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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported)
April 14, 2000
NTN COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 001-11460 31-1103425
(State or Other Jurisdiction of (Commission File Number) (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)
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ITEM 5. OTHER EVENTS.
This Current Report on Form 8-K is filed by NTN Communications, Inc.
RECENT COMPANY DEVELOPMENTS
Preliminary Operating Results for Quarter Ended March 31, 2000. Based
on our preliminary estimates, we believe that our revenues for the first quarter
ended March 31, 2000, were approximately $5.9 million, and that we incurred a
net loss during the quarter of approximately $400,000. The net loss is
determined after taking into account a reversal of a put right liability of
approximately $1,793,000 as of December 31, 2000, which reduced expenses in the
first quarter. Without the reduction in expenses attributable to the reversal of
the put right liability, our net loss for the first quarter of 2000 would have
been approximately $2.2 million.
Recent Developments Pertaining to DITV Network. In 1999, we introduced
a new Digital Interactive Television Network(TM) ("DITV Network") with a
Windows-based platform and 900 MHz Playmakers to replace our original NTN
Network, which is DOS-based with 49 MHz Playmakers. The DITV Network contains
many new features, such as full-motion video capabilities and high-resolution
graphics, to allow more compelling content and better advertising opportunities.
In addition, the new, more consumer friendly Playmakers have increased
transmission range and have a longer battery life. They 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.
NTN has experienced higher operating costs with the DITV Network. The
increased costs associated with transmitting the larger data files associated
with full-motion advertisements and new programming content have been partially
offset by lower costs for technical service and equipment repairs. NTN is
testing alternative data transmission methods and file compression technologies
to reduce these costs, but we cannot give assurances that we will be able to do
so.
As of December 31, 1999, approximately 1,500 DITV systems were
installed, representing 52% of the total network. During the first quarter of
2000, NTN installed an additional 382 DITV systems, 223 of which were
conversions and 159 of which were installed in new sites. NTN plans to continue
to convert the remaining DOS-based systems to DITV by fall of 2000. We estimate
that NTN will convert 75% of the 1,000 systems remaining on the original NTN
Network to the DITV Network and that service will be terminated as to the
remainder of the systems in accordance with existing contract terms with our
customers. We expect that NTN will require approximately $2.5 million in capital
expenditures and will incur approximately $350,000 in one time costs to convert
the additional 750 systems.
Agreement with the National Football League. We have had a 15-year
relationship with the National Football League as a licensee for the hospitality
version of our "QB1" predict-the-play interactive game. On April 3, 2000, we
extended the hospitality platform provisions of our existing License Agreement
with National Football League Properties, Inc. through April 15, 2000, while we
continue our negotiations with the NFL for a new agreement. We are also seeking
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to renew an online license with the NFL that brought QB1 to the Internet at
websites QB1.com and NFL.com last season. We are continuing our negotiations
with the NFL, although we cannot give assurances that we will ultimately be able
to reach agreement with the NFL on these matters.
Settlement of Class-Action Lawsuit. On April 3, 2000, the U.S. District
Court for the Southern District entered a final judgment and order of dismissal
in the 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 LLP. The settlement becomes final upon the
expiration of the time for filing a notice of appeal, which is thirty days after
entry of judgment, or May 3, 2000.
Warrant Exercise. On March 27, 2000, each of the two holders of the
common stock purchase warrants issued pursuant to the Exchange Agreement, dated
October 5, 1998, by and between NTN and holders of the Series B Preferred Stock,
provided notice of the election of each holder to exercise the warrants to
purchase 500,000 shares of Common Stock. Each holder elected to utilize the
cashless exercise option as provided by the warrants. The purchase price of the
warrants in effect at the time of exercise was $0.005 per share based upon the
provisions of the warrants. On March 29, 2000 we issued 499,548 shares of Common
Stock to each holder.
Conversion of Senior Convertible Subordinated Notes. On March 16, 2000,
the holders of the 7% Senior Convertible Subordinated Notes due February 2001
provided notice of each holder's election to convert $100,000 of principal
amount of the Notes plus accrued interest into shares of Common Stock. On March
16, 2000, in accordance with the provisions of the Notes, we issued 79,575
shares of Common Stock to each of the two holders.
