<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,044,000 $ 4,560,000
Restricted cash 239,000 --
Accounts receivable - trade, net of allowance for doubtful
accounts of $2,148,000 in 1999 and $1,720,000 in 1998 2,541,000 2,471,000
Investments available for sale 937,000 --
Deposits on broadcast equipment 611,000 237,000
Prepaid expenses and other current assets 1,015,000 863,000
------------ ------------

Total current assets 6,387,000 8,131,000

Broadcast equipment and fixed assets, net 10,470,000 7,249,000
Software development costs, net of accumulated amortization of
$6,356,000 in 1999 and $5,422,000 in 1998 138,000 1,072,000
Other assets 292,000 315,000
------------ ------------
Total assets $ 17,287,000 $ 16,767,000
============ ============

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 1,421,000 $ 840,000
Accrued expenses 1,498,000 2,328,000
Accrual for litigation costs 334,000 847,000
Accrual for management severance 598,000 866,000
Obligations under capital leases 740,000 205,000
Deferred revenue 796,000 645,000
Note payable 79,000 --
------------ ------------
Total current liabilities 5,466,000 5,731,000

Obligations under capital leases, excluding current portion 475,000 380,000
Accrual for settlement warrants 1,793,000 1,670,000
Accrual for management severance -- 619,000
Revolving line of credit 2,486,000 --
7% senior subordinated convertible notes 4,705,000 --
Other long-term liabilities and note payable, excluding current portion 141,000 42,000
------------ ------------
Total liabilities 15,066,000 8,442,000
------------ ------------

Shareholders' equity:
Series A 10% cumulative convertible preferred stock, $.005 par
value, 5,000,000 shares authorized; 161,000 shares issued
and outstanding at December 31, 1999 and December 31, 1998 1,000 1,000
Series B 7% cumulative convertible preferred stock, $.005 par
value, 85,000 shares authorized; 0 and 56,000 shares
issued and outstanding at December 31, 1999 and December 31,
1998, respectively -- 1,000
Common stock, $.005 par value, 50,000,000 shares authorized;
29,914,000 and 28,086,000 shares issued and outstanding
at December 31, 1999 and December 31, 1998, respectively 149,000 140,000
Additional paid-in capital 66,548,000 70,733,000
Accumulated deficit (63,645,000) (61,147,000)
Accumulated other comprehensive loss (360,000) --
Treasury stock, at cost, 111,000 and 329,000 shares at
December 31, 1999 and December 31, 1998, respectively (472,000) (1,403,000)
------------ ------------
Total shareholders' equity 2,221,000 8,325,000
------------ ------------

------------ ------------
Total liabilities and shareholders' equity $ 17,287,000 $ 16,767,000
============ ============
</TABLE>

See accompanying notes to consolidated financial statements

F-3

<PAGE> 37

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

For the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Hospitality revenues $ 22,250,000 $ 20,973,000 $ 21,018,000
Internet revenues 383,000 1,131,000 694,000
America Online fees 600,000 883,000 2,632,000
Equipment sales, net of cost of sales of $0,
$208,000 and $231,000 in 1999, 1998 and
1997, respectively 84,000 499,000 475,000
Other revenues 431,000 708,000 1,042,000
------------ ------------ ------------

Total revenues 23,748,000 24,194,000 25,861,000
------------ ------------ ------------

Operating expenses:
Direct operating costs 5,982,000 4,715,000 6,565,000
Selling, general and administrative 11,920,000 11,767,000 16,244,000
Litigation, legal and professional fees 558,000 1,658,000 808,000
Equipment lease expense 652,000 932,000 936,000
Stock-based compensation expense 292,000 353,000 3,205,000
Depreciation and amortization 6,557,000 6,412,000 5,305,000
Bad debt expense 746,000 850,000 1,462,000
Equipment charges -- 240,000 2,543,000
Research and development 842,000 714,000 1,600,000
------------ ------------ ------------

Total operating expenses 27,549,000 27,641,000 38,668,000
------------ ------------ ------------

Operating loss (3,801,000) (3,447,000) (12,807,000)
------------ ------------ ------------

Other income (expense):
Interest income 116,000 288,000 238,000
Interest expense (1,050,000) (289,000) (793,000)
Gain on sale of interest in subsidiary -- 1,643,000 --
Gain on sale of assets of subsidiary 2,254,000 -- --
Other (17,000) 12,000 905,000
------------ ------------ ------------

Total other income (expense) 1,303,000 1,654,000 350,000
------------ ------------ ------------

Income (loss) before income taxes (2,498,000) (1,793,000) (12,457,000)

Provision for income taxes -- -- --
------------ ------------ ------------

Net income (loss) (2,498,000) (1,793,000) (12,457,000)
------------ ------------ ------------

Accretion of beneficial conversion
feature on preferred stock -- (758,000) --
------------ ------------ ------------

Net income (loss) available to common shareholders $ (2,498,000) $ (2,551,000) $(12,457,000)
============ ============ ============

Net income (loss) per common share - basic and diluted $ (0.09) $ (0.10) $ (0.55)
============ ============ ============

Weighted average shares outstanding - basic and diluted 28,470,000 26,078,000 22,696,000
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE> 38

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity

For the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
SERIES A AND B
CUMULATIVE
CONVERTIBLE ADDITIONAL
PREFERRED PAID-IN
STOCK COMMON STOCK CAPITAL
------------------------ --------------------------- ------------
SHARES AMOUNT SHARES AMOUNT
------------------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 161,000 $ 1,000 23,177,000 $ 116,000 $ 59,583,000

Issuance of stock for exercise of warrants
and options -- -- 419,000 2,000 888,000
Issuance of Series B Preferred Stock in
private offering, net of issuance costs 70,000 1,000 -- -- 6,706,000
Issuance of stock in lieu of dividends -- -- 8,000 -- --
Issuance and modifications of warrants
granted to non-employees -- -- -- -- 3,205,000
Issuance of stock for settlement of
litigation -- -- 73,000 -- 159,000
Net loss -- -- -- -- --
------- ------------- ------------ ------------ ------------
Balance, December 31, 1997 231,000 $ 2,000 23,677,000 $ 118,000 $ 70,541,000

Issuance of stock in lieu of dividends -- -- 19,000 -- --
Issuance of Treasury stock for settlement
of litigation -- -- -- -- (622,000)
Issuance of Common Stock for settlement
of litigation -- -- 1,200,000 6,000 1,194,000
Conversion of Series B Preferred Stock to
Common Stock (14,000) -- 2,430,000 12,000 (12,000)
Issuance of Common Stock in exchange
for cancellation of options and warrants -- -- 759,000 4,000 (4,000)
Issuance of Treasury Stock in exchange
for cancellation of options and warrants -- -- -- -- (1,181,000)
Accretion of beneficial conversion feature
on Series B Preferred Stock -- -- -- -- 758,000
Issuance of stock for exercise of warrants
and options -- -- 1,000 -- 1,000
Options granted to non-employees -- -- -- -- 58,000
Net loss -- -- -- -- --
------- ------------ ------------ ------------ ------------
Balance, December 31, 1998 217,000 $ 2,000 28,086,000 $ 140,000 $ 70,733,000

