NTN Buzztime Inc – ‘10-Q’ for 9/30/97

As of:  Friday, 11/14/97   ·   For:  9/30/97   ·   Accession #:  944209-97-1549   ·   File #:  1-11460

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      18    103K 
 2: EX-27       Financial Data Schedule                                2      7K 

10-Q   —   Quarterly Report
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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549 
------------------- 

FORM 10-Q 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF          
THE SECURITIES EXCHANGE ACT OF 1934                     

For the quarterly period ended September 30, 1997 

Commission file number 1-11460  

NTN COMMUNICATIONS, INC.  
(Exact name of registrant as specified in its charter)  

Delaware                                     31-1103425       
(State of incorporation)               (I.R.S. Employer Identification No.)   

The Campus 5966 La Place Court, Carlsbad, California 92008  
(Address of principal executive offices)        (Zip Code)  

(760) 438-7400  
(Registrant's telephone number, including area code)  

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

YES  X    NO                                            
---      ---                                    

    Number of shares outstanding of each of the registrant's classes of common
stock, as of November 7, 1997:  23,672,001 shares of common stock, $.005 par    
value.                                                                          

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PART I--FINANCIAL INFORMATION 
----------------------------- 

Item 1.  FINANCIAL STATEMENTS.                                                  

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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets 
September 30, 1997 (Unaudited) and December 31, 1996  

                                                        [Enlarge/Download Table]


                                                                         September 30,         December 31,      
                                                                             1997                 1996           
                                                                         -------------         ------------      
                                                                                                                 
                                    Assets                                                                       
                                    ------                                                                       
Current assets:                                                                                                  
 Cash and cash equivalents                                            $         1,322,000              6,579,000 
 Accounts receivable - trade, net of allowance for                                                               
  doubtful accounts                                                             3,802,000              2,031,000 
 Accounts receivable - officers and directors                                          --                199,000 
 Prepaid expenses and other current assets                                      1,085,000              1,846,000 
                                                                      -------------------   -------------------- 
          Total current assets                                                  6,209,000             10,655,000 

Broadcast equipment and fixed assets, net                                       9,669,000             10,103,000 
Software development costs, net                                                 3,964,000              4,400,000 
Retirement plan assets                                                                 --              2,527,000 
Other assets                                                                      714,000                819,000 
                                                                      -------------------   -------------------- 
          Total assets                                                $        20,556,000             28,504,000 
                                                                      ===================   ==================== 

                     Liabilities and Shareholders' Equity                                                        
                     ------------------------------------                                                        
Current liabilities:                                                                                             
 Accounts payable and accrued liabilities                             $         5,714,000              6,182,000 
 Short-term borrowings                                                          3,748,000              5,060,000 
 Deferred revenue                                                               1,550,000                254,000 
 Customer deposits                                                              1,035,000              1,279,000 
                                                                      -------------------   -------------------- 
          Total current liabilities                                            12,047,000             12,775,000 

Deferred revenue - long term                                                      149,000              1,000,000 
Long term debt                                                                    183,000                     -- 
Accrual for settlement warrants                                                 1,460,000              1,291,000 
Other long-term liabilities                                                     2,373,000              3,216,000 
                                                                      -------------------   -------------------- 
          Total liabilities                                                    16,212,000             18,282,000 
                                                                      -------------------   -------------------- 
Shareholders' equity:                                                                                            
 10% Cumulative convertible preferred stock, $.005 par value,                                                    
  10,000,000 shares authorized; issued and outstanding 161,000 in                                                
  1997 and 1996                                                                     1,000                  1,000 
 Common stock, $.005 par value, 50,000,000 shares authorized; shares                                             
  issued and outstanding 23,672,000 in 1997 and 23,177,000 in 1996                118,000                116,000 
 Treasury stock, 782,000 shares in 1997 and 1996 at cost                       (3,339,000)            (3,339,000)
 Additional paid-in capital                                                    63,412,000             59,583,000 
 Accumulated deficit                                                          (55,848,000)           (46,139,000)
                                                                      -------------------    ------------------- 
          Total shareholders' equity                                            4,344,000             10,222,000 
                                                                      -------------------   -------------------- 
          Total liabilities and shareholders' equity                  $        20,556,000             28,504,000 
                                                                      ===================   ==================== 

See accompanying notes to unaudited consolidated financial statements.          

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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES 
Consolidated Statements of Operations 
Three and Nine Months Ended September 30, 1997 and 1996 
(Unaudited) 

                                                        [Enlarge/Download Table]

                                               Three Months    Three Months     Nine Months     Nine Months  
                                               September 30,   September 30,   September 30,   September 30, 
                                                   1997            1996            1997            1996      
                                               -------------   -------------   -------------   ------------- 
                                                                                                             
Network services                               $   5,281,000       5,083,000      15,214,000      14,892,000 
Online/Internet services                             825,000         400,000       2,381,000       1,298,000 
Advertising revenues                                 313,000         375,000         747,000         869,000 
Equipment sales, net                                 165,000         262,000         392,000       1,771,000 
License and royalty fees and other revenue           255,000         322,000         906,000         857,000 
                                               -------------   -------------   -------------   ------------- 
          Total revenues                           6,839,000       6,442,000      19,640,000      19,687,000 

Operating expenses:                                                                                          
 Operating costs                                   1,496,000       3,998,000       5,524,000       6,797,000 
 Selling, general and administrative               4,297,000       6,195,000      17,441,000      16,647,000 
 Litigation, legal and professional fees             268,000         458,000       1,326,000       1,506,000 
 Equipment lease expense                             233,000       1,350,000         699,000       3,640,000 
 Depreciation and amortization                     1,481,000         669,000       3,905,000       1,442,000 
 Other charges                                            -          721,000              -          721,000 
                                               -------------   -------------   -------------   ------------- 
          Total operating expenses                 7,775,000      13,391,000      28,895,000      30,753,000 

Operating loss                                      (936,000)     (6,949,000)     (9,255,000)    (11,066,000)

Other income (expense)                                                                                       
 Interest income                                      32,000          40,000         178,000         205,000 
 Interest expense                                   (230,000)        (92,000)       (632,000)       (205,000)

                                               -------------   -------------   -------------   ------------- 
                                                    (198,000)        (52,000)       (454,000)             -  

Loss from continuing operations before                                                                       
  income taxes                                    (1,134,000)     (7,001,000)     (9,709,000)    (11,066,000)

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

Loss from continuing operations                   (1,134,000)     (7,001,000)     (9,709,000)    (11,066,000)

Gain from discontinued operations, net                    -               -               -        1,918,000 
                                               -------------   -------------   -------------   ------------- 
          Net loss                             $  (1,134,000)     (7,001,000)     (9,709,000)     (9,148,000)

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

Net loss per share:                                                                                          
 Continuing operations                         $       (0.05)          (0.31)          (0.41)          (0.49)

 Discontinued operations                                  -               -               -             0.09 
                                               -------------   -------------   -------------   ------------- 
 Net loss                                      $       (0.05)          (0.31)          (0.41)          (0.40)

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

Weighted average number of shares outstanding     23,623,000      22,487,000      23,411,000      22,599,000 
                                               =============   =============   =============   ============= 

See accompanying notes to unaudited consolidated financial statements.  