RISK FACTORS
Our business, results of operation and financial condition could be
adversely affected by a number of factors. These risks have been outlined in our
Annual Report on Form 10-K for fiscal year ended December 31, 1999, as amended
by Amendment No. 1 thereto on Form 10-K/A filed on April 5, 2000. In addition to
the risks disclosed in such filings and in our other filings with the SEC, we
also inform investors of the following risks:
We Incurred a Significant Net Loss During the First Quarter of 2000,
and We Expect to Incur Significant Net Losses in the Future. Based on our
preliminary estimates, we believe that we incurred a net loss during the quarter
ended March 31, 2000, of approximately $400,000. The net loss for the first
quarter would have been approximately $2.2 million, except for a one-time
reduction of expenses during the quarter attributable to a reversal of a put
right liability described above under "Recent Company Developments". These
figures compare to a net loss for the first quarter of 1999 of $832,000. We
expect to incur significant and increasing operating and net losses for the
foreseeable future.
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Our Limited Liquidity and Capital Resources May Constrain Our Ability
to Operate and Grow Our Business. We estimate that, at March 31, 2000, our
current assets exceeded our current liabilities by approximately $21,000. On
April 14, 2000, we announced plans to raise $6.0 million through the
underwritten sale of 2,000,000 shares of our common stock pursuant to NTN's
existing shelf registration statement. (A copy of our press release announcing
the offering is filed as an exhibit to this report and is incorporated herein by
reference.) We intend to use the net proceeds of the proposed offering (which
proceeds are expected to be approximately $5.185 million) to market our new game
portal called BUZZTIME.com(TM), to convert our existing customer base to the
DITV Network, and for working capital and general corporate purposes.
We expect that we will require additional equity or debt financing in
an aggregate amount of $10 million as early as the start of the third quarter of
the current fiscal year to continue the development and marketing of
"BUZZTIME.com" and the expansion and improvement of our DITV Network. We cannot
give assurances that we will be able to raise capital, if at all, on terms that
we believe to be satisfactory. If we are unable to raise capital when needed, or
if our cash flows are less than we anticipate, or if we incur unanticipated
expenses, our ability to develop and market BUZZTIME.com and improve and expand
the DITV Network will be materially adversely affected. Any additional equity
financing may be done on terms which are dilutive to stockholders.
Lack of Compliance with American Stock Exchange Guidelines. The
American Stock Exchange (AMEX) has published a set of continued listing
guidelines that it follows to determine whether an AMEX-listed company should
continue trading or listing of its securities on the exchange. Under these
guidelines, the AMEX will consider suspending or "delisting" a company's
securities from the exchange:
o if it has stockholders' equity of less than $2,000,000 and has
incurred operating or net losses in two of its three most recent
fiscal years;
o if it has stockholders' equity of less than $4,000,000 and has
incurred operating or net losses in three its four most recent
fiscal years; or
o if it has sustained operating or net losses in its five most
recent fiscal years.
As we reported in our 1999 Annual Report on Form 10-K, we incurred a
net loss of $2,498,000 for the year ended December 31, 1999, representing our
fifth consecutive year of losses. Additionally, we reported shareholders' equity
of $2,221,000 as of December 31, 1999. As such, NTN is technically not in
compliance with the continued listing guidelines of the AMEX.
We have received correspondence from the AMEX indicating that, despite
the fact that NTN does not currently meet the guidelines, the AMEX will continue
the listing of NTN's Common Stock pending a review by the AMEX of NTN's 1999
Annual Report on Form 10-K and certain other financial information that we have
supplied to the AMEX. The determination by the AMEX is subject to our making
favorable progress towards complying with the guidelines and to periodic review
by the AMEX of our filings with the SEC. We cannot assure that our Common Stock
will remain listed on the AMEX or any other exchange or quotation system in the
future. If our Common Stock is delisted from the AMEX, holders of our Common
Stock may experience decreased liquidity, and our stock price could be adversely
affected.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit
Number Description
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4.1 Warrant Agreement, dated June 30, 1999 between NTN Communications,
Inc. and Interactive Marketing, Inc.
4.2 Warrant Agreement, dated December 20, 1999 between NTN Communications,
Inc. and Sikander, Inc.
4.3 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.4 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.5 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.6 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
21.1 List of Subsidiaries
99.1 Press release issued by NTN Communications, Inc. on April 14, 2000
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NTN COMMUNICATIONS, INC.
By: /s/ Kendra Berger
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Kendra Berger
Chief Financial Officer
Date: April 14, 2000
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EXHIBIT INDEX
Exhibit
Number Description
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4.1 Warrant Agreement, dated June 30, 1999 between NTN Communications,
Inc. and Interactive Marketing, Inc.
4.2 Warrant Agreement, dated December 20, 1999 between NTN Communications,
Inc. and Sikander, Inc.
4.3 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.4 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.5 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
4.6 Warrant Agreement, dated November 10, 1999 between NTN Communications,
Inc. and Spencon Integrated Solutions, LLC
21.1 List of Subsidiaries
99.1 Press release issued by NTN Communications, Inc. on April 14, 2000