Conversion of Series B Preferred Stock to
Convertible Note Payable (56,000) (1,000) -- -- (5,448,000)
Convertible Note Payable converted to
Common Stock -- -- 793,000 4,000 1,008,000
Issuance of stock for exercise of warrants
and options -- -- 334,000 2,000 345,000
Issuance of Treasury Stock pursuant to
anti-dilution provision -- -- -- -- (931,000)
Issuance of stock in lieu of interest -- -- 435,000 2,000 295,000
Issuance of stock in lieu of dividends -- -- 13,000 -- --
Issuance of stock in payment of accrued
board compensation -- -- 253,000 1,000 246,000
Stock options granted below market -- -- -- -- 38,000
Warrants granted to non-employees -- -- -- -- 262,000
Unrealized holding loss on investments
available for sale -- -- -- -- --
Net loss -- -- -- -- --
------- ------------ ------------ ------------ ------------
Balance, December 31, 1999 161,000 $ 1,000 29,914,000 $ 149,000 $ 66,548,000
======= ============ ============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL
OTHER
ACCUMULATED COMPREHENSIVE TREASURY
DEFICIT LOSS STOCK TOTAL
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $(46,139,000) $ (3,339,000) $ 10,222,000

Issuance of stock for exercise of warrants
and options -- -- -- 890,000
Issuance of Series B Preferred Stock in
private offering, net of issuance costs -- -- -- 6,707,000
Issuance of stock in lieu of dividends -- -- -- --
Issuance and modifications of warrants
granted to non-employees -- -- -- 3,205,000
Issuance of stock for settlement of
litigation -- -- -- 159,000
Net loss (12,457,000) -- -- (12,457,000)
------------ ------------ ------------ ------------
Balance, December 31, 1997 $(58,596,000) $ (3,339,000) $ 8,726,000

Issuance of stock in lieu of dividends -- -- -- --
Issuance of Treasury stock for settlement
of litigation -- -- 755,000 133,000
Issuance of Common Stock for settlement
of litigation -- -- -- 1,200,000
Conversion of Series B Preferred Stock to
Common Stock -- -- -- --
Issuance of Common Stock in exchange
for cancellation of options and warrants -- -- -- --
Issuance of Treasury Stock in exchange
for cancellation of options and warrants -- -- 1,181,000 --
Accretion of beneficial conversion feature
on Series B Preferred Stock -- -- -- 758,000
Issuance of stock for exercise of warrants
and options -- -- -- 1,000
Options granted to non-employees -- -- -- 58,000
Net loss (2,551,000) -- -- (2,551,000)
------------ ------------ ------------ ------------
Balance, December 31, 1998 $(61,147,000) -- $ (1,403,000) $ 8,325,000

Conversion of Series B Preferred Stock to
Convertible Note Payable -- -- -- (5,449,000)
Convertible Note Payable converted to
Common Stock -- -- -- 1,012,000
Issuance of stock for exercise of warrants
and options -- -- -- 347,000
Issuance of Treasury Stock pursuant to
anti-dilution provision -- -- 931,000 --
Issuance of stock in lieu of interest -- -- -- 297,000
Issuance of stock in lieu of dividends -- -- -- --
Issuance of stock in payment of accrued
board compensation -- -- -- 247,000
Stock options granted below market -- -- -- 38,000
Warrants granted to non-employees -- -- -- 262,000
Unrealized holding loss on investments
available for sale -- (360,000) -- (360,000)
Net loss (2,498,000) -- -- (2,498,000)
------------ ------------ ------------ ------------
Balance, December 31, 1999 $(63,645,000) $ (360,000) $ (472,000) $ 2,221,000
============ ============ ============ ============
</TABLE>

F-5
<PAGE> 39

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------

<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net Income (loss) $ (2,498,000) $ (1,793,000) $(12,457,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 6,557,000 6,412,000 5,305,000
Provision for doubtful accounts 746,000 850,000 1,462,000
(Gain) loss from disposition of equipment (6,000) 240,000 2,543,000
Non-cash compensation charges 292,000 353,000 3,205,000
Accreted interest expense 459,000 211,000 410,000
Amortization of deferred revenue (85,000) (1,022,000) (719,000)
Gain on sale of interest in subsidiary -- (1,643,000) --
Gain on sale of assets of subsidiary (2,254,000) -- --
Gain on sale of interest in building -- -- (905,000)
Stock issued in settlement of litigation -- -- 159,000
Changes in assets and liabilities:
Restricted cash (239,000) -- --
Accounts receivable (816,000) (627,000) (1,956,000)
Deposits on broadcast equipment (374,000) (237,000) --
Prepaid expenses and other assets (423,000) (487,000) 3,542,000
Accounts payable and accrued expenses (209,000) 64,000 (108,000)
Deferred revenue 236,000 (382,000) 523,000
Management severance and other long-term liabilities (955,000) (819,000) (2,008,000)
------------ ------------ ------------

Net cash provided by (used in) operating activities 431,000 1,120,000 (1,004,000)
------------ ------------ ------------

Cash flows provided by (used in) investing activities:
Capital expenditures (6,814,000) (3,002,000) (3,700,000)
Capital software expenditures -- (10,000) (1,020,000)
Notes receivable 70,000 (70,000) --
Proceeds from sale of assets of subsidiary 1,227,000 -- --
Proceeds from sale of equipment 45,000 -- --
Proceeds from sale of interest in building -- -- 1,405,000
Proceeds from sale of interest in subsidiary -- 1,862,000 --
------------ ------------ ------------

Net cash provided by (used in) investing activities (5,472,000) (1,220,000) (3,315,000)
------------ ------------ ------------

Cash flows provided by (used in) financing activities:
Principal payments on capital leases (1,125,000) (104,000) --
Borrowings from revolving line of credit 11,175,000 -- --
Proceeds from issuance of debt -- -- 4,470,000
Principal payments on debt and revolving line of credit (8,872,000) -- (9,563,000)
Proceeds from issuance of common and preferred stock,
less issuance of costs paid in cash -- -- 7,597,000
Exercise of stock options 347,000 -- --
------------ ------------ ------------

Net cash provided by (used in) financing activities 1,525,000 (104,000) 2,504,000
------------ ------------ ------------

Net increase (decrease) in cash and cash equivalents (3,516,000) (204,000) (1,815,000)
------------ ------------ ------------

Cash and cash equivalents at beginning of period 4,560,000 4,764,000 6,579,000

------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,044,000 $ 4,560,000 $ 4,764,000
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements

F-6
<PAGE> 40

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- --------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 249,000 $ 121,000 $367,000
=========== =========== ========

Income taxes $ -- $ -- $ --
=========== =========== ========

Supplemental disclosure of non-cash investing and
financing activities:
Issuance of treasury stock pursuant to anti-dilution provision $ 931,000 $ 1,181,000 $ --
=========== =========== ========

Issuance of common stock in payment of interest $ 297,000 $ -- $ --
=========== =========== ========

Issuance of common stock in payment of board compensation $ 247,000 $ -- $ --
=========== =========== ========

Equipment acquired under capital leases $ 1,767,000 $ 464,000 $258,000
=========== =========== ========

Equipment and license acquired by issuing note payable $ 361,000 $ -- $ --
=========== =========== ========

Exchange of preferred stock for convertible notes and warrants $ 5,449,000 $ -- $ --
=========== =========== ========

Exchange of convertible notes to common stock $ 1,012,000 $ -- $ --
=========== =========== ========

Issuance of common stock in exchange for cancellation
of options and warrants $ -- $ 4,000 $ --
=========== =========== ========

Unrealized holding loss on investments available for sale $ 360,000 $ -- $ --
=========== =========== ========

Sale of assets of subsidiary for cash of
$1,227,000 and stock of eBet Online $ 1,297,000 $ -- $ --
=========== =========== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-7

<PAGE> 41

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description Of Business

The Company operates its businesses through two operating divisions:
BUZZTIME, Inc.(TM) (BUZZTIME) and The NTN Network(TM). BUZZTIME, NTN's
wholly-owned subsidiary formed in December 1999, owns the exclusive rights to
the largest digital trivia game show library and many unique "TV Play-along"
sports games. The NTN Network operates two interactive television (ITV)
networks: its original NTN Network and its new Digital Interactive Television
(DITV) Network. Both networks broadcast daily a wide variety of popular
interactive games, advertisements and informational programming to consumers in
approximately 3,300 restaurants, sports bars and taverns throughout North
America.