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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES 
Consolidated Statements of Cash Flows 
Three and Nine Months Ended September 30, 1997 and 1996 
(Unaudited) 

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                                                      Three           Three             Nine            Nine     
                                                      Months          Months           Months          Months    
                                                     Sept 30,        Sept 30,         Sept 30,        Sept 30,   
                                                       1997            1996             1997            1996     
                                                   -------------   -------------   -------------   ------------- 
                                                                                                                 
Cash flows from (used for) operating activities:                                                                 
  Net income (loss)                                 $ (1,134,000)     (7,001,000)     (9,709,000)     (9,148,000)
  Adjustments:                                                                                                   
   Gain on discontinued operations                            --              --              --      (3,200,000)
   Depreciation and amortization                       1,481,000       2,587,000       3,905,000       3,361,000 
   Provision for doubtful accounts                       275,000         167,000         750,000         255,000 
   Loss from discontinued operations                          --              --              --       1,282,000 
   Accrual for issuance of warrants                      283,000         293,000       2,796,000       1,910,000 
   Accrual for settlement warrants                        57,000              --         169,000              -- 
   (Gain) loss on sale and leaseback transactions             --         427,000              --              -- 
   Amortization of deferred gain on sale and                                                                     
    leaseback transactions                                51,000         267,000         187,000        (200,000)
   Change in discontinued operations                          --              --              --      (3,102,000)
   Changes in assets and liabilities:                                                                            
    Accounts receivable - trade                       (1,310,000)      1,455,000      (2,322,000)       (125,000)
    Prepaid expenses and other assets                    (76,000)      1,853,000       3,255,000         236,000 
    Accounts payable and accrued liabilities            (523,000)      1,171,000      (1,311,000)      4,455,000 
    Deferred revenue                                     487,000         133,000         258,000         212,000 
    Customer deposits                                    (44,000)         12,000        (244,000)        (47,000)
                                                   -------------   -------------   -------------   ------------- 
       Net cash provided by (used in) operating                                                                  
         activities                                     (453,000)      1,364,000      (2,266,000)     (4,111,000)
                                                   -------------   -------------   -------------   ------------- 
Cash flows from (used for) investing activities:                                                                 
  Capital expenditures                                (1,257,000)     (3,386,000)     (2,066,000)     (3,914,000)
  Buyout of lease obligations                                 --        (385,000)             --        (385,000)
  Notes receivable - related parties                          --        (131,000)             --         432,000 
  Software development costs                            (246,000)       (414,000)       (831,000)     (1,238,000)
  Receipt of marketable securities --                                                                            
    available for sale                                        --          77,000              --          77,000 
  Proceeds from sale and leaseback transactions               --      (1,460,000)             --       2,415,000 
  Deposits related to sale and leaseback                                                                         
    transactions                                              --       1,534,000              --       1,180,000 
                                                   -------------   -------------   -------------   ------------- 
       Net cash (used in) investing activities        (1,503,000)     (4,165,000)     (2,897,000)     (1,433,000)
                                                   -------------   -------------   -------------   ------------- 

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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES 
Consolidated Statements of Cash Flows, Continued
Three and Nine Months Ended September 30, 1997 and 1996 
(Unaudited) 

                                                        [Enlarge/Download Table]

                                                  Three Months   Three Months    Nine Months    Nine Months 
                                                    Sept 30,       Sept 30,       Sept 30,       Sept 30,   
                                                      1997           1996           1997           1996     
                                                  ------------   ------------   ------------   ------------ 
                                                                                                            
Cash flows from (used for) financing activities:                                                            
  Principal payments on debt                      $   (260,000)        (3,000)    (5,830,000)       (18,000)
  Proceeds from issuance of debt                       231,000        950,000      4,701,000      3,321,000 
  Purchase of equipment related to sale and                                                                 
    leaseback transactions                                  --        843,000             --     (1,385,000)
  Proceeds from issuance of common stock, less                                                              
    issuance costs paid in cash                        262,000        577,000      1,035,000        817,000 
  Payments for purchase of treasury stock                   --             --             --     (2,330,000)
                                                  ------------   ------------   ------------   ------------ 
      Net cash provided by (used in) financing                                                              
        activities                                     233,000      2,367,000        (94,000)       405,000 
                                                  ------------   ------------   ------------   ------------ 

Net decrease in cash and cash equivalents           (1,723,000)      (434,000)    (5,257,000)    (5,139,000)

Cash and cash equivalents at beginning of period     3,045,000      1,780,000      6,579,000      6,485,000 
                                                  ------------   ------------   ------------   ------------ 

Cash and cash equivalents at end of period        $  1,322,000      1,346,000      1,322,000      1,346,000 
                                                  ============   ============   ============   ============ 

Supplemental disclosures of cash flow                                                                       
  information:                                                                                              
    Cash paid during the period for:                                                                        
      Interest                                    $         --         52,000             --        117,000 
                                                  ============   ============   ============   ============ 
      Income taxes                                $         --             --             --             -- 
                                                  ============   ============   ============   ============ 

See accompanying notes to unaudited consolidated financial statements.          

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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES 
Notes to Financial Statements 
(Unaudited) 

1.   General.                                                         
-------                                                     

 Management has elected to omit substantially all notes to the Company's
financial statements.  Reference should be made to the Company's Form 10-K filed
for the year ended December 31, 1996, which report incorporated the notes to the
Company's year-end financial statements.                                        

2.   Unaudited Information.                                           
---------------------                                       

     The September 30, 1997 and 1996 information furnished herein was taken from
the books and records of the Company without audit.  However, such information  
reflects all adjustments that are, in the opinion of management, necessary to   
reflect properly the results of the interim periods presented.  The results of  
operations for the period ended September 30, 1997 are not necessarily          
indicative of the results to be expected for the fiscal year ending December 31,
1997.                                                                           

     Certain items in the prior year consolidated financial statements have been
reclassified to conform to the format used for the current periods presented.   

