================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-11460 31-1103425
(Commission File Number) (I.R.S. Employer Identification No.)
5966 LA PLACE COURT 92008
CARLSBAD, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(760) 438-7400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
================================================================================
Item 5. Other Events.
------------
On October 31, 1997, NTN Communications, Inc., a Delaware corporation (the
"Company"), issued and sold to two institutional investors 70,000 shares of the
Company's Series B Convertible Preferred Stock, $100 stated value per share (the
"Series B Preferred Stock"), for an aggregate purchase price of $7,000,000. A
portion of the net proceeds from the private placement will be used to repay
approximately $3.9 million (including accrued interest) of indebtedness of the
Company to GTECH Corporation. The balance of the net proceeds will be used to
augment the Company's working capital and for general corporate 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.
Under the terms of the Certificate of Designations, Preferences and Rights of
the Series B Preferred Stock, any holder of Series B Preferred Stock is entitled
to convert 25% of the Series B Preferred Stock owned by the holder into shares
of Common Stock (the "Conversion Shares") on or after the earlier (the "Initial
Conversion Date") of (i) the effective date of a Registration Statement (the
"Registration Statement") covering the Conversion Shares to be filed with the
Securities and Exchange Commission or (ii) February 28, 1998. An additional 25%
of the Series B Preferred Stock owned by a holder will become convertible on
each of the dates 60, 90 and 120 days, respectively, following the Initial
Conversion Date. Notwithstanding the foregoing, no holder will be entitled to
convert Series B Preferred Stock to the extent that the Conversion Shares
issuable upon such conversion would cause the aggregate shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.9% of the shares
of Common Stock outstanding following such conversion. 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 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 Common Stock on the
American Stock Exchange on the five trading days immediately preceding the
Initial Conversion Date, but in no event higher than $3.50 per share (the
"Conversion Ceiling"); and (b) 85% of the lowest average of the closing bid
prices of the Common Stock on any three trading days during the 20 trading days
immediately preceding the conversion date. The Conversion Price and the
Conversion Ceiling are subject to adjustment in certain events, including stock
dividends or subdivisions or reclassifications of the Common Stock. The actual
number of Conversion Shares into which the Series B Preferred Stock shall be
converted will depend on the Conversion Price in effect on the relevant
conversion date, but the Company will not be required to issue Conversion Shares
to the extent that it is prohibited from doing so by applicable law or the rules
or regulations of the American Stock Exchange or other exchange on which the
Common Stock is then traded. Consequently, the Company will not issue any
Conversion Shares if, as a consequence of such issuance and all prior issuances
of Conversion Shares, the aggregate number of Conversion Shares would exceed
19.9% of the Common Stock outstanding as of October 31, 1997. In such event, the
holder may elect to have the Company either (i) redeem the Series B Preferred
Stock for cash at the redemption price described below, (ii) rescind the
conversion and retain the Series B Preferred Stock, subject to the future right
to convert on the terms described herein or (iii) issue shares of Common Stock
at a conversion price equal to the average of the closing bid prices of the
Common Stock for the five trading days immediately preceding the date on which
the Company receives the holder's election.
The Company's sale of Series B Preferred Stock described above was not
registered under the Securities Act of 1933 (the "Act") in reliance on
exemptions from registration under the Act for offers
2.
and sales not involving a public offering. As a result, neither the Series B
Preferred Stock nor any Conversion Shares may be resold or transferred unless
subsequently registered under the Act or an exemption from such registration is
available. In this connection, the Company has agreed to file on behalf of the
Series B Preferred Stock holders a Registration Statement under the Act covering
the resale of the Conversion Shares.
If a Registration Statement under the Act covering the resale of the
Conversion Shares has not been declared effective on or before February 28,
1998, the Company will be required to pay the holders of the Series B Preferred
Stock, in cash, certain amounts until the Registration Statement is declared
effective, as follows: (i) for the 30-day period beginning March 1, 1998, an
amount equal to 1% of the quotient of $100 plus any accrued but unpaid
dividends, divided by the Conversion Price, for each share of Series B Preferred
Stock; and (ii) for each consecutive 30-day period beginning April 1, 1998, an
amount equal to 2% of the quotient of $100 plus any accrued and unpaid
dividends, divided by the Conversion Price, for each share of Series B Preferred
Stock. Moreover, in the event the Registration Statement shall not have been
declared effective on or before May 29, 1998, the Company will be required to
redeem the Series B Preferred Stock for cash at a redemption price per share of
Series B Preferred Stock equal to the number of Conversion Shares then issuable
upon conversion of a share of Series B Preferred Stock multiplied by the average
of the closing bid prices of the Common Stock on the five trading days preceding
May 29, 1998.
The terms of the sales of shares described above were determined by arm's-
length negotiations between the Company and the investors or their
representatives. The investors and the representatives are not affiliated with
the Company or any of its officers, directors or affiliates.
3.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
The following exhibits included with this report are made part hereof:
4.1 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of NTN Communications, Inc.
10.1 Securities Purchase Agreement, dated October 31, 1997, by and among
NTN Communications, Inc., Stark International and Shephard
International Investments, Ltd.
4.
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 6, 1997 By /S/ Gerald Sokol, Jr.
----------------------------------------
Gerald Sokol, Jr.
Chief Executive Officer and President
5.
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- --------- ------------------------------------------------------- ------------
4.1 Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of NTN
Communications, Inc.
10.2 Securities Purchase Agreement, dated October 31, 1997,
by and among NTN Communications, Inc., Stark
International and Shephard International Investments,
Ltd.
6.