Basis Of Accounting Presentation

The consolidated financial statements include the accounts of NTN and its
wholly-owned subsidiaries, IWN Inc. ("IWN"), IWN, L.P. and BUZZTIME, Inc.
(BUZZTIME) ("the Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.

On June 16, 1998, the Company sold an 82.5% interest in LearnStar, Inc.
(LearnStar) to NewStar Learning Systems, L.L.C. (NewStar) for $1,862,000. The
transaction resulted in a gain of $1,643,000, which is included in other income
for the year ended December 31, 1998. In 1994, the Company formed IWN, Inc.
("IWN"), which serves as the general partner of IWN L.P., a limited partnership
engaged in the development of interactive technology for gaming applications.
IWN has no business or operations apart from its service as the general partner
of IWN, L.P. In August of 1999, the assets of IWN, L.P. were sold to eBet
Limited for $1,227,000 in cash and 4,000,000 shares of eBet Online stock.

Cash And Cash Equivalents

For the purpose of financial statement presentation, the Company
considers all highly liquid investment instruments with original maturities
of three months or less to be cash equivalents. Cash equivalents of $860,000
and $4,144,000 at December 31, 1999 and 1998, respectively, consist of money
market accounts.

Restricted Cash

Under the revolving line of credit agreement, all cash receipts are
required to be deposited into a restricted cash account. The restricted cash
is then transferred to pay down the line of credit.

Broadcast Equipment And Fixed Assets

Broadcast equipment and fixed assets are stated at cost. Equipment
under capital leases is stated at the present value of minimum lease
payments. Depreciation of fixed assets is computed using the straight-line
method over the estimated useful lives of the assets (three to five years).
Depreciation of broadcast equipment is computed using the straight-line
method over the estimated useful lives of the assets (two to four years).
Amortization of fixed assets under capital leases is computed using the
straight-line method over the shorter of the estimated useful lives of the
assets or the lease period, and is included in depreciation expense.

Revenue Recognition

The Company recognizes revenue form five sources: Hospitality revenues,
Internet revenues, America Online revenues, Equipment Sales and Other Sources.

Hospitality revenue is generated primarily from broadcasting content and
advertising. The portion generated from broadcasting content is recognized as
the service is provided by the Company. The advertising portion is billed to the
customer and recognized ratably over the contract period as the advertisements
are aired or displayed.

Internet and America Online revenues are recognized as the service is
provided by the Company.

F-8
<PAGE> 42

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Equipment Sales are recognized when equipment is shipped or transferred to
the purchaser.

Other Revenue is recognized when all material services or
conditions relating to the transaction have been performed or satisfied.

Software Development Costs

The Company capitalizes costs related to the development of certain
software products. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed" capitalization of costs begins when
technological feasibility has been established and ends when the product is
available for general release to customers. Amortization of costs related to
interactive programs is recognized on a straight line basis over three
years.

Stock-Based Compensation

On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which permits entities to recognize as expense
over the vesting period, the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of Accounting Principles Board (APB) No. 25,
"Accounting for Stock Issued to Employees", and provide pro forma net income
and pro forma earnings per share disclosures for employee stock options
grants made in 1996 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.

Under SFAS No. 123, options or warrants issued to non-employees in
exchange for goods or services received are recorded at the fair value of
the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.

Impairment Of Long-Lived Assets And Long-Lived Assets To Be Disposed Of

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows (undiscounted and without interest) expected
to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

Investments Available For Sale

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

Fair Value Of Financial Instruments

The Company believes that the fair value of financial instruments
approximate their carrying value. The following methods and assumptions were
used to estimate the fair value of financial instruments:

F-9
<PAGE> 43
NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

The carrying values of cash and cash equivalents, restricted cash,
investments held for sale, accounts receivable, accounts payable and accrued
liabilities approximate fair value because of the short maturity of these
instruments. The carrying value of the accrual for settlement warrants
approximates the fair value because the accrual for settlement warrants was
determined using the present value of expected future cash flows discounted at
the interest rate currently available to the Company. The carrying value of the
revolving line of credit approximates fair value because the interest rate is
indexed by current market rates, and the other terms are comparable to those
currently available in the market place. The carrying value of the convertible
notes approximates its fair value because the interest rate is comparable to
rates currently available in the market.

Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Research and Development and Advertising

Research and development and advertising are expensed as incurred.
Research and development costs amounted to $842,000, $714,000 and $1,600,000 in
1999, 1998 and 1997, respectively. Advertising costs amounted to $265,000,
$343,000 and $284,000 in 1999, 1998 and 1997, respectively.

Concentration Of Credit Risk

The Company provides services to group viewing locations, generally bars
and lounges, and to third party distributors, primarily throughout the United
States. In addition, the Company licenses its technology and products to
licensees outside of the United States. Concentration of credit risk with
respect to trade receivables is limited due to the large number of customers
comprising the Company's customer base, and their dispersion across many
different industries and geographies. The Company performs ongoing credit
evaluations of its customers and generally requires no collateral. The Company
maintains an allowance for doubtful accounts to provide for credit losses.

Use Of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.

Basic And Diluted Earnings Per Common Share

The Company computes basic and diluted earnings per share in accordance
with SFAS No. 128, "Earnings per Share". Basic EPS excludes the dilutive effects
of options, warrants and other convertible securities. Diluted EPS reflects the
potential dilution of securities that could share in the earnings of the
Company. Options, warrants, convertible preferred stock and convertible notes
representing approximately 15,306,000, 5,569,000 and 17,630,000 shares were
excluded from the computations of net loss per common share for the years ended
December 31, 1999, 1998 and 1997, respectively, as their effect is
anti-dilutive.

Reflected in the net loss available to common shareholders for the year
ended December 31, 1998 is the accretion of the beneficial conversion feature on
the Series B Preferred Stock in the amount of $758,000. The amount of the
beneficial conversion feature was measured at the date of issue of the
convertible security as the difference between the conversion price and the
market value of the Common Stock into which the security was convertible. This
amount was accounted for as a non-cash dividend on the convertible preferred
stock with the same amount credited to additional paid-in capital, allocated
over the period from issuance to first convertibility. Therefore, there is no
impact to shareholders' equity. The beneficial conversion feature was fully
accreted as of

F-10
<PAGE> 44

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

June 30, 1998. As described in Note 4 to the consolidated financial statements,
the Company entered into an exchange agreement with the holders of the Series B
Preferred Stock.

Reclassifications

Certain items in the 1998 and 1997 consolidated financial statements have
been reclassified to conform to the 1999 presentation.

(2) BROADCAST EQUIPMENT AND FIXED ASSETS

Broadcast equipment and fixed assets are recorded at cost and consist of
the following:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Broadcast equipment $ 14,502,000 $ 9,243,000
Furniture and fixtures 445,000 294,000
Machinery and equipment 5,080,000 3,958,000
Leasehold improvements 547,000 472,000
Equipment under capital lease:
Broadcast equipment 1,589,000 --
Machinery and equipment 902,000 724,000
Other equipment 9,000 36,000
------------ ------------
23,074,000 14,727,000
Accumulated depreciation and amortization (12,604,000) (7,478,000)
------------ ------------
$ 10,470,000 $ 7,249,000
============ ============
</TABLE>

(3) COMMON STOCK OPTIONS AND WARRANTS

Options

The Company has two active stock option plans. The 1995 Employee Stock
Option Plan (the "Option Plan") was approved by the shareholders in 1995 and was
subsequently amended. Under the Option Plan, options for the purchase of the
Company's Common Stock may be granted to officers, directors and employees.
Options may be designated as incentive stock options or as nonqualified stock
options and generally vest over four years, except, the Board of Directors, at
its discretion, can authorize acceleration of vesting periods. Options under the
Option Plan, which have a term of up to ten years, are exercisable at a price
per share not less than the fair market value on the date of grant. The
aggregate number of shares authorized for issuance under the Option Plan as of
December 31, 1999 is 6,818,930. The Company held a special meeting of
stockholders on January 7, 2000 at which time approval was received to increase
the aggregate number of shares that may be issued under the plan by 5,000,000
shares.