3.   Management Reorganization.                                       
-------------------------                                   

 In March, 1997, the Company announced a reorganization of its executive
management personnel in which Patrick J. Downs resigned as Chief Executive      
Officer and Chairman of the Board, and Daniel C. Downs resigned as President.   
In connection with the reorganization ("Reorganization"), other personnel       
changes include the resignation of Mr. Ronald Hogan, as Senior Vice President,  
and the terminations of Mr. Gerald McLaughlin, formerly Executive Vice          
President, and Mr. Michael Downs, formerly President and CEO of LearnStar.  The 
Company has entered into separate Resignation and General Release Agreements    
("Agreements") with each of the former officers for the purpose of settling     
their prior employment agreements and other contracts and arrangements with the 
Company.  In compliance with the Agreements, NTN will continue to pay the former
executives their annual salaries and other benefits for the remaining terms of  
their employment agreements with NTN, which expire on or before December 31,    
1999.  Charges for severance and other costs associated with the Reorganization 
recorded in 1996 were $5,092,000.  A charge for severance and other costs       
associated with the Reorganization was $5,298,000 in 1997, including accreted   
interest expense.  The Company has recorded the charges in 1996 and 1997 in     
accordance with Emerging Issues Task Force Issues No. 94 - 3.                   

4.   Equity Financing.                                                
----------------                                            

    On October 31, 1997, the Company completed a private placement whereby the
Company issued and sold to institutional investors 70,000 shares of the         
Company's Series B Convertible Preferred Stock, $100 stated value per share     
("Series B Preferred Stock"), for an aggregate purchase price of $7,000,000. In 
connection with the private placement, the Company paid a brokerage fee of      
$210,000 and incurred certain other offering expenses in the amount of          
approximately $50,000. A portion of the net proceeds from the private placement 
was used to repay approximately $3.9 million (including accrued interest) of    
indebtedness to GTECH Corp (see note 5). The balance of the net proceeds will be
used for general working capital purposes.                                      

   The Series B Preferred Stock provides for a cumulative annual dividend of
$4 per share, payable in quarterly installments of $1 per share on the last day 
of January, April, July and October of each year, commencing January 31, 1998.  
Holders of the Series B Preferred Stock are entitled to convert 25% of the      
Series B Preferred Stock into shares of the Company's Common Stock ("Conversion 
Shares"), subject to certain limitations, on or after the earlier ("Initial     
Conversion Date") of (1) the effective date of the Registration Statement       
covering the Conversion Shares to be filed with the Securities and Exchange     
Commission or (2) February 28, 1998. An additional 25% of the Series B Preferred
Stock will become convertible on each of the dates 60, 90 and 120 days,         
respectively, following the Initial Conversion Date. Any outstanding shares of  
the Series B Preferred Stock not converted by October 31, 2000 will             
automatically be converted as of such date.                                     

   The number of Conversion Shares issuable upon conversion of each share of
Series B Preferred Stock ("Conversion Rate") will be determined by dividing the 
sum of $100 plus any accrued and unpaid dividends on the Series B Preferred     
Stock by the Conversion Price then in effect. The Conversion Price will be equal
to the lesser of (a) 140% of the average of the closing bid prices of the       
Company's Common Stock on the five trading days immediately preceding the       
Initial Conversion Date, but in no event higher than $3.50 per share, and (b)   
85% of the lowest average of the closing bid prices of the Company's Common     
Stock on any three trading days during the 20 trading days immediately preceding
the conversion date. The Conversion Rate is subject to adjustment in certain    
events.                                                                         

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5.   Loan from GTECH Corp.                                            
--------------------                                        

   In June 1997, the Company announced that it had signed a letter of intent
setting forth an agreement in principle to enter into a merger agreement with   
GTECH Corp.  On August 6, 1997 the Company and GTECH mutually agreed to         
terminate the previously announced letter of intent.  However, in connection    
with the letter of intent, GTECH loaned $3.7 million to the Company.  The loan  
bears interest at the rate of 13% per year and is secured by a pledge of all of 
the capital stock of the Company's IWN, Inc. subsidiary and a collateral        
assignment of NTN's partnership interest in IWN, L.P.  The principal amount of, 
and accrued and unpaid interest on, the loan originally was due and payable     
September 15, 1997, which maturity date was extended by GTECH until October 24, 
1997. On November 3, 1997, the Company repaid all the outstanding principal and 
accrued interest of approximately $3,900,000 to GTECH with a portion of the     
proceeds of the private placement (see note 4).                                 

6.   Discontinued Operations - Sale of New World Computing.           
-----------------------------------------------------       

     On June 30, 1996 the Company sold all of the assets and business of its New
World Computing subsidiary to The 3DO Company.  The disposal of the New World   
has been accounted for as a discontinued operation.  Accordingly, the           
consolidated financial statements for the nine-month period ended September 30, 
1996 reports separately the operating results of the discontinued business.     

7.   Earnings per Share.                                              
------------------                                          

    Earnings per share amounts are computed by dividing net earnings increased
by preferred dividends resulting from the assumed exercise of stock options and 
warrants and the assumed conversion of convertible preferred shares, and the    
resulting assumed reduction of outstanding indebtedness, by the weighted average
number of common and common equivalent shares outstanding during the period.    
Common stock equivalents represent the dilutive effect of the assumed exercise  
of certain outstanding options and warrants and preferred stock.                

For those periods with a net loss, the impact of the common stock     
equivalents would have had an antidilutive effect for these periods and         
accordingly have not been included in the computation.                          

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Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND       
RESULTS OF OPERATIONS AND FORWARD LOOKING STATEMENTS.       

General                                                                         
-------                                                                         

 The Company uses existing technology to develop, produce and distribute
point to multi-point multi-player interactive live events and also produces and 
distributes its own original interactive programs.  The Company's principal     
sources of revenue from distribution activities are derived from (a) service    
distribution fees in the United States; (b) advertising fees, (c) sales of      
equipment to foreign licensees; (d) service distribution fees and royalties from
foreign licensees; and (e) licensing fees from foreign and domestic licensees.  

