NTN BUZZTIME INC (Form: 10-K, Received: 03/25/2011 14:46:14)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2010

Commission File Number 1-11460

NTN Buzztime, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	31-1103425
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

5966 La Place Court Carlsbad, California	92008
(Address of Principal Executive Offices)	(Zip Code)

(760) 438-7400

(Registrant’s telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $.005 par value		NYSE Amex

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceeding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ¨ No ¨

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨	Accelerated filer ¨
Non accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company. Yes ¨ No x

The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2010, computed by reference to the closing sale price of the common stock on the NYSE Amex on June 30, 2010, was approximately $28.5 million. Shares of common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 21, 2011, the Registrant had 60,875,090 shares of common stock outstanding.

Documents Incorporated by Reference.

The information required by Part III of this report to the extent not set forth herein, is incorporated by reference to the Registrant’s proxy statement relating to the annual meeting of stockholders expected to be held on or about June 17, 2011.

TABLE OF CONTENTS

Item		Page

	Part I

1.	Business	1
1A.	Risk Factors	6
1B.	Unresolved Staff Comments	12
2.	Properties	12
3.	Legal Proceedings	12
4.	(Removed and Reserved)	12

	Part II

5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
6.	Selected Financial Data	13
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
7A.	Quantitative and Qualitative Disclosures About Market Risk	21
8.	Financial Statements and Supplementary Data	21
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	21
9A.	Controls and Procedures	22
9B.	Other Information	22

	Part III

10.	Directors, Executive Officers and Corporate Governance	23
11.	Executive Compensation	25
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
13.	Certain Relationships and Related Transactions, and Director Independence	25
14.	Principal Accounting Fees and Services	25

	Part IV

15.	Exhibits, Financial Statement Schedules	26
	Signatures	29
	Index to Financial Statements and Schedule	30

This Annual Report on Form 10-K contains forward-looking statements that involve a high degree of risk and uncertainty. Such statements include, but are not limited to, statements containing the words “believes,” “anticipates,” “expects,” “estimates” and words of similar import. Our actual results could differ materially from any forward-looking statements, which reflect management’s opinions only as of the date of this report, as a result of risks and uncertainties that exist in our operations, development efforts and business environment. We undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements. You should carefully review the “Risks and Factors” section below and the risk factors in other documents that we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q.

PART I

ITEM 1. Business

Unless otherwise indicated, references herein to “Buzztime”, “NTN,” “we,” “us” and “our” refer to NTN Buzztime, Inc. and its consolidated subsidiaries. NTN Buzztime, Inc. was incorporated in Delaware in 1984 as Alroy Industries and changed its corporate name to NTN Communications, Inc. in 1985. We changed our name to NTN Buzztime, Inc. in 2005 to better reflect the growing role of the Buzztime consumer brand.

We own several trademarks and consider the Buzztime and Play Along TV trademarks to be among our most valuable assets.

Overview

We have been in the business of social interactive entertainment for over 25 years. Our primary source of revenue is our Buzztime Network, which focuses on the distribution of our interactive promotional television game network programming, primarily to almost 4,000 hospitality venues such as restaurants and bars throughout North America.

The out-of-home Buzztime Network has maintained a unique position in the hospitality industry for over 25 years as a promotional platform providing interactive entertainment to patrons in restaurants and bars (hospitality venues). Approximately 97% of our current consolidated revenues are derived from recurring service fees from hospitality venues (Network subscribers) that subscribe to our Buzztime Network.

The Buzztime Network distributes a wide variety of engaging interactive multi-player games, including trivia quiz shows, play-along sports programming and casino-style and casual games to our Network subscribers. Patrons use our wireless game controllers, or Playmakers, to play along with the Buzztime games which are displayed on television screens. In late 2009, we introduced a downloadable application available on the iPhone that enables patrons to use their iPhone in-venue instead of the Playmaker to play these Buzztime games. In early 2011, we introduced a downloadable application now available on the Android phones. Regardless of the device used to play, Buzztime players can compete with other players within their hospitality venue and also against players in other Network subscriber venues.

We target national and regional hospitality chains as well as local independent hospitality venues that desire a competitive point-of-difference to attract and retain customers. As of December 31, 2010, we had 3,659 United States Network subscribers and 266 Canadian subscribers. Approximately 31% of our Network subscribers come from leading national chains in the casual-dining restaurant segment such as Buffalo Wild Wings, Hooters, TGI Friday’s and Old Chicago.

Through the transmission of interactive game content stored on a site server at each location, our Buzztime Network enables single-player and multi-player participation as part of local, regional, national or international competitions supported with prizes and player recognition. Our Buzztime Network also generates revenue through the sale of advertising and marketing services to companies seeking to reach the millions of consumers that visit the Buzztime Network’s venues.

Our Strategy

As we continue to focus on our core business and achieving profitability, our business strategy is to create compelling, addictive and contagious game experiences for players and users and to translate the player experiences into real value for our Network Subscribers. We intend to increase our active player base and increase player visits into the Buzztime Network venues, thereby increasing returns on the investments made by our Network Subscribers for the Buzztime system.

Additionally, we intend to increase the distribution of Buzztime branded interactive entertainment both in-venue and out-of venue by becoming a consumer marketing company that attracts growing audiences from our developing integrated network (Buzztime Network, web and mobile), which will enable us to acquire high value customers for advertisers and for our own products.

Key elements of our strategy include the following:

Grow out-of-home network

Our plans to grow our out-of-home network include the following:

Improve the entertainment value of our content. We expect to grow our player and audience community, improve customer retention and increase site sales by continuing to improve the entertainment value of our games and our content. We intend to continue to build the Buzztime brand into an increasingly popular entertainment experience for people who are looking for competition, social interaction and entertainment. We also plan to continue to invest in account management including customer and consumer marketing support activities to continue to drive on-premise participation and game play through local events, endorsements, tournaments, championships and prizing, all promoted in local media. We are also currently evaluating options to develop a new generation of the current Playmaker, designed to provide a superior user experience, which should result in the acquisition of new players, subscribers and sponsors.

Develop integrated product offerings. We plan to leverage over 25 years of history providing compelling interactive entertainment in the out-of-home digital media industry by extending our brand to the internet and mobile devices. We believe expanding the availability of Buzztime branded games beyond our traditional hospitality venue-based platform to create a broadly integrated marketing platform and experience will allow us to capture new customer segments, to cross-promote our games across platforms to drive traffic to hospitality venues from the internet/mobile and from hospitality venues to the internet/mobile and to add value for our media partners and sponsors. In late 2009, we introduced a downloadable application available on the iPhone that enables consumers to use their iPhone in place of the Playmaker to play real-time in any of our locations. In early 2011, we introduced a downloadable application available on the Android as well. In the month of February 2011, approximately 27% of new registrations were from the mobile platform. We believe that developing digital platform products and programs will capture new players and will allow us additional opportunities to drive these players into Network venues. Additionally, we plan to promote Buzztime through online/mobile viral marketing and social networking, online trivia challenges and direct-to-consumer grassroots marketing designed to drive additional interest, excitement and traffic for our games and our venues. We believe that these initiatives could play a significant role in improving our customer retention and increasing sales to new customers.

Continue to focus on national key accounts. Currently, national accounts represent approximately 31% of our total subscriber base. We believe we have significant opportunities to grow this segment by offering customized solutions to national accounts as well as enhanced consumer marketing tools. These solutions will be aimed at addressing the revenue, promotional, branding and operational needs of these unique accounts.

Increase distribution of the Buzztime-branded content

We intend to broaden Buzztime’s interactive entertainment business and provide more access points for current players and a new generation of players. During 2011, we plan to target the online audience through a combination of our own internet presence, partner websites, viral distribution and mobile devices. Our internet and mobile products will combine our casual games with rich media and interactive broadband video to create a compelling next generation entertainment experience that is integrated with our Buzztime Network.

Grow advertising and sponsorship revenue

We believe we are well positioned to secure sponsorships from advertisers offering strategic advantages and having products that are endemic to bars and restaurants such as the spirits and beer categories. Our plan is to provide these key sponsors with a completely integrated marketing experience beyond just the media element available with the Buzztime product, which includes game integration and promotions.

Geographic Areas

The following table presents the geographic breakdown of our revenue for the last two fiscal years.

	Year Ended December 31,
	2010		2009
United States		90%		90%
Canada		10%		10%

Total		100%		100%

The following table presents the geographic breakdown of our long-term tangible assets for our last two fiscal years.

	Year Ended December 31,
	2010		2009
United States		97%		94%
Canada		3%		6%

Total		100%		100%

2009 Asset Acquisitions

iSports

In April 2009, we acquired substantially all of the assets from iSports Inc., or iSports, including technology and other intangible assets, used in the conduct of its business as a provider of mobile sports and entertainment content. We are using these acquired assets to accelerate the development of our mobile gaming platform, including the launch of our iPhone application in 2009 and the Android application in the first quarter of 2011.

i-am TV

In May 2009, we acquired from Instant Access Media, LLC, or i-am TV, certain of its assets used in the conduct of i-am TV's business as a provider of out-of-home entertainment programming and advertising to hospitality venues. The assets we acquired consist primarily of approximately 1,400 flat panel television screens located in over 360 hospitality venues in the United States, together with certain related satellite communications equipment. In addition, we acquired intangible assets related to customer and advertising relationships. We have used these acquired assets to generate customer leads, increase the number of customer sites by obtaining approximately 110 sites related to i-am TV customers, and further develop advertising relationships.

Technology

The Buzztime Network sends and receives data to our site servers via broadband internet. Content files (video and graphics) are delivered to our site servers via the EdgeCast content delivery network, a highly scalable third party network with multiple points of presence across the globe.

With the exception of our wireless Playmakers, each system installed at a hospitality location is assembled from off-the-shelf components available from a variety of sources. We internally developed the unique software that runs our on-site servers, and we carefully manage software releases over our Network. We are responsible for the installation and maintenance of each system, which we continue to own.

End User “Playmaker” Devices

Our Buzztime Network system uses a 900 MHz wireless Playmaker, a hand-held radio frequency device with a monochrome LCD display and sealed keypad that players use to enter choices and selections. The Playmakers have been manufactured primarily by a non-affiliated manufacturer in Taiwan and are a rugged combination of hardware and firmware optimized for hospitality environments. We also offer the Buzztime Mobile Playmaker, an application that allows our players to interact in-venue with our game content using iPhones, iPod Touches and Android phones. We are currently evaluating options to develop a new generation Playmaker.

Content Services

We internally develop and license from third party providers content that we deliver on our Buzztime Network. Each hospitality venue can be addressed individually, allowing us to send specific content to selected Network subscribers. Subscribing hospitality locations receive our content, in the form of programming, for approximately 15 hours each day, 365 days a year.

Game Content and Promotion

Our primary product is the distribution of a variety of multi-player interactive games that entertain and challenge a player’s skill and knowledge while prompting the customer of the hospitality venue to stay longer, spend more money and return more often.

Trivia Games

We provide premium trivia competitions during evening hours when the venues, particularly restaurants and sports bars, tend to be busiest. During these programs, each venue system simultaneously displays selected trivia questions on television monitors. Participants use Playmakers to enter their individual answers. Answers are collected, transmitted and tabulated. We display the score of each participant on the television monitors in our customer venues, along with national, regional and local rankings, as applicable. Players can compete for prizes in their local venues, as well as on a regional and national scale. In addition to game interaction, other consumer features available on the Playmaker include player chat and real-time sports scores transmitted directly to the units.

Sports Games

We have developed and produced a number of interactive sports games for over 25 years including Predict the Play ® sports games. Predict the Play sports games call for participants to predict the outcome of events before they happen, primarily in an intensive play-by-play method. One such game in this category is QB1, a live, play-along football game in which players predict the outcome of each play broadcast within professional and collegiate football games. We have developed a following of thousands of loyal players who participate weekly in our customer’s hospitality venues during football season.

In addition to our Predict the Play games, we offer a series of pre-event prediction games. Race Day consists of two game play components: one predictive before the race and one trivia during the race. Points from both elements are added together for a final score. Brackets asks players to predict the outcome of all 65 games of the NCAA Men’s Basketball tournament.

Turn Based Games

The turn-based game programming is designed with today’s young adults in mind, and primary products include multi-player card games Blackjack and Texas Hold’em poker. Programming is developed with a goal of securing subscription contracts with new hospitality venues that might not be attracted to our core trivia and sports products, as well as retaining existing hospitality venues with the expanded content offering by driving a broader group of consumers into our subscribing venues, based on varied tastes in interactive entertainment.

Playmaker Games

We also offer a suite of Playmaker only games. This suite of games is independent of the Buzztime Network and they are played directly on our wireless Playmakers rather than on one of the television screens in the hospitality venue. Players access the games by logging onto a Playmaker and following the instructions on the Playmaker screen. Currently, we have the following Playmaker only games:


Playmaker Poker:	Compete against the house in a game of jacks-or-better poker.
Acey Duecey:	Two cards are dealt face up. Players bet that the third card will fall between the previous two.
Crystal Ball:	Ask the Crystal Ball a question and receive your answer.
Shark Attack:	Just like hangman, but with an oceanic twist.

Competition

We face direct competition in hospitality venues and face competition for total entertainment dollars in the marketplace. A relatively small number of direct competitors are active in the bar and restaurant games market, including Touchtunes Interactive Networks and The Answer Is . . . Productions Inc. Competing forms of entertainment provided in public venues include music-based systems, live entertainment, cable and pay-per-view programming, coin-operated single-player games/amusements, cell phone and other mobile device games and traffic-building promotions like happy hour specials and buffets.

Buzztime Network Marketing, Sales and Distribution

We market our services to the industry primarily through national and regional trade shows, telemarketing, direct mail, online and direct contact through our field sales and marketing representatives. We organize and track all sales prospects through a distributed database software. We also use the internet to drive leads directly to our sales team. Potential customers learn of our products via marketing and promotional efforts, including direct mail trade ads or trade shows, and are directed to our website, where their information is collected, electronically sorted and delivered to the appropriate sales team.

We sell the Network primarily through direct sales employees organized by regions throughout the United States and Canada. A portion of our sales are made through independent dealers and representatives. Our sales cycle varies by customer type, and is generally longer for national accounts than independent subscribers. Generally, sales can be conducted telephonically rather than in person.

We have an account management team geographically dispersed to provide customer and consumer marketing support activities to continue to drive on-premise participation and game play through local events, endorsements, tournaments, championships and prizing, all promoted in local media.

Buzztime Significant Customer

Our customers are diverse and vary in venue size as well as location. For the years ended December 31, 2010 and 2009, we generated approximately 19% and 16%, respectively, of revenue from a single national chain, Buffalo Wild Wings, together with its franchisees. As of December 31, 2010 and 2009, approximately $100,000 and $71,000, respectively, was included in accounts receivable from this customer.

Buzztime Network Backlog

We historically have not had a significant backlog at any time because we normally can deliver and install new systems at hospitality locations within the delivery schedule requested by customers (generally, within three to four weeks).

Licensing, Trademarks, Copyrights and Patents

We keep confidential as trade secrets our technology, know-how and software. The hardware used in our operations is purchased from outside vendors. We enter into confidentiality and invention assignment agreements with our employees and contractors, and non-disclosure agreements with third parties with whom we conduct business in order to limit access to, and disclosure of, our proprietary information. We have either received, or have applied for, trademark protection for the names of our proprietary programming, to the extent that trademark protection is available for them. Our intellectual property assets, especially trademarks and copyright, are important to our business and, accordingly, we have launched a program directed to the protection of our intellectual property assets.

As of December 31, 2010, we owned one U.S. patent covering certain aspects of technology related to an interactive learning system, which expires in 2017. We have a small number of patent applications pending in the United States and Canada related to our interactive, network-based game technologies. We do not consider technology patents to be central to our competitive position. Instead, our content and branding, which are protected by copyright and trademark law, form the core of our market approach.

We consider the Buzztime and Play Along TV trademarks and our many related trademarks to be valuable assets and have registered these trademarks in the United States and aggressively seek to protect them. Our flagship game titles, Countdown and Showdown are protected by both trademark and copyright registrations in the United States.

Government Contracts

We provide our content distribution services through the Buzztime Network to colleges, universities and a small number of government agencies, typically military base recreation units. However, the number of government customers is small compared to our overall customer base. We provide our products and services to government agencies under contracts with substantially the same terms and conditions as are in place with non-government customers.

Government Regulations

The cost of compliance with federal, state and local laws has not had a material effect on our capital expenditures, earnings or competitive position to date. In June 1998, we received approval from the Federal Communications Commission for our 900 MHz Playmakers. The 900 MHz Playmaker is an integral component of our network. The multi-player card games offered on the Buzztime Network may be restricted in some jurisdictions; the laws and regulations governing distribution of card games vary in different jurisdictions.

We are subject not only to regulations applicable to businesses generally, but also to laws and regulations that apply directly to the industry of interactive television products. Although there are currently few such laws and regulations, state and federal governments may adopt laws and regulations that address issues such as:

•

user privacy;

•

copyrights;

•

gaming, lottery and alcohol beverage control regulations;

•

consumer protection;

•

the media distribution of specific material or content; and

•

the characteristics and quality of interactive television products and services.

In addition, we operate games of chance and, in some instances, award prizes. These games are regulated in many jurisdictions. The selection of prizewinners is sometimes based on chance, although none of our games require any form of monetary payment. We also operate interactive card games, such as Texas Hold’em poker and Blackjack. These card games are restricted in several jurisdictions. The laws and regulations that govern these games, however, vary in different jurisdictions and are subject to legislative and regulatory change in all of the jurisdictions in which we offer our games, as well as law enforcement discretion. We may find it necessary to eliminate, modify or cancel certain components of our products in certain states or jurisdictions based on changes in law, regulations or law enforcement discretion, which could result in additional development costs and/or the possible loss of customers and revenue.

Web Site Access to SEC Filings

We maintain an internet website at www.buzztime.com . We make available free of charge on our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

Employees

As of March 11, 2011, we employed approximately 128 people on a full-time basis and 6 people on a part-time basis. We also utilize independent contractors for specific projects and hire as many as 10 seasonal employees as needed to produce our play-along sports games during various professional and collegiate sports seasons. None of our employees are represented by a labor union and we believe our employee relations are satisfactory.

ITEM 1A . Risk Factors

Risk Factors That May Affect Our Business

Our financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within our control. These risks may cause actual performance to differ materially from historical or projected future performance. We urge investors to carefully consider the risk factors described below in evaluating the information contained in this report.:

Industry and economic conditions have and may continue to adversely affect the market and can affect demand for our services and ultimately harm our business.

Negative trends in the general economy and reduced traffic and revenues in the restaurant and hospitality industry continue to depress the market for our products and services. The current and continuing financial and economic problems have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets and extreme volatility in credit and equity markets. This financial crisis could adversely affect our operating results if it results, for example, in spending cutbacks at our customers generally or the insolvency of a significant customer. For instance, during the past two years, a few of our chain customers ceased operations and closed their stores, which resulted in material reduction of subscriber sites. Tight credit markets could eliminate or delay growth of our customers and the number of customer sites and could also delay or prevent us from acquiring or making investments in other technologies, products or businesses that could enhance or complement our Buzztime Network or ability to generate additional revenues, such as from out-of-home advertising.

In addition, global economic conditions, including the credit crisis, increased cost of commodities, widespread employee layoffs, actual or threatened military action by the United States and the continued threat of terrorism, have resulted in decreased consumer spending and may continue to negatively impact consumer confidence and spending. Continued weakness in consumer confidence or disposable income in general may negatively affect consumer spending at the hospitality venues that comprise the primary customer base for our Buzztime Network, and may also negatively affect spending by advertisers in the out-of-home market.

We cannot predict other negative events that may have adverse effects on the global economy in general and the hospitality and out-of-home media industries specifically. However, the factors described above and such unforeseen events could have a material adverse effect on our revenues and operating results.

We may not be able to compete effectively within the highly competitive interactive games and entertainment industries.

We face intense competition in the markets in which we operate. Our Buzztime Network faces significant competition from other companies for total revenues in the overall market for entertainment in hospitality venues. Our direct competitors in the hospitality games market comprise a small number of significant competitors including Touchtunes Interactive Networks and The Answer Is . . . Productions Inc. Additionally, we compete with a variety of other forms of entertainment for total entertainment dollars in the marketplace. These other forms of entertainment include music-based systems, live entertainment, cable and pay-per-view programming, coin-operated single-player games/amusements, cell phone and other mobile device games and traffic-building promotions like happy hour specials and buffets.

Our network programming competes generally with broadcast television, direct satellite programming, pay-per-view, other content offered on cable television and other forms of entertainment. Some of our current and potential competitors enjoy substantial competitive advantages, including greater financial resources for competitive activities, such as content development and programming, research and development, strategic acquisitions, alliances, joint ventures and sales and marketing. As a result, these current and potential competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or consumer preferences.

We also compete with providers of other content and services available to consumers through online services. The expanded use of online networks and the internet provides computer users with an increasing number of alternatives to video games and entertainment software. With this increasing competition and the rapid pace of change in product and service offerings in the interactive entertainment industry, we must be able to compete in terms of technology, content and management strategy. If we fail to provide competitive, engaging, quality services and products, we will lose revenues to other competitors in the entertainment industry. Increased competition may also result in price reductions, fewer customer orders, reduced gross margins, longer sales cycles, reduced revenues and loss of market share.

New products and rapid technological change may render our operations obsolete or noncompetitive.

The emergence of new entertainment products and technologies, changes in consumer preferences, the adoption of new industry standards and other factors may limit the life cycle of our technologies, products and services. Accordingly, our future performance will depend on our ability to:

·	identify emerging technological trends and industry standards in our market;

·	identify changing consumer needs, desires or tastes;

·	develop and maintain competitive technology, including new hardware and content products and service offerings;

·	improve the performance, features and reliability of our existing products and services, particularly in response to changes in consumer preferences, technological changes and competitive offerings; and

·	bring technology to the market quickly at cost-effective prices.

If we do not compete successfully in the development of new products and keep pace with rapid technological change, we will be unable to achieve profitability or sustain a meaningful market position. The interactive entertainment and game and out-of-home digital advertising industries are highly competitive and subject to rapid technological changes. We are aware of other companies that are introducing interactive game products on various platforms, including mobile devices and interactive television, which allow players to compete across the nation. Some of these companies may have substantially greater financial resources and organizational capital than we do, which could allow them to identify or better exploit emerging trends and market opportunities. In addition, changes in customer tastes may render our Buzztime Network and its content obsolete or noncompetitive.

We may not be successful in developing and marketing new products and services that respond to technological and competitive developments and changing customer needs. We may have to incur substantial costs to modify or adapt our products or services to respond to these developments. We must be able to incorporate new technologies into the products we design and develop in order to address the increasingly complex and varied needs of our customer base. Any significant delay or failure in developing new or enhanced technology, including new product and service offerings, could result in a loss of actual or potential market share and a decrease in revenues.

We may not be able to significantly grow our out-of-home Buzztime Network revenue and implement our other business strategies.

We expect to derive substantially all of our revenue, including subscription and advertising revenue, for at least the next several years from our out-of-home Buzztime Network. Accordingly, our success depends on our ability to increase market awareness and encourage the adoption of the Buzztime brand and our game service among establishments such as restaurants, sports bars, taverns and pubs, and within the interactive game player community. Our success also depends on our ability to improve customer retention. We may not be able to leverage our resources to expand awareness of and demand for our game service. In addition, our efforts to improve our game platform and content may not succeed in generating additional demand for our products within the player community or strengthening the loyalty and retention of our existing customers. The degree of market adoption of Buzztime will depend on many factors, including consumer preferences, the availability and quality of competing products and services, and our ability to leverage our brand.

Our success also depends on our ability to implement our other business strategies, which include growing our advertising revenue, developing an integrated platform that allows for consumer play across the digital platform including our Network and provides related cross-selling opportunities across our Network, the internet, and mobile devices, focusing on national accounts and growing our marketing services and sponsorship revenues. The implementation of these strategies will require us to dedicate significant resources to, among other things, expanding our product offerings, customizing our products and services to meet the unique needs of our national accounts and expanding and improving our marketing services and promotional efforts. We may be unable to implement these strategies as currently planned.

We receive a significant portion of our revenues from a single customer, and any decrease in the amount of business from that customer or any other significant customer could materially and adversely affect our cash flow and revenue.

Buffalo Wild Wings together with its franchisees is a significant customer. For the year ended December 31, 2010, we generated approximately 19% of our total revenue from this national chain. As of that date, approximately $100,000 was included in accounts receivable from this customer. If Buffalo Wild Wings, a significant number of its franchisees, and/or one or more other significant customers breach or terminate their subscriptions or otherwise decrease the amount of business they transact with us, we could lose a significant portion of our revenues and cash flow.

Communication or other system failures could result in the cancellation of subscribers and a decrease in our revenues.

We rely on continuous operation of our information technology and communications systems, and those of a variety of third parties, to communicate with our subscriber locations and distribute our services. We currently transmit our data to our hospitality customer sites via broadband internet connectivity including telephone and cable TV networks. These systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, storms, fires, power loss, telecommunications and other network failures, equipment failures, computer viruses, computer denial of service or other attacks, and other causes. These systems are also subject to break-ins, sabotage, vandalism, and to other disruptions, for example if we or the operators of these systems and system facilities have financial difficulties. Some of our systems are not fully redundant, and our system protections and disaster recovery plans cannot prevent all outages, errors or data losses. A natural or man-made disaster, a decision to close a facility we are using without adequate notice for financial or other reasons, or other unanticipated problems at our facilities or those of a third party could result in lengthy interruptions in our service. In addition, our services and systems are highly technical and complex and may contain errors or other vulnerabilities. Any errors or vulnerabilities in our products and services, or damage to or failure of our systems, could result in interruptions in our services, which could reduce our revenues and cash flow, and damage our brand. Any interruption in communications or failure of proper hardware or software function at our, or our subscribers’, locations could decrease customer loyalty and satisfaction and result in a cancellation of our services.

A disruption in our sole-source supply of game controllers could negatively impact our subscriptions and revenue.

We currently purchase our Playmaker game controllers from an unaffiliated manufacturer located in Taiwan under a supply agreement executed in April 2007, with a term that automatically renews for one year periods. We currently do not have an alternative source of supply for these devices. If this sole supplier is delayed, becomes unavailable, has product quality issues or shortages occur, we may be unable to timely obtain replacement controllers, which, in turn could hurt our customer loyalty, cause subscription cancellations and reduce our revenue. If our supplier were to go out of business or otherwise become unable to meet our needs for reliable game controller equipment, the process of locating and qualifying alternate sources could take months, during which time our production could be delayed, and may, in some cases, require us to redesign our products and systems. Such delays and potentially costly re-sourcing and redesign could have a material adverse effect on our business, operating results and financial condition.

Our management turnover creates uncertainties.

We have experienced significant changes in our executive leadership over the past several years. Michael Bush has served as our Chief Executive Officer since April 2010. Terry Bateman was appointed Chief Executive Officer in February 2009 and resigned effective March 2010. Michael Fleming served as Interim Chief Executive Officer from May 2008 until his resignation in November 2008. Dario Santana, our former CEO and President, separated from our Company in May 2008. Because of our recent financial and stock performance, geographic location and other business factors in a relatively small industry, we face substantial challenges in attracting and retaining experienced senior executives. Changes in senior management are inherently disruptive, and efforts to implement any new strategic or operating goals may not succeed in the absence of a long-term management team. Changes to strategic or operating goals with the appointment of new executives may themselves prove to be disruptive. Executive leadership transition periods are often difficult as the new executives gain detailed knowledge of company operations and due to cultural differences and friction that may result from changes in strategy and style. Without consistent and experienced leadership, customers, employees, creditors, stockholders and others may lose confidence in us.

Our cash flow may not cover current capital needs and we may need to raise additional funds in the future. Such funds may not be available on favorable terms or at all and, if available, may dilute current stockholders.

Our capital requirements will depend on many factors, including:

·	our ability to generate cash from operating activities;

·	acceptance of, and demand for, our interactive games and entertainment;

·	the costs of developing new entertainment content, products or technology or expanding our offering to new media platforms such as the internet and mobile phones;

·	the extent to which we invest in the creation of new entertainment content and new technology; and

·	the number and timing of acquisitions and other strategic transactions, if any.

In the future, we may need to raise additional funds, and such funds may not be available on favorable terms, or at all, particularly given the continuing credit environment and downturn in the overall global economy. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders. If we cannot raise funds on acceptable terms, or at all, we may not be able to develop or enhance our products and services, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. This may materially harm our business, results of operations and financial condition.

Our products and services are subject to government regulations that may restrict our operations or cause demand for our products to decline significantly.

We are subject not only to regulations applicable to businesses generally, but also to laws and regulations that apply directly to the interactive television products and game industries. In the area of interactive television products, state and federal governments may adopt a number of laws and regulations governing any of the following issues:

•

gaming, lottery and alcohol beverage control regulations;

•

user privacy;

•

copyrights;

•

consumer protection;

•

media distribution of specific material or content; and

•

the characteristics and quality of interactive television products and services.