In addition, the Company has issued options pursuant to a Special Stock
Option Plan ("Special Plan"). Options issued under the Special Plan are made at
the discretion of the Board of Directors and are designated only as nonqualified
options. The options generally have a term of up to ten years, are exercisable
at a price per share not less than the fair market value on the date of grant
and vest over various terms. The aggregate number of shares authorized for
issuance under the Special Plan as of December 31, 1999 is 704,000.

The per share weighted-average fair value of stock options granted during
1999, 1998 and 1997 was $0.72, $0.72, and $2.58, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
1999-dividend yield of 0%, risk-free interest rate of 5.28%, expected volatility
of 124.97%, and expected life of 3.6 years; 1998 - dividend yield of 0%,
risk-free interest rate of 4.69%, expected volatility of 188%, and expected life
of 5.2 years; and 1997 - dividend yield of 0%, risk-free interest rate of 6.5%,
expected volatility of 179%, and expected life of 7.5 years; In compliance with
APB No. 25, the Company expensed $38,000 in 1999 associated with the grant

F-11
<PAGE> 45

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

of 600,000 options issued in 1999 below market value pursuant to the Option
Plan. No options were granted below market value in 1998 or 1997 pursuant to the
Option Plan.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost has
been recognized in the consolidated financial statements for the issuance of
options to employees pursuant to the Special Plan and the Option Plan. Had
compensation cost related to employees for the Company's stock-based
compensation plans been determined consistent with SFAS No. 123, the Company's
net loss and net loss per share applicable to Common Stock would have been
increased to the pro forma amounts indicated below.

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C> <C>
Net loss As reported $2,498,000 $2,551,000 $12,457,000

Pro forma $3,514,000 $4,365,000 $16,733,000

Net loss per share As reported $ 0.09 $ 0.10 $ 0.55

Pro forma $ 0.12 $ 0.17 $ 0.74
</TABLE>

A summary of stock option activity during 1999, 1998 and 1997 is as
follows:

<TABLE>
<CAPTION>
SPECIAL PLAN OPTION PLAN
------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1996 -- -- 6,689,000 $ 5.09
Granted 600,000 $ 5.00 1,947,000 2.66
Exercised 430,000 3.30 (45,000) 2.08
Canceled -- -- (3,503,000) 5.58
---------- ---------- ---------- ----------
Outstanding December 31, 1997 1,030,000 3.01 5,088,000 3.47
Granted 104,000 2.81 3,290,000 0.93
Exercised -- -- -- --
Canceled (430,000) 3.30 (3,721,000) 3.59
---------- ---------- ---------- ----------
Outstanding December 31, 1998 704,000 2.81 4,657,000 1.58
Granted -- -- 3,179,000 0.92
Exercised -- -- (325,000) 1.04
Canceled -- -- (1,030,000) 0.95
---------- ---------- ---------- ----------
Outstanding December 31, 1999 704,000 $ 2.81 6,481,000 $ 1.38
========== ========== ========== ==========
Exercisable as of December 31, 1999 704,000 $ 2.81 2,039,000 $ 2.11
========== ========== ========== ==========
</TABLE>

F-12

<PAGE> 46

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

A summary of options outstanding and exercisable by exercise price range
at December 31, 1999 is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- --------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Special Plan:
$2.81 704,000 4 years $ 2.81 704,000 $ 2.81

Option Plan:
$0.56 - $1.50 4,863,000 9 years $ 0.86 807,000 $ 0.89
$1.51 - $3.00 1,293,000 6 years $ 2.71 1,006,000 $ 2.68
$3.01 - $6.50 325,000 5 years $ 3.95 226,000 $ 3.95
</TABLE>

In April 1998, the Board of Directors approved the issuance of 564,000
options with exercise price of $1.00 in exchange for the cancellation of various
prior employee options under the Option Plan with exercise prices ranging from
$2.00 to $6.50. No compensation expense was recorded as a result of the
issuance.

In March 1998, the Company issued approximately 277,000 shares of Common
Stock to two former officers in exchange for the surrender and cancellation of
certain previously outstanding warrants and options to purchase 1,500,000 shares
of Common Stock at exercise prices ranging from $2.00 to $4.75 per share. The
fair market value of the shares issued was approximately $242,000, which was
less than the fair value of the warrants and options received in the exchange.

In January 1998, the Company issued approximately 759,000 shares of Common
Stock in exchange for the surrender and cancellation of certain previously
outstanding warrants and options to purchase approximately 2,578,000 shares of
Common Stock at exercise prices ranging from $2.00 to $5.75 per share. The fair
market value of the shares issued was approximately $900,000, which was less
than the fair value of the warrants and options received in the exchange.

In May 1997, the Board of Directors approved a modification to previously
issued options under the Special and Option Plans whereby the exercise price of
1,612,000 options issued to certain members of the Board of Directors,
management and employees was reduced to $2.81. The previous exercise prices
ranged from $3.50 to $5.08. No compensation expense was recorded as a result of
the modification.

The Company has issued various options pursuant to the Special Plan to
non-employees to purchase Common Stock in 1997, the majority of which were
exercisable as of December 31, 1997. In compliance with SFAS No. 123, the
Company expensed $58,000 and $354,000 in 1998 and 1997, respectively, associated
with the grant of 134,000 options in 1997. The fair value of each grant in 1997
was estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: dividend yield of 0% percent, risk-free interest
rate of 6.5%, expected volatility of 179%, and an expected option life of 5
years.

Warrants

In 1999, 1998 and 1997, the Company granted 1,191,000, 1,000,000 and
1,065,000 warrants to non-employees, with exercise prices equal to the market
value on the date of grant. The per share weighted-average fair value of
warrants granted during 1999, 1998 and 1997 was $1.03, $0.50 and $1.83,
respectively. In compliance with SFAS No. 123, the Company expensed $262,000, $0
and $1,401,000 in 1999, 1998 and 1997, respectively, associated with the grant
of these warrants. The fair value of each warrant grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: 1999 - dividend yield of 0% percent, risk- free
interest rate of 4.93%, expected volatility of 81.2%, and an expected life of
2.9 years; 1998 - dividend yield of 0% percent, risk- free interest rate of
4.23%, expected volatility of 188%, and an expected life of 2.3 years; 1997 -
dividend yield of 0% percent, risk-free interest rate of 6.5%, expected
volatility of 179%, and an expected life of 10 years.

F-13
<PAGE> 47

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

The following summarizes warrant activity during 1999, 1998 and 1997:

<TABLE>
<CAPTION>
OUTSTANDING WEIGHTED AVERAGE
WARRANTS EXERCISE PRICES
----------- ----------------
<S> <C> <C>
December 31, 1996 4,581,000 4.10
Granted 1,065,000 1.83
Exercised (374,000) 2.07
Canceled (1,078,000) 4.39
----------- ----

December 31, 1997 4,194,000 3.63
Granted 1,000,000 1.25
Exercised -- --
Canceled (2,291,000) 4.02
----------- ----
December 31, 1998 2,903,000 2.49
Granted 1,191,000 1.00
Exercised (9,000) 0.96
Canceled (938,000) 2.63
----------- ----
December 31, 1999 3,147,000 1.89
=========== ====
Balance exercisable at
December 31, 1999 2,905,000 $ 1.72
========== ======
</TABLE>

At December 31, 1999, the range of exercise prices and the weighted
- -average remaining contractual life of outstanding warrants was $0.6875 to $7.50
and 2 years, respectively.