   As previously reported, on October 25, 1996, the Company reported that it
was advised on September 9, 1996 by the United States Federal Communications    
Commission that its Playmaker(R) had not received FCC approval.  The Company    
immediately suspended shipment of the Playmakers(R) to new NTN Network Locations
pending approval by the FCC.  Upon notification, the Company commenced testing  
its equipment and submitted its application to the FCC.  There was no           
interruption of the Company's services to existing NTN Network customers, nor   
were any of the Company's Online/Internet Services ever affected.  The Company  
received approval on January 15, 1997 and immediately began shipments to new    
Locations.  The Company will also implement a corrective action program to be   
approved by the FCC.                                                            

    As previously disclosed, new locations signed up by the Company during the
suspension of Playmakers(R) shipments were granted up to one day of credit by   
the Company against future billings for each day the sites could not utilize the
NTN system.  The Company estimates that the temporary suspension of Playmaker(R)
shipments and the credits extended by the Company to backlogged locations has   
resulted in reduced cash flow of approximately $350,000 during 1997 from all    
affected locations.                                                             

The Playmakers(R) are handheld radio frequency devices that contain   
rechargeable batteries.  As previously reported, Playmakers(R) manufactured     
earlier this year and last year had experienced problems related to noise       
sensitivity and recharging performance.  The Company has completed various      
modifications to its Playmakers(R) in accordance with recommendations of an     
outside engineering consulting firm.  The modifications have been undertaken in 
an effort to decrease the number of "disconnects" (i.e. customers terminating   
service) and to enhance customer satisfaction.  Prior diminished customer       
satisfaction has resulted in an increase in accounts receivable.  To date, it   
appears that such modifications have resulted in a decrease of technical        
problems and an increase in reliability of performance.  In addition, as        
previously reported, the Company earlier discovered that the "basestation" - a  
device used in conjunction with Playmakers(R) - had not been performing         
satisfactorily.  The Company decided to recall all poorly performing            
basestations and replace all such equipment with an upgraded and improved model 
in customer locations, which process began in 1997.  The Company recorded a     
charge of $650,000 in the quarter ended March 31, 1997 for the replacement of   
equipment in the field.  During the nine months ended September 30, 1997, the   
Company's revenues have been adversely affected by in charges relating to the   
repair and replacement of the affected equipment.                               

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Material Changes in Results of Operations                                       
-----------------------------------------                                       

Three-month periods ended September 30, 1997 and September 30, 1996             

  The Company incurred a net loss of $1,134,000 for the three months ended
September 30, 1997 compared to a net loss of $7,001,000 for the three months    
ended September 30, 1996.  For the current quarter, total revenues increased 6% 
from $6,442,000 to $6,839,000, primarily as a result of the growth in the       
Company's primary services.                                                     

Network Services increased 4% from $5,083,000 to $5,281,000.  This is 
primarily due to a modest growth in the number of subscriber locations          
contracting for services partially offset by a revised pricing structure.       
Online/Internet Services increased 105% from $400,000 to $825,000 primarily due 
to billings to AOL, recognition of revenue for production services related to a 
large development contract of $110,000 and an increase in the basic services to 
online customers.  Although the hours of service has recently remained          
relatively constant, the pricing structure has continued to evolve over the past
year in a consistently downward pattern.  Advertising revenues decreased 17%    
from $375,000 to $313,000 due to a lesser number of commercial spots sold.      

Equipment Sales, net of cost of sales decreased 37% from $262,000 to  
$165,000.  Equipment Sales in the past have included large sale and leaseback   
transactions.  In late 1996, the Company decided to no longer enter into sale   
and leaseback financing arrangements.  Currently, equipment sales are           
predominantly due to sales to educational customers.  Equipment sales in the    
past have also included sales to foreign licensees which are subject to outside 
influences and can occur unevenly throughout the year.  Equipment sales have    
been highly volatile in the past and are expected to remain so, as they are     
dependent on the timing of expansion plans of the Company's foreign licensees   
and its educational customers.                                                  

     Operating Expenses related to Network Services and Online/Internet Services
decreased 63% from $3,998,000 in the prior years quarter to $1,496,000 in the   
current years quarter.  The 1996 results include a charge for $2,478,000 for    
obsolete equipment.  Exclusive of this charge, Operating Expenses decreased 2%  
from the prior years quarter.  This is primarily attributable to a change in the
rate structure for commissions and service fees paid to sales, net of growth and
service reps and operating expenses commencing at IWN L.P.  Selling, General and
Administrative Expenses decreased 31% from $6,195,000 to $4,297,000.  The 1996  
results include a charge of $1,707,000 related to an accrual of severance       
benefits, a large increase in the allowance for doubtful accounts and a change  
in estimate for deferred advertising costs.  Exclusive of these charges,        
Selling, General and Administrative Expenses decreased 4%.  This is primarily   
due to cutbacks in personnel and other operating expenses offset by additional  
charges to increase the allowance for doubtful accounts of $275,000.  Stock-    
based compensation charges recorded in accordance with SFAS 123 were $283,000 in
1997 compared to $293,000 in 1996.  Stock-based compensation charges result from
the issuance of warrants or options to non-employees and can vary from period to
period.                                                                         

Deprecation and Amortization Expense increased 121% from $669,000 to  
$1,481,000 due to depreciation charges resulting from the buyout of equipment   
lease commitments late in 1996 in which the Company now owns most of its        
Broadcast equipment.  Equipment Lease Expense decreased 83% from $1,350,000 to  
$233,000 also due to the buyout of leases in late 1996.  Interest Expense       
increased from $92,000 to $230,000 largely due to interest charges related to   
the IWN Put Option, and accretion of interest for the settlement warrant        
liability and the severance liability for the Reorganization that was discounted
when recorded.                                                                  

Nine-month periods ended September 30, 1997 and September 30, 1996              

 In March, 1997, the Company announced a reorganization of its executive
management personnel in which Patrick J. Downs resigned as Chief Executive      
Officer and Chairman of the Board, and Daniel C. Downs resigned as President.   
In connection with the reorganization ("Reorganization"), other personnel       
changes include the resignation of Mr. Ronald Hogan, as Senior Vice President,  
and the terminations of Mr. Gerald McLaughlin, formerly Executive Vice          
President, and Mr. Michael Downs, formerly President and CEO of LearnStar.  The 
Company has entered into separate Resignation and General Release               

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Agreements ("Agreements") with each of the former officers for the purpose of   
settling their prior employment agreements and other contracts and arrangements 
with the Company. In compliance with the Agreements, NTN will continue to pay   
the former executives their annual salaries and other benefits for the remaining
terms of their employment agreements with NTN, which expire on or before        
December 31, 1999. Charges for severance and other costs associated with the    
Reorganization recorded in 1996 were $5,092,000. A charge for severance and     
other costs associated with the Reorganization was $5,298,000 in 1997, including
accreted interest expense. The Company has recorded the charges in 1996 and 1997
in accordance with Emerging Issues Task Force Issues No. 94 - 3.                