In particular, we operate games of chance and, in some instances, award prizes. These games are regulated in many jurisdictions. The selection of prizewinners is sometimes based on chance, although none of our games require or contemplate any form of monetary payment. We also operate interactive card games, such as Texas Hold’em poker and Blackjack. These card games are restricted in several jurisdictions. The laws and regulations that govern these games also vary in different jurisdictions and are subject to legislative and regulatory change as well as to law enforcement discretion in all of the jurisdictions in which we offer our games. We may find it necessary to eliminate, modify, suspend or cancel certain components of our products in certain states or jurisdictions based on changes in law, regulations or law enforcement discretion, which could result in additional development costs and/or the loss of customers and revenue.

We have experienced significant losses, and we may incur significant losses in the future.

We have a history of significant losses, including net losses of $400,000 in 2010 and $1,501,000 in 2009 and an accumulated deficit of $107,284,000 as of December 31, 2010. We may also incur future operating and net losses, due in part to expenditures required to implement our business strategies. Despite significant expenditures, we may not be able to achieve or maintain profitability. Moreover, if we do achieve profitability, the level of any profitability cannot be predicted and may vary significantly from quarter to quarter and year to year.

Our success depends on our ability to recruit and retain skilled professionals for our business.

Our business requires experienced programmers, creative designers, application developers and sales and marketing personnel. Our success will depend on identifying, hiring, training and retaining such experienced and knowledgeable professionals. We must recruit talented professionals in order for our business to grow. There is significant competition for employees with the skills required to develop the products and perform the services we offer. We may be unable to attract a sufficient number of qualified employees in the future to sustain and grow our business, and we may not be successful in motivating and retaining the employees we are able to attract. If we cannot attract, motivate and retain qualified technical and sales and marketing professionals, our business, financial condition and results of operations will suffer.

Execution of our growth strategy may result in unsuitable acquisitions and we may fail to successfully integrate acquired companies.

We expect to continue to consider and pursue opportunities to grow our business through acquisitions of other businesses, assets, technologies and products. We have in the past and may in the future invest significant resources in evaluating, consummating and integrating such acquisitions. In making acquisition decisions, we may not be successful in selecting businesses, assets, technologies or products that complement our existing or future business and products. We may also be unsuccessful in integrating any acquired business and personnel.

We may face exposure on sales and use taxes in various states.

From time to time, state tax authorities have made and other states will make inquiries as to whether or not a portion of our services might require the collection of sales and use taxes from customers in those states. In the current difficult economic climate, many states are expanding their interpretation of their sales and use tax statutes to derive additional revenue. While in the past the sales and use tax assessments we have paid have not been significant to our operations, it is likely that such expenses will increase in the future.

We may be liable for the content we make available on the Buzztime Network, the Buzztime Trivia Channel and the internet.

We make content available on the Buzztime Network, the Buzztime Trivia Channel for cable television and the internet. The availability of this content could result in claims against us based on a variety of theories, including defamation, obscenity, negligence or copyright or trademark infringement. We could also be exposed to liability for third-party content accessed through the links from our websites to other websites. Federal laws may limit, but not eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with certain statutory requirements. We may incur costs to defend against claims related to either our own content or that of third parties, and our financial condition could be materially adversely affected if we are found liable for information that we make available. Implementing measures to reduce our exposure may require us to spend substantial resources and may limit the attractiveness of our services to users which would impair our profitability and harm our business operations.

If intellectual property law and practice do not adequately protect our proprietary rights and intellectual property, our business could be seriously damaged.

We rely on a combination of trademarks, copyrights, patents and trade secret laws to protect our proprietary rights in our products. We believe that the success of our business also depends on such factors as the technical expertise, innovative skills, marketing and capabilities of our employees. It is our policy that all employees and consultants sign non-disclosure agreements and assignment of invention agreements. Our competitors and former employees and consultants may, however, misappropriate our technology or independently develop technologies that are as good as, or better than ours. Our competitors may also challenge or circumvent our proprietary rights. If we have to initiate or defend against an infringement claim to protect our proprietary rights, the litigation over such claims could be time-consuming and costly to us, adversely affecting our financial condition.

From time to time, we hire or retain employees or external consultants who may have worked for other companies developing products similar to those that we offer. These other employers may claim that our products are based on their products and that we have misappropriated their intellectual property. Any such litigation could prevent us from exploiting our proprietary portfolio and cause us to incur substantial costs, which in turn could materially adversely affect our business. We have a small number of patent applications pending in the United States and Canada related to our interactive, network-based game technologies. Our pending patent applications and any future applications might not be approved. Moreover, our patents might not provide us with competitive advantages. Third parties might challenge our patents or trademarks or attempt to use infringing technologies or brands which could harm our ability to compete and reduce our revenues, as well as create significant litigation expenses. In addition, patents and trademarks held by third parties might have an adverse effect on our ability to do business and could likewise result in significant litigation expenses. Furthermore, third parties might independently develop similar products, duplicate our products or, to the extent patents are issued to us, design around those patents. Others may have filed and, in the future may file, patent applications that are similar or identical to ours. Such third-party patent applications might have priority over our patent applications. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office. Such interference proceedings could result in substantial cost to us.

We have incurred significant net operating loss carryforwards that we may not fully use.

As of December 31, 2010, we have federal income tax net operating loss, or NOL, carryforwards of approximately $59.8 million, which will begin expiring in 2011. As of December 31, 2010, we have state income tax NOL carryforwards of approximately $17.2 million, which will begin expiring in 2015. We believe that our ability to utilize our NOL carryforwards may be substantially restricted by the passage of time and the limitations of Section 382 of the Internal Revenue Code, which apply when there are certain changes in ownership of a corporation. To the extent we begin to realize significant taxable income, these Section 382 limitations may result in our incurring federal income tax liability notwithstanding the existence of otherwise available carryforwards. We completed a Section 382 analysis for the period from January 1, 1992 through September 30, 2010 and determined that we will be able to utilize the total NOL carryforwards that existed as of September 30, 2010. Based on our analysis of our stockholder activity for the three months ended December 31, 2010, there were no ownership changes that caused an annual limitation per the provisions of Section 382. Accordingly, we will be able to utilize the total NOL carryforwards that existed as of December 31, 2010, provided we generate sufficient future earnings prior to the expiration of the NOLs and that future changes in ownership do not trigger a Section 382 limitation. We have established a full valuation allowance for substantially all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.

Foreign currency exchange rate fluctuations, trade barriers and other risks associated with operating our business in foreign countries could harm our business.

We operate the Buzztime Network in Canada. Since service fees and operating expenses from our Canadian subsidiary are recognized in its local currency, our financial position and results of operations could be significantly affected by large fluctuations in foreign currency exchange rates or by weak economic conditions in Canada. To the extent we attempt to expand our sales efforts in other international markets, we may also face difficulties in staffing and managing foreign operations, longer payment cycles and problems with collecting accounts receivable and increased risks of piracy and limits on our ability to enforce our intellectual property rights. If we are unable to adequately address the risks of doing business abroad, our business, financial condition and results of operations may be harmed.

Risk Factors Associated with our Common Stock

Our common stock could be delisted or suspended from trading on the NYSE Amex if we fail to maintain compliance with continued listing criteria.

NYSE Amex will normally consider suspending dealings in, or removing from the list, securities selling for a substantial period of time at a low price per share if the issuer fails to effect a reverse split of such stock within a reasonable time after being notified that NYSE Amex deems such action to be appropriate under the circumstances. While NYSE Amex does not provide bright line minimum share price standards for continued listing, we believe that a price less than $1.00 per share for a substantial period of time may be investigated. Our common stock has traded at below $1.00 per share since July 2007.

If we are unable to comply with the NYSE Amex continued listing requirements, including its trading price requirements, our common stock may be suspended from trading on and/or delisted from NYSE Amex. Alternatively, in order to avoid delisting by NYSE Amex, we may be required to effect a reverse split of our common stock. The delisting of our common stock from NYSE Amex may materially impair our stockholders’ ability to buy and sell shares of our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

Our stock price has been highly volatile and your investment could suffer a decrease in value.

The trading price of our common stock has been, and may continue to be, subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for technology-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance.

Our charter contains provisions that may hinder or prevent a change in control of our company, which could result in our inability to approve a change in control and potentially receive a premium over the current market value of your stock.

Certain provisions of our certificate of incorporation could make it more difficult for a third party to acquire control of us, even if such a change in control would benefit our stockholders. For example, our certificate of incorporation requires a supermajority vote of at least 80% of the total voting power, voting together as a single class, to amend certain of its provisions, including provisions relating to:

•

the number, election and term of directors;

•

the removal of directors and the filling of vacancies; and

•

the supermajority voting requirements of our restated certificate of incorporation.

Additionally, our certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:

•

authorize the issuance of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to those of the common stock;

•

prohibit stockholders from filling Board vacancies, calling special stockholder meetings, or taking action by written consent;

•

prohibit our stockholders from making certain changes to our bylaws except with 66 2 / 3 % stockholder approval; and

•

require advance written notice of stockholder proposals and director nominations.

These provisions could discourage third parties from taking control of our company. Such provisions may also impede a transaction in which you could receive a premium over then current market prices and your ability to approve a transaction that you consider in your best interest.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our Restated Certificate of Incorporation, Restated Bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by the then-current Board, including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board could cause the market price of our common stock to decline.

Future sales of our common stock reserved for issuance pursuant to stock option and warrant exercises may adversely affect the market price of our common stock.

Future sales of substantial amounts of our common stock in the public market or the anticipation of such sales could have a material adverse effect on then-prevailing market prices. As of December 31, 2010, there were approximately 4,943,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from $0.11 to $3.33 per share. As of December 31, 2010, there were also outstanding warrants to purchase an aggregate of approximately 4,500,000 shares of common stock at exercise prices ranging from $0.30 to $1.50 per share.

These outstanding options and warrants could adversely affect our ability to obtain future financing or engage in certain mergers or other transactions because the holders of the options and warrants may exercise these securities when we are attempting to raise additional capital through a new offering of securities at a price per share that exceeds the exercise price of such options and warrants. To the extent the trading price of our common stock at the time of exercise of any of our outstanding options or warrants exceeds the exercise price, such exercise will have a dilutive effect on our stockholders.

ITEM 1B. Unresolved Staff Comments

We do not have any unresolved comments issued by the SEC Staff.

ITEM 2. Properties

We lease approximately 41,000 square feet of office and warehouse space at 5966 La Place Court, Carlsbad, California, for our corporate headquarters. In October 2005, we entered into an amendment to our lease agreement whereby we extended the term of the lease through June 2011. In February 2006, we entered into a second amendment to our lease agreement whereby we expanded the square footage we lease from approximately 39,000 square feet to 41,000 square feet. The term of the lease for this expanded square footage is also through June 2011. We do not intend to renew either of these leases.

In February 2011, we entered into a new lease for approximately 28,000 square feet of office space at 2231 Rutherford Road, Carlsbad, California. The term of the lease is from June 2011 through October 2018, and we are entitled to renew the lease for an additional five-year extension. We intend to relocate our corporate headquarters to this location.

The facilities that we lease are suitable for our current needs and are considered adequate to support expected growth.

ITEM 3. Legal Proceedings

From time to time, we become subject to legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business. Litigation in general, and securities litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict. An unfavorable resolution of one or more of these lawsuits could materially adversely affect our business, results of operations or financial condition. The need to defend any such claims could require payments of legal fees and our limited financial resources could severely impact our ability to defend any such claims.

In addition, from time to time, state tax agencies have made, and we anticipate will make in the future, inquiries as to tax consequences of our service offerings. Many states have expanded their interpretation of their sales and use tax statues to derive additional revenue. We evaluate such inquiries on a case-by-case basis and have favorably resolved the majority of these tax issues in the past. However, any such inquiry could, if not resolved favorably to us, result in a material adverse consequence.

During the quarter ended March 31, 2009, we settled a long on-going sales tax evaluation with the state of Texas. We entered into an Audit Resolution Agreement and Joint Motion to Dismiss with the State of Texas pursuant to which we will pay the state approximately $450,000 over a two year period. As part of those agreements, both parties agreed to waive all rights to any redetermination or refund hearings. In February 2009, we began collecting and remitting sales tax in the state of Texas in accordance with the state tax statutes. As of December 31, 2010, $128,000 is due to the State of Texas under this settlement agreement.

We are involved in ongoing sales tax inquiries, including certain formal assessments of $705,000, with other states and provinces. As a result of those inquiries and the Texas liability discussed above, we recorded a total net liability of $746,000 and $847,000 as of December 31, 2010 and 2009, respectively. Based on the guidance set forth by ASC No. 450, Contingencies, we deemed the likelihood that we will be required to pay all or part of these assessments with other states as reasonably possible.

ITEM 4. (Removed and Reserved)

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the NYSE Amex under the symbol “NTN.” Set forth below are the high and low sales prices for the common stock for the two most recent fiscal years:

	High		Low
Year Ended December 31, 2010
First Quarter	$	0.56	$	0.26
Second Quarter	$	0.74	$	0.43
Third Quarter	$	0.55	$	0.33
Fourth Quarter	$	0.46	$	0.31


	High		Low
Year Ended December 31, 2009
First Quarter	$	0.33	$	0.12
Second Quarter	$	0.50	$	0.21
Third Quarter	$	0.58	$	0.25
Fourth Quarter	$	0.63	$	0.42

On March 21, 2011, the closing price for our common stock as reported on the NYSE Amex was $0.43 and there were approximately 1,088 holders of record.

To date, we have not declared or paid any cash dividends with respect to our common stock, and the current policy of our Board of Directors is to retain earnings, if any, after payment of dividends on the outstanding preferred stock to provide for our growth. Consequently, no cash dividends are expected to be paid on our common stock in the foreseeable future.

We have 161,000 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. In 2010 we issued approximately 34,000 common shares for payment of these dividends.

ITEM 6. Selected Financial Data

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information otherwise required by this item.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Annual Report on Form 10-K (including, but not limited to, the following discussion of our financial condition and results of operations) and the documents incorporated herein by reference contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “believes,” “anticipates,” “estimates,” “expects,” “projections,” “may,” “potential,” “plan,” “continue” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including but not limited to statements regarding our future financial performance or position, our business strategy, plans or expectations, and our objectives for future operations, including relating to our products and services. Forward-looking statements contained herein are inherently subject to risks and uncertainties and our actual results and outcomes may be materially different from those expressed or implied by the forward-looking statements. Our actual results and outcomes may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in our operations, development efforts and business environment, including those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. We cannot guarantee future results, levels of activity, performance or achievements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to revise or update any such forward-looking statement to reflect future events or circumstances.

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this Form 10-K.

Overview

2009 Asset Acquisitions

iSports

i-am TV

Results of Operations

Year Ended December 31, 2010 compared to the Year Ended December 31, 2009

We generated a net loss of $400,000 for the twelve months ended December 31, 2010, compared to net loss of $1,501,000 for the twelve months ended December 31, 2009.

Revenue

Revenue decreased $505,000, or 2%, to $25,309,000 for the year ended December 31, 2010 from $25,814,000 for the year ended December 31, 2009. This decrease was primarily due to a decrease in subscription revenue related to lower site count and lower average revenue generated per site, a decrease in advertising revenue of $86,000 and a decrease in certain non-recurring hardware sales we recognized for the period in 2009. Comparative site count information for Buzztime Network is as follows:

	Network Subscribers as of December 31,
	2010		2009
United States		3,659		3,689
Canada		266		327
Total		3,925		4,016

Direct Costs and Gross Margin

The following table compares the direct costs and gross margin for the twelve months ended December 31, 2010 and 2009:

	For the year ended December 31,
	2010		2009
Revenues	$	25,309,000	$	25,814,000
Direct Costs		6,063,000		6,460,000
Gross Margin	$	19,246,000	$	19,354,000

Gross Margin Percentage		76%		75%

Gross margin as a percentage of revenue increased to 76% for the year ended December 31, 2010 compared to 75% in the prior year. Direct costs decreased $397,000, or 6%, to $6,063,000 for the year ended December 31, 2010 as compared to $6,460,000 for the same period in 2009. The decrease in direct costs was primarily due to a decrease of $488,000 in communications expense as we completed the conversion of customers from satellite to broadband during 2009, a decrease of $104,000 in service provider fees due to our efforts to reduce service calls and a decrease in Playmaker repair and other equipment costs of $76,000. These decreases were offset by an increase in depreciation and amortization expense of $264,000 resulting from increased equipment purchases to support new customers and intangible assets that were acquired during the second quarter of 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $1,125,000, or 6%, to $18,906,000 for the twelve months ended December 31, 2010 from $20,031,000 for the same period in 2009. Selling, general and administrative expenses decreased due to decreased professional fees of $540,000 resulting from less consulting expense, legal fees related to the asset acquisitions in 2009 and lower auditing fees; decreased selling and marketing expense of $314,000 due to reduced trade show attendance and market research costs; decreased facilities expense of $290,000 due to reduced rent, maintenance and telephone costs; decreased tax expense of $57,000; a decrease of $129,000 in i-am TV transition related expenses including the shipping costs associated with the acquired assets and approximately $59,000 of net miscellaneous expense decreases. These decreases were offset by increased personnel and related expenses of $264,000 resulting from increased headcount, health insurance expenses, temporary labor, stock compensation and annual merit increases.

Depreciation and Amortization

Depreciation and amortization expense (excluding depreciation and amortization included in direct operating costs) decreased $254,000 to $665,000 for the twelve months ended December 31, 2010 from $919,000 for the same period in 2009 primarily due to fully amortizing an intangible asset we acquired in 2009.

Other (Expense) Income, Net

Other (expense) income, net increased in expense $223,000 to $33,000 of expense for the twelve months ended December 31, 2010 from $190,000 of other income for the same period in 2009. The increase in expense was primarily due to less interest income of $69,000 due to declining interest rates; an increase in interest expense of $35,000 due to capital leases; a $51,000 increase in foreign currency exchange expense related to intercompany activity with our Canadian subsidiary; a decrease of $20,000 due to loss on disposal of assets during 2010 and a $47,000 decrease in other miscellaneous income.

Income Taxes

We expect to report a U.S. tax loss for the year ended December 31, 2010. We expect that we will not incur a federal tax liability; however, we will likely incur state tax liabilities. We also expect to pay income taxes in Canada due to the profitability of NTN Canada. As a result, we recorded a tax provision of $42,000 for the year ended December 31, 2010. This was a $53,000 decrease compared to the $95,000 provision for income taxes recorded for the year ended December 31, 2009.

At December 31, 2010, we had NOL carryforwards of approximately $59,757,000 and $17,171,000 for federal and state income tax purposes, respectively. Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control which are available to offset future taxable income. We completed a Section 382 analysis for the period from January 1, 1992 through September 30, 2010 and determined that we will be able to utilize the total NOL carryforwards that existed as of September 30, 2010. Based on our analysis of our stockholder activity for the three months ended December 31, 2010, there were no ownership changes that caused an annual limitation per the provisions of Section 382. Accordingly, we will be able to utilize the total NOL carryforwards that existed as of December 31, 2010, provided we generate sufficient future earnings prior to the expiration of the NOLs, which begin expiring in 2011, and that future changes in ownership do not trigger a Section 382 limitation. We have established a full valuation allowance for substantially all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.

EBITDA—Consolidated Operations

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is not intended to represent a measure of performance in accordance with accounting principles generally accepted in the United States (GAAP). Nor should EBITDA be considered as an alternative to statements of cash flows as a measure of liquidity. EBITDA is included herein because we believe it is a measure of operating performance that financial analysts, lenders, investors and other interested parties find to be a useful tool for analyzing companies like us that carry significant levels of non-cash depreciation and amortization charges in comparison to their GAAP earnings or loss.

The following table reconciles our consolidated net loss per GAAP to EBITDA:

	For the three months ended December 31,					For the year ended December 31,
	2010		2009			2010			2009
Net income (loss) per GAAP	$	322,000	$	(196,000	)	$	(400,000	)	$	(1,501,000	)
Interest expense (income), net		19,000		30,000			98,000			(6,000	)
Depreciation and amortization		797,000		864,000			3,203,000			3,193,000
Income taxes		4,000		91,000			42,000			95,000
EBITDA	$	1,142,000	$	789,000		$	2,943,000		$	1,781,000

Liquidity and Capital Resources

As of December 31, 2010, we had cash and cash equivalents of $3,906,000 compared to cash and cash equivalents of $3,637,000 as of December 31, 2009. We believe existing cash and cash equivalents, together with funds generated from operations, will be sufficient to meet our operating cash requirements for at least the next twelve months. We have no debt obligations other than capital leases. It is our intention to continue entering into capital lease facilities for certain equipment requirements when economically advantageous. In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, we may be required to reduce planned capital expenses, reduce operational cash uses, sell assets or seek financing. Any actions we may undertake to reduce planned capital purchases, reduce expenses, or generate proceeds from the sale of assets may be insufficient to cover shortfalls in available funds. If we require additional capital, we may be unable to secure additional financing on terms that are acceptable to us, or at all.

Working Capital

As of December 31, 2010, we had working capital (current assets in excess of current liabilities) of $1,891,000 compared to $800,000 as of December 31, 2009. The following table shows our change in working capital from December 31, 2009 to December 31, 2010.

	Increase (Decrease)
Working capital as of December 31, 2009	$	800,000
Changes in current assets:
Cash and cash equivalents		269,000
Accounts receivable, net of allowance		(57,000	)
Investment available-for-sale		4,000
Prepaid expenses and other current assets		(46,000	)
Total current assets		170,000
Changes in current liabilities:
Accounts payable		1,000
Accrued compensation		(447,000	)
Accrued expenses		(337,000	)
Sales taxes payable		1,000
Income taxes payable		8,000
Obligations under capital lease		76,000
Deferred revenue		(3,000	)
Other current liabilities		(220,000	)
Total current liabilities		(921,000	)
Net change in working capital		1,091,000
Working capital as of December 31, 2010	$	1,891,000

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows:

	For the year ended December 31,
	2010			2009
Cash provided by (used in):
Operating activities	$	2,831,000		$	2,503,000
Investing activities		(2,203,000	)		(3,170,000	)
Financing activities		(364,000	)		623,000
Effect of exchange rates		5,000			319,000
Net increase in cash and cash equivalents	$	269,000		$	275,000

Net cash provided by operating activities. We are dependent on cash flows from operations to meet our cash requirements. Net cash generated from operating activities was $2,831,000 for the twelve months ended December 31, 2010 compared to net cash generated from operating activities of $2,503,000 for the same period in 2009. The $328,000 increase in cash provided by operations was primarily due to a decrease in net loss of $1,101,000, an increase of $85,000 in non-cash charges and a decrease of $858,000 in cash provided by operating assets and liabilities during the twelve months ended December 31, 2010 compared to the same period in 2009.

Our largest use of cash is payroll and related costs. Cash used related to payroll increased $659,000 to $11,130,000 for the twelve months ended December 31, 2010 from $10,471,000 during the same period in 2009. This increase is primarily the result of merit increases that were given during 2010 as well as the pay out of corporate incentive compensation in 2010 that was earned in 2009. No corporate incentive compensation was paid out during 2009 and no merit increases were given during 2009. Our primary source of cash is cash we generate from customers. Cash received from customers increased $115,000 to $26,414,000 for the twelve months ended December 31, 2010 from $26,299,000 during the same period in 2009.

Net cash used in investing activities. We used $2,203,000 in cash for investing activities for the twelve months ended December 31, 2010 compared to $3,170,000 used in cash for investing activities during the same period in 2009. The $967,000 decrease in cash used in investing activities was primarily due to a decrease in capital expenditures, including deposits, of $615,000, a decrease in capitalized software expenditures of $293,000 and a decrease in cash used for a trademark license of $59,000.

Net cash (used in) provided by financing activities. Net cash used in financing activities increased $987,000 to $364,000 for the twelve months ended December 31, 2010 compared to net cash provided by financing activities of $623,000 for the same period in 2009. The increase in cash used in financing activities was due to a $270,000 increase in principal payments on capital leases and a $750,000 decrease in proceeds from the sale of common stock in 2009, offset by a $33,000 increase in proceeds received from the exercise of stock options.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to deferred costs and revenues, depreciation of broadcast equipment, allowance for doubtful accounts, investments, intangible assets and contingencies. We base our estimates on a combination of historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require management’s most subjective judgments.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts —We maintain allowances for doubtful accounts for estimated losses resulting from nonpayment by our customers. We reserve for all accounts that have been suspended or terminated from our Buzztime Network services and for customers with balances that are greater than a predetermined number of days past due. We analyze historical collection trends, customer concentrations and creditworthiness, economic trends and anticipated changes in customer payment patterns when evaluating the adequacy of our allowance for doubtful accounts for specific and general risks. Additional reserves may also be established if specific customers’ balances are identified as potentially uncollectible. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Broadcast Equipment and Fixed Assets —Broadcast equipment and fixed assets are recorded at cost. Equipment under capital leases is recorded at the present value of future minimum lease payments. Depreciation of broadcast equipment and fixed assets is computed using the straight-line method over the estimated useful lives of the assets. Depreciation of leasehold improvements and fixed assets under capital leases is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease period.

We incur a relatively significant level of depreciation expense in relation to our operating income. The amount of depreciation expense in any fiscal year is largely related to the estimated life of handheld wireless Playmaker devices and associated electronics and the computers located at our customer’s sites. The Playmakers are depreciated over a seven-year life and associated electronics and computers are depreciated over two to four years. The depreciable life of these assets was determined based on the shorter of the contractual capital lease period or their estimated useful life, which considers anticipated technology changes. We determined that the useful life our Playmakers that we purchased after June 2009 increased from four to seven years. This increase is the result of superior digital technology used in the current Playmakers. If our Playmakers and associated electronics and the computers turn out to have longer lives, on average, than estimated, our depreciation expense would be significantly reduced in those future periods. Conversely, if the Playmakers, and associated electronics and the computers turn out to have shorter lives, on average, than estimated, our depreciation expense would be significantly increased in those future periods.

Investments —ASC 320, Investments-Debt and Equity Securities, provides guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, we employ a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. We also consider specific adverse conditions related to the financial health of, and business outlook of the investee, including industry and sector performance, changes in technology, operational and financing cash flow factors, and rating agency actions. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry and/or investor conditions deteriorate, we may incur future impairments.

Goodwill and Other Intangible Assets —Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase combination determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of ASC No. 350, Intangibles - Goodwill and Other . ASC No. 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC No. 360, Property, Plant and Equipment .

In accordance with ASC No. 360, we assess potential impairments of our long-lived assets whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable. An impairment loss would be recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group.

We performed our annual test for goodwill impairment by calculating the fair value for NTN Canada, Inc., as of September 30, 2010 and 2009. The valuation methods employed to determine the fair value for NTN Canada, Inc. as of these periods were (1) the market approach—guideline company method, (2) the market approach—guideline transaction method and (3) the income approach—discounted cash flow method.

We consider market conditions, new product offerings, pricing and selling strategies, revenue growth rates and additional investment needed to achieve these growth rates. We believe the projections are reasonable based on existing operations and prospective business opportunities. The resulting indicated value from each approach is weighted equally and added to interest bearing debt to arrive at the indicated fair market value of the invested capital. The resulting value is compared against the carrying value of equity after interest bearing debt to determine impairment. As a result of the annual test, we determined that there were no indications of impairment as of September 30, 2010. We considered the need to perform an additional test of goodwill of our Canadian business as of December 31, 2010, but determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2010 valuation.

Purchase Accounting – We account for acquisitions pursuant to ASC No. 805, Business Combinations . We record all acquired tangible and intangible assets and all assumed liabilities based upon their estimated fair values. The purchase price allocations for the asset acquisitions of iSports and i-am TV were final as of December 31, 2009.

Assessments of Functional Currencies —The United States dollar is our functional currency, except for our operations in Canada where the functional currency is the Canadian dollar. The financial position and results of operations of our foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. In accordance with ASC No. 830, Foreign Currency Matters , revenues and expenses of our subsidiaries have been translated into U.S. dollars at weighted average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the years ended December 31, 2010 and 2009, we recorded $2,000 in foreign currency losses and $49,000 in foreign currency gains, respectively, due to settlements of intercompany transactions and re-measurement of intercompany balances with our Canadian subsidiary and other non-functional currency denominated transactions, which are included in other income in the accompanying statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect our results of operations and period-to-period comparisons of our operating results. We do not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2010, the net impact to our results of operations from the effect of exchange rate fluctuations was immaterial when compared to the exchange rates for the year ended December 31, 2009.