(4) CUMULATIVE CONVERTIBLE PREFERRED STOCK

The Company has authorized 10,000,000 shares of preferred stock. The
preferred stock may be issued in one or more series. The only series currently
designated are a series of 5,000,000 shares of Series A Cumulative Convertible
Preferred Stock ("Series A Preferred Stock") and a series of 85,000 shares of
Series B Preferred Stock.

Series A

At December 31, 1999 and 1998, there were 161,000 shares of Series A
Preferred Stock issued and outstanding. The Series A Preferred Stock provides
for a cumulative annual dividend of 10 cents per share, payable in semi-annual
installments in June and December. Dividends may be paid in cash or with shares
of Common Stock. In 1999, 1998 and 1997, the Company issued approximately
13,000, 19,000 and 8,000 common shares, respectively, for payment of dividends.
At December 31, 1999, the cumulative unpaid dividends for the Series A Preferred
Stock was approximately $1,300.

The Series A Preferred Stock has no voting rights and has a $1.00 per
share liquidation preference over Common Stock. The registered holder has the
right at any time to convert shares of Series A Preferred Stock into that number
of shares of NTN Common Stock that equals the number of shares of Series A
Preferred Stock that are surrendered for conversion divided by the conversion
rate. The conversion rate is subject to adjustment in certain events and is
established at the time of each conversion. During 1999, 1998 and 1997, there
were no conversions. There are no mandatory conversion terms or dates associated
with the Series A Preferred Stock.

Series B

In October 1997, NTN sold and issued 35,000 shares of Series B Preferred
Stock each to two institutional purchasers ("the Investors") for a total of
$7,000,000. The sale of the Series B Preferred Stock was effected pursuant to
Regulation D of the

F-14
<PAGE> 48

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Securities and Exchange Commission under the Securities Act of 1993 as amended.
The Company paid $210,000 in financial advisory services in connection with the
sale of the Series B Preferred Stock. A portion of the net proceeds from the
private placement was used to repay indebtedness and accrued interest to GTECH
totaling $3,883,000. The balance was used for general working capital purposes.

As of October 5, 1998, 14,000 shares of the Series B Preferred Stock (plus
accrued dividends) had been converted into 2,430,000 shares of Common Stock of
the Company, leaving 56,000 shares of the Series B Preferred Stock outstanding.
On October 5, 1998, NTN entered into an Exchange Agreement with the Investors
pursuant to which they agreed to surrender for cancellation their remaining
shares of Series B Preferred Stock in exchange for warrants and 7% senior
subordinated convertible notes (convertible notes) as described below. Pending
their surrender and cancellation, the dividend rate on the Series B Preferred
Stock was increased from 4% to 7% and the conversion price of the Series B
Preferred Stock was fixed at $1.275 per share.

Under the Exchange Agreement, the Company agreed to issue each of the
Investors a convertible note of the Company in a principal amount equal to the
stated value of their Series B Preferred Stock, plus accrued and unpaid
dividends through the date of issuance of the convertible notes. The convertible
notes were issued January 11, 1999.

(5) RETIREMENT AND SAVINGS PLANS

Defined Contribution Plan

During 1994, the Company established a defined contribution plan which is
organized under Section 401(k) of the Internal Revenue Code, which allows
employees who have completed at least six months of service or reached age 21,
whichever is later, to defer up to 15% of their pay on a pre-tax basis. The
Company, at its discretion, may contribute to the plan. For the years ended
December 31, 1999, 1998 and 1997, the Company made no such contributions.

Defined Benefit Pension Plan

In connection with the Reorganization in 1997, the Company terminated a
non-qualified, non-contributory pension plan that covered certain former
officers. There were no accrued pension benefits payable to any participants
upon termination of the plan. The plan was secured by whole- life insurance
policies for certain former officers. The Company had previously borrowed funds
against these assets. Upon termination, the loans were repaid and the net assets
were liquidated.

Deferred Compensation Plan

In connection with the Reorganization in 1997, the Company terminated an
unfunded, non-qualified deferred compensation plan that covered certain former
officers. The accrued plan benefits of $580,000 included in accrued expenses as
of December 31, 1996 were substantially paid to participants in 1997. Unpaid
benefits at December 31, 1999 and 1998 were $0 and $58,000, respectively.

F-15
<PAGE> 49

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(6) INCOME TAXES

For each of the years ended December 31, 1999, 1998 and 1997, there was no
provision for current or deferred income taxes. The components that comprise
deferred tax assets and liabilities at December 31, 1999 and 1998 are as
follows:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
NOL carryforwards $ 16,711,000 $ 17,295,000
Legal and litigation accruals 3,000 361,000
Allowance for doubtful accounts 859,000 719,000
Compensation and vacation accrual 337,000 779,000
Accrued expenses 185,000 1,032,000
Allowance for equipment obsolescence 77,000 --
Deferred revenue 247,000 133,000
Research and experimentation credit 245,000 280,000
Other reserves 717,000 247,000
Amortization 96,000 --
Depreciation 482,000 --
Charitable contributions 10,000 376,000
Other -- 12,000
------------ ------------
Total gross deferred tax assets 19,969,000 21,234,000
Valuation allowance (19,914,000) (20,703,000)
------------ ------------
Net deferred tax assets 55,000 531,000
------------ ------------
Deferred tax liabilities:
Capitalized software 55,000 457,000
Amortization -- 55,000
Other -- 19,000
------------ ------------
Total gross deferred liabilities 55,000 531,000
------------ ------------
Net deferred taxes $ -- $ --
============ ============
</TABLE>

The reconciliation of computed expected income taxes to effective income
taxes by applying the federal statutory rate is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Tax at federal income tax rate $ (849,000) $ (610,000) $(4,235,000)
State taxes net of federal benefit (150,000) (105,000) (142,000)
Settlement warrants and SFAS 123 charges 99,000 84,000 1,109,000
Nondeductible expenses of IWN -- 299,000 --
Sale of LearnStar -- (559,000) --
Change in valuation allowance (789,000) 3,131,000 2,768,000
Adjustments of net operating loss 1,384,000 (2,313,000) 563,000
carryforwards
Other 305,000 73,000 (63,000)
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
</TABLE>

F-16
<PAGE> 50

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

The net change in the total valuation allowance for the year ended
December 31, 1999 was a decrease of $789,000. The net change in the total
valuation allowance for the years ended December 31, 1998 and 1997 was an
increase of $3,131,000, and $2,768,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based on the level of historical operating
results and projections for the taxable income for the future, management has
determined that it is more likely than not that the portion of deferred tax
assets not utilized through the reversal of deferred tax liabilities will not be
realized. Accordingly, the Company has recorded a valuation allowance to reduce
deferred tax assets to the amount that is more likely than not to be realized.

At December 31, 1999, the Company has available net operating loss
carryforwards of approximately $47,500,000 for federal income tax purposes,
which begin to expire in 2000. The net operating loss carryforwards for state
purposes, which began expiring in 1998 are approximately $9,100,000.

(7) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office and production facilities and equipment under
agreements which expire at various dates. Certain leases contain renewal
provisions and generally require the Company to pay utilities, insurance, taxes
and other operating expenses. Additionally, the Company entered into lease
agreements for certain equipment used in broadcast operations, some of which
involved sale and leaseback transactions. Any deferred gains on sale and
leaseback transactions were amortized over the three year lease terms. Each
lease provides an option to the Company to repurchase the equipment at the
estimated fair market value at the end of the lease term. All sale and leaseback
transactions were completed during 1999 at which time the equipment was
purchased. Lease expense under operating leases totaled $1,007,000, 1,505,000
and $1,299,000, in 1999, 1998 and 1997, respectively, net of sublease income of
$157,000 and $46,000 in 1999 and 1998, respectively.