 The Company incurred a net loss of $9,709,000 for the nine months ended
September 30, 1997 compared to a net loss of $9,148,000 for the nine months     
ended September 30, 1996.  The 1996 results include a gain from discontinued    
operations related to the sale of New World of $1,918,000.  The 1997 results    
include significant charges totaling $5,298,000 related to the Reorganization   
and a $650,000 charge related to defective equipment.                           

For the nine months ended September 30, 1997, total revenues declined 
slightly from $19,687,000 to $19,640,000, primarily as a result of a large      
decrease in equipment sales, coupled with modest growth in the Company's primary
services.  In conjunction with the Company's decision to no longer enter into   
sale and leaseback financing arrangements, equipment sales have become a minor  
activity under current operations.  Total revenue for the nine months ended     
September 30, 1997, excluding Net Equipment Sales, increased 7% over the        
corresponding prior year period.                                                

   Network Services increased 2% for the current nine-month period over 1996
from $14,892,000 to $15,214,000.  The increase is primarily due to a modest     
growth in the number of subscriber locations contracting for services partially 
offset by a revised pricing structure.  Online/Internet Services increased 83%  
from $1,298,000 to $2,381,000 largely due to revenue from AOL of $818,000       
related to a termination of a previous agreement, recognition of revenue for    
production services related to a large development contract of $110,000 and a   
modest increase in the basic services to online customers.  Although the hours  
of service has remained relatively constant, the pricing structure has continue 
to evolve over the past year in a consistently downward pattern.  Advertising   
revenues decreased 14% during the current nine-month period from $869,000 to    
$747,000 due to a lesser number of commercial spots sold.                       

    Equipment Sales, net of cost of sales during the current nine-month period
decreased 78% from $1,771,000 to $392,000.  Equipment Sales in the past have    
included large sale and leaseback transactions.  In late 1996, the Company      
decided to no longer enter into sale and leaseback financing arrangements.      
Currently, equipment sales are predominantly due to sales to educational        
customers.  Equipment sales in the past have also included sales to foreign     
licensees which are subject to outside influences and can occur unevenly        
throughout the year.  Equipment sales have been highly volatile in the past and 
are expected to remain so, as they are dependent on the timing of expansion     
plans of the Company's foreign licensees and its educational customers.         

     Operating Expenses related to Network Services and Online/Internet Services
decreased 19% from $6,797,000 in the prior year's period to $5,524,000 in the   
current year's period.  The 1996 results include a charge for $2,478,000 for    
obsolete equipment.  The 1997 results include a charge of $650,000 for the      
replacement and repair of defective equipment.   Exclusive of these charges,    
Operating Expenses increased 13% from the prior years period due to a slight    
expansion in the number of subscribers and online services contracting for      
services, operating expenses commencing at IWN L.P and a reduction in the rate  
structure for commissions and service fees paid to sales and service reps.      
Selling, General and Administrative Expenses increased 5% from $16,647,000 to   
$17,441,000.  Included in Selling, General and Administrative Expenses for 1997 
are charges for the Reorganization totaling $3,277,000.  The 1996 results       
include a charge of $1,707,000 related to an accrual of severance benefits, a   
large increase in the allowance for doubtful accounts and a change in estimate  
for deferred advertising costs.  Exclusive of these charges, Selling, General   
and Administrative Expenses decreased 5%.  Stock-based compensation charges made
in compliance with SFAS 123 which were $2,796,000 in 1997 compared to $1,910,000
in 1996.  Stock-based compensation charges result from the issuance of warrants 
or options to non-employees and can vary from period to period.  Charges in 1997
include $1,450,000 that resulted from extension of the exercise period of       
warrants owned by certain former officers pursuant to the Reorganization.       

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Deprecation and Amortization Expense increased 171% from $1,442,000 to
$3,905,000 due to depreciation charges resulting from the buyout of equipment   
lease commitments late in 1996 in which the Company now owns most of its        
Broadcast equipment. Equipment Lease Expense decreased 81% from $3,640,000 to   
$699,000 also due to the buyout of equipment leases in late 1996.   Interest    
Expense increased 208% from $205,000 to $632,000 largely due to interest charges
related to the IWN Put Option, and accretion of interest for the settlement     
warrant liability and the liability for the Reorganization that was discounted  
when recorded.                                                                  

Material Changes in Financial Condition                                         
---------------------------------------                                         

     The following analysis compares information as of the most recent unaudited
balance sheet date of September 30, 1997 to the prior year-end audited balance  
sheet dated December 31, 1996.                                                  

  Total assets decreased 28% from $28,504,000 to $20,556,000 from December
31, 1996 to September 30, 1997. The decrease in assets is primarily due to      
losses and the reduction in the retirement assets used to repay related loans.  
Cash decreased from $6,579,000 to $1,322,000 at September 30, 1997 due primarily
to $2,316,000 in cash used to fund operations. The decrease was attributable, in
part, to approximately $813,000 used for initial payments related to the        
Reorganization and $522,000 paid to former officers under an existing deferred  
compensation plan. The Company also expended $2,897,000 to develop new software 
and purchase capital assets.                                                    

    Accounts Receivable - Trade increased 87% from $2,031,000 to $3,802,000 at
September 30, 1997.  Of this, $747,000 was invoiced late in the third quarter as
development fees and online services were earned and became billable.           
Receivables from Network Services customers experienced some ongoing settlement 
issues with customers due to the technical problems experienced earlier in the  
year.  In addition, unrelated to the technical problems, the Company has        
experienced reduced payments from one of the Company's national accounts.  The  
Company has revamped its collection function and increased its allowance for    
doubtful accounts in response to management's ongoing monitoring of credit risk.
Prepaid expenses and retirement plan assets decreased from $4,373,000 to        
$1,085,000 due to termination of the executive retirement plan in connection    
with the Reorganization.  There were no accrued benefits due to employees under 
the plan.                                                                       

Broadcast Equipment and Fixed Assets decreased from $10,103,000 to    
$9,669,000 as the result of additions for new Network Services subscribers, net 
of depreciation of assets and a charge to write-off and repair certain equipment
of $650,000.                                                                    