Revenue Recognition —We recognize revenue from recurring service fees earned from our network subscribers, advertising revenues and distribution and licensing fees from our Buzztime-branded content delivery primarily through our interactive consumer platforms. To the extent these arrangements contain multiple deliverables, we evaluate the criteria in ASC No. 605, Revenue Recognition , to determine whether such deliverables represent separate units of accounting. In order to be considered a separate unit of accounting, the delivered items in an arrangement must have stand-alone value to the customer and objective and reliable evidence of fair value must exist for any undelivered elements. Arrangements for the transmission of our Buzztime Network contain two deliverables: the installation of equipment and the transmission of our network content for which we receive monthly subscription fees. As the installation deliverable does not have stand-alone value to the customer, it does not represent a separate unit of accounting and, therefore, all installation fees received are deferred and recognized as revenue on a straight-line basis over the estimated life of the customer relationship. As a result, installation fees not recognized in revenue have been recorded as deferred revenue in the accompanying consolidated balance sheets.

In addition, the direct expenses of the installation, commissions, setup and training are being deferred and amortized on a straight-line basis and are classified as deferred costs on the accompanying consolidated balance sheets. The amortization period approximates the estimated life of the customer relationship for deferred direct costs that are of an amount that is less than or equal to the deferred revenue for the related contract. For costs that exceed the deferred revenue, the amortization period is the initial term of the contract, in accordance with ASC No. 605, which is generally one year.

Advertising and royalty revenues are recognized when all material services or conditions relating to the transaction have been performed or satisfied.

Software Development Costs —We capitalize costs related to the development of certain software products for the Entertainment Division in accordance with ASC No. 350. Amortization of costs related to interactive programs is recognized on a straight-line basis over the programs’ estimated useful lives, generally two to three years. Amortization expense relating to capitalized software development costs totaled $521,000 and $370,000 for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, approximately $331,000 and $554,000, respectively, of capitalized software costs was not subject to amortization as the development of various software projects was not complete.

We performed our annual review of software development projects for the years ended December 31, 2010 and 2009, and determined to abandon various software development projects that we determined were no longer a current strategic fit or for which we determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, an impairment of $236,000 and $256,000 was recognized for the years ended December 31, 2010 and 2009, respectively, which was included in our selling, general and administrative expenses.

Stock Based Compensation —We estimate the fair value of our stock options using a Black-Scholes option pricing model, consistent with the provisions of ASC No. 718 , Compensation – Stock Compensation . The fair value of stock options granted is recognized to expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is reported as selling, general and administrative based upon the departments to which substantially all of the associated employees report.

We used the historical stock price volatility as an input to value our stock options under ASC No. 718. The expected term of our stock options represents the period of time options are expected to be outstanding, and is based on observed historical exercise patterns for our company, which we believe are indicative of future exercise behavior. For the risk-free interest rate, we use the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on our history and expectation of dividend payouts.

The following weighted average assumptions were used for grants issued during 2010 and 2009 under the ASC No. 718 requirements:

	2010		2009
Weighted average risk-free rate		1.68%		1.72%
Weighted average volatility		93.72%		88.55%
Dividend yield		0.00%		0.00%
Expected life	6.50 years		6.05 years

ASC No. 718 requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Forfeitures were estimated based on historical activity for our company. We estimated an annual forfeiture rate of approximately 18% for each of the years ended December 31, 2010 and 2009. Stock-based compensation expense for employees in 2010 and 2009 was $299,000 and $180,000, respectively, and is expensed in selling, general and administrative expenses based upon the departments to which substantially all of the associated employees report and credited to additional paid-in-capital.

Income Taxes —Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC No. 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. We have reviewed our tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

Recent Accounting Pronouncements

In October 2009, the FASB issued an accounting standards update to ASC No. 605-25, Revenue Recognition—Multiple-Element Arrangements . The purpose of this update is to amend the criteria used for separating consideration in multiple-deliverable arrangements. In particular, the amendment:

Establishes a selling price hierarchy for determining the selling price of a deliverable; replaces the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant;

·	Eliminates using the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and

·	Requires that the best estimate of a selling price is determined in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be our 2011 fiscal year. Early adoption is permitted. If adopted early, we would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. We did not adopt the amendments early, and we do not anticipate that the adoption of these amendments will have a material impact on our consolidated financial statements.

In October 2009, the FASB issued an accounting standards update to ASC No. 985, Software. The purpose of this update is to change the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in Subtopic 985-605. In addition, this update requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. In addition, the update provides guidance on how a vendor should allocate arrangement consideration to deliverables in an arrangement that includes both tangible products and software. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be our 2011 fiscal year. Early adoption is permitted. If adopted early, we would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. We did not adopt the amendments early, and we do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

In December 2009, we adopted the updated guidance issued by the FASB related to ASC Topic No. 820, Fair Value Measurements and Disclosures, which requires a reporting entity to separately disclose the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. The updated guidance also requires that an entity provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring Level 2 and Level 3 fair value measurements. This guidance was effective for interim or annual financial reporting periods beginning after December 15, 2009, which was our 2010 fiscal year. The adoption of this updated guidance did not have an impact on our consolidated financial statements.

In addition, the updated guidance requires that in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity separately disclose information about purchases, sales, issuances and settlements on a gross basis rather than as one net number. This guidance is effective for fiscal years beginning after December 15, 2010, which will be our 2011 fiscal year. Therefore, we have not yet adopted the guidance with respect to the roll forward activity in Level 3 fair value measurements. We do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

In April 2010, the FASB issued an accounting standards update to ASC Topic No. 718, Compensation – Stock Compensation. ASC No. 718 stipulates that a share-based payment award that contains a condition that is not a market, performance, or a service condition is required to be classified as a liability. This update clarifies that when an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s securities trades differs from the functional currency of the employer entity or payroll currency of the employee, such award should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this update will be effective for fiscal years beginning on or after December 15, 2010, which will be our 2011 fiscal year. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied and should be presented separately. Early adoption is permitted; however, we did adopt the amendments early. We do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

In December 2010, the FASB issued an amendment to ASC No. 350, Intangibles – Goodwill and Other, to clarify when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. Prior to this amendment, continuation to Step 2 was not required if the carrying amount of the reporting unit exceeded the fair value. However, in cases where the carrying amount was zero or negative, the fair value most likely was greater. This amendment requires that the evaluation must still continue to Step 2, given a fair value greater than the carrying amount, if it is more likely than not that a goodwill impairment exists. This amendment becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, which will be our 2011 fiscal year. We do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information otherwise required by this item.

ITEM 8. Financial Statements and Supplementary Data

See “Index to Consolidated Financial Statements and Schedule” on page F-1 for a listing of the Consolidated Financial Statements and Schedule filed with this report.

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

None

ITEM 9A. Controls and Procedures

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this report under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on our evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that there were no material weaknesses in our disclosure controls and procedures and that such disclosure controls and procedures were effective as of the end of the period covered by this report in providing reasonable assurance of achieving the desired control objectives, and therefore there were no corrective actions taken.

Management’s Report on Internal Control Over Financial Reporting

Our Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2010. According to the guidelines established by Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, one or more material weaknesses renders a company’s internal control over financial reporting ineffective. Based on this evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2010.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. Other Information

Not Applicable.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

Directors

The following table sets forth certain information regarding our directors:

Name	Age (1)	Director Since
Jeff Berg	51	2008
Michael Bush	50	2009
Mary Beth Lewis	53	2009
Terry Bateman	54	2008
Steve Mitgang	49	2010

____________________________

(1) As of March 25, 2011.

The following biographical information is furnished with respect to our directors:

Jeff Berg has served on our Board of Directors since August 2008 and as Chairman of our Board of Directors since November 2008. Mr. Berg is a private investor currently serving as General Partner of Matador Capital Partners, LP, an investment partnership that he founded in 2007. Since 2001, he has been Chairman of the Board of Directors and a lead investor in Surfline/Wavetrak Inc., a digital media business. He was also the lead director of Swell Commerce, Inc., a direct marketer of surf apparel and accessories, a company that he co-founded in 1999, until it was sold in December 2009 to Billabong International. From July 2000 to April 2001, Mr. Berg served as Interim Chief Executive Officer of Swell. He was also founder and sole stockholder of Airborne Media LLC, a specialty media company that he founded in 2006, which operates web sites and publishes magazines and other niche-market print products, and sold the majority of its assets in 2009. Between 1995 and 2000, Mr. Berg was Chairman of the Board of Directors of AccentHealth, a provider of segmented, patient education-oriented TV programming to medical waiting rooms. Mr. Berg has over 20 years of experience as a professional investor. Prior to founding Matador Capital Partners, he worked for nine years at Raymond James Financial as an institutional securities analyst, where he served as the Chief Investment Officer from 1994 to 2006. Mr. Berg holds a B.S. in Business Administration from the University of Florida. Mr. Berg was chosen to serve on our Board of Directors because of his experience with out-of-home and digital media, as well as because of Mr. Berg being a significant shareholder of the Company.

Michael J. Bush was appointed a Director in September 2009 and was appointed as our President and Chief Executive Officer effective April 12, 2010. Prior to becoming our President and Chief Executive Officer, Mr. Bush was President and Chief Executive Officer of 3 Day Blinds Corporation, a position he held from September 2007 to April 2010. 3 Day Blinds declared bankruptcy in October 2008. Prior to joining 3 Day Blinds, a seller of custom-crafted window coverings, from December 2003 to February 2007, Mr. Bush served as President and Chief Executive of Anchor Blue Retail Group, a 175 store chain of youth oriented apparel stores and served as President and Chief Executive Officer of Levi’s and Dockers’ Outlets by MOST, an 80 store chain of outlet stores selling Levi Strauss & Company apparel in outlet malls. From February 2000 to May 2002, Mr. Bush served as President and Chief Executive of Bally North America, a manufacturer and seller of women’s footwear and apparel, a member of the Board of Directors of Bally International AG, the parent company for Bally, and Senior Vice President of Global Re-engineering. Prior to Bally, Mr. Bush was Chief Operating Officer and Executive Vice President of Movado Group, Inc., a publicly traded global manufacturer and marketer of wristwatches. Mr. Bush joined Movado from Ross Stores where he served as Senior Vice President of Strategic Planning, Business Development and Marketing. Mr. Bush currently serves as a director of Ross Stores, a national chain of discount department stores and a Fortune 500 company, and Technoserve, a global not-for-profit enterprise. Mr. Bush also joined 3 Day Blinds’ Board of Directors upon his resignation as President and Chief Executive Officer of 3 Day Blinds. He is a graduate of Dartmouth College and the Stanford Graduate School of Business. Mr. Bush was chosen to serve on our Board of Directors because of his familiarity with and leadership of our company as our Chief Executive Officer, as well as his extensive experience in executing business growth strategies, together with his leadership qualities.

Mary Beth Lewis has served on our Board of Directors since February 2009. From August 2007 to January 2009, Ms. Lewis served as Chief Financial Officer of Fresh Produce Sportswear, Inc., a women’s apparel company. Since August 2009 and also from August 2006 to May 2007, she has been an accounting instructor in the College of Business at Colorado State University. From October 2001 to April 2005, Ms. Lewis served as Chief Financial Officer of Noodles & Company, a restaurant chain. Prior to that, she was the Chief Financial Officer of Wild Oats Markets, Inc., a national natural foods grocery store chain. Ms. Lewis currently serves on the Board of Directors for eBags, Inc., an online retailer of bags and accessories, where she also serves as the chairman of its audit committee. Ms. Lewis holds two undergraduate degrees from West Virginia University: a B.A. in Psychology and a B.S. in Speech Pathology and Audiology. Ms. Lewis also holds an MBA in Accounting and Finance from the University of Pittsburgh. Ms. Lewis was chosen to serve on our Board of Directors because of her financial and corporate governance expertise and her prior experience as a chief financial officer.

Terry Bateman has served on our Board of Directors since November 2008 and served as our Chief Executive Officer from February 2009 to March 2010. Mr. Bateman has nearly 30 years executive experience in developing, growing, managing and selling businesses. Mr. Bateman has been a personal investor in Red Zone Capital from 2006 to the present, and in connection with that investment activity, served as Chief Executive Officer of Dick Clark Productions, a television production company, from June 2007 to February 2008. Prior to that, Mr. Bateman served as interim Chief Marketing Officer of the Washington Redskins, a professional football team, from September 2006 to June 2007. From September 2005 to September 2006, Mr. Bateman served as President and Chief Executive Officer at Barton Cotton, Inc., a provider of integrated direct marketing fundraising services to non-profit organizations, and prior to that, served as its Executive Vice President of Fundraising beginning in 1998. He was President of Snyder Communications' Marketing Services Division between 1994 and 1997. Mr. Bateman was Executive Vice President, Vice President and Director of Whittle Communications between 1981 and 1994, having begun his career in marketing with The Gillette Company between 1979 and 1981. Mr. Bateman holds a B.S. in Economics from the University of Tennessee. Mr. Bateman was chosen to serve on our Board of Directors because of his extensive consumer out-of-home marketing and advertising experience, including his prior experience having served as our Chief Executive Officer, as well as his general business acumen.

Steve Mitgang has served on our Board of Directors since August 2010. He also serves on the Board of Directors of MapMyFitness, Inc., an online business featuring fitness-oriented social networks and training applications. From 2007 to 2009, Mr. Mitgang was the President and Chief Executive Officer of Veoh Networks, an internet television company. Prior to his tenure at Veoh Networks, Mr. Mitgang worked at Yahoo! from 2003 to 2007. Mr. Mitgang joined Yahoo! after its acquisition of Overture Services, where he was the head of the Performance Marketing group. From 2001 to 2003, Mr. Mitgang was President and Chief Executive Officer of Keylime Software, a web analytics company that was acquired by Overture Services during Mr. Mitgang’s leadership. Mr. Mitgang holds a degree in Architecture from the University of California, Berkeley. Mr. Mitgang was chosen to serve on our Board of Directors because of his extensive experience in business development, marketing and advertising within the digital media and technology industries.

Executive Officers

The following table sets forth certain information regarding our other executive officers:

Name	Age (1)	Position(s) Held
Kendra Berger	44	Chief Financial Officer
Christopher George	36	Chief Information Officer
Vladimir Khuchua-Edelman	37	Chief Content Officer

____________________________

(1) As of March 25, 2011.

The following biographical information is furnished with respect to our other executive officers:

Kendra Berger was appointed our Chief Financial Officer and Secretary in August 2006. Ms. Berger served on our Board of Directors and as Chairperson of our Audit Committee from July 2005 until August 2006. From May 2005 until August 2006, Ms. Berger was the Executive Director of Finance and Controller of Nventa Biopharmaceuticals Corporation. Prior to that, from April 2001 until May 2005, she was the Vice President, Finance and Controller of Discovery Partners International, Inc. Both Nventa Biopharmaceuticals and Discovery Partners International were publicly traded biopharmaceutical companies. Prior to joining Discovery Partners International in 2001, Ms. Berger was the Chief Financial Officer of our company. She is a licensed CPA and a graduate of Ohio University.

Christopher George was appointed as our Chief Information Officer in June 2010 after serving as an outside consultant in this capacity since 2008. Prior to becoming our Chief Information Officer, Mr. George co-founded Protelligent, Inc., a California-based technology consulting firm concentrating on network and systems services, custom software development, and ASP/Hosting services, and served as its President and Chief Executive Officer from June 2002 to June 2010. Before founding Protelligent, Mr. George served as Director of Network Services for InterKnowlogys, Director of Network and Systems Development at TheBigStore.com and Network Manager at Shopping.com.

Vladimir Khuchua-Edelman was appointed our as Chief Content Officer in February 2011 with more than 16 years of experience in digital content & marketing. Prior to becoming our Chief Content Officer, Mr. Edelman was Chief Marketing Officer from October 2009 to January 2011 at envIO Networks, a start-up focused on real-time behavioral targeting using social content-consumption data. From February 2006 to March 2008, Mr. Edelman held the position of Chief Executive Officer of Ansible, Interpublic Group's mobile marketing agency, a company he founded, and from September 2005 to September 2006, he was Chief Executive Officer of technology platforms provider Soapbox. Prior to Soapbox, Mr. Edelman was Vice President and General Manager for Mobile Worldwide at ESPN and Executive Producer and General Manager at CBS.com. Mr. Edelman holds an M.S. in Financial Journalism from Boston University.

Additional information responsive to Part III, Item 10 will be included in our proxy statement relating to our 2011 annual meeting of stockholders to be filed by us with the Securities and Exchange Commission no later than 120 days after the close of our fiscal year ended December 31, 2010 (the “Proxy Statement”) including under the captions entitled “Election of Directors,” "Information Concerning Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

ITEM 11. Executive Compensation

Information responsive to Part III, Item 11 will be included in the Proxy Statement under the captions entitled “Executive Compensation,” and “Compensation of Directors” and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information responsive to Part III, Item 12 will be included in the Proxy Statement under the captions entitled “Security Ownership of Certain Beneficial Owners and Management,” “Equity Compensation Plan Information” and “Compensation of Directors” and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions , and Director Independence

Information concerning certain relationships and related transactions will be included in the Proxy Statement under the captions entitled “Certain Relationships and Related Transactions” and “Company Policy Regarding Related Party Transactions” and is incorporated herein by reference. Information concerning director independence will be included in the Proxy Statement under the heading “Election of Directors” and is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services

Information responsive to Part III, Item 14 will be included in the Proxy Statement under the caption entitled “Principal Accounting Firm Fees” and is incorporated herein by reference.

PART IV

ITEM 15. Exhibits, Consolidated Financial Statement Schedules

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

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

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

INDEX TO EXHIBITS

Exhibit	Description	Incorporation By Reference
2.1	Asset Purchase Agreement dated May 11, 2009 between NTN Buzztime, Inc. and Instant Access Media, LLC	Previously filed as an exhibit to the NTN’s report on Form 8-K filed on May 15, 2009 and incorporated by reference.
2.2	Asset Purchase Agreement dated April 24, 2009 between NTN Buzztime, Inc. and iSports Inc.	Previously filed as an exhibit to NTN’s report on Form 10-K filed on March 31, 2009 and incorporated herein by reference.
3.1	Amended and Restated Certificate of Incorporation of the Company, as amended	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 11, 2008 and incorporated herein by reference.
3.2	Certificate of Designations, Rights and Preferences of Series B Convertible Preferred Stock	Previously filed as an exhibit to NTN’s report on Form 8-K filed on November 7, 1997 and incorporated herein by reference.
3.3	Bylaws of the Company, as amended	Previously filed as an exhibit to NTN’s report on Form 10-K filed on March 26, 2008 and incorporated herein by reference.
4.1	Specimen Common Stock Certificate	Previously filed as an exhibit to NTN’s registration statement on Form 8-A, File No. 0-19383, and incorporated by reference.
4.2	Form of Common Stock Purchase Warrant issued on January 30, 2004 by and between Roth Capital Partners, LLC and the Company	Previously filed as an exhibit to NTN’s report on Form 8-K filed on January 29, 2004 and incorporated herein by reference.
4.3	Form of Common Stock Purchase Warrant issued on April 24, 2009 by and between NTN Buzztime, Inc. and iSports Inc.	Previously filed as an exhibit to NTN’s report on Form 10-K filed on March 31, 2009 and incorporated herein by reference.
4.4	Form of Common Stock Purchase Warrant issued on May 11, 2009 by and between NTN Buzztime, Inc. and Instant Access Media, LLC	Previously filed as an exhibit to NTN’s report on Form 10-K filed on March 31, 2009 and incorporated herein by reference.
4.5	Registration Rights Agreement dated as of May 11, 2009 by and between the Company and Instant Access Media, LLC et al.	Previously filed as an exhibit to the NTN’s report on Form 8-K filed on May 15, 2009 and incorporated by reference.
10.1	Securities Purchase Agreement dated as of May 11, 2009 by and between the Company and certain creditors and members of Instant Access Media, LLC	Previously filed as an exhibit to the NTN’s report on Form 8-K filed on May 15, 2009 and incorporated by reference.

Exhibit

Description

Incorporation By Reference

10.2*	2004 Performance Incentive Plan	Previously filed as Appendix A to the Definitive Proxy Statement on Schedule 14A filed by NTN on September 3, 2004 and incorporated herein by reference.
10.3*	2010 Performance Incentive Plan	Previously filed as an exhibit to the Definitive Proxy Statement on Schedule 14A filed by NTN on April 29, 2010 and incorporated herein by reference.
10.4	Office Lease, dated July 17, 2000, by and between Prentiss Properties Acquisition Partners, L.P. and the Company	Previously filed as an exhibit to NTN’s report on Form 10-K April 2, 2001 and incorporated herein by reference.
10.5	First Amendment to Lease, dated October 4, 2005, by and between Prentiss Properties Acquisition Partners, L.P. and the Company	Previously filed as an exhibit to NTN’s report on Form 10-K/A filed on July 12, 2006 and incorporated herein by reference.
10.6	Second Amendment to Lease, dated as of February 16, 2006, by and between Cognac Campus LLC (successor to Prentiss Properties) and the Company	Previously filed as an exhibit to NTN’s report on Form 10-K filed on March 31, 2010 and incorporated herein by reference.
10.7	Office Lease, dated February 24, 2011, by and between Beckman/Carlsbad I, LLC and the Company Filed herewith.	Filed herewith.
10.8*	Form of Executive Employee Incentive Stock Option Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 9, 2007 and incorporated herein by reference.
10.9*	Form of Incentive Stock Option Agreement under the 2010 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on May 14, 2010 and incorporated herein by reference.
10.10*	Form of Nonstatutory Stock Option Agreement under the 2010 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on May 14, 2010 and incorporated herein by reference.
10.11*	NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. Fiscal Year 2010	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on May 14, 2010 and incorporated herein by reference.
10.12*	Form of Non-Executive Employee Incentive Stock Option Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 9, 2007 and incorporated herein by reference.
10.13*	Form of Stock Unit Award Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 9, 2007 and incorporated herein by reference.
10.14*	Form of Initial Director Stock Option Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 9, 2007 and incorporated herein by reference.
10.15*	Form of Annual Director Stock Option Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 9, 2007 and incorporated herein by reference.

Exhibit

Description

Incorporation By Reference

10.16*	Retention and Severance Agreement, dated June 27, 2008, by and between the Company and Kendra Berger	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 11, 2008 and incorporated herein by reference.
10.17*	Form of Stock Unit Award Agreement under the 2004 Performance Incentive Plan	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on March 24, 2009 and incorporated herein by reference.
10.18*	Amendment to Stock Option Grants, dated October 16, 2008, by and between the Company and Barry Bergsman.	Previously filed as an exhibit to NTN’s report on Form 8-K filed on October 21, 2008 and incorporated herein by reference.
10.19*	Employment Agreement, dated February 2, 2009, by and between the Company and Terry Bateman.	Previously filed as an exhibit to NTN’s report on Form 8-K filed on February 4, 2009 and incorporated herein by reference.
10.20*	Employment Agreement, dated as of July 27, 2009, by and between the Company Kenneth Keymer.	Previously filed as an exhibit to the NTN’s current report on Form 8-K filed on July 23, 2009 and incorporated by reference.
10.21*	Employment Agreement, dated April 12, 2010, by and between the Company and Michael Bush Bateman	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 13, 2010 and incorporated herein by reference.
10.22*	Amendment and Restated Employment Agreement, dated December 28, 2010, by and between the Company and Michael Bush	Filed herewith.
10.23*	Severance Agreement and General Release, dated April 30, 2010, by and between the Company and Kenneth Keymer	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 13, 2010 and incorporated herein by reference.
10.24*	Employment offer letter, dated May 25, 2010, by and between the Company and Christopher George.	Previously filed as an exhibit to NTN’s report on Form 10-Q filed on August 13, 2010 and incorporated herein by reference.
10.25*	Employment offer letter, dated February 7, 2010, by and between the Company and Vladimir Khuchua-Edelman.	Filed herewith.
10.26	Master Equipment Lease dated as of September 29, 2009, by and between the Company and Data Sales Co.	Filed herewith.
14.1	Company Code of Ethics	Previously filed as an exhibit to NTN’s report on Form 8-K filed on August 13, 2010 and incorporated herein by reference.
21.1	Subsidiaries of Registrant	Filed herewith.
23.1	Consent of Mayer Hoffman McCann P.C.	Filed herewith.
31.1#	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
31.2#	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.1#	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.2#	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
*	Management Contract or Compensatory Plan
#	This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing.

SIGNATURES

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

	NTN BUZZTIME, INC.

Dated: March 25, 2011	By:	/s/ K ENDRA B ERGER
		Kendra Berger
		Chief Financial Officer
		(As Principal Financial and Accounting Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Bush and Kendra Berger, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.

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

Signature	Title	Date

/s/ Michael J. Bush	President, Chief Executive Officer and Director	March 25, 2011
Michael J. Bush	(Principal Executive Officer)

/s/ Jeff Berg	Director and Chairman of the Board	March 25, 2011
Jeff Berg

/s/ Mary Beth Lewis	Director	March 25, 2011
Mary Beth Lewis

/s/ Terry Bateman	Director	March 25, 2011
Terry Bateman

/s/ Steve Mitgang	Director	March 25, 2011
Steve Mitgang

NTN BUZZTIME, INC. AND SUBSIDIARIES

(Formerly NTN Communications, Inc. and Subsidiaries)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

	Page

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2010 and 2009	F-2

Consolidated Statements of Operations for the years ended December 31, 2010 and 2009	F-3

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2010 and 2009	F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009	F-5

Notes to the Consolidated Financial Statements	F-6

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

NTN Buzztime, Inc.

We have audited the accompanying consolidated balance sheets of NTN Buzztime, Inc. (“the Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years then ended. Our audit also included the financial statement schedule for each of the years ended December 31, 2010 and 2009, listed in the Index at Item 15. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NTN Buzztime, Inc. as of December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule referred to above, presents fairly, in all material respects, the information set forth therein.

/s/ Mayer Hoffman McCann P.C.