In November 1997, the Company sold its interest in a LLC that owns the
building containing the Company's corporate office. A gain of $905,000 was
recognized in 1997.

Future minimum lease obligations under noncancelable operating leases, net
of expected sublease payments of $154,000 in 2000 and $79,000 in 2001, at
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING TOTAL
----------- ----------
<S> <C>
2000 $ 378,000
2001 63,000
----------
Total $ 441,000
==========
</TABLE>

F-17
<PAGE> 51

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Capital Leases

The Company entered into capital leases for the purchase of new equipment.
Future minimum lease payments under the capital leases together with the present
value of the net minimum lease payments as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING TOTAL
----------- -----------
<S> <C>
2000 $ 907,000
2001 480,000
2002 21,000
2003 17,000
-----------
Total minimum lease payments 1,425,000

Less: Amount representing interest
ranging from 6% to 33.7% (210,000)
-----------

Present value of net minimum lease payments 1,215,000
Less current portion (740,000)
-----------
Long term portion $ 475,000
===========
</TABLE>

Property held under capital leases is as follows:

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Equipment $ 2,491,000 $ 724,000
Accumulated depreciation (667,000) (159,000)
----------- -----------
$ 1,824,000 $ 565,000
=========== ===========
</TABLE>

(8) DEBT

Revolving Line Of Credit

The Company entered into an agreement with Coast Business Credit for a
revolving line of credit not to exceed $4,000,000. Interest is charged on the
outstanding balance at a rate equal to the prime rate plus 1.5% per annum
(effective rate of interest is 10% at December 31, 1999), but cannot be less
than 9% per annum. The line of credit is secured by substantially all of the
Company's assets. Total loan fees of $120,000 are payable in three annual
installments and are being amortized over the life of the loan which matures on
August 31, 2002. The unused line of credit at December 31, 1999 was $1,514,000.

7% Senior Subordinated Convertible Notes

In 1999, the Company reacquired the Series B Preferred Stock in exchange
for convertible notes and warrants. The convertible notes, with a face value of
$5,913,000, were issued January 11, 1999 and bear interest at the annual rate of
7% per annum. Interest is due and payable in quarterly installments, in arrears,
and the entire principal amount will be due and payable on February 1, 2001.
Interest on the convertible notes may be paid in cash or, at NTN's election, in
shares of its Common Stock valued for this purpose at 90% of the average closing
bid price of the Common Stock during the 10 trading days preceding the interest
payment date.

At any time after a period of 20 consecutive trading days during which the
daily "Market Price" (as defined in the Exchange Agreement) of the Common Stock
equals or exceeds $1.75 (subject to adjustment), the Company may elect upon 45
days prior written notice to prepay all or any portion of the convertible notes
at a price of 105% of the outstanding principal amount, plus accrued and unpaid
interest. The convertible notes will continue to be convertible, however, at any
time prior to prepayment in full. The convertible notes must be prepaid in
connection with a merger or consolidation of the Company or other "Major
Transaction" (as defined in the Exchange Agreement) if the consideration per
share of Common Stock in the Major Transaction is at least $1.50.

F-18

<PAGE> 52

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

In such event, the prepayment price will be 105% of the outstanding principal
amount of the convertible notes, plus accrued and unpaid interest.

The holders of the convertible notes may convert them at any time, in
whole or in part, at their option. The number of shares of Common Stock issuable
upon conversion of each convertible note will be determined by dividing the
outstanding principal amount to be converted, plus any accrued and unpaid
interest, by the conversion price then in effect. The conversion price will be
$1.275 per share, subject to adjustment if certain events, including stock
dividends or subdivisions or reclassifications of the Common Stock or any sale
or issuance of Common Stock (or of rights or options to subscribe for or
purchase Common Stock) for no consideration or for a consideration per share
less than the "Average Market Price" (as defined in the Exchange Agreement) of
the Common Stock. The actual number of shares of Common Stock issuable upon any
conversion of the convertible notes will depend on the conversion price in
effect on the relevant conversion date. On November 20, 1999, $1,000,000 of
principal plus accrued interest was converted into approximately 793,000 shares
of Common Stock. An additional $45,000 of interest expense related to the
unamortized discount on the converted notes was recognized upon conversion of
the principal.

The convertible notes are subordinate in right of payment to the prior
payment of all "Senior Debt" (as defined in the Exchange Agreement). The Company
is restricted under the terms of the convertible notes from incurring any Senior
Debt in excess of $10,000,000 or any other indebtedness (except senior debt and
"subordinated debt" (as defined in the Exchange Agreement)) in excess of
$2,000,000 at any time.

The Company will be in default under the convertible notes if it fails to
pay any principal or interest on the convertible notes when due, and in certain
other events, including in the event of a material adverse change in the
condition, financial or otherwise, or operations of the Company as determined by
the holders of the convertible notes in their discretion. If the Company
defaults under the convertible notes, in the discretion of the holders of the
convertible notes, the entire outstanding principal amount of the convertible
notes and all accrued and unpaid interest will become immediately due and
payable in full.

On October 5, 1998, in consideration for their entering into the Exchange
Agreement on October 5, 1998, NTN issued to each of the Investors a warrant to
purchase 500,000 shares of Common Stock at an initial purchase price of $1.25
per share. The purchase price of shares of Common Stock under the warrants will
be subject to reduction based on the future "Market Price" (as defined) of the
Common Stock as follows: the purchase price will be (i) $0.75, if the daily
Market Price on each day during any 10 consecutive trading days shall be equal
to or greater than $1.75 but less than $2.00; (ii) $0.625, if the daily Market
Price on each day during any 10 consecutive trading days shall be equal to or
greater than $2.00 but less than $2.25; (iii) $0.50, if the daily Market Price
on each day during any 10 consecutive trading days shall be equal to or greater
than $2.25 but less than $2.50; (iv) $0.375, if the daily Market Price on each
day during any 10 consecutive trading days shall be equal to or greater than
$2.50 but less than $3.00; (v) $0.25, if the daily Market Price on each day
during any 10 consecutive trading days shall be equal to or greater than $3.00
but less than $4.00; and (vi) $0.005, if the daily Market Price on each day
during any 10 consecutive trading days shall be equal to or greater than $4.00.
No adjustments to the purchase price will be made to increase the purchase price
in effect at any time. The warrants are exercisable at any time on or before
February 1, 2001. In the event, however, that a "Major Transaction" (as defined
in the Convertible Notes) occurs, NTN may elect upon 30 days prior written
notice to the warrant holders to accelerate the expiration date of the warrants
so long as the consideration per share of Common Stock which would be received
by the warrant holders in the Major Transaction exceeds the then-applicable
purchase price per share under the warrants.

The warrants contain certain antidilution provisions that require
adjustments in the purchase price and the number of shares of Common Stock
purchasable in the event of a stock dividend, subdivision or combination of the
outstanding shares of Common Stock or in the event of a recapitalization of the
Company and certain similar events. In addition, the exercise price and number
of shares purchasable under the warrants are to be adjusted in the event the
Company issues additional shares of Common Stock (or rights or options to
subscribe for or purchase Common Stock) for no consideration, or for a
consideration per share of Common Stock less than the "Current Market Price" (as
defined) of the Common Stock under any employee stock option plan or other
employee plan approved by the Company's Board of Directors, provided that the
exercise or purchase price is not less than 85% of the fair market value on the
date of grant. The warrants allow for cashless exercises by means of the
Company's withholding of shares of Common Stock otherwise issuable to the
holder, which shares are to be valued for this purpose based on the market price
of the Common Stock at the time.