Total liabilities decreased 11% from $18,282,000 to $16,212,000 from  
December 31, 1996 to September 30, 1997. The decrease in Accounts Payable and   
Accrued Liabilities from $6,182,000 to $5,714,000 reflects the use of cash to   
pay down liabilities following year end, offset by accrual of charges for       
settlement of new litigation and the current portion of recently announced      
litigation settlements. Short-term borrowings decreased from $5,060,000 to      
$3,748,000 due to payoff of the amount due pursuant to the IWN Put Option and   
payoff of the loan associated with the retirement plan, net of a new borrowing  
from GTECH Corp. In June 1997, the Company borrowed $3.7 million from GTECH     
Corp, with whom it had agreed in principle to enter into a merger agreement. The
funds were used to pay Symphony LLC for its interest in IWN. The merger         
agreement was terminated in August 1997. Other long-term liabilities decreased  
26% from $3,216,000 to $2,373,000 due to legal liabilities transferred to       
current liabilities, accrual of amounts due under the Reorganization, net of    
payments.                                                                       

     Short-term and long-term deferred revenues increased 35% from $1,254,000 to
$1,699,000.  This is primarily due to large billings for development and on-line
services that were billed late in the quarter, but for which revenue recognition
is deferred, net of amortization.                                               

Overall, the Company's working capital deficit increased $3,718,000 to
$5,838,000 from December 31, 1996 to September 30, 1997, primarily the result of
the use of cash to fund operations and charges and activity related to the      
Reorganization.  As a result of the working capital deficit and other factors,  
the Company is in default of certain covenants of its leasing arrangements.  The
leasing arrangements provide                                                    

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for payments from certain customers to be paid to a lockbox maintained by an    
independent bank. The Company has agreed to direct the payments of other        
customers to the lockboxes each month to provide the lessors with further       
security. The excess funds are returned to the Company each month following the 
lease payment. In return, the lessors have agreed to forego their contractual   
rights to accelerate payments and other rights in the event of default.         

 The Company has $1,322,000 of cash available at September 30, 1997.  In
1996, the Company completed a plan to repurchase equipment related to certain   
lease obligations.  This transaction has resulted in improved cash flow due to  
the elimination of the lease payments.  Further, following the Reorganization,  
the Company implemented an organization and strategic restructuring plan aimed  
at reducing overhead expenses, which included a workforce reduction and re-     
focusing on immediate goals designed to generate immediate results.             

     The Company has both short-term and long-term needs for cash outside of its
normal operating needs.  In the past year, the Company has experienced technical
problems related to its Playmaker(R) device.  Further, the Company has also     
experienced a high rate of customers discontinuing service.  A task force has   
been assembled to review the issue and to make recommendations to improve       
Playmaker(R) performance.  Based on preliminary data, the Company believes that 
any required changes can be effected within the next year.  The costs are       
estimated to be less than $1 million and are expected to be funded through      
current operational cash flow.  The Company anticipates that the number of      
customers discontinuing service due to technical problems may decrease once the 
Playmaker(R) performance has been improved, although no assurances can be given 
that a solution can be reached without undue delay or cost.  If the technical   
problems persist for an extended period of time, it may negatively impact the   
Company's cash flow from operations.                                            

    As noted earlier, the Company completed a reorganization of its management
team that will require the payment to former officers over the next three years.
These payments include contractual amounts under employment agreements and      
payment for unused vacation leave.  Further, payments in 1997 include amounts   
due for previously deferred compensation of approximately $500,000.  The Company
has specific assets identified that were liquidated to pay-off the deferred     
compensation obligation; therefore, no current cash assets were utilized for    
that portion of the obligation.  All other obligations owing to former officers 
are expected to be funded through operations through 1999.                      

     The Company has several lawsuits pending.  In 1996, the Company settled one
lawsuit by establishing a settlement fund consisting of $400,000 in cash and    
565,000 warrants to purchase the common stock of the Company.  This settlement  
minimizes the amount of cash used and provides for possible future inflow of    
cash if the warrants are exercised.  The Company is currently attempting to     
settle other lawsuits and may settle these using a similar format of cash and   
equity instruments.                                                             

As part of the Reorganization, the Company terminated the pension and 
deferred compensation plan that benefited only former officers.  The termination
of these plans generated approximately $500,000 in cash, after payment of       
related loans against these assets.                                             

The Company has entered into an agreement to sell its interest in The 
Campus LLC, of which the Company has a 15% interest. The Campus LLC owns the    
buildings in which the Company maintains its headquarters. The sale is expected 
to be finalized in November 1997, at which time the Company anticipates         
receiving approximately $1,250,000 for its interest. The Company's basis in The 
Campus LLC is $500,000.                                                         

In October 1997, the Company completed a private placement whereby the
Company issued 70,000 shares of Series B Convertible Preferred Stock for an     
aggregate sales price of $7,000,000. Approximately, $3,900,000 of the net       
proceeds was used to repay GTECH as described below.  The balance of the net    
proceeds have been and will be used for working capital and general corporate   
purposes.                                                                       

     In June 1997, the Company received a $3.7 million loan from GTECH Corp. The
loan bears interest at the rate of 13% per year and is secured by a pledge of   
all of the capital stock of the Company's IWN, Inc. subsidiary and a collateral 
assignment of NTN's partnership interest in IWN, L.P. The principal amount of,  
and accrued and unpaid interest on, the loan originally was due and payable     
September 15,                                                                   

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1997, which maturity date was extended by GTECH until October 24, 1997. On      
November 3, 1997, the Company repaid all the outstanding principal and accrued  
interest of approximately $3,900,000 to GTECH with a portion of the proceeds of 
the private placement.                                                          

   In the past, the Company has been able to fund its operations and improve
its working capital position by sales of Common Stock, upon exercise of warrants
and options, by leasing transactions for equipment in use at subscriber         
locations, and by licensing its technology to foreign licensees. The Company is 
exploring alternative capital financing possibilities which may include (1)     
licensing and related royalties of the Company's technology and products; (2)   
borrowing arrangements under fixed and revolving credit agreements; or (3) sale 
of additional equity securities. The Company may negotiate for additional lease 
and debt financing and additional foreign licensing, however, the extent to     
which any of the foregoing may be accomplished, if at all, cannot be predicted  
at this time.                                                                   

  The Company has certain lawsuits pending as described in this report. To
avoid the expense and disruption of protracted litigation the Company has       
settled certain cases and may continue to attempt to settle others. There can be
no assurances that the Company will be successful in settling or defending such 
actions or that any or all actions would be decided in favor of the Company or  
that the continued cost of defending and prosecuting these actions will not have
a material adverse effect on the Company's financial position or results of     
operations.                                                                     

Forward Looking Statements                                                      
--------------------------                                                      

Certain of the statements contained in this section of the report,    
including those under "Material Changes in Results of Operations" and "Material 
Changes in Financial Condition" are forward-looking.  While the Company believes
that these statements are accurate, the Company's business is dependent upon    
general economic conditions and various conditions specific to its industry, and
future trends cannot be predicted with certainty.  In particular:               

   The Company currently uses a single vendor, Climax, located in Taiwan, to
manufacture its proprietary Playmaker.  If, for reasons beyond the control of   
the Company, Climax ceases operating its business, or if a dispute arises       
between the Company and Climax, there will be some delay in the manufacture of  
the Playmakers which will likely have an adverse impact on sales until an       
alternate source for such manufacturing is identified and production can begin. 