San Diego, CA

March 2 5, 2011

F-1

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amount)

	December 31,
	2010			2009
ASSETS
Current Assets:
Cash and cash equivalents	$	3,906		$	3,637
Accounts receivable, net of allowances of $220 and $321, respectively		549			606
Investments available-for-sale (Note 6)		184			180
Prepaid expenses and other current assets		588			634
Total current assets		5,227			5,057
Broadcast equipment and fixed assets, net (Note 4)		3,638			3,809
Software development costs, net of accumulated amortization of $1,591 and $1,197, respectively		1,094			1,374
Deferred costs		839			1,080
Goodwill (Note 5)		1,261			1,202
Intangible assets, net (Note 5)		1,025			1,585
Other assets		41			190
Total assets	$	13,125		$	14,297

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	423		$	422
Accrued compensation (Note 7)		628			1,075
Accrued expenses		451			788
Sales taxes payable		856			855
Income taxes payable		8			-
Obligations under capital lease - current portion (Note 13)		376			300
Deferred revenue		520			523
Other current liabilities		74			294
Total current liabilities		3,336			4,257
Sales taxes payable, excluding current portion		-			128
Obligations under capital leases, excluding current portion		105			173
Deferred revenue, excluding current portion		124			82
Other liabilities		99			239
Total liabilities		3,664			4,879
Commitments and contingencies (Notes 13 and 14)

Shareholders' Equity:
Series A 10% cumulative convertible preferred stock, $.005 par value, $161 liquidation preference, 5,000 shares authorized; 161 shares issued and outstanding at December 31, 2010 and December 31, 2009		1			1
Common stock, $.005 par value, 84,000 shares authorized; 60,751 and 60,359 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively		304			302
Treasury stock, at cost, 503 shares at December 31, 2010 and December 31, 2009, respectively		(456	)		(456	)
Additional paid-in capital		116,114			115,740
Accumulated deficit		(107,284	)		(106,868	)
Accumulated other comprehensive income (Note 17)		782			699
Total shareholders' equity		9,461			9,418
Total shareholders' equity and liabilities	$	13,125		$	14,297

See accompanying notes to consolidated financial statements

F-2

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

	Years Ended December 31,
	2010			2009

Revenues	$	25,309		$	25,814
Operating expenses:
Direct operating costs (includes depreciation and amortization of $2,538 and $2,274, respectively)		6,063			6,460
Selling, general and administrative		18,906			20,031
Depreciation and amortization (excluding depreciation and amortization included in direct operating costs)		665			919
Total operating expenses		25,634			27,410
Operating loss		(325	)		(1,596	)
Other income (expense):
Interest income		3			72
Interest expense		(101	)		(66	)
Other income		65			184
Total other (expense) income		(33	)		190
Loss before income taxes		(358	)		(1,406	)
Provision for income taxes		(42	)		(95	)
Net loss	$	(400	)	$	(1,501	)

Net loss per common share - basic and diluted	$	(0.01	)	$	(0.03	)

Weighted average shares outstanding - basic and diluted		60,134			58,188

See accompanying notes to consolidated financial statements

F-3

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 2010 and 2009
(in thousands)

	Series A Cumulative Convertible Preferred Stock				Common Stock				Additional Paid-in		Treasury			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Capital		Stock			Deficit			Income (Loss)		Total
Balances at December 31, 2008		161	$	1		55,727	$	277	$	113,267	$	(456	)	$	(105,351	)	$	8	$	7,746

Comprehensive loss:
Foreign currency translation adjustment		-		-		-		-		-		-			-			569		569
Unrealized holding gain on investment available-for-sale		-		-		-		-		-		-			-			122		122
Net loss		-		-		-		-		-		-			(1,501	)		-		(1,501	)
Total comprehensive loss																				(810	)
Issuance of stock in lieu of dividends		-		-		37		1		15		-			(16	)		-		-
Issuance of common stock upon exercise of stock option		-		-		176		1		27		-			-			-		28
Issuance of common stock for the acquisition of iSports, Inc.		-		-		500		3		163		-			-			-		166
Issuance of warrants for the acquisition of iSports, Inc.		-		-		-		-		371		-			-			-		371
Issuance of common stock for the acquisition of i-am TV		-		-		1,500		8		442		-			-			-		450
Issuance of warrants for the acquisition of i-am TV		-		-		-		-		537		-			-			-		537
Sale of common stock in private placement		-		-		2,419		12		738		-			-			-		750
Non-cash stock based compensation		-		-		-		-		180		-			-			-		180

Balances at December 31, 2009		161		1		60,359		302		115,740		(456	)		(106,868	)		699		9,418

Comprehensive loss:
Foreign currency translation adjustment		-		-		-		-		-		-			-			79		79
Unrealized holding gain on investment available-for-sale		-		-		-		-		-		-			-			4		4
Net loss		-		-		-		-		-		-			(400	)		-		(400	)
Total comprehensive loss																				(317	)
Issuance of stock in lieu of dividends		-		-		34		-		16		-			(16	)		-		-
Issuance of common stock upon exercise of stock option		-		-		358		2		59		-			-			-		61
Non-cash stock based compensation		-		-		-		-		299		-			-			-		299

Balances at December 31, 2010		161	$	1		60,751	$	304	$	116,114	$	(456	)	$	(107,284	)	$	782	$	9,461

See accompanying notes to consolidated financial statements

F-4

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	For the years ended December 31,
	2010			2009
Cash flows provided by operating activities:
Net loss	$	(400	)	$	(1,501	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,203			3,193
Provision for doubtful accounts		191			227
Stock-based compensation		299			180
Gain on contract termination		(11	)		-
Loss from disposition of equipment and capitalized software		270			267
Changes in assets and liabilities:
Accounts receivable		(131	)		(181	)
Prepaid expenses and other assets		41			95
Accounts payable and accrued liabilities		(1,082	)		139
Income taxes payable		169			(161	)
Deferred costs		244			393
Deferred revenue		38			(148	)
Net cash provided by operating activities		2,831			2,503
Cash flows used in investing activities:
Capital expenditures		(1,323	)		(1,910	)
Software development expenditures		(845	)		(1,138	)
Trademark license		(35	)		(94	)
Deposits on broadcast equipment		-			(28	)
Net cash used in investing activities		(2,203	)		(3,170	)
Cash flows (used in) provided by financing activities:
Principal payments on capital lease		(425	)		(155	)
Proceeds from the sale of common stock		-			750
Proceeds from exercise of stock options		61			28
Net cash (used in) provided by financing activities		(364	)		623
Net increase (decrease) in cash and cash equivalents		264			(44	)
Effect of exchange rate on cash		5			319
Cash and cash equivalents at beginning of year		3,637			3,362
Cash and cash equivalents at end of year	$	3,906		$	3,637

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	90		$	63
Income taxes	$	50		$	223
Supplemental disclosure of non-cash investing and financing activities:
Equipment acquired under capital lease	$	419		$	603
Issuance of common stock in lieu of payment of dividends	$	16		$	16
Unrealized holding gain on investments available-for-sale	$	4		$	122
Assumed obligations in connection with the acquisition of intangible assets	$	-		$	63
Issuance of common stock in connection with the acquisition of intangible assets	$	-		$	616
Issuance of warrants in connection with the acquitision of intangible assets	$	-		$	908
Earn-out liability in connection with the acquisition of of intangible assets	$	-		$	188
Insurance financed through a third-party	$	-		$	81

See accompanying notes to consolidated financial statements

F-5

NTN BUZZTIME, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2010 and 2009

1. Organization of Company

Description of Business

NTN Buzztime, Inc. (the “Company”) was incorporated in Delaware in 1984 as Alroy Industries and changed its corporate name to NTN Communications, Inc. in 1985. The Company changed its name to NTN Buzztime, Inc. in 2005 to better reflect the growing role of the Buzztime consumer brand.

The Company has been in the business of social interactive entertainment for over 25 years. Its primary source of revenue is its Buzztime Network, which focuses on distributing the Company’s interactive promotional television game network programming, primarily to almost 4,000 hospitality venues such as restaurants and bars throughout North America.

Basis of Accounting Presentation

The consolidated financial statements include the accounts of NTN Buzztime, Inc. and its wholly-owned subsidiaries: IWN, Inc., IWN, L.P., Buzztime Entertainment, Inc., NTN Wireless Communications, Inc., NTN Software Solutions, Inc., NTN Canada, Inc., and NTN Buzztime, Ltd., all of which, other than NTN Canada, Inc., are dormant subsidiaries. Unless otherwise indicated, references to “NTN,” “we”, “us” and “our” include the Company and its consolidated subsidiaries.

Reclassifications

The Company reclassified the consolidated balance sheet for the period ended December 31, 2009 to conform to the 2010 presentation.

2. Summary of Significant Accounting Policies and Estimates

Consolidation —The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates —Preparing the Company’s consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to deferred costs and revenues; depreciation of broadcast equipment; allowance for doubtful accounts; investments; stock-based compensation assumptions; impairment of software development costs, intangible assets and goodwill, and broadcast equipment; contingencies, including the reserve for sales tax inquiries; the provision for income taxes, including the valuation allowance; and purchase price allocations related to acquisitions. The Company bases its estimates on a combination of historical experience and various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about significant carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Cash and Cash Equivalents —ASC No. 230, Statement of Cash Flows , defines “cash and cash equivalents” as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation, the Company has applied the provisions of ASC No. 230, as it considers all highly liquid investment instruments with original maturities of three months or less; or any investment redeemable without penalty or loss of interest to be cash equivalents.

Capital Resources —The Company is dependent upon cash on hand and cash flow from operations to meet its liquidity needs. The Company believes existing cash and cash equivalents, together with funds generated from operations, will be sufficient to meet its operating cash requirements for at least the next 12 months. The Company currently has no debt obligations other than capital leases. It is the Company’s intention to continuing entering into capital lease facilities for certain equipment requirements when economically advantageous. In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, the Company may be required to reduce planned capital expenses, reduce operational cash uses, sell assets or seek financing. Any actions the Company may undertake to reduce planned capital purchases, further reduce expenses or generate proceeds from the sale of assets may be insufficient to cover shortfalls in available funds. If the Company requires additional capital, it may be unable to secure additional financing on terms that are acceptable to the Company, or at all.

Allowance for Doubtful Accounts —The Company maintains allowances for doubtful accounts for estimated losses resulting from nonpayment by its customers. The Company reserves for all accounts that have been suspended or terminated from its Buzztime Network services and for customers with balances that are greater than a predetermined number of days past due. The Company analyzes historical collection trends, customer concentrations and creditworthiness, economic trends and anticipated changes in customer payment patterns when evaluating the adequacy of its allowance for doubtful accounts for specific and general risks. Additional reserves may also be established if specific customers’ balances are identified as potentially uncollectible. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

F-6

The Company incurs a relatively significant level of depreciation expense in relation to its operating income. The amount of depreciation expense in any fiscal year is largely related to the estimated life of handheld wireless Playmaker devices and associated electronics, and the computers located at its customers’ sites. The Playmakers are depreciated over a seven-year life and the associated electronics and computers are depreciated over two to four years. The depreciable life of these assets was determined based on the shorter of the contractual capital lease period or their estimated useful life, which considers anticipated technology changes. The Company determined that the useful life of Playmakers purchased after June 2009 increased from four to seven years. This increase is the result of superior digital technology used in the current Playmakers. If its Playmakers and associated electronics and computers turn out to have longer average lives than estimated, the Company’s depreciation expense would be significantly reduced in those future periods. Conversely, if the Playmakers and associated electronics and the computers turn out to have shorter average lives than estimated, the Company’s depreciation expense would be significantly increased in those future periods.

Investments —ASC No. 320, Investments - Debt and Equity Securities, provides guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, the Company employs a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost and its intent and ability to hold the investment. The Company also considers specific adverse conditions related to the financial health, and business outlook of the investee, including industry and sector performance, changes in technology, operational and financing cash flow factors and rating agency actions. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry and/or investor conditions deteriorate, the Company may incur future impairments.

In accordance with ASC No. 360, the Company assesses potential impairments of its long-lived assets whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable. An impairment loss would be recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group.

The Company has performed its annual test for goodwill impairment by calculating the fair value for NTN Canada, Inc., as of September 30, 2010. The valuation methods employed to determine the fair value for NTN Canada, Inc. at September 30, 2010 were (1) the market approach—guideline company method (2) the market approach—guideline transaction method and (3) the income approach—discounted cash flow method.

Management considers market conditions, new product offerings, pricing and selling strategies, revenue growth rates and additional investment needed to achieve these growth rates. The Company believes the projections are reasonable based on existing operations and prospective business opportunities. The resulting indicated value from each approach is weighted equally and added to interest bearing debt to arrive at the indicated fair market value of the invested capital. The resulting value is compared against the carrying value of equity after interest bearing debt to determine impairment. As a result of the annual test, the Company determined that there were no indications of impairment as of September 30, 2010. The Company considered the need to perform an additional test of goodwill of its Canadian business as of December 31, 2010, but determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2010 valuation.

Assessments of Functional Currencies —The United States dollar is the Company’s functional currency, except for its operations in Canada where the functional currency is the Canadian dollar. The financial position and results of operations of the Canadian subsidiary is measured using the foreign subsidiary’s local currency as the functional currency. In accordance with ASC No. 830, Foreign Currency Matters , revenues and expenses of its foreign subsidiary have been translated into U.S. dollars at weighted average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the years ended December 31, 2010 and 2009, the Company recorded $2,000 in foreign currency transaction losses and $49,000 in foreign currency transaction gains, respectively, due to settlements of intercompany transactions, re-measurement of intercompany balances with its Canadian subsidiary and other non-functional currency denominated transactions, which are included in other income in the accompanying statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect the Company’s results of operations and period-to-period comparisons of its operating results. The Company does not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2010, the net impact to the Company’s results of operations from the effect of exchange rate fluctuations was immaterial when compared to the exchange rates for the year ended December 31, 2009.

F-7

Purchase Accounting – The Company accounts for acquisitions pursuant to ASC No. 805, Business Combinations . The Company records all acquired tangible and intangible assets and all assumed liabilities based upon their estimated fair values. The purchase price allocation for the asset acquisitions of iSports and i-am TV were final as of December 31, 2009.

Revenue Recognition —The Company recognizes revenue from recurring service fees earned from its network subscribers, advertising revenues, and distribution and licensing fees from its Buzztime-branded content delivered primarily through its interactive consumer platforms. To the extent its arrangements contain multiple deliverables the Company evaluates the criteria in ASC No. 605, Revenue Recognition , to determine whether such deliverables represent separate units of accounting. In order to be considered a separate unit of accounting, the delivered items in an arrangement must have stand-alone value to the customer and objective and reliable evidence of fair value must exist for any undelivered elements. The Company’s arrangements for the transmission of the Buzztime Network contain two deliverables: the installation of its equipment and the transmission of its network content for which the Company receives monthly subscription fees. As the installation deliverable does not have stand-alone value to the customer, it does not represent a separate unit of accounting and, therefore, all installation fees received are deferred and recognized as revenue on a straight-line basis over the estimated life of the customer relationship. As a result, installation fees not recognized in revenue have been recorded as deferred revenue in the accompanying consolidated balance sheets.

Advertising and royalty revenues are recognized when all material services or conditions relating to the transaction have been performed or satisfied.

Software Development Costs —The Company capitalizes costs related to developing certain software products in accordance with ASC No. 350. Amortization expense relating to capitalized software development costs totaled $521,000 and $370,000 for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, approximately $331,000 and $554,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete.

The Company performed its annual review of software development projects for the years ended December 31, 2010 and 2009, and determined to abandon various software development projects that it determined were no longer a current strategic fit or for which the Company determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, an impairment loss of $236,000 and $256,000 was recognized for the years ended December 31, 2010 and 2009, respectively, which is included in selling, general and administrative expenses.

Shipping and Handling Costs —Shipping and handling costs are included in direct operating costs in the accompanying consolidated statements of operations and are expensed as incurred.

Stock-Based Compensation — The Company estimates the fair value of its stock options using a Black-Scholes option pricing model, consistent with the provisions of ASC No. 718 , Compensation – Stock Compensation . The fair value of stock options granted is recognized to expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is reported in selling, general and expenses based upon the departments to which substantially all of the associated employees report and credited to additional paid-in-capital.

F-8

ASC No. 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

Earnings Per Share —Basic and diluted loss per common share have been computed by dividing the losses applicable to common stock by the weighted average number of common shares outstanding. The Company’s basic and fully diluted EPS calculation are the same since the increased number of shares that would be included in the diluted calculation from assumed exercise of common stock equivalents would be anti-dilutive to the net loss in each of the years shown in the consolidated financial statements.

Recent Accounting Pronouncements

Establishes a elling price hierarchy for determining the selling price of a deliverable; replaces the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant;

·	Eliminates using the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and

·	Requires that the best estimate of a selling price is determined in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be the Company’s 2011 fiscal year. Early adoption is permitted. If adopted early, the Company would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. The Company did not adopt the amendments early. The Company does not anticipate that the adoption of these amendments will have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued an accounting standards update to ASC No. 985, Software. The purpose of this update is to change the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in Subtopic 985-605. In addition, this update requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. In addition, the update provides guidance on how a vendor should allocate arrangement consideration to deliverables in an arrangement that includes both tangible products and software. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be the Company’s 2011 fiscal year. Early adoption is permitted. If adopted early, the Company would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. The Company did not adopt the amendments early. The Company does not anticipate that the adoption of this amendment will have a material impact on its consolidated financial statements.

In December 2009, the Company adopted the updated guidance issued by the FASB related to ASC Topic No. 820, Fair Value Measurements and Disclosures, which requires a reporting entity to separately disclose the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. The updated guidance also requires that an entity provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring Level 2 and Level 3 fair value measurements. This guidance was effective for interim or annual financial reporting periods beginning after December 15, 2009, which was the Company’s 2010 fiscal year. The adoption of this updated guidance did not have an impact on the Company’s consolidated financial statements.

In addition, the updated guidance requires that in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity separately disclose information about purchases, sales, issuances and settlements on a gross basis rather than as one net number. This guidance is effective for fiscal years beginning after December 15, 2010, which will be the Company’s 2011 fiscal year. Therefore, we have not yet adopted the guidance with respect to the roll forward activity in Level 3 fair value measurements. The Company does not anticipate that the adoption of this amendment will have a material impact on its consolidated financial statements.

F-9

In April 2010, the FASB issued an accounting standards update to ASC Topic No. 718, Compensation – Stock Compensation. ASC No. 718 stipulates that a share-based payment award that contains a condition that is not a market, performance, or a service condition is required to be classified as a liability. This update clarifies that when an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s securities trades differs from the functional currency of the employer entity or payroll currency of the employee, such award should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this update will be effective for fiscal years beginning on or after December 15, 2010, which will be the Company’s 2011 fiscal year. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied and should be presented separately. Early adoption is permitted; however, the Company did not adopt the amendments early. The Company does not anticipate that the adoption of this amendment will have a material impact on its consolidated financial statements.

In December 2010, the FASB issued an amendment to ASC No. 350, Intangibles – Goodwill and Other, to clarify when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. Prior to this amendment, continuation to Step 2 was not required if the carrying amount of the reporting unit exceeded the fair value. However, in cases where the carrying amount was zero or negative, the fair value most likely was greater. This amendment requires that the evaluation must still continue to Step 2, given a fair value greater than the carrying amount, if it is more likely than not that a goodwill impairment exists. This amendment becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, which will be the Company’s 2011 fiscal year. The Company does not anticipate that the adoption of this amendment will have a material impact on its consolidated financial statements.

3. Acquisitions

iSports Acquisition

In April 2009, the Company entered into an asset purchase agreement with iSports Inc., a California corporation. iSports was a provider of mobile sports scores, news and interactive gameplay. Pursuant to the terms of the agreement, in consideration for the acquired assets, the Company issued (i) 500,000 unregistered shares of the Company’s common stock, (ii) a warrant to purchase 1,000,000 shares of unregistered common stock, with an exercise price of $0.30 per share, and (iii) a warrant to purchase 500,000 shares of unregistered common stock, with an exercise price of $0.50 per share. In addition, if certain business conditions are satisfied in each of calendar years 2009, 2010 and 2011, the Company would be required to pay as additional consideration 35% of the amount by which the Company’s net media revenues (as defined in the agreement) for such years exceed specified threshold amounts. The agreement also contains customary representations, warranties and covenants.

The total value assigned to the transaction, including liabilities assumed, was calculated as $599,000. The purchase price of $599,000 was comprised of $371,000 in warrants to purchase shares of unregistered common stock of the Company, $166,000 in unregistered shares of common stock of the Company and approximately $62,000 in assumed liabilities. The fair values of the warrants were determined using the Black-Scholes model using the following weighted-average assumptions: risk-free interest rates of 2.79%; dividend yield of 0%; expected volatility of 78.1%; and a term of 8 years.

The Company is using the acquired assets to accelerate the development of its mobile gaming platform. Following the closing, the Company employed a co-founder of iSports, Inc. as the Company’s Executive Vice President of Programming and Technology.

The Company accounted for the acquisition pursuant to ASC No. 805, Business Combinations . Accordingly, it recorded net assets and liabilities acquired at their fair values. The purchase price allocation amounts reflected in the Company’s financial statements were final as of December 31, 2009. The purchase price allocation was as follows:

Acquisition Footnote

Intangible assets – acquired technology	$	599,000
Total assets		599,000

Accounts payable		(62,000	)
Total liabilities		(62,000	)

Purchase price allocated to assets and liabilities acquired	$	537,000

The purchase price may be increased if certain thresholds of net media revenues are exceeded in calendar years 2009, 2010 and 2011. The thresholds of net media revenues were not exceeded in 2009 or 2010, and the Company does not estimate that they will be met in the future. In the event the thresholds are met, the purchase price allocation will be adjusted and reflected in current earnings in the period that the additional purchase price amount is earned.

Because there was no continuity of iSports operations after the acquisition date, the Company has determined that the proforma revenue and net loss information for the twelve months ended December 31, 2009 generally required by ASC No. 805 would not be meaningful and may be misleading. Therefore, the Company has omitted these disclosures from the financial statements.

F-10

i-am TV Acquisition

In May 2009, the Company entered into an asset purchase agreement (the “i-am TV Agreement”) through which it acquired certain assets of “i-am TV” from Instant Access Media, LLC. i-am TV had been in the business of providing programming and advertising to hospitality venues located in the top 15 designated market areas throughout the United States. The transaction included the acquisition of approximately 1,400 flat panel television screens installed in 368 locations as well as the related communication equipment. Pursuant to the terms of the i-am TV Agreement, in consideration for the acquired assets, the Company issued (i) 1,500,000 unregistered shares of the Company’s common stock, (ii) warrants to purchase 1,000,000 shares of unregistered common stock with an exercise price of $0.50 per share, (iii) warrants to purchase 1,000,000 shares of unregistered common stock with an exercise price of $1.00 per share and (iv) warrants to purchase 1,000,000 shares of unregistered common stock with an exercise price of $1.50 per share. In addition, the Company has agreed to provide future earnout consideration (the “Earnout”) in calendar years 2010 through 2012 based on net advertising revenues as defined in the i-am TV Agreement. The Earnout will be calculated as the product of the total net advertising revenues for the Company multiplied by the percentage of qualifying venues that have converted from i-am TV to the Company’s Buzztime Network in relation to the total population of Buzztime Network subscribers. The i-am TV Agreement also contained customary representations, warranties and covenants.

The total value assigned to the transaction, including liabilities assumed, was calculated as $1,176,000. The purchase price of $1,176,000 was comprised of $537,000 in warrants to purchase shares of unregistered common stock of the Company, $450,000 in unregistered shares of common stock of the Company, $188,000 of contingent consideration in the form of an earnout and approximately $1,000 in assumed liabilities. The fair values of the warrants were determined using the Black-Scholes model using the following weighted-average assumptions: risk-free interest rates of 2.79%; dividend yield of 0%; expected volatility of 78.1%; and a term of 8 years.

The Company also entered into an agreement with certain investors in Instant Access Media, LLC whereby they purchased 2,419,355 shares of the Company’s common stock in a private placement raising $750,000 in additional working capital.

The Company accounted for the acquisition pursuant to ASC No. 805. Accordingly, it recorded net assets and liabilities acquired at their fair values. The fair value calculations are based on certain assumptions, including the number of i-am TV sites converted to Buzztime customers and the incremental cash flows to the Company from those sites. The purchase price allocation amounts reflected in the Company’s financial statements were final as of December 31, 2009. The purchase price allocation was as follows:

Intangible assets – customer relationships – advertising	$	302,000
Intangible assets – customer relationships – subscription		874,000
Total assets		1,176,000

Accounts payable		(1,000	)
i-am TV earnout – long term liabilities		(188,000	)
Total liabilities		(189,000	)

Purchase price allocated to assets and liabilities acquired	$	987,000

The purchase price may be increased or decreased if net advertising revenues for the Company deviate from estimations in calendar years 2010, 2011 and 2012. In that event, the liability will be adjusted and reflected in current earnings in the period that the adjustment becomes necessary. For the twelve months ended December 31, 2010, the i-am TV earnout liability was reduced by $70,000 due to net advertising revenues deviating from estimations and is reflected in other income in the current year consolidated statement of operations.

As a result of the i-am TV acquisition, the Company recognized approximately $319,000 in subscription and other revenue for the twelve months ended December 31, 2010 resulting from 110 sites obtained through sales efforts directed at former i-am TV customers to the Buzztime platform. Based on the post-acquisition integration efforts of the Company, it is not practical to determine the impact on net loss for the twelve months ended December 31, 2010.

Because there was no continuity of i-am TV’s operations after the acquisition date, the Company has determined that the proforma revenue and net loss information for the twelve months ended December 31, 2009 generally required by ASC No. 805 would not be meaningful and may be misleading. The Company has therefore omitted these disclosures from the consolidated financial statements.

F-11

4. Broadcast Equipment and Fixed Assets

Broadcast equipment and fixed assets are recorded at cost and consist of the following at December 31, 2010 and 2009:

	December 31,
	2010			2009
Broadcast equipment	$	17,793,000		$	17,897,000
Furniture and fixtures		790,000			736,000
Machinery and equipment		5,449,000			4,919,000
Leasehold improvements		562,000			633,000
Other equipment		24,000			24,000
		24,618,000			24,209,000

Accumulated depreciation		(20,980,000	)		(20,400,000	)

Total	$	3,638,000		$	3,809,000

Depreciation expense totaled $2,252,000 and $2,148,000 for the years ended December 31, 2010 and 2009, respectively.

5. Goodwill and Other Intangible Assets

The Company’s goodwill balance relates to the purchase of NTN Canada. The Company performed its annual test for goodwill impairment for NTN Canada as of September 30, 2010 and it was determined that there were no indications of impairment. The Company considered the need to perform an additional test of goodwill of its Canadian business as of December 31, 2010, but determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2010 valuation.

As discussed in Note 3, during the quarter ended June 30, 2009, the Company acquired certain assets of iSports Inc. and Instant Access Media, LLC. As a result of those transactions, the Company recorded $1,176,000 in customer relationship intangible assets and $599,000 in unpatented technology. The majority of the customer relationship intangible asset will be amortized on a straight line basis over a period of 44 months and recorded in selling, general and administrative expenses. Approximately $300,000 was amortized over the three months ended August 31, 2009 coinciding with the period that the related advertising revenue was recognized. The unpatented technology intangible asset is being amortized on a straight line basis over a period of 60 months and recorded in direct expenses. The useful lives reflect the estimated period of time and method by which the underlying intangible asset benefits will be realized.

The Company also has other intangible assets comprised predominantly of developed technology, trivia databases and trademarks. The weighted average remaining useful life for all intangible assets is 2.6 years as of December 31, 2010. Amortization expense relating to all intangible assets totaled $430,000 and $675,000 for the years ended December 31, 2010 and 2009, respectively.

As of December 31, 2010 and 2009, intangible assets with estimable lives were comprised of the following:

	December 31, 2010							December 31, 2009
	Gross Carrying Value		Accumulated Amortization			Net Book Value		Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	206,000	$	(206,000	)	$	-	$	206,000	$	(206,000	)	$	-
Trivia database		446,000		(314,000	)		132,000		426,000		(257,000	)		169,000
Trademarks and trademark licenses		67,000		(67,000	)		-		340,000		(176,000	)		164,000
Acquired technology		599,000		(202,000	)		397,000		599,000		(82,000	)		517,000
Acquired advertising customers		302,000		(302,000	)		-		302,000		(302,000	)		-
Acquired subscription customers		874,000		(378,000	)		496,000		874,000		(139,000	)		735,000
Total	$	2,494,000	$	(1,469,000	)	$	1,025,000	$	2,747,000	$	(1,162,000	)	$	1,585,000

F-12

The estimated aggregate amortization expense relating to the Company’s intangible assets for each of the five succeeding years is as follows:

Year Ending	Estimated Aggregate Amortization Expense
2011	$	403,000
2012		403,000
2013		182,000
2014		37,000
Thereafter		-
Total	$	1,025,000

6. Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short maturity of these instruments.

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

The one investment available-for-sale that the Company holds is 2,518,260 shares in its Australian licensee eBet Limited (eBet), an Australian gaming technology corporation. The Company’s original cost basis in the eBet shares is AUD$0.50 per share. The Company’s initial investment in 1999 was for 4,000,000 shares and at various points in 2000, the Company sold 1,481,740 eBet shares, leaving its existing holding of 2,518,260 shares, which represents less than 1.2% of eBet’s current shares outstanding. The value of the investment increased $4,000 and $122,000 for the years ended December 31, 2010 and 2009, respectively. Based on the closing market price at December 31, 2010, the value of the investment was approximately $184,000. The unrealized gains of this investment are recorded as other comprehensive income in the Company’s consolidated balance sheet (See Note 17). The Company will continue to monitor this investment for any decline in value that could be deemed other-than-temporary ultimately resulting in future impairments.

ASC No. 820, Fair Value Measurements and Disclosures, applies to certain assets and liabilities that are being measured and reported on a fair value basis. Broadly, the ASC No. 820 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC No. 820 also establishes a fair value hierarchy for ranking the quality and reliability of the information used to determine fair values. This hierarchy is as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:

The fair value of the Company’s investment in eBet Limited is determined based on quoted market prices, which is a Level 1 classification. The Company records the investment on the balance sheet at fair value with changes in fair value recorded as a component of other comprehensive income (loss) in the consolidated balance sheet (see Note 17).

F-13

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:

Certain assets are measured at fair value on a non-recurring basis and are subject to fair value adjustments only in certain circumstances. Included in this category are goodwill written down to fair value when determined to be impaired, assets and liabilities with respect to the business combinations closed during 2009, and long-lived assets including capitalized software that are written down to fair value when they are held for sale or determined to be impaired. The valuation methods for goodwill, assets and liabilities resulting from business combinations, and long-lived assets involve assumptions concerning interest and discount rates, growth projections, and/or other assumptions of future business conditions. As all of the assumptions employed to measure these assets and liabilities on a nonrecurring basis are based on management’s judgment using internal and external data, these fair value determinations are classified in Level 3 of the valuation hierarchy.

7. Accrued Compensation

Accrued compensation consisted of the following at December 31, 2010 and 2009:

	December 31,
	2010		2009
Accrued vacation	$	436,000	$	398,000
Accrued bonuses		81,000		401,000
Accrued salaries		62,000		194,000
Accrued commissions		49,000		82,000
Total accrued compensation	$	628,000	$	1,075,000

8. Concentrations of Risk

Credit Risk

At times, the Company’s cash balances held in financial institutions are in excess of federally insured limits. The Company performs periodic evaluations of the relative credit standing of financial institutions and seeks to limit the amount of risk by selecting financial institutions with a strong credit standing. The Company believes it is not exposed to any significant credit risk with respect to its cash and cash equivalents.

The Buzztime Network provides services to group viewing locations, generally restaurants, sports bars and lounges throughout North America. Concentration of credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company’s customer base, and their dispersion across many different geographies. The Company performs credit evaluations of new customers and generally requires no collateral. The Company maintains an allowance for doubtful accounts to provide for credit losses.