An allocation has been made between the convertible notes and the warrants
based on the relative fair values of the securities at the time of issuance. A
discount of approximately $464,000 has been recorded against the convertible

F-19
<PAGE> 53

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

notes due to the allocation. As a result of this allocation, the Company will
record interest expense, at an effective interest rate of 11% per year,
throughout the terms of the convertible notes which began in the first quarter
of 1999. Interest expense of approximately $257,000 has been accreted for the
year ended December 31, 1999.

The balance of the note plus accreted interest at December 31, 1999 is
$4,705,000.

A registration statement on Form S-3 covering 4,637,516 shares of Common
Stock, some or all of which may be issuable upon conversion of the convertible
notes, was declared effective by the Securities and Exchange Commission on
January 8, 1999.

Note Payable

The Company purchased equipment and a license agreement related to the
Internet stations for $400,000 in April 1999. A promissory note was issued for
$360,000 and cash of $40,000 was paid in relation to this agreement. The note
bears interest at 10% per annum and principal is payable in twelve equal
quarterly installments of $30,000 plus interest. In December 1999, the agreement
was revised and a payment of approximately $123,000 plus interest was paid in
December 1999, leaving a balance of approximately $178,000 at December 31, 1999
to be paid in nine quarterly installments of $19,676 beginning on March 31,
2000.

Maturities

Maturities of notes payable at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING CONVERTIBLE NOTES NOTE PAYABLE TOTAL
- ----------- ----------------- ------------ -----------
<S> <C> <C> <C>
2000 -- $ 79,000 $ 79,000
2001 $ 4,705,000 79,000 4,784,000
2003 -- 20,000 20,000
----------- ------------ -----------
Total Obligation 4,705,000 178,000 4,883,000
Less Current Maturities -- (79,000) (79,000)
----------- ------------ -----------
Long Term Obligation $ 4,705,000 $ 99,000 $ 4,804,000
=========== ============ ===========
</TABLE>

(9) LEGAL ACTIONS

In February 1998, pursuant to the settlement of a class-action lawsuit
pending against the Company since 1993, the Company issued 565,000 warrants to
purchase the Common Stock of the Company ("Settlement Warrants"). Each
Settlement Warrant has a term of three years beginning February 18, 1998. The
Settlement Warrants were issued on February 18, 1998 and entitle the holder of a
Settlement Warrant to purchase a share of Common Stock of the Company at a price
of $0.96. During the period from February 18, 2000 to February 18, 2001, the
holders of Settlement Warrants were to have the right, but not the obligation,
to put the Settlement Warrants to the Company for repurchase at a price of $3.25
per Settlement Warrant (the "Put Right"), however, this Put Right expired by its
terms on February 17, 2000 when the closing price per share of the Company's
Common Stock on the American Stock Exchange reached $4.22 or above for the
seventh trading day. The Company has no further obligation to repurchase the
Settlement Warrants. In no event shall the Company have any obligation to
repurchase its Common Stock. The right of holders to exercise the Settlement
Warrants to purchase shares of Common Stock of the Company at $0.96 per share
continues through February 18, 2001.

On June 11, 1997, the Company was included as a defendant in a
class-action lawsuit, entitled Eliot Miller and Jay Iyer, shareholders on behalf
of themselves and all others similarly situated vs. NTN Communications, Inc.,
Patrick J. Downs, Daniel C. Downs, Donald C. Klosterman, Ronald E. Hogan, Gerald
P. McLaughlin and KPMG Peat Marwick LLP, filed in the United States District
Court for the Southern District of California. The complaint alleges violations
of state and federal securities laws based upon purported omissions from the
Company's filings with the Securities and Exchange Commission. More
particularly, the complaint alleges that the directors and former officers
devised an "exit strategy" to provide themselves with undue compensation upon
their resignation from the Company. The plaintiffs further allege that
defendants made false statements about, and failed to disclose, contingent
liabilities (guaranteed compensation to management and the right of an investor
in IWN to require the

F-20
<PAGE> 54

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Company to repurchase its investment during 1997) and phantom assets (loans to
management) in the Company's financial statements and KPMG LLP's audit reports,
all of which served allegedly to inflate the trading price of the Company's
Common Stock.

On July 3, 1997, the Company filed a motion to dismiss the lawsuit. On
November 6, 1997, the Court dismissed all of the plaintiff's state law causes of
action against the Company but retained the plaintiff's federal law causes of
action. In February 1998, the attorneys representing the plaintiffs in this
litigation filed an action entitled Dorman vs. NTN Communications, Inc. in the
Superior Court of San Diego County for the State of California in which they
essentially replead the state law causes of action dismissed in the federal
lawsuit. In March 1999, the Court granted the Company's motion for summary
judgment in the Dorman matter. On May 13, 1999, plaintiffs filed a motion for
new trial which was denied by the Court. On August 20, 1999, plaintiffs filed an
appeal of the summary judgment in the Fourth Appellate District of the Court of
Appeals for the State of California. The Company will file its reply to the
appeal on or before March 30, 2000. In the Company's opinion, the claim in the
Dorman litigation is covered by directors and officers liability insurance
providing $15,000,000 of coverage. The Company has submitted this claim to its
directors and officers liability insurance underwriters, who have accepted such
claims subject to reservation of rights. The Company's deductible under the
insurance policy is $200,000 which has been paid.

In November 1999, the Company reached a tentative settlement agreement
with the class of plaintiffs in the Miller litigation whereby the Company would
pay $3,250,000 upon approval by the court. The settlement payment is fully
covered by the Company's liability insurance. A settlement hearing is scheduled
to take place in April, 2000 for the purpose of seeking court approval of the
proposed settlement and plan of allocation of the settlement funds. Upon
approval of the proposed settlement, the Court will enter final judgment and
dismiss the litigation as to all defendants.

In September 1998, the Company received correspondence from counsel to
Microsoft Corporation and related inquiries from the Business Software Alliance
and Software Publishers Association, two industry associations, requesting
information regarding the Company's use of the MS-DOS operating system in
connection with its Playmaker(R) systems which were installed in over 2,900
hospitality locations throughout the United States. In response, the Company
conducted an internal audit and produced the results to counsel to the three
entities. Based on the audit results, it was determined that the Company had
insufficient licensing for the MS-DOS in use in the hospitality locations. In
November 1999, the Company entered into a Settlement Agreement with the Business
Software Alliance ("BSA") pursuant to which the Company will pay the Business
Software Alliance a total of $339,864 in ten equal monthly installments. The
Company will also be required to deliver to BSA a Certification of Compliance
certifying the accuracy of the software audit results and that all copies of the
relevant software products used by NTN in the course of business are licensed to
NTN and are used solely in accordance with such licenses. In addition, in
December 1999, the Company entered into a Settlement Agreement with the Software
Publishers Association pursuant to which the Company was liable for a total of
$25,000 to the Software Publishers Association in two equal installments and
purchased sufficient copies of the software to replace infringing copies as
needed. The Company had previously provided an amount sufficient to cover the
expense of both settlements.

The Company has been involved as a plaintiff or defendant in various
previously reported lawsuits in both the United States and Canada involving
Interactive Network, Inc. ("IN"). With the court's assistance, the Company and
IN reached a resolution of all pending disputes in the United States and agreed
to private arbitration regarding any future licensing, copyright or infringement
issues which may arise between the parties. There remain two lawsuits involving
the Company, its unaffiliated Canadian licensee and IN, which were filed in
Canada in 1992. No action was taken in the Canadian litigation until May 1998,
when IN gave notice of its intention to proceed. In November 1998, the Company
and its Canadian licensee filed a counterclaim against IN. 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. In
January, 2000 the Court ordered the parties to complete discovery in the matter
on or before May 2000. Although they cannot be estimated with certainty, any
damages the Company might incur are not expected to be material.