The Company is not currently aware of any direct competition in the   
hospitality industry.  However, there is competition from other providers of    
entertainment to the hospitality industry for the funds available for such      
entertainment which may have a negative impact on future sales as well as       
impacting existing customers.                                                   

 Sales and the possibility of certain customers "disconnecting" from the
Company's network may vary as a result of general economic conditions.  In      
addition, a decline in the general economic condition presents a risk that      
customers may not be able to meet their financial obligations as they become due
which will likely result in an increase of accounts receivable and a decline in 
revenues.                                                                       

PART II   OTHER INFORMATION                                                     
-----------------                                           

Item 1. LEGAL PROCEEDINGS.                                            

  A description of certain legal proceedings is contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 under the       
caption "Legal Proceedings".                                                    

   In connection with the resolution of litigation entitled Sahba Azar, et al.
                                                            ------------------
On Behalf of Themselves and All Others Similarly Situated vs. NTN               
-----------------------------------------------------------------               
Communications, Inc., Donald C. Klosterman, Patrick J. Downs, Daniel C. Downs   
-----------------------------------------------------------------------------   
and Alan P. Magerman, with which four other related actions were ultimately     
--------------------                                                            
consolidated, the Company has entered into a Stipulation of Settlement          
Agreement. The terms of the                                                     

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settlement are set forth in greater detail in the Company's prior public filings
and more specifically, in the Form 8-K dated June 24, 1996. As of the date of   
this filing, the registration statement relating to the shares of the Company's 
common stock underlying the warrants has not yet become effective.              

On April 18, 1995, a class action lawsuit was filed in United States  
District Court entitled Lenora Isaacs, On behalf of Herself and All Others      
         -----------------------------------------------------------
Similarly Situated vs. NTN Communications and Patrick J. Downs.  The complaint  
--------------------------------------------------------------                  
alleges violations of federal securities laws based upon the Company's          
projections for the fourth quarter of 1994 and for the 1994 fiscal year, and    
further alleges that certain of the Company's insiders sold stock on information
not generally known to the public.  The Company, which has assumed the defense  
of this matter on behalf of all defendants, has denied liability based upon the 
allegations contained in the complaint.  Plaintiffs have claimed to be entitled 
to damages between $8 million and $10 million. The Company believes, based in   
part on the advice of outside counsel, that the actual damages, if any, would be
substantially less than such amount. As previously announced, in order to avoid 
the costs and expenses associated with complex litigation including attorney    
fees, expert fees and costs, analyses which must be conducted and other costs   
necessary to prepare to defend this case at trial and perhaps through the       
appeals process, in addition to the business disruption occasioned by such      
protracted litigation, the Company has agreed to an out-of-court settlement     
having a total value of $1,450,000. The settlement, which is subject to final   
court approval, consists of $250,000 in cash with the remaining balance of      
$1,200,000 being payable with the Company's common stock or in cash, at the     
Company's election.  There can be no assurances that the settlement will be     
approved.                                                                       

On July 3, 1995, a single shareholder filed a separate lawsuit in the 
United States District Court for the Northern District of Texas containing      
allegations essentially identical to those raised in the shareholder lawsuit in 
April 1995.  Upon the Company's motion, the case was transferred from Texas to  
California.  The initial discovery and other proceedings of this action were    
coordinated with the class-action lawsuit referred to in the immediately        
preceding paragraph, and upon the parties' motion this separate action was      
dismissed without prejudice in January 1997.                                    

   There can be no assurance that any or all of the foregoing claims will be
decided in favor of the Company, which is not insured against the claims made.  
During the pendency of such claims, the Company will continue to incur the costs
of defense of same. If the shareholder litigation is decided in a manner adverse
to the Company, the resulting liabilities to the Company could materially and   
adversely affect the Company's financial condition and result of operations.    

In May 1997, a shareholder derivative complaint was filed against the 
Company and certain of its former officers and directors in Superior Court of   
California, North County Branch.  The complaint, which sought injunctive relief 
and an unspecified amount of damages, alleged that the Company was injured by a 
lack of independence and breach of business judgment by the defendant officers  
and directors by virtue of the Resignation Agreements and related transactions  
entered into in connection with the recent management reorganization.  The      
Company believed that the lawsuit was without merit and conveyed its position to
plaintiffs' counsel.  On June 10, 1997, the plaintiff voluntarily dismissed the 
lawsuit without any payment from the Company.  On June 11, 1997, the Company was
included as a defendant in the litigation entitled Elliot Miller and Jan Iver,  
                                                 ---------------------------
shareholders on behalf of themselves 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. The complaint  
---------------------------------------------------------------                 
alleges violations of state and federal securities laws based upon purported    
omissions from the Company's periodic filings with the Commission. More         
particularly, the complaint alleges that the Company and the defendant directors
and former officers devised an "exit strategy" to provide themselves with undue 
compensation upon their resignation from the Company. Plaintiffs further allege 
that the Company's financial statements misrepresented or omitted information   
concerning contingent liabilities, in the form of guaranteed compensation to    
management and the Symphony Option described below, and phantom assets in the   
form of loans recoverable from management, which misrepresentations and         
omissions allegedly served to inflate the trading price of the Company's Common 
Stock.                                                                          

   On July 3, 1997, the Company, on behalf of itself and the named directors
and officers, filed a motion to dismiss the lawsuit.  A ruling on this motion is
pending.  All proceedings in the case are stayed pending resolution of the      
Company's motion.  The Company has submitted this claim to its insurance        

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carriers; however, there can be no assurances that the insurance carriers will  
accept coverage or that, if coverage is accepted, it will be without a          
reservation of rights by the carriers. The insurance carriers are still         
reviewing the submission of the claim to reach a decision as to coverage.       