Significant Customer

For the years ended December 31, 2010 and 2009, the Company generated approximately 19% and 16%, respectively, of total revenue from a national chain, Buffalo Wild Wings together with its franchisees. As of December 31, 2010 and 2009, approximately $100,000 and $71,000, respectively, was included in accounts receivable from this customer.

Single Source Playmaker Supplier

The Company currently purchases its Playmakers from an unaffiliated Taiwanese manufacturer subject to the terms of a supply agreement dated April 23, 2007 with a term that automatically renews for one year periods. The Company currently does not have an alternative source for its playmaker devices. Management believes other manufacturers could be identified to produce the Playmakers on comparable terms. A change in manufacturers, however, could cause delays in supply and may have an adverse effect on the Company’s operations. As of December 31, 2010 and 2009, approximately $127,000 and $133,000, respectively, were included in accounts payable or accrued expenses for this supplier.

9. Basic and Diluted Earnings Per Common Share

Basic earnings per share excludes the dilutive effects of options, warrants and other convertible securities. Diluted earnings per share reflects the potential dilutions of securities that could share in the Company’s earnings. Options, warrants, convertible preferred stock and deferred stock units representing approximately 9,414,000 and 9,640,000 shares were excluded from the computations of diluted net loss per common share for the years ended December 31, 2010 and 2009, respectively, as their effect was anti-dilutive.

F-14

10. Common Stock Options, Deferred Stock Units and Warrants

Equity Incentive Plans

2004 Performance Incentive Plan

In September 2004 at a Special Meeting of Stockholders, the Company’s stockholders approved the 2004 Performance Incentive Plan (the “2004 Plan”). The 2004 Plan provided for the issuance of up to 2,500,000 shares of NTN common stock. In addition, all shares that remained unissued under the 1995 Employee Stock Option Plan (the “1995 Plan”) on the effective date of the 2004 Plan, and all shares issuable upon exercise of options granted pursuant to the 1995 Plan that expire or become unexercisable for any reason without having been exercised in full, were available for issuance under the 2004 Plan. On the effective date, the 1995 Plan had approximately 77,000 options available for grant. Options under both the 1995 Plan and the 2004 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. In September 2009, the 2004 Plan expired. All awards that were granted under the 2004 Plan will continue to be governed by the 2004 Plan until they are exercised or expire in accordance with that plan’s terms. As of December 31, 2010, there were approximately 2,363,000 options outstanding under the 2004 Plan.

2010 Performance Incentive Plan

In June 2010, the Company’s shareholders approved the 2010 Performance Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the issuance of up to 6,000,000 shares of NTN common stock. Under the 2010 Plan, options for the purchase of NTN common stock or other instruments such as deferred stock units may be granted to officers, directors, employees and consultants. The Board of Directors designated its Nominating and Corporate Governance/Compensation Committee as the 2010 Plan Committee. Stock options granted under the 2010 Plan may either be incentive stock options or nonqualified stock options. A stock option granted under the 2010 Plan generally cannot be exercised until it becomes vested. The 2010 Plan Committee establishes the vesting schedule of each stock option at the time of grant. At its discretion, the 2010 Plan Committee can accelerate the vesting, extend the post-termination exercise term or waive restrictions of any stock options or other awards under the 2010 Plan. Options under the 2010 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. As of December 31, 2010, there were approximately 2,303,000 options outstanding under the 2010 Plan.

Buzztime Distribution Stock Incentive Plan

On May 31, 2001, Buzztime Distribution (“Buzztime”) adopted an incentive stock option plan. Pursuant to the plan, Buzztime may grant options to purchase Buzztime common stock, subject to applicable share limits, upon terms and conditions specified in the plan. There are 300,000 shares authorized under this plan, and the plan expires on May 31, 2011. To date, no options have been granted under the plan.

Stock-Based Compensation Valuation Assumptions

The Company records stock-based compensation in accordance with ASC No. 718 , Compensation – Stock Compensation . The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method.

The Company uses the historical stock price volatility as an input to value its stock options under ASC No. 718. The expected term of stock options represents the period of time options are expected to be outstanding and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

The following weighted-average assumptions were used for grants issued during 2010 and 2009 under the ASC No. 718 requirements:

	2010		2009
Weighted average risk-free rate		1.68%		1.72%
Weighted average volatility		93.72%		88.55%
Dividend yield		0.00%		0.00%
Expected life	6.50 years		6.05 years

ASC No. 718 requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Forfeitures were estimated based on historical activity for the Company. The Company estimated an annual forfeiture rate of approximately 18% for each of the years ended December 31, 2010 and 2009. Stock-based compensation expense for employees in 2010 and 2009 was $299,000 and $180,000, respectively, and is expensed in selling, general and administrative expenses and credited to the additional paid-in-capital account.

F-15

Stock Option Activity

The following table summarizes stock option activity for the year ended December 31, 2010:

	Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding December 31, 2009		4,870,000		$	0.66		7.16	$	655,000
Granted		2,486,000			0.49		-		-
Exercised		(358,000	)		0.17		-		-
Forfeited		(2,263,000	)		0.26
Cancelled		(69,000	)		1.04		-		-
Outstanding December 31, 2010		4,666,000		$	0.79		7.22	$	42,000

Options vested and exercisable at December 31, 2010		2,151,000		$	1.17		4.94	$	30,000

The aggregate intrinsic value of options at December 31, 2010 is based on the company’s closing stock price on that date of $0.38 per share as reported by the NYSE Amex. The total intrinsic value of options exercised during the twelve months ended December 31, 2010 and 2009 was $113,000 and $56,000, respectively. The total cash received as a result of stock option exercises during the twelve months ended December 31, 2010 and 2009 was approximately $61,000 and $28,000, respectively.

The per share weighted average grant-date fair value of stock options granted during 2010 and 2009 was $0.41 and $0.18, respectively.

As of December 31, 2010, the unamortized compensation expense related to outstanding unvested options was approximately $622,000 with a weighted average remaining requisite service period of 3.06 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. A deferred tax asset generally would be recorded related to the expected future tax benefit from the exercise of the non-qualified stock options. However, due to a history of net operating losses, a full valuation allowance has been recorded related to the tax benefit for non-qualified stock options.

Deferred Stock Unit Activity

In prior years, the Company granted deferred stock units to employees. Grants of deferred stock units are paid in an equal number of shares of common stock on the vesting date of the award, subject to any deferred payment date that the holder may elect. A stock unit award is paid only to the extent vested. Vesting generally requires the continued employment by the award recipient through the respective vesting date, subject to accelerated vesting in certain circumstances. Since the deferred stock units are paid in an equal number of shares of common stock without any kind of offsetting payment by the employee, the measurement of cost is based on the quoted market price of the stock at the measurement date which is the date of grant.

The following table summarizes deferred stock unit activity during 2010:

	Outstanding Deferred Stock
December 31, 2009		109,000
Granted		-
Cancelled		(22,000	)
December 31, 2010		87,000

Balance exercisable at December 31, 2010		-

The Company did not grant any deferred stock units during the twelve months ended December 31, 2010 or 2009. The deferred stock units outstanding have performance-based accelerated vesting provisions that are tied to certain revenue targets for the Company which could result in accelerated vesting of up to 50% of the total award. The Company has evaluated the likelihood of attaining the performance based targets and they are not considered probable, therefore, accelerated expense was not recorded. The Company will continue to monitor its revenue results and should any estimates made regarding the satisfaction of those performances based conditions change at any time during the estimated requisite period, an adjustment will be calculated and recorded in accordance with ASC No. 718.

F-16

Warrant Activity

The following summarizes warrant activity during 2010:

	Outstanding Warrants		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)
Outstanding December 31, 2009		4,500,000	$	0.79		7.35
Granted		-		-		-
Exercised		-		-		-
Forfeited		-		-		-
Outstanding December 31, 2010		4,500,000	$	0.79		6.35

Balance exercisable at December 31, 2010		4,500,000	$	0.79		6.35

The 4,500,000 warrants outstanding were issued during 2009 in connection with the iSports and i-am TV asset acquisitions. The fair values of the warrants were approximately $908,000 in aggregate and were determined using the Black-Scholes model using the following weighted-average assumptions: risk-free interest rates of 2.79%; dividend yield of 0%; expected volatility of 78.1%; and a term of 8 years.

11. Cumulative Convertible Preferred Stock

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

As of December 31, 2010 and 2009, there were 161,000 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. For the twelve months ended December 31, 2010 and 2009, the Company issued approximately 34,000 and 37,000 common shares, respectively, for payment of dividends.

The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate. The conversion rate is subject to adjustment in certain events and is established at the time of each conversion, such that the number of shares of common stock issuable upon conversion of the preferred stock is convertible into is higher than the original conversion rate. During 2010 and 2009, there were no conversions. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock.

12. Income Taxes

For each of the years 2010 and 2009, current tax provisions and current deferred provisions were recorded as follows:

	2010			2009
Current Tax Provision
Federal	$	-		$	57,000
State		15,000			13,000
Foreign		(11,000	)		(41,000	)
		4,000			29,000
Deferred Tax Provision
Federal		-			-
State		-			-
Foreign		38,000			66,000
		38,000			66,000
Total Tax Provison
Federal		-			57,000
State		15,000			13,000
Foreign		27,000			25,000
	$	42,000		$	95,000

F-17

The net deferred tax assets and liabilities have been reported in other assets in the consolidated balance sheets at December 31, 2010 and 2009 as follows:

	2010						2009
	Current			Noncurrent			Current			Noncurrent

Deferred Tax Assets:
NOL carryforwards	$	-		$	21,204,000		$	-		$	21,826,000
UK NOL carryforwards		-			724,000			-			904,000
Legal & litigation accruals		-			-			-			-
Allowance for doubtful accounts		77,000			-			128,000			-
Compensation and vacation accrual		151,000			-			405,000			-
Operating accruals		277,000			-			272,000			-
Deferred revenue		57,000			-			59,000			-
Research and experimentation credit		-			9,000			-			9,000
AMT credit		-			21,000			-			21,000
Foreign tax credit		-			112,000			-			105,000
Amortization		-			735,000			-			741,000
Depreciation		-			988,000			-			889,000
Foreign		8,000			13,000			-			53,000
Charitable contributions		-			1,000			-			1,000
Other		-			343,000			-			303,000
Total gross deferred tax assets		570,000			24,150,000			864,000			24,852,000
Valuation allowance		(350,000	)		(23,095,000	)		(655,000	)		(23,848,000	)
Net deferred tax assets		220,000			1,055,000			209,000			1,004,000

Deferred Tax Liabilities:
Capitalized software		-			1,042,000			-			951,000
Amortization		-			-			-			-
Deferred revenue		212,000			-			209,000			-
Total gross deferred liabilities		212,000			1,042,000			209,000			951,000
Net deferred taxes	$	8,000		$	13,000		$	-		$	53,000

The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 34% is as follows:

	For the year ended December 31,
	2010			2009
Tax at federal income tax rate	$	(121,000	)	$	(478,000	)
State (benefit)		(15,000	)		(52,000	)
Foreign tax differential		(2,000	)		(17,000	)
Change in valuation allowance		(877,000	)		448,000
Expiration of net operating loss carryforwards		974,000			-
Permanent items		83,000			113,000
Other		-			81,000
Total Provision	$	42,000		$	95,000

The net change in the total valuation allowance for the year ended December 31, 2010 was a decrease of $877,000. The net change in the total valuation allowance for the year ended December 31, 2009 was an increase of $448,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the portion of deferred taxes not utilized through the reversal of deferred tax liabilities will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

F-18

At December 31, 2010, the Company has available net operating loss (“NOL”) carryforwards of approximately $59,757,000 for federal income tax purposes, which will begin expiring in 2011. The NOL carryforwards for state purposes, which will begin expiring in 2015, are approximately $17,171,000. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards due to continued operating losses. Further, Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. The Company completed a Section 382 analysis for the period from January 1, 1992 through September 30, 2010 and determined that the Company will be able to utilize the total NOL carryforwards that existed as of September 30, 2010. Based on the Company’s analysis of its stockholder activity for the three months ended December 31, 2010, there were no ownership changes that caused an annual limitation per the provisions of Section 382. Accordingly, the Company will be able to utilize the total NOL carryforwards that existed as of December 31, 2010, provided it generates sufficient future earnings prior to the expiration of the NOLs and that future changes in ownership do not trigger a Section 382 limitation. The Company has established a full valuation allowance for substantially all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2005. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The deferred tax assets as of December 31, 2010 include a deferred tax asset of $1,294,000 representing NOLs arising from the exercise of stock options by Company employees. To the extent the Company realizes any tax benefit for the NOLs attributable to the stock option exercises, such amount would be credited directly to stockholders' equity.

13. Commitments

Operating Leases

The Company leases office and production facilities and equipment under agreements which expire at various dates through 2018, which includes a new lease for the Company’s headquarters entered into in February 2011 (see Note 20). Certain leases contain renewal provisions and escalating rental clauses and generally require us to pay utilities, insurance, taxes and other operating expenses. Lease expense under operating leases totaled $690,000 and $856,000 in 2010 and 2009, respectively.

The estimated aggregate lease payments under operating leases for each of the five succeeding years is as follows:

Years Ending December 31,	Lease Payment
2011	$	390,000
2012		273,000
2013		508,000
2014		618,000
2015		589,000
Thereafter		1,756,000
Total	$	4,134,000

Capital Leases

In 2009, the Company entered into a $500,000 equipment lease facility with an equipment leasing company. The terms of that agreement allow for use of the facility in multiple tranches with each individual tranche having a 24 month term. Additionally, the equipment lease has a collateral obligation whereby the Company has pledged certain equipment located at the Carlsbad, California location to satisfy the equipment leasing company’s requirements. As of December 31, 2010, the Company had utilized $457,000 of this facility, which has been accounted for as a capital lease. As of December 31, 2010, $85,000 remained outstanding under this facility.

In October 2009, the Company entered into a $1,000,000 equipment lease facility with an equipment leasing company. The terms of that agreement allow for use of the facility for 24 months and for use of the facility in multiple tranches with each individual tranche having a 24 month term. As of December 31, 2010, the Company had utilized $565,000 of this facility, which has been accounted for as a capital lease. As of December 31, 2010, $373,000 remained outstanding under this facility.

F-19

As of December 31, 2010 and 2009, property held under current capital leases was as follows:

	For the Years Ended December 31,
	2010			2009
Broadcast equipment	$	1,023,000		$	591,000
Other equipment		43,000			43,000
		1,066,000			634,000
Accumulated depreciation		(592,000	)		(159,000	)

Total	$	474,000		$	475,000

Total depreciation expense under capital leases was $433,000 and $148,000 for the years ended December 31, 2010 and 2009, respectively.

As of December 31, 2010, future minimum payments under all capital leases are as follows:

Years Ending December 31,	Lease Payment
2011	$	412,000
2012		106,000
2013		5,000
Thereafter		-
Total minimum payments		523,000
Less amounts representing interest		(42,000	)
Present value of net minimum payments		481,000
Less current portion		(376,000	)
Long-term capital lease obligations	$	105,000

Purchase Commitments

The Company had a commitment, under a long-term agreement, to purchase equipment from a vendor. Under the original terms of the agreement, the Company was obligated to purchase $835,000 and $76,000 of equipment in 2008 and 2009, respectively, after the Company’s acceptance of certain milestones. Issues arose under the terms of the agreement, which still remain unresolved as of December 31, 2010. In early 2008, the Company informed the vendor that numerous defects existed with the equipment. The vendor failed to remedy the defects in a timely manner and the Company was forced to purchase equipment from a different manufacturer. Due to the vendor's failure to cure the defects in accordance with the provisions in the agreement, the Company does not believe the required milestones were met.

On April 15, 2009, the Company received a letter from the vendor requesting $300,000 to cover certain costs incurred citing breach of the agreement. The Company responded to the letter, indicating that certain contract milestones had not been met by the vendor and therefore, the Company was not obligated to purchase equipment under the contract. The Company ultimately requested a mutual release to the agreement without any cash payment by either party. The vendor responded to the Company's rebuttal indicating that it disagreed with the Company's assertions, however, was willing to resolve the matter amicably. The last communication was on May 19, 2009, whereby the Company sent a letter which reaffirmed its desire to bring closure to this issue amicably and with no payment by either party. The Company believes the vendor's claim lacks merit and does not plan to make any payments. The Company has not recorded a reserve as it has assessed the likelihood that it would have to pay any amounts as being less than probable.

14. Contingencies

The Company is subject to litigation from time to time in the ordinary course of its business. There can be no assurance that any or all of the following claims will be decided in the Company’s favor and the Company is not insured against all claims made. During the pendency of such claims, the Company will continue to incur the costs of its legal defense. Other than set forth below, there is no material litigation pending or threatened against the Company.

Sales and Use Tax

From time to time, state tax authorities will make inquiries as to whether or not a portion of the Company’s services require the collection of sales and use taxes from customers in those states. Many states have expanded their interpretation of their sales and use tax statutes to derive additional revenue. The Company evaluates such inquiries on a case-by-case basis and has favorably resolved the majority of these tax issues in the past without any material adverse consequences.

F-20

During the quarter ended March 31, 2009, the Company settled a long on-going sales tax evaluation with the state of Texas. The Company and the State of Texas executed an Audit Resolution Agreement and Joint Motion to Dismiss pursuant to which the Company will pay the state approximately $450,000 over a two year period. As part of those agreements, both parties agreed to waive all rights to any redetermination or refund hearings. In February 2009, the Company began collecting and remitting sales tax in the state of Texas in accordance with the state tax statutes. As of December 31, 2010 and 2009, $128,000 and $334,000, respectively, was due to the State of Texas under this settlement agreement.

The Company is involved in ongoing sales tax inquiries, including certain formal assessments which total $705,000, with other states and provinces. As a result of those inquiries and the Texas liability discussed above, the Company recorded a total liability of $746,000 and $847,000 as of December 31, 2010 and December 31, 2009, respectively, and is reported in sales taxes payable in the accompanying consolidated balance sheets . Based on the guidance set forth by ASC No. 450, Contingencies, management has deemed the likelihood that it will be forced to pay all or part of these assessments with other states as reasonably possible.

15. Retirement Savings Plan

In 1994 the Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allowed employees who have completed at least one month of service and have reached age 18 to defer up to 50% of their pay on a pre-tax basis. Effective April 1, 2007, the Company began to match 50% of the first 6% of employee contributions up to a maximum of $2,000 per employee. However, after March 31, 2009, the Company discontinued the employer contribution. For the year ended December 31, 2009, the Company contributed $41,000. There were no employer contributions for the year ended December 31, 2010.

16. Related Parties

In June 2010, Christopher George became the Company’s Chief Information Officer. Prior to this date, the Company received consulting services and purchased hardware and software from a company that Mr. George co-founded. Although the Company ceased receiving consulting services upon Mr. George’s employment with the Company, it continues to purchase hardware and software when economically advantageous to the Company. During the years ended December 31, 2010 and 2009, the Company paid approximately $333,000 and $227,000, respectively, to this vendor. As of December 31, 2009, approximately $39,000 was due to this vendor and was reflected in accounts payable and accrued expenses on the accompanying balance sheet. There were no amounts due to this vendor as of December 31, 2010.

17. Accumulated Other Comprehensive Income

Accumulated other comprehensive income is the combination of accumulated net unrealized gains or losses on investments available-for-sale and the accumulated gains or losses from foreign currency translation adjustments. The Company translated the assets and liabilities of its Canadian statement of financial position into U.S. dollars using the period end exchange rate. Revenue and expenses were translated using the weighted average exchange rates for the reporting period.

The carrying value of the Company’s Australian investment, eBet, has fluctuated and the respective unrealized gains and losses are recorded in accumulated other comprehensive income. As of December 31, 2010 and 2009, the components of accumulated other comprehensive income were as follows:

	December 31,
	2010		2009
Unrealized gain on investment available-for-sale	$	20,000	$	16,000
Foreign currency translation adjustment		762,000		683,000
Ending balance	$	782,000	$	699,000

18. Geographical Information

Geographic breakdown of the Company’s revenue for the last two fiscal years were as follows:

	For the years ended December 31,
	2010		2009
United States	$	22,904,000	$	23,289,000
Canada		2,405,000		2,525,000
Total revenue	$	25,309,000	$	25,814,000

F-21

Geographic breakdown of the Company’s long-term tangible assets for the last two fiscal years were as follows:

	As of December 31,
	2010		2009
United States	$	3,529,000	$	3,588,000
Canada		109,000		221,000
Total assets	$	3,638,000	$	3,809,000

19. Selected Quarterly Financial Information (Unaudited) (amounts in thousands, except per share data)

The following table presents selected unaudited financial results for each of the eight quarters during the two year period ended December 31, 2010. In the opinion of management, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments (consisting of only normal recurring adjustments) necessary for the fair statement of the financial information for the periods presented.

For the three months ended

Mar 31,

2010

Jun 30,

2010

Sep 30,

2010

Dec 31,

2010

Total

2010 (1)

Total revenue	$	6,271		$	6,191		$	6,505	$	6,342	$	25,309
Operating (loss) income		(359	)		(407	)		155		286		(325	)
(Loss) income before income taxes		(353	)		(470	)		139		326		(358	)
Net (loss) income		(389	)		(457	)		124		322		(400	)

Per share amounts:
Net (loss) income per common share - basic	$	(0.01	)	$	(0.01	)	$	0.00	$	0.01	$	(0.01	)

Net (loss) income per common share - diluted	$	(0.01	)	$	(0.01	)	$	0.00	$	0.01	$	(0.01	)

Weighted average shares outstanding - basic		59,900			60,188			60,209		60,248		60,134

Weighted average shares outstanding - diluted		59,900			60,188			60,849		60,746		60,134

	For the three months ended
	Mar 31, 2009			Jun 30, 2009			Sep 30, 2009			Dec 31, 2009			Total 2009 (1)
Total revenue	$	6,196		$	6,285		$	6,717		$	6,616		$	25,814
Opeating loss		(265	)		(311	)		(916	)		(104	)		(1,596	)
Loss before income taxes		(224	)		(300	)		(777	)		(105	)		(1,406	)
Net loss		(255	)		(282	)		(768	)		(196	)		(1,501	)

Per share amounts:
Net loss	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.03	)
Weighted average shares outstanding- basic and diluted		55,224			57,762			59,845			59,850			58,188

(1)	The sum of the four quarters may not necessarily agree to the year total due to rounding within a quarter.

20. Subsequent Event

In February 2011, the Company entered into a new operating lease to occupy approximately 28,000 square feet of office space for its headquarters in Carlsbad, California. The lease will commence on June 1, 2011 and expire on October 31, 2018. Under the terms of the lease, the Company has the option to extend the lease for an additional five years. The expected annual lease expense for this new lease is included in the estimated aggregate lease expense under operating leases in Note 13.

The Company’s existing lease for the facility its headquarters currently occupies will expire in June 2011.

F-22

SCHEDULE II

NTN BUZZTIME, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2010 and 2009

Allowance for Doubtful Accounts	Balance at Beginning of Period		Additions Charged to Expense		Deductions (a)			Balance at End of Period
2010	$	321,000		191,000		(292,000	)	$	220,000
2009	$	298,000		227,000		(204,000	)	$	321,000

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

See accompanying report of independent registered public accounting firm.

II-1

Exhibit 10.7

STANDARD OFFICE LEASE

PROJECT: 2231 Rutherford Road, Carlsbad, California

LANDLORD: BECKMAN/CARLSBAD I, LLC

TENANT: NTN Buzztime, Inc., a Delaware corporation

TABLE OF CONTENTS

ARTICLE 1-BASIC LEASE TERMS	1
1.1 Address for Notice
1.2 Description of Premises
1.3 Commencement Date
1.4 Lease Term
1.5 Minimum Monthly Rent
1.6 Security Deposit
1.7 Base Year
1.8 Tenant’s Pro Rata Share
1.9 Permitted Use
1.10 Tenant’s Guarantor
1.11 Tenant’s Parking Spaces
1.12 Landlord’s Broker
1.13 Additional Provisions
1.14 Exhibits
1.15 Building Hours

ARTICLE 2-LEASE OF PREMISES	2

ARTICLE 3-LEASE TERM	2
3.1 Commencement
3.2 Delay in Commencement
3.3 Early Occupancy
3.4 Option to Extend Term

ARTICLE 4-RENT	3
4.1 Minimum Monthly Rent
4.2 Lease Year
4.3 Additional Rent
4.4 Impounds

ARTICLE 5-SECURITY DEPOSIT	3

ARTICLE 6-OPERATING COSTS	4
6.1 Payment of Excess Operating Cost by Tenant
6.2 Pro Rata Share
6.3 Operating Costs
6.4 Common Facilities

ARTICLE 7-MAINTENANCE AND REPAIRS	4
7.1 Tenant’s Obligations
7.2 Landlord’s Obligations
7.3 Performance by Landlord

ARTICLE 8-REAL PROPERTY TAXES	5
8.1 Payment of Excess Real Property Taxes by Tenant
8.2 Real Property Taxes Defined
8.3 Personal Property Taxes


ARTICLE 9-INSURANCE	5
9.1 Landlord’s Insurance
9.2 Tenant’s insurance
9.3 Payment of Insurance Premium Increases and Deductibles
9.4 Waiver of Subrogation
9.5 Tenant’s Use Not to Increase Premium

ARTICLE 10-UTILITIES	7
10.1 Payment of Utilities by Tenant
10.2 Heating, Ventilation and Air Conditioning Hours

ARTICLE 11-USE	7
11.1 Permitted Use
11.2 Compliance with Law and Other Requirements
11.3 Waste; Quiet Conduct
11.4 Rules and Regulations
11.5 Signs
11.6 Parking
11.7 Entry by Landlord

ARTICLE 12-ACCEPTANCE OF PREMISES; NONLIABILITY OF LANDLORD; DISCLAIMER	8
12.1 Acceptance of Premises
12.2 Landlord’s Exemption From Liability
12.3 No Warranties or Representations
12.4 Keys

ARTICLE 13-INDEMNIFICATION	9

ARTICLE 14-HAZARDOUS MATERIALS	9
14.1 Definitions
14.2 Use of Hazardous Materials
14.3 Compliance With Laws; Handling Hazardous Materials
14.4 Notice; Reporting
14.5 Indemnity
14.6 Entry and Inspection; Cure
14.7 Termination; Expiration
14.8 Exit Assessment
14.9 Event of Default

ARTICLE 15- ALTERATIONS; LIENS	11
15.1 Alterations by Tenant
15.2 Permits and Governmental Requirements
15.3 Liens
15.4 Remodel


ARTICLE 16-DAMAGE AND DESTRUCTION	12
16.1 Partial Insured Damage
16.2 Intentionally Omitted
16.3 Total Destruction
16.4 Partial Destruction of Project
16.5 Tenant’s Obligations
16.6 Rent Abatement
16.7 Waiver of Inconsistent Statutes

ARTICLE 17-CONDEMNATION	12
17.1 Condemnation of Premises
17.2 Condemnation of Parking Areas
17.3 Condemnation Award

ARTICLE 18-ASSIGNMENT AND SUBLETTING	13
18.1 Landlord’s Consent Required
18.2 Landlord’s Election
18.3 Costs; Transfer Fee
18.4 Assumption; No Release of Tenant
18.5 No Merger
18.6 Reasonable Restriction

ARTICLE 19-SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE	14
19.1 Subordination
19.2 Attornment
19.3 Estoppel Certificates

ARTICLE 20-SURRENDER OF PREMISES	14
20.1 Condition of Premises
20.2 Removal of Certain Alterations, Fixtures and Equipment Prohibited
20.3 Holding Over

ARTICLE 21-DEFAULT BY TENANT	15

ARTICLE 22-REMEDIES	15
22.1 Termination of Lease
22.2 Continuation of Lease
22.3 Performance By Landlord
22.4 Late Charge; Interest on Overdue Payments
22.5 Landlord’s Right to Require Advance Payment of Rent; Cashier’s Check

ARTICLE 23- DEFAULT BY LANDLORD	17
23.1 Notice to Landlord
23.2 Notice to Mortgagees
23.3 Limitations on Remedies Against Landlord

iii


ARTICLE 24-GENERAL PROVISIONS	17
24.1 Action of Defense by Tenant
24.2 Waiver of Jury Trail
24.3 Attorneys’ Fees
24.4 Authority of Tenant
24.5 Binding Effect
24.6 Brokers
24.7 Construction
24.8 Counterparts
24.9 Entire Agreement
24.10 Exhibits
24.11 Financial Statements
24.12 Force Majeure
24.13 Governing Law
24.14 Joint and Several Liability
24.15 Modification
24.16 Modification for Lender
24.17 Nondiscrimination
24.18 Notice
24.19 Partial Invalidity
24.20 Intentionally Omitted
24.21 Quiet Enjoyment
24.22 Recording
24.23 Relationship of Parties
24.24 Intentionally Omitted
24.25 Rights of Redemption Waived
24.26 Time of the Essence
24.27 Transfer of Landlord’s Interest
24.28 Waiver
24.29 Right of First Offer, Contiguous Space

ARTICLE 25-TENANT IMPROVEMENTS	19
25.1 Space Plan; Construction
25.2 Changes to Tenant Improvements
25.3 Tenant Responsibilities

EXHIBITS:

EXHIBIT A: Preliminary Space Plan
EXHIBIT B: Rules and Regulations

SCHEDULE 1: Disclosure

STANDARD OFFICE LEASE

This STANDARD OFFICE LEASE ("Lease"), dated for reference purposes only February 24, 2011, is entered into by Beckman/Carlsbad I, LLC, a California limited liability company ("Landlord"), and NTN Buzztime, Inc., a Delaware corporation, (“Tenant”).