F-21
<PAGE> 55

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(10) MANAGEMENT REORGANIZATION

On March 5, 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 and Daniel C. Downs resigned as President. In
addition, three other officers resigned or were terminated in connection with
the reorganization ("Reorganization"). The Company entered into separate
agreements ("Agreements") with each of the former officers setting out the terms
on which their existing employment contracts with the Company would be settled.
In compliance with the Agreements, the Company was to continue to pay the former
officers their current annual salaries and other benefits for the remaining
terms of their employment agreements with the Company, which were to expire on
or before December 31, 1999.

In March 1998, the Company and three of the former officers agreed to an
amendment of the Agreements. The Agreements were modified to extend the payment
term an additional year to December 31, 2000 and provided for reductions of
amounts to be paid in 1998 and 1999 totaling $272,000 and $355,000,
respectively. Medical and life insurance benefits pursuant to the Agreements
were also extended to December 31, 2000.

Pursuant to the Agreements, in 1997, the Company canceled an aggregate of
2,325,000 of outstanding warrants and options to purchase Common Stock of the
Company previously issued to the former officers. In addition, the Company
agreed to extend the exercise period and reduce the exercise price of certain
other warrants and options retained by the former officers.

Total charges related to the Reorganization are comprised of the
following:

<TABLE>
<CAPTION>
1997
----------
<S> <C>
Contractual payments for Agreements, net of discount $3,128,000
Cancellation of notes receivable and related accrued
interest of $216,000 from former officers --
Cancellation of note receivable from President 150,000
Bonus granted to President 85,000
Charge related to extension of the exercise period and
reduction in the exercise price of certain warrants
and options 1,450,000
-----------
Total charges $ 4,813,000
===========
</TABLE>

Interest expense totaling $34,000, $56,000 and $185,000 was incurred in
1999, 1998 and 1997, respectively, related to the Agreements.

Upon joining the Company in October 1997 as Chief Financial Officer,
Gerald Sokol, Jr. was granted a total of 700,000 options to purchase Common
Stock at prices ranging from $5.00 to $5.08 per share. The options were
exercisable as follows: 100,000 upon grant, 200,000 in three equal annual
installments and 400,000 exercisable only if the closing price of the Common
Stock was at least $11 per share for ten consecutive days prior to August 15,
1998. All of the options were subject to acceleration in the event of a "Change
in Control Event" as defined. Such a Change of Control Event occurred in March
1997 as a consequence of the Reorganization and all the options became vested
and exercisable in full at that time. Also as a result of the Reorganization in
1997, the Board of Directors granted Gerald Sokol Jr. an additional 600,000
options to purchase the Common Stock of the Company. Mr. Sokol is no longer with
the Company.

F-22
<PAGE> 56

NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(11) SEGMENT INFORMATION

The Company's operations are to develop and distribute interactive
entertainment. The Company's reportable segments have been determined based on
the nature of the services offered to customers, which include, but are not
limited to, revenue from the Hospitality and Buzztime divisions. Hospitality
revenue is generated primarily from broadcasting content to customer locations
through two interactive television networks. Hospitality revenues comprise 94%
of the Company's total revenue. Revenue from Buzztime is primarily generated
from the distribution of its digital trivia game show content and "Play-Along"
sports games as well as revenue related to production services for third
parties. The following tables set forth certain information regarding the
Company's segments and other operations:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Hospitality $ 22,250,000 $ 20,973,000 $ 21,018,000
BUZZTIME 1,028,000 2,014,000 3,326,000
IWN 302,000 493,000 275,000
Other -- 282,000 456,000
Corporate 168,000 432,000 787,000
------------ ------------ ------------
Total Revenues $ 23,748,000 $ 24,194,000 $ 25,861,000
============ ============ ============

Operating income (loss):
Hospitality $ 6,798,000 $ 5,755,000 $ 1,129,000
BUZZTIME (4,599,000) (1,371,000) (247,000)
IWN (50,000) (895,000) (1,429,000)
Other -- (16,000) (780,000)
Corporate (5,950,000) (6,920,000) (11,480,000)
------------ ------------ ------------
Total Operating Loss $ (3,801,000) $ (3,447,000) (12,807,000)
============ ============ ============

Total Assets:
Hospitality $ 12,547,000 $ 11,816,000 $ 10,510,000
BUZZTIME 230,000 1,072,000 3,087,000
IWN 118,000 367,000 1,126,000
Other -- -- 556,000
Corporate 4,392,000 3,512,000 4,992,000
------------ ------------ ------------
Total Assets $ 17,287,000 $ 16,767,000 20,271,000
============ ============ ============

Capital Expenditures and
Software Development Costs:
Hospitality $ 5,174,000 $ 2,383,000 $ 4,050,000
BUZZTIME -- 10,000 --
Corporate 1,640,000 619,000 670,000
------------ ------------ ------------
Total Capital Expenditures and
Software Development Costs $ 6,814,000 $ 3,012,000 4,720,000
============ ============ ============
Depreciation and amortization:
Hospitality 4,290,000 2,865,000 2,848,000
BUZZTIME 934,000 2,015,000 1,578,000
IWN 14,000 698,000 157,000
Other -- 21,000 67,000
Corporate 1,319,000 763,000 788,000
------------ ------------ ------------
Total depreciation and
Amortization 6,557,000 6,412,000 5,305,000
============ ============ ============
</TABLE>

F-23
<PAGE> 57

SCHEDULE II
NTN COMMUNICATIONS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

BALANCE
ALLOWANCE FOR ADDITIONS CHARGED AT END
DOUBTFUL ACCOUNTS BALANCE AT BEGINNING TO EXPENSE DEDUCTIONS (a) OF PERIOD
- ----------------- -------------------- ---------------- -------------- ----------
<S> <C> <C> <C> <C>
1997 $1,563,000 1,462,000 1,712,000 $1,313,000

1998 $1,313,000 850,000 443,000(b) $1,720,000

1999 $1,720,000 746,000 318,000 $2,148,000
</TABLE>

(a) Reflects trade accounts receivable written off during the year, net of
amounts recovered.

(b) In June 1998, the Company sold 82.5% of its interest in LearnStar, Inc.
The deductions for 1998 include $379,000 related to the allowance for
LearnStar, Inc. at the time of the sale.

See accompanying independent auditors' report.

F-24

<PAGE> 58

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

DATED: March 16, 2000 NTN COMMUNICATIONS, INC.

By: /s/ KENDRA BERGER
-----------------------
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STANLEY B. KINSEY Chief Executive Officer and March 16, 2000
--------------------- Chairman of the Board
Stanley B. Kinsey

/s/ BARRY BERGSMAN Director March 16, 2000
------------------
Barry Bergsman

/s/ ROBERT M. BENNETT Director March 16, 2000
---------------------
Robert M. Bennett

s/ DONALD C. KLOSTERMAN Director March 16, 2000
-----------------------
Donald C. Klosterman

/s/ ESTHER L. RODRIGUEZ Director March 16, 2000
-----------------------
Esther L. Rodriguez

/s/ GARY ARLEN Director March 16, 2000
--------------
Gary Arlen

/s/ VINCENT A. CARRINO Director March 16, 2000
----------------------
Vincent A. Carrino
</TABLE>

F-25
<PAGE> 59

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.1 Amended and Restated Certificate of Incorporation of the Company, as
amended (7)

10.2 By-laws of the Company (2)

10.3 License Agreement with NTN Canada (3)

10.4 National Football League License Agreement (3)

10.5 Lease of Office with The Campus L.L.C. (4)

10.6* Resignation and General Release Agreement, dated December 31, 1996
between NTN Communications, Inc. and Patrick J. Downs. (5)