Mail Stop 0407
May 24, 2005
Via U.S. Mail and Fax (760) 930-1178
Mr. James B. Frakes
Chief Financial Officer
NTN Communications, Inc.
5966 La Place Court
Carlsbad, CA 92008
RE: NTN Communications, Inc.
Form 10-K for the fiscal year ended December 31, 2004
Filed March 16, 2005
Amended May 2, 2005
File No. 1-11460
Dear Mr. Frakes:
We have reviewed the above referenced filing and have the
following comments. We have limited our review to only your
financial statements and related disclosures and will make no
further
review of your documents. As such, all persons who are
responsible
for the adequacy and accuracy of the disclosure are urged to be
certain that they have included all information required pursuant
to
the Securities Exchange Act of 1934. Please address the following
comments in future filings. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a future
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Revenue Recognition, page F-12
1. We note your disclosure that arrangements for the transmission
of
the NTN iTV Network contain two deliverables; the installation of
the
equipment and the transmission of the network content. However,
we
also note on page 4 that the interactive content is stored on a
site
server equipped for satellite data reception at a subscriber`s
location. Additionally, the system requires the use of wireless
playmakers which are provided by you. Tell us how you account for
these additional deliverables including any related consideration
received. Tell us if the arrangement also contains a lease and
your
consideration of EITF 01-8.
(7) Income Taxes, page F-20
2. We note your statement that approximately $508,000 of the
valuation allowance, if realized, will be recognized as a credit
to
paid- in capital. Please provide us with more details and cite
your
basis in the accounting literature for your anticipated treatment
of
the valuation allowance.
(12) Media General Investment, pages F-24 - F-25
3. We note your statement that no allocation of fair value was
made
to the Buzztime warrants due to the lack of marketability of
Buzztime
common stock and limited convertibility into NTN common stock.
Please:
* Clarify the nature of Media General`s conversion rights on the
second and fourth anniversaries of the transaction date as well as
its co-sale rights.
* Tell us how your drag-along rights impact Media General`s
conversion rights.
* Tell us how you considered whether your warrants have a
beneficial
conversion feature as addressed by Issue 13 of EITF 00-27.
4. Tell us your basis for the valuation of the acquired Boxerjam
game
license.
(15) Acquisitions
Breakaway International, page F-29
5. We note that you included deferred revenue as a liability
assumed
in connection with the Breakaway acquisition. Tell us your basis
for
recognition and measurement of the subject liability. Refer to
EITF
01-3.
(19) Segment Information, pages F-31 to F-33
6. Please disclose the amount of goodwill assigned to each
segment.
Refer to paragraph 45 of SFAS 142.
Form 10-K for the year ended December 31, 2004
Part II, Item 9A. Controls and Procedures, page 39
7. We note your statement in the Form 10-K that, "[e]xcept as
disclosed above, there has been no change in [y]our internal
control
over financial reporting...." Note that you may not qualify your
conclusion; rather, you should take any changes into account when
making your conclusion about changes in your internal control over
financial reporting. Therefore, amend your disclosure to
definitively conclude whether or not your disclosure controls and
procedures were effective, without qualification. If you conclude
that they were effective, include disclosure explaining why your
material weakness did not affect your ability to conclude that
your
disclosure controls and procedures were effective. Please also
address this comment with respect to your qualifying disclosure in
your March 31, 2005 Form 10-Q. See Question 5 of Management`s
Reports on Internal Control over Financial Reporting and
Certification of Disclosure in Exchange Act Periodic Reports
Frequently Asked Questions (revised October 6, 2004) available on
our
web site at
http://www.sec.gov/info/accountants/controlfaq1004.htm.
Form 10-Q for the quarter ended March 31, 2005
Item 4. Controls and Procedures, page 23
8. It is not clear whether, in making their conclusions, your
certifying officers considered all information described in the
definition of "disclosure controls and procedures" because you
chose
to pair your conclusions with only a portion of the definition in
Exchange Act Rule 13a-15(e). As a result, please revise your
disclosure to clarify whether your certifying officers concluded
that
your disclosure controls and procedures were effective to ensure
that
information required to be disclosed in the reports that you file
or
submit under the Exchange Act is accumulated and communicated to
your
management, including your certifying officers, to allow timely
decisions regarding required disclosure.
9. Describe the "improved controls and processes" you have been
"designing and implementing" as part of your remediation efforts.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested supplemental information. Please file your response
letter
on EDGAR.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Kathryn Jacobson, Staff Accountant, at (202)
551-3365 or Kyle Moffatt, Accountant Branch Chief, at (202) 551-
3836
if you have questions regarding comments on the financial
statements
and related matters. Please contact me at (202) 551-3810 with any
other questions.
Sincerely,
Larry Spirgel
Assistant Director
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