1. BASIC LEASE TERMS.

The basic terms of the Lease set forth in this Article 1 shall be read in conjunction with the other Articles of this Lease, which define and explain the basic terms.

1.1 Address for Notice :

Landlord: c/o Beckman Properties, Inc.

505 Lomas Santa Fe, Suite 100

Solana Beach, California 92075

Attention: Mr. William R. Beckman

Tenant: NTN Buzztime, Inc., a Delaware corporation,

5966 La Place Court, Suite 100,

Carlsbad, California 92008

1.2 Description of Premises :

Project Name: Carlsbad Courtyard

Address: 2231 Rutherford Road

Carlsbad, California 92008

Suites: 100, 150, 200 & 210

Approximate Rentable Square Footage (see Exhibit "A"): 28,458

1.3 Commencement Date : The later of June 1, 2011, or substantial completion of Tenant Improvements. Substantial completion shall be deemed to have occurred when Landlord delivers to Tenant (i) the Premises with all Tenant Improvements completed except for minor punch-list items as reasonably determined by Landlord and (ii) any required certificate of occupancy.

1.4 Lease Term (see Article 3): Approximately Eighty- Nine months , beginning on the Commencement Date and ending on the last day of the calendar month which is the Eighty-Ninth month thereafter (the "Expiration Date").

1.5 Minimum Monthly Rent : Minimum Monthly Rent shall be the following amounts for the following periods:

Period

Minimum Monthly Rent

Commencement Date through the twelfth month of the Term*

$44,109.90

Thirteenth through the twenty fourth month of the Term

$45,433.20

Twenty fifth through the thirty sixth month of the Term

$46,796.19

Thirty seventh through forty eighth month of the Term

$48,200.08

Forty ninth through the sixtieth month of the Term

$49,646.08

Sixty-first through the Seventy second month of the Term

$51,135.46

Seventy third through the last month of the Term

$52,669.52

1.6 Security Deposit :: (see Article 5). $52,669.52

1.7 Base Year: 2011

1.8 Tenant's Pro Rata Share : 71.97%

1.9 Permitted Use (see Article 11): general office uses permitted in the zoning and consistent with office buildings in Carlsbad Research Center, and for no other use.

1.10 Tenant's Guarantor (If none, so state): None.

1.11 Tenant's Parking Spaces (Unassigned) (see Section 11.6): 97

1.12 Landlord's Broker (If none, so state): Joe Anderson and Cassidy Turley/BRE Commercial.

Tenant's Broker (If none, so state): Louis J. Tomaselli of 360 Commercial Partners and Seth Davenport of Voit Commercial Real Estate Services,.

1.13 Additional Provisions : * Rental Abatement. Provided that there has not been any Event(s) of Default on the part of Tenant under this Lease nor any condition that with the giving of notice or the passage of time or both would constitute an Event of Default on the part of Tenant under this Lease, the Minimum Monthly Rent for the Premises shall be abated and no Minimum Monthly Rent shall be due for months two (2) through thirteen (13).

1.14 Exhibits: The following Exhibits are attached to and made a part of this Lease:

Exhibit "A" - Preliminary Space Plan

Exhibit "B" - Rules and Regulations

Schedule 1 -- Disclosure

1.15 Building Hours: 7:00am to 6:00pm Monday through Friday

8:00am to 12:00pm Saturday

1.16 Tenant Improvement Allowance : $20.00 per rentable square foot which based on 28,458 rentable square feet equals $569,160.00.

2. LEASE OF PREMISES.

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the premises (the "Premises") described in Section 1.2, which are indicated on the site/floor plan attached as Exhibit "A". The Premises are part of the office building or center identified in Section 1.2 (the "Project"). The approximate Rentable Square Footage identified in Section 1.2 is a measurement of the net leasable floor area of the Premises, as determined by Landlord and applied on a consistent basis throughout the Project.

3. LEASE TERM.

3.1 Commencement. The term of this Lease (the "Lease Term") shall commence on the Commencement Date stated in Section 1.3 and shall continue for the period stated in Section 1.4, unless sooner terminated pursuant to any provision of this Lease.

3.2 Delay In Commencement. If Landlord cannot deliver possession of the Premises to Tenant on the Commencement Date specified in Section 1.3 for any reason (including if the Tenant Improvements to be constructed by Landlord under Section 25 are not substantially complete), Landlord shall not be subject to any liability therefor. Such nondelivery shall not affect the validity of this Lease nor the obligations of Tenant hereunder, provided however: (a) Tenant shall not be obligated to pay rent until possession of the Premises is delivered to Tenant, and (b) if possession of the Premises is not delivered to Tenant within thirty (30) days of the Commencement Date, then last day of the Lease Term shall be extended by the total number of days that possession is so delayed, plus the minimum number of additional days necessary to make the Expiration Date the last day of a calendar month; (c) if Landlord does not deliver possession of the Premises by July 1, 2011, without fault on Tenant’s and/or it’s agents, contractors, space planners’ part, Landlord give Tenant a credit toward Tenant’s future Minimum Monthly Rent under the Lease in the amount of $1627.52 per day, for each day, until possession of the Premises is delivered to Tenant, and (d) if Landlord does not deliver possession of the Premises by October 1, 2011, unless due to fault on Tenant’s part and/or it’s agents, contractors, space planners’ part, Tenant shall have the right to terminate the Lease.

3.3 Early Occupancy. If Tenant occupies the Premises or any part thereof prior to the Commencement Date, such occupancy shall be subject to all provisions of this Lease other than the payment of Minimum Monthly Rent and other monthly charges. Such occupancy shall not advance the Expiration Date. Thirty days prior to completion of the Tenant Improvements and provided such does not interfere with the build out of the Tenant Improvements, Tenant may access the Premises for the installation of telecommunication wiring, computer feeder lines, and related equipment; except for the foregoing,, Tenant shall not occupy or use the Premises until all Tenant Improvements are substantially completed. Tenant shall pay for any utilities consumed by Tenant during such early occupancy period.

3.4 Option to Extend Term.

(a) Provided that Tenant is not and has never committed an Event of Default by Tenant under the terms of the Lease, and provided further that no condition exists that, with the giving of notice or the passage of time or both would constitute an Event of Default under this Lease, Tenant shall have the option (the "Option") to extend the term of this Lease for one (1) additional period of five (5 ) years upon all of the terms and conditions of the Lease, other than the Minimum Monthly Rent, which shall be determined as described below. The Option must be exercised, if at all, by Tenant giving Landlord written notice of the exercise thereof no more than twelve (12) months and no less than six (6) months prior to the expiration of the Lease Term. Any failure of Tenant to give due notice of its exercise of the Option within such time shall constitute an irrevocable election on the part of Tenant not to exercise the Option.

(b) The Minimum Monthly Rent during the Option Term shall be the then "Fair Market Rental Value" of the Premises, as defined below. Upon exercise of the Option, Landlord and Tenant shall, in good faith, attempt to reach a mutually acceptable Fair Market Rental Value of the Premises and consequent Minimum Monthly Rent for the Option Term.

(c) If Landlord and Tenant cannot agree upon the Fair Market Rental Value within ten (10) business days of Tenant's exercise of the Option, then, within five (5) business days thereafter, Landlord and Tenant shall each select and notify the other of the name of an "Evaluator," who, for purposes of the Lease, shall be an independent and impartial real estate professional (such as a licensed real estate broker) having more than ten years' experience in the leasing of space comparable to the Premises. Each Evaluator shall promptly proceed to select a third Evaluator, who shall have the aforesaid qualifications of an Evaluator. Such third Evaluator shall determine the Fair Market Rental Value of the Premises and shall deliver to both Landlord and Tenant a copy of such determination within ten (10) business days after his or her appointment as the third Evaluator. The parties agree that the third Evaluator's determination as aforesaid shall be considered as the Fair Market Rental Value of the Premises and shall be conclusive and binding upon Landlord and Tenant; provided, however, that Tenant may void Tenant’s exercise of the Option by giving notice to Landlord within ten (10) business days after such third Evaluator has rendered its decision, in which case the Option shall be of no further force or effect and the term of the Lease shall expire at the end of the initial Term. If the original two Evaluators shall fail to agree upon the selection of a third Evaluator, the same shall be designated by the president of the San Diego Board of Realtors, or any successor organization thereto. Landlord and Tenant shall each pay any fees of their own Evaluator and shall share equally the fees of the third Evaluator, if any.

(d) As used herein, the term "Fair Market Rental Value" shall mean the then-prevailing rental for space comparable to the Premises in the Carlsbad Research Center area of the City of Carlsbad that a willing, comparable Tenant would pay to a willing Landlord, neither of whom is compelled to rent, at arms length during a term as the case may be on all of the terms and conditions of the Lease (other than the Minimum Monthly Rent for the Option Term, which is to be determined pursuant to this Section). The determination of Fair Market Rental Value shall also include any appropriate adjustments over the term of the Option Term in the Minimum Monthly Rent based on the cost of living or otherwise, including any minimums and maximums in the adjustment thereof.

4. RENT.

4.1 Minimum Monthly Rent. Tenant shall pay minimum monthly rent ("Minimum Monthly Rent") in the initial amount stated in Section 1.5. The Minimum Monthly Rent shall be increased as set forth in Section 1.5 and/or elsewhere in this Lease. Tenant shall pay the Minimum Monthly Rent on or before the first day of each calendar month, in advance, at the office of Landlord or at such other place designated by Landlord, without deduction, offset or prior demand, except as provided in this Lease. If the Commencement Date is not the first day of a calendar month, the rent for the partial month at the beginning of the Lease Term shall be prorated on a per diem basis and shall be due on the first day of such partial month. Upon execution of this Lease, and before the Commencement Date, Tenant shall pay to Landlord the aggregate of the first month's Minimum Monthly Rent and the Security Deposit (see Section 5).

4.2 Lease Year. As used in this Lease, the term "Lease Year" means (i) the first period of twelve (12) full calendar months following the Commencement Date (including, if the Commencement Date is not the first day of a calendar month, the period between the Commencement Date and the next first day of the month), (ii) each period of twelve (12) full calendar months thereafter, and (iii) any remaining period at the end of the Lease Term of less than twelve (12) full calendar months.

4.3 Additional Rent. All charges payable by Tenant in addition to Minimum Monthly Rent shall constitute Additional Rent to Landlord. All remedies available to Landlord for nonpayment of rent shall be available for nonpayment of any such Additional Rent. Unless this Lease provides otherwise, all Additional Rent shall be paid by Tenant, without limitation or offset, within fifteen (15) days after Tenant's receipt of a statement from Landlord. Additional Rent includes, without limitation, excess Operating Costs (see Article 6), Maintenance and Repairs (see Article 7), excess Real Property Taxes (see Article 8), excess insurance costs (see Article 9), Utilities (see Article 10),and attorneys' fees and costs (see Section 24.3). If any Minimum Rent is abated or waived pursuant to another specific term of this Lease or in any separate agreement, it is understood that such abatement of waiver shall apply only to the Minimum Monthly Rent, and Tenant shall be obligated to pay all components of Additional Rent (including the applicable impounds thereof) during the periods of abatement or waiver of Minimum Monthly Rent and throughout the Lease Term. Minimum Monthly Rent, Additional Rent, and all other charges and monetary amounts due Landlord from Tenant hereunder shall constitute "rent."

4.4 Impounds. After the Base Year, Landlord shall have the right, but not the obligation, to collect and impound, in advance, any or all components of excess Operating Costs, excess Real Property Taxes, excess insurance costs, and Utilities (as defined in section 10.1), based upon Landlord's reasonable estimate of Tenant's future liability for such amounts under this Lease. Landlord shall initially establish the monthly amount of such impound ("Monthly Impound Payments"), based upon its estimate of one-twelfth of Tenant's annual liability therefor. Landlord shall have the right, at any time during the Lease Term, to initiate or reasonably adjust the amount of the Monthly Impound Payment upon not less than 30 days written notice to Tenant, which shall include reasonable documentation supporting the estimate. The Monthly Impound Payment shall be due and payable on the first day of each month throughout the Lease Term. Any failure to pay the Monthly Impound Payment when due shall be considered a failure to pay rent when due under Section 21(a) and other relevant provisions of this Lease, and shall entitle Landlord to exercise any or all of its remedies available in the same manner as for the failure to pay rent, including the imposition of late charges and interest. Upon the occurrence of any Event of Default by Tenant hereunder, Landlord shall have the right to apply all unapplied amounts of Monthly Impound Payments to Tenant's default. Within ninety (90) days after the end of each calendar year, Landlord shall deliver to Tenant an accounting of Tenant's actual Pro Rata Share of excess Operating Costs, excess Real Property Taxes, excess insurance costs, and Utilities and the estimated amounts paid by Tenant. Any overpayment by Tenant shall be credited against next Monthly Impound Payments due hereunder, or, at Landlord's option, shall be remitted to Tenant within 30 days of delivery of such accounting. Tenant shall pay the amount of any underpayment within 30 days after receipt of the accounting. Tenant acknowledges that the Monthly Impound Payments are estimates only and not a representation of the amount of Tenant's ultimate liability for excess Operating Costs, excess Real Property Taxes, excess insurance costs, and Utilities.

5. SECURITY DEPOSIT

Upon execution of this Lease, Tenant shall deposit with Landlord the amount specified in Section 1.6 (the "Security Deposit"), to be held by Landlord, without liability for interest, as security for Tenant's performance of its obligations under this Lease. Landlord shall not be required to keep the Security Deposit separate from its other accounts. Landlord may apply all or a part of the Security Deposit to any Event of Default due to unpaid rent (including unpaid Additional Rent or Monthly Impound Payments) or other monetary payments due from Tenant or to cure any other Event of Default of Tenant hereunder and to compensate Landlord for all damage and expense sustained as a result of such Event of Default. If all or any portion of the Security Deposit is so applied, Tenant shall deposit cash sufficient to restore the Security Deposit to its original amount within fifteen (15) days after receipt of Landlord's written demand. If Tenant fully and faithfully performs each of its obligations under this Lease, the Security Deposit or any balance thereof shall be returned to Tenant within thirty (30) days of the later of the expiration or earlier termination of this Lease or the vacation of the Premises by Tenant. At Landlord's request, Tenant shall accompany Landlord or Landlord's representative on a "walk-through" of the Premises prior to Landlord's return of the Security Deposit.

6. OPERATING COSTS.

6.1 Payment of Excess Operating Costs by Tenant. Unless disputed, Tenant shall pay (or receive a credit against rent for) its Pro Rata Share of the amount by which Operating Costs (as defined herein) exceed (or are less than) , during any calendar year, the Operating Costs for the Base Year identified in Section 1.7. Tenant's Pro Rata Share shall be computed by Landlord on a calendar year basis beginning the next year following the Base Year. Tenant shall pay the undisputed amount of such Pro Rata Share to Landlord, to the extent such obligation exceeds any amount thereof impounded under Section 4.4, within thirty (30) days after receipt of a statement from Landlord. If Tenant disputes any invoice, charge or billing from Landlord for Tenant’s Pro Rata Share of Excess Operating Costs, which dispute is not resolved by the parties within thirty (30) days after Tenant’s notice to Landlord that Tenant is disputing said charges, such dispute shall be submitted to binding arbitration before the Judicial and Mediation Services (JAMS) of San Diego County in conformity with the rules of the American Arbitration Association. The nonprevailing party in such arbitration shall pay all costs of arbitration of the prevailing party, including reasonable attorneys’ fees and costs and the arbitrator’s award to the prevailing party, within five (5) business days after receipt of notice of the award. As used in the preceding sentence, Landlord shall be considered to be the prevailing party if more than fifty percent (50%) of all or any portion of the amount disputed is awarded to Landlord, Tenant shall be considered the prevailing party if less than fifty percent (50%) of the amount disputed is awarded to Landlord, and neither party shall be considered the prevailing party if exactly fifty percent (50%) of the amount disputed is awarded to Landlord.

6.2 Pro Rata Share. Tenant's Pro Rata Share is stated in Section 1.8 and represents the ratio of the Rentable Square Footage of the Premises (identified in Section 1.2) to the total Rentable Square Footage of the Project, as determined by Landlord. Changes in Rentable Square Footage shall be effective on the first day of the first calendar month following the change. Tenant's share of excess Real Property Taxes, excess insurance costs and other components of Additional Rent shall be computed on the same basis as Tenant's Pro Rata Share, unless some other basis would be more equitable. If the Project is not fully occupied during any year or in the event all of the Project is not provided with standard services during any year, an adjustment shall be made by Landlord in computing Operating Costs for such year so that Operating Costs shall be computed as though 95% of the Project had been occupied and 95% of the Project had been provided with standard services during such year (or such Operating Costs shall be computed in accordance with actual occupancy or actual provision of standard services if such respective amounts shall exceed 95%); but in no event shall the aggregate amount of Operating Costs collected by Landlord from all tenants in the Project exceed the actual Operating Costs for said year. Additionally, if any item of the Common Facilities exclusively serves the Premises, then Tenant's Pro Rata Share of such item shall be 100%.

6.3 Operating Costs. "Operating Costs" includes all costs of operating, managing, repairing and maintaining the Common Facilities, including without limitation: gardening and landscaping; the cost of public liability and property damage insurance; Real Property Taxes, as defined in Section 8.2 but applicable to the Common Facilities; utilities; line painting and parking lot repairs; roof repairs; lighting; trash and refuse removal; supplies; equipment; exterior painting; capital improvements (including without limitation the costs of roof, parking lot and underground utilities replacements); reasonable reserves for repairs and replacements; the costs of altering, improving, renovating, upgrading or retrofitting any portion of the Common Facilities to comply with all laws, regulations and governmental requirements applicable to the Project (including without limitation those related to disabled persons, hazardous materials, lighting upgrades, sprinkler and energy-saving retrofits); security service; property management costs and administrative fees; bookkeeping services; labor; and the cost of personnel to implement such services and to direct parking. In lieu of including the entire amount of any such expense in Operating Costs in any one period, Landlord, at its election reasonably exercised, will spread the inclusion of, or may amortize, any such expenses, or a reasonable reserve for anticipated expenses, in Operating Costs over such multiple periods as Landlord shall determine.

6.4 Common Facilities. "Common Facilities" means all areas, facilities, utilities, equipment and services provided by Landlord for the common use or benefit of the occupants of the Project, and their employees, agent s, customers and other invitees, including without limitation, if the same exist: building lobbies, structural elements and exteriors, common corridors and hallways, restrooms, pedestrian walkways, driveways and access roads, parking lots, access facilities for disabled persons (including elevators), landscaped areas, stairways, elevators, retaining walls, all areas required to be maintained under the conditions of governmental approvals for the Project, comfort and first-aid stations, parcel pick-up stations, and other generally understood public or common areas. Landlord reserves the right to relocate, alter, improve, or adjust the size and location of any Common Facilities from time to time upon reasonable notice, but without liability to Tenant, so long as reasonable access to and by Tenant is maintained.

7. MAINTENANCE AND REPAIRS.

7.1 Tenant's Obligations. Except as provided in Section 7.2, Tenant shall keep the Premises in good order, condition and repair during the Lease Term, including without limitation: all nonstructural, interior areas; all interior glass, glazing, windows, window moldings, partitions, doors and door hardware; exterior glazing is the responsibility of the Landlord unless damaged by Tenant’s occupancy and use of the Premises (see 7.2); all interior painting; all fixtures and appurtenances in the Premises or exclusively serving the Premises including electrical, lighting and plumbing fixtures; and all other portions of the Premises seen or unseen, normal wear and tear excluded. If any portion or element of the Premises, or the other systems or equipment for which Tenant is responsible hereunder cannot be fully repaired, Tenant shall promptly replace the same at its sole cost and expense regardless of whether the benefit of such replacement extends beyond the Lease Term.

7.2 Landlord's Obligations. Landlord shall at Landlord’s expense repair and maintain all Common Facilities, the heating, ventilation and air conditioning system serving the Premises, the common elements of the electrical, lighting and plumbing systems of the Premises and the Common Facilities, subject to Tenant's obligation to pay its Pro Rata Share of excess Operating Costs as provided in Article 6. Notwithstanding the foregoing, Landlord shall repair and maintain the roof structures, foundation and major structural elements of the Project, as well as any defects in the Tenant Improvements, without reimbursement from Tenant. Provided, however, that Tenant shall pay the full amount of any maintenance and repairs necessitated by any act, omission, conduct or activity of, or breach of this lease by, Tenant or any of Tenant's officers, agents, customers or invitees (except for normal wear and tear arising from Tenant’s occupancy and use of the Premises). Tenant shall pay the cost of such required repairs, as Additional Rent, within 30 days after receipt of a statement from Landlord. . Except as provided in Article 16 (Damage and Destruction) and Article 17 (Condemnation), there shall be no abatement of rent and Landlord shall have absolutely no other responsibility to repair, maintain or replace any portion of the Premises at any time. Tenant waives the right to make repairs at Landlord's expense under California Civil Code Section 1942, or under any other law, statute or ordinance now or hereafter in effect. Landlord's obligations under this Section are not intended to alter or modify in any way the provisions of Article 12.

7.3 Performance By Landlord. If Tenant refuses or neglects to perform its maintenance obligations hereunder, and if such failure has a material impact on other occupants of the Project, Landlord shall have the right (but not the obligation), upon three (3) days' prior notice to Tenant, to enter the Premises and perform such repairs and maintenance on behalf of Tenant. Landlord shall not be liable to Tenant for any loss or damage to Tenant's merchandise, fixtures, or other property or to Tenant's business in connection with Landlord's performance hereunder, except due to Landlord’s or its contractors’ gross negligence or intentional misconduct and Tenant shall pay Landlord's costs of repairs that are the responsibility of Tenant, within 30 days of presentation of a statement therefor, as Additional Rent. Tenant shall also pay interest at the rate provided in Section 22.4 from the date thirty (30) days after Landlord's invoice for such repairs to the date paid by Tenant.

8. REAL PROPERTY TAXES.

8.1 Payment of Excess Real Property Taxes by Tenant. Tenant shall pay all Real Property Taxes applicable to the Premises during the Lease Term that exceed, during any calendar year the Real Property Taxes for the Base Year identified in Section 1.7. If the Premises are not separately assessed, a share of the tax bill that includes the Premises shall be allocated to the Premises. Such share shall be equitably apportioned based upon the Rentable Square Footage of the Premises compared to the total Rentable Square Footage covered by the tax bill, the respective valuations assigned in the assessor's worksheet, or other reasonably available information. Tenant shall pay such obligation for excess Real Property Taxes to Landlord, to the extent such obligation exceeds any amount thereof impounded under Section 4.4, within 30 days after receipt of a statement from Landlord.

8.2 Real Property Taxes Defined. "Real Property Taxes" means all taxes, assessments, levies, fees and other governmental charges levied on or attributable to the Premises or any part thereof, including without limitation: (a) real property taxes and assessments levied with respect to all or a portion of the Premises, (b) assessments, charges and fees charged by governmental agencies or districts for services or facilities provided to the Premises, (c) transfer, transaction, rental, gross receipts, license or similar taxes or charges measured by rent received by Landlord, excluding any federal or state income, franchise, estate or inheritance taxes of Landlord, (d) taxes based upon a reassessment of the Premises due to a transfer or change of ownership, and (e) any assessment, charge or fee that is a substitute in whole or in part for any tax now or previously included within the definition of Real Property Taxes. If Landlord elects to contest an assessment of any Real Property Taxes, Landlord shall have the right to recover its actual costs of such contest (including attorneys' fees and costs) as part of Real Property Taxes, but only to the extent such contest has resulted in a reduction of Real Property Taxes. Tenant shall not be entitled to the benefit of any reduction, refund, rebate or credit accruing or payable to Landlord prior to the commencement of or after the expiration or other termination of the Lease Term unless applicable to periods encompassed by the Lease Term or any extensions thereof; in which case Tenant shall be entitled to a proportionate share of such rebate after deduction of Landlord’s expenses incurred in connection with the acquisition thereof. Notwithstanding the definition of Real Property Taxes set forth in Section 8.2 hereof, excess Real Property Taxes shall not include any temporary or permanent supplemental assessments arising from Landlord’s installation of tenant improvements in space other than the Premises.

8.3 Personal Property Taxes. Tenant shall pay prior to delinquency all taxes charged against trade fixtures, furnishings, equipment or any other personal property belonging to Tenant. Tenant shall attempt to have such personal property taxed separately from the Premises. If any such taxes on Tenant's personal property are levied against Landlord or the Premises, or if the assessed value of the Premises is increased by inclusion of a value placed upon such personal property of Tenant, then: (a) Landlord, after written notice to Tenant, shall have the right to pay the taxes levied against Landlord, or the taxes based upon such increased valuation, but under protest if so requested by Tenant in writing, and (b) Tenant shall pay to Landlord the taxes levied against Landlord, or the taxes resulting from such increased valuation, within fifteen (15) days after Tenant's receipt of a written statement from Landlord.

9. INSURANCE.

9.1 Landlord's Insurance. During the Lease Term, Landlord shall maintain insurance covering loss or damage to the Premises (excluding Tenant's Alterations, fixtures, equipment and personal property), insuring against any or all risks of physical loss (and including, at Landlord's option, flood and earthquake coverage), with the scope and amounts of such coverage as determined by Landlord. Said insurance shall provide for payment of loss thereunder to Landlord or to the holder of a first mortgage or deed of trust on the Premises. Landlord shall also maintain during the Lease Term a policy of rental income insurance covering a period of one (1) year, with loss payable to Landlord. Landlord shall also maintain liability insurance of not less than $1,000,000 combined single liability limits and $3,000,000 combined aggregate liability limits and other insurance (including environmental insurance) as Landlord may, at its sole option, elect to maintain.

9.2 Tenant's Insurance.

(a) Tenant shall at all times maintain, at Tenant's sole expense, insurance against any or all risks of physical loss in an amount adequate to cover the cost of replacement of all of Tenant's Alterations, trade fixtures, equipment and personal property. Such policy shall be issued by an insurance company approved by Landlord, shall name Landlord and Landlord's lender as additional insureds, and shall provide that no cancellation or reduction in coverage shall be effective until thirty (30) days after written notice to Landlord and Landlord's lender. Tenant shall deliver a certificate evidencing such insurance to Landlord and a renewal or binder at least twenty (20) days prior to expiration. Tenant acknowledges that Landlord's insurance is not intended to cover Tenant's Alterations, trade fixtures, equipment, and personal property. Provided, however, that at Landlord's sole election, Landlord may obtain at Tenant's expense any or all of the insurance described in this Section.

(b) Tenant shall, at Tenant's sole cost and expense, provide comprehensive general liability insurance, fully covering and indemnifying Landlord and such other person related to Landlord covered by a standard comprehensive general liability insurance policy, and their respective successors and assigns (together with, at Landlord's election, Landlord's lender), as additional insureds, against any and all claims arising from personal injury, death, and/or property damage occurring in or about the Premises or the Project during the period of Tenant's possession (actual and/or constructive) at the Premises. The initial limits of such insurance shall be at least $2,000,000 per occurrence. Tenant shall also, at its sole cost and expense, obtain workers' compensation insurance for the protection of its employees such as will relieve Landlord of all liability to such employees for any and all accidents that may arise on or about the Premises or the Project. If Tenant's use of the Premises involves any use, generation, manufacturing, storage or disposal of any Hazardous Materials, or if any of Tenant's activities increases any risk of any liability to Tenant or Landlord under Hazardous Materials Laws, at Landlord's request, Tenant shall carry such environmental insurance as may be required by Landlord or Landlord's lenders. All insurance required to be carried by Tenant shall be primary and noncontributory to any insurance carried by Landlord, regardless of the absence of negligence or other fault of Tenant for alleged injury, death and/or property damage.