    On August 8, 1997, a class action complaint was filed in the United States
District Court for the Southern District of California by Yehuda Lefkowitz, on  
behalf of himself and others similarly situated against the Company and Patrick 
and Daniel Downs. The complaint alleged that defendants made materially false   
and misleading statements concerning the Company's business, operations and     
products. The complaint was voluntarily dismissed, without prejudice, by the    
plaintiff on September 3, 1997 having never been served and without any payment 
by the defendants. Though the Company believes, based in part on the opinion of 
outside counsel, that the action was without merit, there can be no assurances  
that the plaintiff or others similarly situated will not refile the same or a   
similar action at a future date.                                                

The Company had been involved as a plaintiff or defendant in various  
previously reported lawsuits in Federal courts in both the United States and    
Canada involving Interactive Network, Inc. ("IN"). With the court's assistance, 
the Company and IN have been able to reach a resolution of all pending disputes 
in the United States and have agreed to private arbitration regarding any future
licensing, copyright or infringement issues which may arise between the parties.
There remain two lawsuits among the Company, its unaffiliated Canadian licensee 
and IN, which were filed in Canada in 1992.  No substantive action has been     
taken in furtherance of either action. These actions affect only the Canadian   
operations of the Company and its Canadian licensee and do not extend to the    
Company's operations in the United States or elsewhere. Although they cannot be 
estimated with certainty, any damages the Company might incur in the event the  
actions are determined adversely to the Company are not expected to be material 
to the Company.                                                                 

    In December 1995, the Company entered into an agreement ("Agreement") with
Symphony IWN Investment LLC ("Symphony"), an unaffiliated company, under which  
Symphony invested $3,000,000 for a 10% interest in IWN, Inc. and a limited      
partner interest in IWN, L.P., a limited partnership of which IWN, Inc. is the  
general partner.  The Agreement included a provision (the "Symphony Option")    
entitling Symphony to elect to cause the Company to repurchase Symphony's shares
of IWN, Inc. and limited partner interest in IWN, L.P. at any time during the   
period from April 1, 1997 through December 1, 1997 for specified consideration. 

  In April 1997, Symphony notified the Company of its election to exercise
the Symphony Option, and in June 1997 the Company paid Symphony $3,555,727 in   
satisfaction of its obligations under the Symphony Option.  In July 1997, the   
Company filed a lawsuit against Symphony containing claims for breach of        
contract, specific performance, declaratory relief and intentional interference 
with economic relations and a demand for punitive damages.  Despite the fact    
that Symphony had retained all sums paid by the Company, Symphony claimed it was
entitled to approximately $1,000,000 in additional funds and a greater number of
warrants to purchase the Company's stock based on anti-dilution provisions in   
its warrants.  The claims of Symphony were set forth in a subsequent lawsuit    
filed by Symphony in July 1997 against the Company.  In the interest of avoiding
the expense of legal fees and costs inherent in such litigation, and            
accomplishing a prompt resolution of such claims, in August 1997, the parties   
entered into a settlement and general release agreement.  More specifically, the
Company agreed to pay Symphony an additional $75,000 and issue 72,500 shares of 
Common Stock.  The Company, in turn, received all the outstanding shares of IWN 
Inc., the limited partner interest in IWN L.P. and warrants to purchase 400,000 
shares of NTN Common Stock previously issued to Symphony.                       

Item 2.   CHANGE IN SECURITIES.                                       

   In April 1997, the Company granted a warrant to purchase 1,000,000 common
shares to Frazier/King Media Holding Co.  The warrant was granted pursuant to a 
consulting agreement whereby Frazier/King agreed to provide financial and       
management consulting services to the Company.  The warrant is exercisable at   
$2.81 and is immediately exercisable as to 200,000 shares and generally will    
become exercisable as to the balance of the shares in installments of 100,000   
shares on each of the following dates, July 15, 1997, October 15, 1997, January 
15, 1998, April 15, 1998, July 15, 1998, October                                

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15, 1997 and January 15, 1999. In the event of a change of control (as defined) 
of NTN, the warrant will become immediately exercisable in full.                

   In September 1997, the Company granted, under its 1995 Stock Option Plan,
options to purchase 100,000 common shares to Ms. Esther L. Rodriguez.  The      
option was granted as a result of Ms. Rodriguez agreeing to join the Board of   
Directors.  The option is exercisable at $2.4375 and becomes exercisable as to  
one-third of the shares covered thereby on the first anniversary of the 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 Ms. Rodriguez remaining a director.                      

Item 3.   DEFAULTS UPON SENIOR SECURITIES.                            

Refer to Footnote 5 for a description of the loan from GTECH Corp and 
repayment subsequent to September 30, 1997.                                     

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

None.                                                                 

Item 6.   EXHIBITS AND REPORTS ON REPORT 8-K.                         

(a)   Exhibits                                                        

27.   Financial Data Schedule                                         

(b)   Reports on Form 8-K                                             

None.                                                                 

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SIGNATURES
----------

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the        
undersigned hereunto duly authorized.                                           

              NTN COMMUNICATIONS, INC.

Date:  November 10, 1997            By:  /s/GERALD SOKOL, JR.                   
                  ----------------------
              Gerald Sokol, Jr.,
                                 President and Chief Executive Officer

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		10/31/00		7
		12/31/99		7		11			10-K,  10-K/A
		1/15/99		17
		7/15/98		16
		4/15/98		16					10-K
		2/28/98		7
		1/31/98		7
		1/15/98		16
		12/31/97		7					10-K,  10-K/A,  NT 10-K
		12/1/97		16
		11/19/97
Filed on:		11/14/97
		11/10/97		18
		11/7/97		1					8-K
		11/3/97		8		14			DEF 14A
		10/31/97		7					8-K
		10/24/97		8		14
		10/15/97		16
For Period End:		9/30/97		1		17
		9/15/97		8
		9/3/97		16
		8/8/97		16
		8/6/97		8
		7/15/97		16
		7/3/97		15
		6/11/97		15
		6/10/97		15
		4/1/97		16
		3/31/97		9					10-Q,  10-Q/A
		1/15/97		9					S-3/A
		12/31/96		3		14			10-K,  10-K/A,  NT 10-K
		10/25/96		9					8-K
		9/30/96		4		11			10-Q,  10-Q/A
		9/9/96		9
		6/30/96		8					10-Q,  10-Q/A,  8-K
		6/24/96		15					8-K
		7/3/95		15
		4/18/95		15
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