(c) Each policy of insurance required to be carried by Tenant hereunder shall: (i) contain contractual liability endorsements and provisions or endorsements such that insured losses caused by Tenant are not excluded from Landlord's coverage, (ii) provide that no cancellation or reduction in coverage shall be effective until thirty (30) days after written notice to Landlord and Landlord's lender, (iii) be issued by an insurer licensed in California and reasonably approved by Landlord, and (iv) shall insure Tenant's performance of the indemnity provisions of Article 13, but the amount of such insurance shall not limit Tenant's liability nor relieve Tenant of any obligation hereunder. Tenant shall be responsible for the payment of the full amount of any deductible or self-insured retention on its insurance. Prior to the Commencement Date, Tenant shall deliver a certificate evidencing all such insurance to Landlord. Tenant shall deliver a renewal or binder of such policy prior to expiration thereof. Tenant shall, at Tenant's expense, maintain such other liability insurance as Tenant deems necessary to protect Tenant. Tenant shall be in material breach of this Lease if Tenant fails to obtain the insurance required under this Section, or if Tenant obtains insurance with terms, conditions and/or exclusions that are inconsistent with the requirements and terms of this Lease.

9.3 Payment of Insurance Premium Increases and Deductibles. Tenant shall pay directly all premiums for its liability insurance required under Section 9.2 and for all other insurance Tenant elects to carry. Tenant shall pay the insurance premiums on Tenant’s policies or, where applicable, its Pro Rata Share or more equitable apportionment determined by Landlord, for the insurance policies carried or obtained by Landlord described in this Article in excess of (or receive a credit for its share of any decrease as compared to) the premiums payable during the Base Year described in Section 1.7, but only if such increase (or decrease) is the result of lender requirements or general rate increases/decreases. If the Lease Term expires before the expiration of any such insurance policy, Tenant's liability for premiums shall be prorated on an annual basis. Tenant shall pay such obligation for excess insurance costs to Landlord, to the extent such obligation exceeds any amount thereof impounded under Section 4.4, within 30 days after receipt of a statement from Landlord. If any insurance policy maintained by Landlord covers improvements or real property other than the Premises, Landlord shall reasonably determine the portion of the premiums applicable to the Premises, and Tenant shall pay its share thereof as so determined.

9.4 Waiver of Subrogation. Each party waives all rights of recovery against the other party and its officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, for any claims for loss or damage to person or property caused by or resulting from fire or any other risks insured against under any insurance policy in force at the time of such loss or damage. Each party shall cause each insurance policy obtained by it to provide that the insurer waives all rights of recovery by way of subrogation against the other party in connection with any damage covered by such policy.

9.5 Tenant's Use Not to Increase Premium. Tenant shall not keep, use, manufacture, assemble, sell or offer for sale in or upon the Premises any article that may be prohibited by, or that might invalidate, in whole or in part, the coverage afforded by, a standard form of fire or all risk insurance policy. Tenant shall pay the entire amount of any increase in premiums that may be charged during the Lease Term for the insurance that may be maintained by Landlord on the Premises or the Project resulting from the type of materials or products stored, manufactured, assembled or sold by Tenant in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule issued by the entity making the insurance rate on the Premises showing the various components of such rate shall be conclusive evidence of the items and charges that make up the fire insurance rate on the Premises.

10. UTILITIES.

10.1 Payment of Utilities by Tenant . Landlord shall furnish the following utilities and services to the Premises during generally accepted business days and hours (as determined by Landlord), subject to the Project Rules and Regulations: heating, ventilation and air conditioning (See Section 10.3 ); electricity for normal desk top office, telecommunications, computer and copying equipment; water; lighting; routine janitorial service for the Common Facilities, and five days per week routine janitorial service for the Premises. Tenant shall pay the cost of all electrical utilities and electrical services supplied to the Premises. Tenant shall make payments for all separately metered electrical utilities, when due, directly to the appropriate supplier. If any electrical utilities or services are not separately metered or monitored, Tenant shall pay its Pro Rata Share of the portion thereof not attributed to the Common Facilities (such share referred to herein as the “Utilities”), as set forth in Section 1.8, to the extent such obligation exceeds any amount thereof impounded under Section 4.4, within 30 days after receipt of a statement from Landlord. Landlord makes no representation or warranty as the suitability of the utility service for Tenant's requirements, and no such change, failure, defect, unavailability or unsuitability shall constitute any actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant of any of its obligations under the Lease. Provided, however, if Landlord reasonably determines that Tenant is using any service or utility materially in excess of Tenant's Pro Rata Share, Landlord may require Tenant to pay an increased share equitably determined by Landlord or to install, at Tenant's sole expense, a separate meter for any such utility that is not separately metered. Utilities shall be equitably reduced in the event any other tenant’s use of non-separately metered service or utility is materially in excess of such other tenant’s pro rata share. Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility service, and no such failure or interruption shall entitle Tenant to terminate this Lease or abate the rent due hereunder, except for interruptions caused by the gross negligence or intentional misconduct of Landlord or its contractors.

10.2 Heating, Ventilation and Air Conditioning Hours; Additional Services . Landlord shall provide heating, ventilation and air conditioning services to the Premises during normal business hours, which, on the Commencement Date, shall be deemed to be from 7:00am to 6:00pm, Monday through Friday, and 8:00am through 12:00p.m. on Saturdays, except for Christmas Day, Thanksgiving Day, New Year’s Day, Memorial Day, Independence Day and Labor Day. Should Tenant desire that HVAC services be provided to the Premises at hours other than such normal business hours, then, upon at least two (2) business days’ request therefore, Landlord shall provide such services. Tenant shall pay to Landlord, upon invoice, an amount equal to $25.00 per hour of service; such amount to be increased after the initial term to Landlord’s cost of providing such services, plus a fifteen percent (15%) fee for overhead. It is understood that the HVAC units are not individual to each premises and that Tenant’s request for additional HVAC services may require that other premises in the Project to be so served. In such an event, Tenant shall pay the total cost of providing such services, even if such services must be provided to other portions of the Project.

11. USE

11.1 Permitted Use. The Premises shall be used and occupied only for the permitted uses specified in Section 1.9. The Premises shall not be used or occupied for any other purposes without the prior written consent of Landlord. Tenant shall provide such information about such proposed use as may be reasonably requested by Landlord. Landlord shall not unreasonably withhold its consent to any requested change of use, and shall have the right to impose reasonable restrictions on such other use. Factors that Landlord may take into account in granting or withholding its consent shall include, without limitation: (a) whether the proposed use is compatible with the character and tenant mix of the Project, (b) whether the proposed use poses any increased risk to Landlord or any other occupant of the Project, (c) whether any proposed Alterations to accommodate such proposed use might decrease the rental or sale value of the Premises or the Project, and (d) whether Tenant has the requisite expertise and financial ability to successfully operate in the Premises with the proposed use.

11.2 Compliance with Law and Other Requirements. Tenant shall not do or permit anything to be done in or about the Premises in conflict with all laws, ordinances, rules, regulations, orders, requirements, and recorded covenants and restrictions applicable to the Premises, whether now in force or hereafter in effect, including any requirement to make alterations or to install additional facilities required by Tenant's occupancy or the conduct of Tenant's business, and Tenant shall promptly comply with the same at its sole expense,

11.3 Waste; Quiet Conduct. Tenant shall not use or permit the use of the Premises in any manner that tends to create waste or a nuisance, that will cause objectionable noise or odors, or that may disturb the quiet enjoyment of any other tenant in the Project.

11.4 Rules and Regulations. Tenant shall comply with the Rules and Regulations for the Project attached as Exhibit "B", as the same may be reasonably amended by Landlord from time to time, upon notice to Tenant.

11.5 Signs.

(a) Landlord shall provide Tenant with building standard identification signage on the building directory in the building lobby and on or near the main entry door to the Premises. Signage shall include up to four (4) individual tenant names on all building directories. Except as provided in the next section, no other sign, placard, pennant, flag, awning, or advertising matter of any kind shall be placed or maintained on any exterior door, wall or window of the Premises or in any area outside the Premises, and no decoration, lettering or advertising matter shall be placed or maintained on the glass of any window or door, or that can be seen through the glass, of the Premises without Landlord's prior written approval, not to be unreasonably withheld.

(b) Tenant shall have the non-exclusive right to place its identification sign on the monument sign serving the Project and one (1) building exterior sign. All costs associated with design, permitting, fabrication, application and removal of all such signs shall be borne by Tenant. Such signs shall be subject to the approval of Landlord not to be unreasonably withheld, and shall conform to all sign criteria and other requirements of the City of Carlsbad and Carlsbad Research Center. Landlord shall assist Tenant in obtaining City of Carlsbad and Carlsbad Research Center approval.

11.6 Parking . Tenant shall have the nonexclusive right, in common with others, to use the parking areas of the Project; provided, however, that Tenant shall not use more than the number of parking spaces designated in Section 1.11 for Tenant's employees, customers, visitors or parties making deliveries to or providing service to Tenant. If no number of such spaces is so indicated, Tenant shall not use more than its reasonable share of parking spaces, as Landlord shall determine, in its sole and absolute discretion. Landlord reserves the right, without liability to Tenant, to modify the parking areas, to designate the specific location of the parking for Tenant's employees, customers, visitors, or parties making deliveries to or providing service to Tenant, and to adopt reasonable rules and regulations for use of the parking areas.

If Tenant's employees, customers, visitors, or parties making deliveries to or providing services to Tenant are occupying/utilizing any parking spaces in excess of the number of parking spaces designated in Section 1.11, then any of the aforementioned in excess of this number will be required to park offsite. Requiring its employees, customers, visitors or parties making deliveries to or providing service to Tenant to park offsite will be the responsibility of Tenant. Landlord shall have the right but not the obligation to monitor and/or enforce this process. If Landlord, in its sole discretion, decides to implement a program to manage the parking, Tenant shall promptly pay its reasonable share of the cost of implementing this program.

11.7 Entry by Landlord. Tenant shall, upon notice as provided herein, permit Landlord and Landlord's agents to enter the Premises at all reasonable times for any of the following purposes: (a) to inspect the Premises, (b) to supply any services or to perform any maintenance obligations of Landlord, including the erection and maintenance of such scaffolding, canopies, fences, and props as may be required, (c) to make repairs to the Common Facilities or systems within the responsibilities of Landlord, including the heating, ventilation, air conditioning or plumbing systems, to correct, repair or bring into legal compliance any fire or other life safety systems of the Premises, and to repair or replace any broken glass or glazing., (d) to post notices of nonresponsibility, (e) to place any usual or ordinary "for sale" signs, or (f) within six (6) months prior to the expiration of this Lease, to place any usual or ordinary "for lease" signs. Except as provided in Article 16, no such entry shall result in any rebate of rent or any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises. Landlord shall give at least 24 hours notice to Tenant prior to any entry except in an emergency, including correcting or removing any dangerous or hazardous condition, or unless Tenant consents at the time of entry. After not less than twenty-four (24) hours notice, if Tenant is not personally present to open and permit an entry into the Premises, at any time when for any reason an entry therein shall be necessary or permissible, Landlord or Landlord's agents may enter the same by a master key, or may forcibly enter the same without rendering Landlord or such agents liable therefor, and without in any manner affecting the obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever for the care, maintenance or repair of the Premises or any part thereof, except as otherwise specifically provided herein. Any entry for Premises improvements, replacements, remodeling or additions shall be at times and upon conditions reasonably acceptable to Tenant and consistent with its quiet enjoyment, not to be unreasonably withheld or delayed, provided Tenant shall have a reasonable opportunity to review plans and specifications for same prior to its acceptance.

12. ACCEPTANCE OF PREMISES; NONLIABILITY OF LANDLORD; DISCLAIMER.

12.1 Acceptance of Premises. By taking possession hereunder, Tenant acknowledges that it has examined the Premises and accepts the condition thereof. Tenant acknowledges and agrees that Landlord has no obligation to improve the Premises other than as set forth specifically in this Lease, if at all. In particular, Tenant acknowledges that any additional improvements or alterations needed to accommodate Tenant's intended use shall be made solely at Tenant's sole cost and expense, and strictly in accordance with the requirements of this Lease (including the requirement to obtain Landlord's consent thereto), unless such improvements and alterations are specifically required of Landlord. Landlord shall have no responsibility to do any work required under any building codes or other governmental requirements not in effect or applicable at the time the Premises were constructed, including without limitation any requirements related to sprinkler retrofitting, seismic structural requirements, accommodation of disabled persons, or hazardous materials. Landlord shall be under no obligation to provide utility, telephone or other service or access beyond that which exists at the Premises as of the date of this Lease, unless Landlord specifically agrees in writing to provide the same. If it is anticipated that Tenant will be doing any Alterations or installations prior to taking occupancy, any delays encountered by Tenant in accomplishing such work or obtaining any required permits therefor shall not delay the Commencement Date or the date that Tenant becomes liable to pay rent, or the date that Landlord may effectively deliver possession of the Premises to Tenant. By taking possession hereunder, Tenant acknowledges that it accepts the square footage of the Premises as delivered and as stated in this Lease. No discovery or alleged discovery after such acceptance of any variance in such square footage as set forth in this Lease (or in any proposal, advertisement or other description thereof) shall be grounds for any adjustment in any element of the rent payable hereunder, unless such adjustment is initiated by and implemented by Landlord in writing. Landlord has provided or will provide Tenant with Landlord’s measurement and calculation of the leased square footage prior to execution of the Lease.

12.2 Landlord's Exemption From Liability. Landlord shall not be liable for injury to Tenant's business or loss of income therefrom, or for personal injury or property damage that may be sustained by Tenant or any subtenant of Tenant, or their respective employees, invitees, customers, agents or contractors or any other person in or about the Premises, caused by or resulting from fire, flood, earthquake or other natural disaster, or from steam, electricity, gas, water or rain, that may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air-conditioning, lighting fixtures or computer equipment or software, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Project, or from other sources, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant, except to the extent caused by the gross negligence or intentional misconduct of Landlord or its contractors. Landlord shall not be liable for any damages to property or for personal injury or loss of life arising from any use by, act or failure to act of any third parties (including other occupants of the Project) occurring in, or about the Premises or in or about the Project (including without limitation the criminal acts of any third parties) except Landlord’s agents and contractors. Landlord shall not be liable for any latent defect in the Premises or in the Project. All property of Tenant kept or stored on the Premises shall be so kept or stored at the risk of Tenant only, and Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, from and against any claims arising out of damage to the same, including subrogation claims by Tenant's insurance carriers except to the extent caused by the gross, negligence or intentional misconduct of Landlord or its contractors.

12.3 Warranties and Representations.

(a) Landlord represents and warrants that to Landlord’s actual knowledge there are no actual or threatened foreclosure actions, liens, mortgages, breaches of any of the foregoing and/or lawsuits that would, conflict with Tenant’s rights under this Lease or its quiet enjoyment with respect to the Premises or use of the Common Facilities, except those rights and actions listed in Schedule 1.

(b) Landlord represents and warrants that Landlord owns the entire right, title and interest in the Project. Landlord’s total assets exceed its total liabilities by at least $500,000, calculated in accordance with US GAAP (“Net Assets”).

(b) Neither Landlord nor Landlord's agents make any warranty or representation with respect to the suitability or fitness of the space for the conduct of Tenant's business, or for any other purpose.

(c) Except as set forth in section 12.3(a), neither Landlord nor Landlord's agents make any warranty or representation with respect to any other tenants or users that may or may not construct improvements, occupy space or conduct business within the Project, and Tenant hereby acknowledges and agrees that it is not relying on any warranty or representation relating thereto in entering into this Lease. Notwithstanding the foregoing, Landlord shall exercise its business judgment to select other tenants of the Project whose uses thereof are not incompatible with the Tenant's use of its Premises as a corporate headquarters, nor whose presence in the Project would material diminish the reputation of Tenant. Such standard shall be applied at the time Landlord leases such other space, it being understood that Landlord may not have the legal right to control future changes in such other tenants' uses, and that Landlord cannot be responsible for changes in reputations or public perceptions of Tenant or such other tenants.

(d) Landlord specifically disavows any oral representations made by or on behalf of its employees, agents and independent contractors, and Tenant hereby acknowledges and agrees that it is not relying and has not relied on any oral representations in entering into this Lease.

(e) Landlord has not made any promises or representations, expressed or implied, that it will renew, extend or modify this Lease in favor of Tenant or any permitted transferee of Tenant, except as may be specifically set forth herein or in a written instrument signed by both parties amending this Lease.

(f) Notwithstanding that the rent payable to Landlord hereunder may at times include the cost of guard service or other security measures, it is specifically understood that Landlord does not represent, guarantee or assume responsibility that Tenant will be secure from any damage, injury or loss of life because of such guard service. Landlord shall have no obligation to hire, maintain or provide such services, which may be withdrawn or changed at any time with or without notice to Tenant or any other person and without liability to Landlord. To induce Landlord to provide such service if Landlord elects in its sole discretion to do so, Tenant agrees that (i) Landlord shall not be liable for any damage, injury or loss of life related to the provision or nonprovision of such service, and (ii) Landlord shall have no responsibility to protect Tenant, or its employees or agents, from the acts of any third parties (including other occupants of the Project) occurring in, or about the Premises or in or about the Project (including without limitation the criminal acts of any third parties), whether or not the same could have been prevented by any such guard service or other security measures.

12.4 Keys. The Project is monitored by a card key system for after-hours access and security. Tenant shall re-key the Premises at its sole cost upon taking possession thereof. Tenant hereby acknowledges that various persons have had access to the keys to the Premises as keyed prior to Tenant's possession, and that Landlord disclaims all liability and responsibility for any unauthorized distribution or possession of such prior keys. Tenant shall provide Landlord with four (4) copies of keys to Premises immediately upon rekeying the Premises. Tenant shall rekey Premises such that Landlord’s Master Key will also unlock the primary door to the Premises. Tenant shall have the right to install its own security system on the Premises, provided it provides Landlord with access information or equipment.

13. INDEMNIFICATION.

Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns (collectively, "Landlord's Related Entities"), from and against any and all claims, actions, damages, liability, costs, and expenses, including attorneys' fees and costs, arising from personal injury, death, and/or property damage and arising from: (a) Tenant's use or occupation of the Premises or any work or activity done or permitted by Tenant in or about the Premises (including without limitation any storage or display of materials or merchandise, or other activity by Tenant in the Common Facilities) except the acts or omissions of Landlord or its contractors, (b) any activity, condition or occurrence in the Premises or other area under the control of Tenant, except the acts or omissions of Landlord or its contractors, (c) any breach or failure to perform any obligation imposed on Tenant under this Lease, or (d) any other act or omission of Tenant or its assignees or subtenants or their respective agents, contractors, employees, customers, invitees or licensees. Upon notice from Landlord, Tenant shall, at Tenant's sole expense and by counsel reasonably satisfactory to Landlord, defend any action or proceeding brought against Landlord or Landlord's Related Entities by reason of any such claim. Landlord may engage separate counsel, at its own expense. If Landlord or any of Landlord's Related Entities is made a party to any third-party litigation commenced by or against Tenant, then Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's Related Entities from and against any and all claims, actions, damages, liability, costs, expenses and attorneys' fees and costs incurred or paid in connection with such litigation. Tenant, as a material part of the consideration to Landlord hereunder, assumes all risk of, and waives all claims against Landlord for, personal injury or property damage in, upon or about the Premises, from any cause whatsoever, provided, however, that the indemnifications and waivers of Tenant set forth in this Section shall not apply to damage and liability to the extent caused by the negligence or willful misconduct of Landlord.

14. HAZARDOUS MATERIALS.

14.1 Definitions. "Hazardous Materials Laws" means any and all federal, state or local laws, ordinances, rules, decrees, orders, regulations or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under or about the Premises, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ' 9601, et seq. , the Resource Conservation and Recovery Act ,42 U.S.C. ' 6901, et seq. , the Hazardous Materials Transportation Act, 49 U.S.C. ' 1801, et seq. , the California Hazardous Waste Control Act, Cal. Health and Safety Code ' 25100, et seq. , the Carpenter-Presley-Tanner Hazardous Substances Account Act, Cal. Health and Safety Code ' 25300, et seq. , the Safe Drinking Water and Toxic Enforcement Act, Cal. Health and Safety Code ' 25249.5, et seq. , the Porter-Cologne Water Quality Control Act, Cal. Water Code ' 13000, et seq ., any amendments to the foregoing, and any similar federal, state or local laws, ordinances, rules, decrees, orders or regulations. "Hazardous Materials" means any chemical, compound, material, substance or other matter that: (a) is defined as a hazardous substance, hazardous material, hazardous waste or toxic substance under any Hazardous Materials Law, (b) is controlled or governed by any Hazardous Materials Law or gives rise to any reporting, notice or publication requirements hereunder, or gives rise to any liability, responsibility or duty on the part of Tenant or Landlord with respect to any third person hereunder; or (c) is flammable or explosive material, oil, asbestos, urea formaldehyde, radioactive material, nuclear medicine material, drug, vaccine, bacteria, virus, hazardous waste, toxic substance, or related injurious or potentially injurious material (by itself or in combination with other materials).

14.2 Use of Hazardous Materials. Tenant shall not allow any Hazardous Material to be used, generated, manufactured, released, stored or disposed of on, under or about, or transported from, the Premises, unless: (a) such use is specifically disclosed to and approved by Landlord in writing prior to such use, and (b) such use is conducted in compliance with the provisions of this Article. Landlord's consent may be withheld in Landlord's sole discretion and, if granted, may be revoked at any time. Landlord may approve such use subject to reasonable conditions to protect the Premises and Landlord's interests. Landlord may withhold approval if Landlord determines that such proposed use involves a material risk of a release or discharge of Hazardous Materials or a violation of any Hazardous Materials Laws or that Tenant has not provided reasonably sufficient assurances of its ability to remedy such a violation and fulfill its obligations under this Article. Notwithstanding the foregoing, Landlord hereby consents to Tenant's use, storage or disposal of products containing small quantities of Hazardous Materials that are of a type customarily found in offices and households (such as aerosol cans containing insecticides, toner for copies, paints, paint remover and the like) provided that Tenant shall handle, use, store and dispose of such Hazardous Materials in a safe and lawful manner and shall not allow such Hazardous Materials to contaminate the Premises.

14.3 Compliance With Laws; Handling Hazardous Materials. Tenant shall strictly comply with, and shall maintain the Premises in compliance with, all Hazardous Materials Laws. Tenant shall obtain, maintain in effect and comply with the conditions of all permits, licenses and other governmental approvals required for Tenant's operations on the Premises under any Hazardous Materials Laws, including, but not limited to, the discharge of appropriately treated Hazardous Materials into or through any sanitary sewer serving the Premises. At Landlord's request, Tenant shall deliver copies of, or allow Landlord to inspect, all such permits, licenses and approvals. All Hazardous Materials removed from the Premises shall be removed and transported by duly licensed haulers to duly licensed disposal facilities, in compliance with all Hazardous Materials Laws. Tenant shall perform any monitoring, testing, investigation, clean-up, removal, detoxification, preparation of closure or other required plans and any other remedial work required by any governmental agency or lender, or recommended by Landlord's environmental consultants, as a result of any release or discharge or potential release or discharge of Hazardous Materials affecting the Premises or the Project or any violation or potential violation of Hazardous Materials Laws by Tenant or any assignee or subtenant of Tenant or their respective agents, contractors, employees, licensees or invitees (collectively, "Remedial Work"). Landlord shall have the right to intervene in any governmental action or proceeding involving any Remedial Work, and to approve performance of the work, in order to protect Landlord's interests. Tenant shall not enter into any settlement agreement, consent decree or other compromise with respect to any claims relating to Hazardous Materials without notifying Landlord and providing ample opportunity for Landlord to intervene. Tenant shall additionally comply with the recommendations of Landlord's and Tenant's insurers based upon National Fire Protection Association standards or other applicable guidelines regarding the management and handling of Hazardous Materials. If any present or future law imposes any requirement of reporting, survey, investigation or other compliance upon Landlord, Tenant, or the Premises, and if such requirement is precipitated by a transaction to which Tenant is a party, including without limitation any Transfer (as defined in Section 18.1) of the Lease by Tenant, then Tenant shall fully comply with and pay all costs of compliance with such requirement, including Landlord's attorneys' fees and costs.

14.4 Notice; Reporting. Tenant shall notify Landlord, in writing, within three (3) days after any of the following: (a) Tenant has knowledge, or has reasonable cause to believe, that any Hazardous Material has been released, discharged or is located on, under or about the Premises, whether or not the release or discharge is in quantities that would otherwise be reportable to a public agency, (b) Tenant receives any order of a governmental agency requiring any Remedial Work pursuant to any Hazardous Materials Laws, (c) Tenant receives any warning, notice of inspection, notice of violation or alleged violation or Tenant receives notice or knowledge of any proceeding, investigation or enforcement action, pursuant to any Hazardous Materials Laws; or (d) Tenant receives notice or knowledge of any claims made or threatened by any third party against Tenant or the Premises relating to any loss or injury resulting from Hazardous Materials. If the potential risk of any of the foregoing events is material, Tenant shall deliver immediate verbal notice to Landlord, in addition to written notice as set forth above. Tenant shall deliver to Landlord copies of all test results, reports and business or management plans required to be filed with any governmental agency pursuant to any Hazardous Materials Laws.

14.5 Indemnity. Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, from and against any and all liabilities, claims, suits, judgments, actions, investigations, proceedings, costs and expenses (including attorneys' fees and costs) arising out of or in connection with any breach of any provisions of this Article or directly or indirectly arising out of the use, generation, storage, release, disposal or transportation of Hazardous Materials by Tenant, or any assignee or subtenant of Tenant, or their respective agents, contractors, employees, licensees, or invitees, on, under or about the Premises during the Lease Term or any other period of Tenant's actual or constructive occupancy of the Premises, including, but not limited to, all foreseeable and unforeseeable consequential damages and the cost of any Remedial Work. Any defense of Landlord pursuant to this Section shall be by counsel reasonably acceptable to Landlord. Neither the consent by Landlord to the use, generation, storage, release, disposal or transportation of Hazardous Materials nor the strict compliance with all Hazardous Materials Laws shall excuse Tenant from Tenant's indemnification obligations pursuant to this Article. The foregoing indemnity shall be in addition to and not a limitation of the indemnification provisions of Article 13 of this Lease. Tenant's obligations pursuant to this Article shall survive the termination or expiration of this Lease.

14.6 Entry and Inspection; Cure. Landlord and its agents, employees and contractors, shall have the right (but not the obligation) to enter the Premises at all reasonable times to inspect the Premises and Tenant's compliance with the terms and conditions of this Article, or to conduct investigations and tests. No prior notice to Tenant shall be required in the event of an emergency, or if Landlord has reasonable cause to believe that violations of this Article have occurred, or if Tenant consents at the time of entry. In all other cases, Landlord shall give at least twenty-four (24) hours' prior notice to Tenant. Landlord shall have the right (but not the obligation) to remedy any violation by Tenant of the provisions of this Article pursuant to Section 22.3 of this Lease or to perform any Remedial Work. Tenant shall pay, upon demand, all costs incurred by Landlord in investigating any such violations or potential violations or performing Remedial Work, plus interest thereon at the rate specified in this Lease from the date of demand until the date paid by Tenant.

14.7 Termination; Expiration. Upon termination or expiration of this Lease, Tenant shall, at Tenant's cost, remove any equipment, improvements or storage facilities utilized in connection with any Hazardous Materials and shall clean up, detoxify, repair and otherwise restore the Premises to a condition free of Hazardous Materials, to the extent such condition is caused by Tenant or any assignee or subtenant of Tenant or their respective agents, contractors, employees, licensees or invitees.

14.8 Exit Assessment. If Tenant or any other occupant of the Premises during Tenant's possession thereof has used, generated, manufactured, released, stored or disposed of on, under or about, or transported from, the Premises, any material amount of Hazardous Materials (other than reasonable amounts of normal office supplies such as stationery supplies, inks, cleaning supplies, copier toner and the like, consistent with normal office use), then Landlord shall have the right to require Tenant to shall cause to be performed, at its sole expense, no later than ten (10) days after the expiration or earlier termination of this Lease, an environmental assessment (the "Exit Assessment") of the Premises. Landlord agrees to allow Tenant access to the Premises for such purpose. The Exit Assessment must be performed by a qualified environmental consultant acceptable to Landlord, and shall include such examinations of the Premises and the Project, and such reports and testing, as may be appropriate, in the opinion of such consultant and prevailing industry standards based on the any actual or reasonably suspected Hazardous Material activities in or about the Premises during Tenant's possession thereof The original of the Exit Assessment shall be addressed to Landlord and shall be provided to Landlord within twenty (20) days of the expiration or earlier termination of the Lease. In addition to Tenant's obligations under Section 14.7, Tenant agrees to fully implement and address all recommended actions contained in the Exit Assessment, at its sole cost, within thirty (30) days of the date thereof.

14.9 Event of Default. The release or discharge of any Hazardous Material or the violation of any Hazardous Materials Law by Tenant or any assignee or subtenant of Tenant shall be a default by Tenant under this Lease, subject to the provisions of Section 21(b).

15. ALTERATIONS; LIENS.

15.1 Alterations by Tenant. Tenant shall not make any alterations, additions or improvements ("Alterations") to the Premises without Landlord's prior written consent, not to be unreasonably withheld or delayed. All Alterations installed by Tenant shall be new or completely reconditioned. Landlord shall have the right to approve the contractor, the method of payment of the contractor, which consent shall not be unreasonably withheld or delayed, and the plans and specifications for all proposed Alterations shall be provided to Landlord reasonably in advance of the proposed commencement of the Alterations for approval, which consent shall not be unreasonably withheld or delayed. Tenant shall obtain Landlord's consent to all proposed Alterations requiring Landlord's consent prior to the commencement of any such Alterations, which consent shall not be unreasonably withheld or delayed. Tenant's request for consent shall be accompanied by information identifying the contractor and method of payment and two (2) copies of the proposed plans and specifications. All Alterations of whatever kind and nature shall become at once a part of the realty and shall be surrendered with the Premises upon expiration or earlier termination of the Lease Term, unless Landlord requires Tenant to remove the same as provided in Article 20. If Tenant demolishes or removes any then-existing Tenant Improvements or other portions of the Premises or the Project (including without limitation any previously-installed Alterations), Tenant shall promptly commence and diligently pursue to completion all Alterations then underway; provided, however, that if Tenant fails to do so, at the election of Landlord, Tenant shall restore the Premises and the Project to its condition and state of improvement prior to such demolition or removal. During the Lease Term, Tenant agrees to provide, at Tenant's expense, a policy of insurance covering loss or damage to any Alterations made by Tenant, in an amount adequate to repair or replace the same, naming Landlord as an additional insured. Provided, however, Tenant may install movable furniture, trade fixtures, machinery or equipment in conformance with applicable governmental rules or ordinances and remove the same upon expiration or earlier termination of this Lease as provided in Article 20.

15.2 Permits and Governmental Requirements. Tenant shall obtain, at Tenant's sole cost and expense, all building permits and other permits of every kind and nature required by any governmental agency having jurisdiction in connection with the Alterations. Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, from and against any and all claims, actions, damages, liability, costs, and expenses, including attorneys' fees and costs, arising out of any failure by Tenant or Tenant's contractor or agents to obtain all required permits, regardless of when such failure is discovered. Tenant shall do any and all additional construction, alterations, improvements and retrofittings required by a government authority to be made to the Premises and/or the Project, or any other property of Landlord as a result of, or as may be triggered by, Tenant's Alterations. Landlord shall have the right to do such additional construction itself if Tenant fails to do so after reasonable notice from Landlord; but in all instances Tenant shall pay all costs directly or indirectly related to such additional work. Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, from and against any and all claims, actions, damages, liability, costs, and expenses, including attorneys' fees and costs, arising out of any such additionally required work done by Tenant or its contractors. All payment and indemnification obligations under this Section shall survive the expiration or earlier termination of the Lease Term. Notwithstanding the foregoing, Landlord shall procure and pay for all permits necessary to install the Tenant Improvements made to date or to be made as a condition of the effectiveness of this Lease.

15.3 Liens. Tenant shall pay when due all claims for any work performed, materials furnished or obligations incurred by or for Tenant, and Tenant shall keep the Premises free from any liens arising with respect thereto. If Tenant fails to cause any such lien to be released within fifteen (15) days after imposition, by payment or posting of a proper bond, Landlord shall have the right (but not the obligation) to cause such release by such means as Landlord deems proper. Tenant shall pay Landlord upon demand for all costs incurred by Landlord in connection therewith (including attorneys' fees and costs), with interest at the rate specified in Section 22.4 from the date of payment by Landlord to the date of payment by Tenant. Tenant will notify Landlord in writing ten (10) business days prior to commencing any alterations, additions, improvements or repairs in order to allow Landlord time to file a notice of nonresponsibility.

15.4 Remodel. Landlord may in the future remodel, renovate or refurbish ("remodel") all or any portion of the Project, which remodel, however, may not include the Premises. The remodeling will be done in accordance with design specifications prepared by the project architect and reviewed and approved by Landlord. Copies of such specifications will be made available to Tenant, and Tenant agrees to accept the same. Tenant further agrees that Tenant will not, through any act or omission on the part of Tenant, in any way impede, delay or prevent the completion of such remodeling in a timely manner.

16. DAMAGE AND DESTRUCTION.

16.1 Partial Insured Damage. If the Premises or any building in which the Premises are located, including the Common Facilities, HVAC, plumbing or common utilities (collectively the “Building”) are partially damaged or destroyed during the Lease Term, Landlord shall make the necessary repairs, provided such repairs can reasonably be completed within sixty (60) days after the date of the damage or destruction in accordance with applicable laws and regulations and provided that the cost to repair is equal to or less than $150,000.00 or Landlord receives sufficient insurance proceeds to pay the cost of such repairs. In such event, this Lease shall continue in full force and effect. If such repairs cannot reasonably be completed within sixty (60) days after the date of the damage or destruction or if Landlord does not receive sufficient insurance proceeds, then Landlord may, at its option, elect within thirty (30) days of the date of the damage or destruction to proceed with the necessary repairs, in which event this Lease shall continue in full force and effect provided Landlord’s contractor estimates in writing that such repairs can be completed within 180 days and that Landlord completes the same within a reasonable time but in no event in excess of one hundred eighty (180) days after commencement. If Landlord does not so elect to make such repairs or if such repairs cannot be made under applicable laws and regulations within such time, this Lease may be terminated at the option of either party by notice to the other.

16.2 Intentionally omitted.

16.3 Uninsured Damage. In the event of any damage or destruction of the Premises or the Building by an uninsured casualty the cost of repair of which would exceed One Fifty Hundred Thousand Dollars ($150,000) Landlord shall have the right to elect either to repair such damage, provided that the contractor estimates in writing that such repair can be completed within 180 days. Such election shall be exercised by written notice to Tenant within thirty (30) days of such damage or destruction. If Landlord so elects, this Lease shall continue in full force and effect and Landlord shall complete the same within a reasonable time but in no event in excess of one hundred eighty (180) days after commencement. If Landlord does not so elect to make such repairs or if such repairs cannot be made under applicable laws and regulations within such time, this Lease may be terminated at the option of either party by notice to the other.

16.4 Total Destruction. A total destruction (including any destruction required by any authorized public authority) of either the Premises or any Building in which the Premises are located shall terminate this Lease.

16.5 Partial Destruction of Project. If fifty percent (50%) or more of the rentable area of the Project is damaged or destroyed by fire or other cause, notwithstanding that the Premises may be unaffected, either Landlord or Tenant shall have the right, to be exercised by notice in writing delivered to Landlord or Tenant as appropriate, within sixty ( 60) days after said occurrence, to elect to terminate this Lease.

16.6 Tenant's Obligations. Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any restoration or replacement of any Alterations, trade fixtures, equipment or personal property placed or installed in the Premises by or on behalf of Tenant. Unless this Lease is terminated pursuant to this Article, Tenant shall promptly repair, restore or replace the same in the event of damage. Nothing contained in this Article shall be construed as a limitation on Tenant's liability for any damage or destruction if such liability otherwise exists.

16.7 Rent Abatement. After damage or destruction as described in this Article, Minimum Monthly Rent payable by Tenant hereunder from the date of damage until the repairs are completed or the Lease is terminated shall be equitably reduced or abated, based upon the extent to which such damage or repairs interfere with or prevent the use of, or the business carried on by Tenant in, the Premises, but only to the extent Landlord receives proceeds from the rental income insurance described in Section 9.1. Landlord agrees to take all reasonable steps to make a claim for and collect any rental income insurance proceeds that might be available.

16.8 Waiver of Inconsistent Statutes. The parties' rights and obligations in the event of damage or destruction shall be governed by the provisions of this Lease; accordingly, Tenant waives the provisions of California Civil Code Sections 1932(2) and 1933(4), and any other statute, code or judicial decisions that grants a tenant a right to terminate a lease in the event of damage or destruction of a leased premises.

17. CONDEMNATION.

17.1 Condemnation of Premises. If any portion of the Project is taken or condemned for a public or quasi-public use ("Condemnation"), then this Lease shall terminate, provided however that it shall remain in full force and effect if the Tenant’s use of the Premises is not materially affected and if the parking available to tenant is not reduced below a ratio of three (3) parking space for each one thousand (1,000) usable square feet. If terminated, this Lease terminates as of the date title vests in the condemnor. Landlord shall, within a reasonable period of time, restore the remaining Premises as nearly as practicable to the condition existing prior to the condemnation; provided, however, if Landlord receives insufficient funds from the condemnor for such purpose, Landlord may elect to terminate this Lease. If this Lease continues in effect, the Minimum Monthly Rent shall be equitably adjusted, based upon the value of the Premises remaining after the Condemnation compared to the value of the Premises prior to Condemnation. Provided, however, in the event of any such partial condemnation, Landlord shall have the option to terminate this Lease entirely as of the date title vests in the condemnor. If all the Premises are condemned, or such portion so that there does not remain a portion that is susceptible of occupation, or if such a substantial portion of the Project is condemned that it is no longer economically reasonable to lease the Premises on the terms and conditions of this Lease, as reasonably determined by Landlord, then at the election of Landlord this Lease shall terminate as of the date title vests in the condemnor.

17.2 Condemnation of Parking Area. If all or any portion of the parking area in the Project is condemned such that the ratio of the total square footage of parking and other Common Facilities compared to the total rentable building square footage of the Project is reduced to a ratio below three to one, then at the election of either party this Lease shall terminate as of the date title vests in the condemnor.

17.3 Condemnation Award. All compensation awarded upon any such partial or total Condemnation shall be paid to Landlord and Tenant shall have no claim thereto, and Tenant hereby irrevocably assigns and transfers to Landlord any right to compensation or damages by reason of any such Condemnation. Provided, however, that Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant's own right on account of any damage to Tenant's business by reason of the Condemnation and on account of any cost that Tenant may incur in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment. If this Lease is terminated, in whole or in part, in accordance with this Article as a result of a Condemnation, Tenant shall have no claim for the value of any unexpired term of this Lease.

18. ASSIGNMENT AND SUBLETTING.

18.1 Landlord's Consent Required. Tenant shall not voluntarily or involuntarily assign, sublease, mortgage, encumber, or otherwise transfer all or any portion of the Premises or its interest in this Lease (collectively, "Transfer") without Landlord's prior written consent, which consent Landlord shall not unreasonably withhold. Landlord may withhold its consent until Tenant has complied with the provisions of Sections 18.2 and 18.3. Any attempted Transfer without Landlord's written consent shall be void and shall constitute an Event of Default under this Lease. If Tenant is a corporation, any cumulative Transfer of fifty percent (50%) or more of the voting stock of such corporation shall constitute a Transfer requiring Landlord's consent hereunder; provided, however that this sentence shall not apply to any corporation whose stock is publicly traded. If Tenant is a partnership, limited liability company, trust or other entity, any cumulative Transfer of fifty percent (50%) or more of the partnership, membership, beneficial or other ownership interests therein shall constitute a Transfer requiring Landlord's consent hereunder. Tenant shall not have the right to consummate a Transfer or to request Landlord's consent to any Transfer if any Event of Default has occurred and is continuing or if Tenant or any affiliate of Tenant is in default under any lease in the Project.

18.2 Landlord's Election. Tenant's request for consent to any Transfer for any portion of the Premises shall be accompanied by a written statement setting forth the details of the proposed Transfer, including the name, business and financial condition of the prospective Transferee, financial details of the proposed Transfer applicable to this Lease (e.g., the term and the rent and security deposit payable), and any other related information that Landlord may reasonably require. Landlord shall have the right: (a) to withhold consent to the Transfer, if reasonable, or (b) to grant consent, (c) to consent on the condition that Landlord be paid, as Additional Rent hereunder, 50% of all subrent or other consideration to be paid to Tenant under the original Term, or 100% of all subrent or other consideration to be paid to Tenant under any renewal Term under the terms of the Transfer, in excess of the total rent due hereunder (including, if such Transfer is an assignment or if such Transfer is to occur directly or indirectly in connection with the sale of any assets of Tenant, all of the amount of the consideration attributable to the Transfer of the Lease). Prior to calculation and payment to Landlord of any Additional Rent related to an approved Transfer, Tenant is entitled to recover the reasonable and verified third party costs incurred in securing the approved Transferee, including: brokers' fees and commissions, advertising costs and other reasonable and typical third party expenses directly related to obtaining this approved Transferee. Landlord may require any permitted subtenant to make rental payments directly to Landlord, in the amount of rent due hereunder. The grounds on which Landlord may reasonably withhold its consent to any requested Transfer include, without limitation, that: (i) the proposed Transferee's contemplated use of the Premises following the proposed Transfer is not reasonably similar to the use of the Premises permitted hereunder, (ii) in Landlord's reasonable business judgment, the proposed Transferee lacks sufficient net worth, working capital, anticipated cash flow and other indications of financial strength to meet all of its obligations under this Lease, (iii) the proposed Transfer would breach any covenant of Landlord respecting a radius restriction, location, use or exclusivity in any other lease, financing agreement, or other agreement relating to the Project, and (iv) in Landlord's reasonable business judgment, the possibility of a release of Hazardous Materials is materially increased as a result of the Transfer or if Landlord does not receive sufficient assurances that the proposed Transferee has the experience and financial ability to remedy a violation of Hazardous Materials and to fulfill its obligations under Articles 13 and 14. In connection with any such Transfer, Landlord shall have the right to require Tenant, at Tenant's sole cost, to cause environmental testing meeting the requirements of an Exit Assessment described in Section 14.8 to be performed. Landlord need only respond to any request by Tenant hereunder within a reasonable time of not more than ten (10) business days after receipt of all information and other submission required in connection with such request.

18.3 Costs; Transfer Fee. Tenant shall pay all costs and expenses in connection with any permitted Transfer, including any real estate brokerage commissions due with respect to the Transfer. Tenant shall pay the reasonable attorneys' fees and costs incurred by Landlord not to exceed $500 to reimburse Landlord for costs and expenses incurred in connection with any request by Tenant for Landlord's consent to a Transfer. Such fee shall be delivered to Landlord concurrently with Tenant's request for consent.

18.4 Assumption; No Release of Tenant. Any permitted transferee shall assume in writing all obligations of Tenant under this Lease, utilizing a form of assumption agreement provided or approved by Landlord, and an executed copy of such assumption agreement shall be delivered to Landlord within fifteen (15) days after the effective date of the Transfer. The taking of possession of all or any part of the Premises by any such permitted assignee or subtenant shall constitute an agreement by such person or entity to assume without limitation or qualification all of the obligations of Tenant under this Lease, notwithstanding any failure by such person to execute the assumption agreement required in the immediately preceding sentence. No permitted Transfer shall release or change Tenant's primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Landlord's acceptance of rent from any other person is not a waiver of any provision of this Article or a consent to Transfer. Consent to one Transfer shall not constitute a consent to any subsequent Transfer. If any transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent Transfers or modifications of this Lease by Tenant's transferee, without notifying Tenant or obtaining its consent, and such action shall not relieve Tenant of its liability under this Lease (but excluding any increases in such liability such as increased rent or extensions of the Term other than pursuant to an exercise of the Option).

18.5 No Merger. No merger shall result from any Transfer pursuant to this Article, any surrender by Tenant of its interest under this Lease, or any termination hereof in any other manner. In any such event, Landlord may either terminate any or all subleases or succeed to the interest of Tenant thereunder.

18.6 Reasonable Restriction. Tenant acknowledges that the restrictions on Transfer contained herein are reasonable restrictions for purposes of Section 22.2 of this Lease and California Civil Code Section 1951.4.

19. SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE.

19.1 Subordination. This Lease is junior and subordinate to all ground leases, mortgages, deeds of trust, and other security instruments now or hereafter affecting the real property of which the Premises are a part, and to all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. If any mortgagee, beneficiary under deed of trust or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and gives written notice thereof to Tenant, this Lease shall be deemed prior thereto. Tenant agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any such mortgage, deed of trust or ground lease, as the case may be, and if Tenant fails to do so within fifteen (15) days after written demand, Tenant does hereby make, constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead, to do so. Any such request for subordination shall be accompanied or shall contain appropriate agreements of nondisturbance of Tenant’s rights of occupancy in the event of foreclosure or other proceeding by which the holder of any superior or prior rights in and to the Project acquires ownership thereof.

19.2 Attornment. If Landlord sells, transfers, or conveys its interest in the Premises or this Lease, or if the same is foreclosed judicially or nonjudicially, or is otherwise acquired, by a mortgagee, beneficiary under deed of trust or ground lessor, upon the request and at the sole election of Landlord's lawful successor, Tenant shall attorn to said successor, provided said successor accepts the Premises subject to this Lease. Tenant shall, upon request of Landlord or any such mortgagee, beneficiary under deed of trust or ground lessor, execute an attornment agreement confirming the same, in form and substance acceptable to Landlord. Such agreement shall provide, among other things, that said successor shall not be (a) bound by any prepayment of more than one (1) month's rent, (ii) liable for the return of any Security Deposit not actually received by said successor, or (iii) bound by any material amendment of this Lease made after the later of the initial effective date of this Lease, or the date that such successor's lien or interest first arose, unless said successor shall have consented to such amendment. .Landlord shall, in good faith attempt to obtain, within ninety days of the date of this Lease, from any mortgagee, beneficiary under deed of trust or ground lessor, a reasonable non-disturbance agreement recognizing Tenant’s rights under the Lease in the event of a foreclosure. Landlord shall, in good faith attempt to obtain and provide to Tenant, within ninety days of the date of this Lease, from any mortgagee, beneficiary under deed of trust or ground lessor, a commercially reasonable non-disturbance agreement recognizing Tenant’s rights under the Lease in the event of a foreclosure.

19.3 Estoppel Certificates. Within fifteen (15) days after written request from Landlord, Tenant at Tenant's sole cost shall execute, acknowledge and deliver to Landlord a written certificate in favor of Landlord and any prospective lender on or purchaser of the Project or any part thereof, (a) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modifications and certifying that this Lease is in full force and effect as so modified), (b) the amount of any rent paid in advance, and (c) that there are no uncured defaults on the part of Landlord, or specifying the nature of such defaults if any are claimed. In addition to the foregoing, such certificate shall include Tenant's certification to such other matters, and be on such form, as Landlord or such prospective lender or purchaser shall reasonably require.

20. SURRENDER OF PREMISES.

20.1 Condition of Premises. Upon the expiration or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord, broom clean and in the same condition and state of repair as at the commencement of the Lease Term, except for ordinary wear and tear that Tenant is not otherwise obligated to remedy under the provisions of this Lease. Tenant shall deliver all keys to the Premises and the Project to Landlord. Upon Tenant's vacation of the Premises, Tenant shall remove all portable furniture, trade fixtures, machinery, equipment, signs and other items of personal property (unless prohibited from doing the same under Section 20.2), and shall remove any Alterations (whether or not made with Landlord's consent) that Landlord may require Tenant to remove. Tenant shall repair all damage to the Premises caused by such removal and shall restore the Premises to its prior condition, all at Tenant's expense, provided that Tenant shall not be responsible for any restoration or expense in connection with new or amended building codes. Such repairs shall be performed in a manner satisfactory to Landlord and shall include, but are not limited to, the following: capping all plumbing, capping all electrical wiring, repairing all holes in walls, restoring damaged floor and/or ceiling tiles, and thorough cleaning of the Premises. If Tenant fails to remove any items that Tenant has an obligation to remove under this Section when required by Landlord or otherwise, such items shall, at Landlord's option, become the property of Landlord and Landlord shall have the right to remove and retain or dispose of the same in any manner, without any obligation to account to Tenant for the proceeds thereof. Tenant waives all claims against Landlord for any damages to Tenant resulting from Landlord's retention or disposition of such Alterations or personal property. Tenant shall be liable to Landlord for Landlord's costs of removing, storing and disposing of such items.

20.2 Removal of Certain Alterations, Fixtures and Equipment Prohibited. All Alterations, fixtures (except trade fixtures removed by Tenant pursuant to Section 20.1, machinery, equipment, signs and other items of personal property) that Landlord has not required Tenant to remove under Section 20.1 shall become Landlord's property and shall be surrendered to Landlord with the Premises, regardless of who paid for the same. In particular and without limiting the foregoing, Tenant shall not remove any of the following materials or equipment without Landlord's prior written consent, regardless of who paid for the same and regardless of whether the same are permanently attached to the Premises: any power wiring and power panels; computer, telephone, telecommunications wiring, lighting and lighting fixtures; wall coverings; drapes, blinds and other window coverings; carpets and other floor coverings; and other building operating equipment.

20.3 Holding Over. Tenant shall vacate the Premises upon the expiration or earlier termination of this Lease, and Tenant shall indemnify, protect, hold harmless and defend Landlord against all liabilities, damages and expenses incurred by Landlord as a result of any delay by Tenant in vacating the Premises. Subject to the remaining provisions herein, if Tenant remains in possession of the Premises or any part thereof for a period of ninety days or less after the expiration of the Lease Term without Landlord's written permission, Tenant's occupancy shall be a tenancy from month-to-month only, and not a renewal or extension hereof, and provided Landlord has not (i) executed a lease for at least 25% of the Premises with a third party or (ii) executed a sale agreement for the Project with a third party, then all provisions of this Lease (other than those relating to the term) shall apply to such month-to-month tenancy, except that the Minimum Monthly Rent shall be increased to 125)% of the Minimum Monthly Rent in effect during the last month of the Lease Term. . If Tenant remains in possession of the Premises or any part thereof after the expiration of the Lease Term without Landlord's written permission, Tenant's occupancy shall be a tenancy from month-to-month only, and not a renewal or extension hereof; and provided Landlord has executed a lease for at least 25% of the Premises with a third party or executed a sale agreement for the Project with a third party, then all provisions of this Lease (other than those relating to the term) shall apply to such month-to-month tenancy, except that the Minimum Monthly Rent shall be increased to 200% of the Minimum Monthly Rent in effect during the last month of the Lease Term. In addition, if, Tenant remains in possession of the Premises or any part thereof for any time greater than ninety days after the expiration of the Lease Term, then all provisions of this Lease (other than those relating to the term) shall apply to such month-to-month tenancy, except that the Minimum Monthly Rent shall be increased to 200% of the Minimum Monthly Rent in effect during the last month of the Lease Term. No acceptance of rent, negotiation of rent checks or other act or omission of Landlord or its agents shall extend the Expiration Date of this Lease other than a writing executed by Landlord giving Tenant permission to remain in occupancy beyond the Expiration Date under the terms of the immediately preceding sentence.

21. DEFAULT BY TENANT.

The occurrence of any of the following shall constitute an "Event of Default" under this Lease by Tenant:

(a) Failure to pay within five (5) days of the date due the rent or any other monetary sums required hereunder; provided that no more than twice in any twelve (12) month period, such late payment shall not constitute an Event of Default until ten (10) days after written notice by Landlord to Tenant. Landlord's notice described herein is intended to satisfy, and is not in addition to, any and all legal notices required prior to commencement of an unlawful detainer action, including without limitation the notice requirements of California Code of Civil Procedure Sections 1161 et seq .

(b) Failure to perform any other agreement or obligation of Tenant hereunder, if such failure continues for thirty (30) days after written notice by Landlord to Tenant, except as to those Events of Default that are noncurable, in which case no such grace period shall apply; provided, however, that if the nature of the obligation is such that more than thirty (30) days are required for performance, then Tenant shall not be in default if Tenant commences performance within such thirty (30) day period, thereafter diligently prosecutes to completion, and in fact effectuates a cure thereof within one hundred twenty (120) days of Landlord's notice. Landlord's notice described herein is intended to satisfy, and is not in addition to, any and all legal notices required prior to commencement of an unlawful detainer action, including without limitation the notice requirements of California Code of Civil Procedure Sections 1161 et seq .

(c) Abandonment or vacation of the Premises by Tenant, or failure to occupy the Premises, in each case for a period of twenty (20) consecutive days following notice from Landlord

(d) If any of the following occurs: (i) a petition is filed for an order of relief under the federal Bankruptcy Code or for an order or decree of insolvency or reorganization or rearrangement under any state or federal law, and such petition is not dismissed within ninety (90) days after the filing thereof; (ii) Tenant makes a general assignment for the benefit of creditors; (iii) a receiver or trustee is appointed to take possession of any substantial part of Tenant's assets, unless such appointment is vacated within ninety (90) days after the date thereof; (iv) Tenant consents to or suffers an attachment, execution or other judicial seizure of any substantial part of its assets or its interest under this Lease, unless such process is released or satisfied within ninety (90) days after the occurrence thereof. If a court of competent jurisdiction determines that any of the foregoing events is not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession), and such trustee or Tenant transfers Tenant's interest hereunder, then Landlord shall receive, as Additional Rent, the difference between the rent (or other consideration) paid in connection with such transfer and the rent payable by Tenant hereunder. Any assignee pursuant to the provisions of any bankruptcy law shall be deemed without further act to have assumed all of the obligations of the Tenant hereunder arising on or after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption.

22. REMEDIES.

Upon the occurrence of any Event of Default by Tenant, Landlord shall have the following remedies, each of which shall be cumulative and in addition to any other remedies now or hereafter available at law or in equity:

22.1 Termination of Lease. Landlord can terminate this Lease and Tenant's right to possession of the Premises by giving written notice of termination, and then re-enter the Premises and take possession thereof. No act by Landlord other than giving written notice to Tenant of such termination shall terminate this Lease. Upon termination, Landlord has the right to recover all damages incurred by Landlord as a result of Tenant's default, including:

(a) The worth at the time of award of any unpaid rent that had been earned at the time of such termination; plus

b) The worth at the time of award of the amount by which the unpaid rent that would have been earned under the Lease after the date of termination until the time of award exceeds the amount of the loss of rent that Tenant proves could have been reasonably avoided; plus

(c) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's default, including, but not limited to (i) expenses for cleaning, repairing or restoring the Premises, (ii) brokers' fees and commissions, advertising costs and other expenses of reletting the Premises, (iv) costs of carrying the Premises, such as taxes, insurance premiums, utilities and security precautions, (v) expenses in retaking possession of the Premises, and (vi) attorneys' fees and costs, plus

(e) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law. As used in paragraphs (a) and (b) above, the "worth at the time of award" shall be computed by allowing interest at the maximum permissible legal rate (which currently is 10% per annum). As used in paragraph (c) above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

22.2 Continuation of Lease. Landlord has the remedy described in California Civil Code Section 1951.4 (Landlord may continue the Lease in effect after Tenant's breach and abandonment and recover rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations), as follows:

(a) Landlord can continue this Lease in full force and effect without terminating Tenant's right of possession, and Landlord shall have the right to collect rent and other monetary charges when due and to enforce all other obligations of Tenant hereunder. Landlord shall have the right to enter the Premises to do acts of maintenance and preservation of the Premises, to make alterations and repairs in order to relet the Premises, and/or to undertake other efforts to relet the Premises. Landlord may also remove personal property from the Premises and store the same in a public warehouse at Tenant's expense and risk. No act by Landlord permitted under this paragraph shall terminate this Lease unless a written notice of termination is given by Landlord to Tenant or unless the termination is decreed by a court of competent jurisdiction.

(b) In furtherance of the remedy set forth in this Section, Landlord may relet the Premises or any part thereof for Tenant's account, for such term (which may extend beyond the Lease Term), at such rent, and on such other terms and conditions as Landlord may deem advisable in its sole discretion. Tenant shall be liable to Landlord for all costs Landlord incurs in reletting the Premises, as set forth in Section 22.1. Any rents received by Landlord from such reletting shall be applied to the payment of: (i) any indebtedness other than rent due hereunder from Tenant to Landlord, (ii) the costs of such reletting to the extent of Tenant’s liability therefor, including brokerage and attorneys' fees and costs, and the cost of any repairs to the Premises as set forth in Section 22.1, and (iii) the payment of rent due and unpaid hereunder. Any remainder shall be held by Landlord and applied in payment of future amounts as the same become due and payable hereunder. In no event shall Tenant be entitled to any excess rent received by Landlord after an Event of Default by Tenant and the exercise of Landlord's remedies hereunder. If the rent from such reletting during any month is less than the rent payable hereunder, Tenant shall pay such deficiency to Landlord upon demand.

(c) Landlord shall not, by any re-entry or other act, be deemed to have accepted any surrender by Tenant of the Premises or Tenant's interest therein, or be deemed to have terminated this Lease or Tenant's right to possession of the Premises or the liability of Tenant to pay rent accruing thereafter or Tenant's liability for damages under any of the provisions hereof, unless Landlord shall have given Tenant notice in writing that it has so elected to terminate this Lease.

(d) Tenant acknowledges and agrees that the restrictions on the Transfer of the Lease set forth in Article 18 of this Lease constitute reasonable restrictions on such transfer for purposes of this Section and California Civil Code Section 1951.4.

22.3 Performance By Landlord. If Tenant fails to pay any sum of money or perform any other act to be performed by Tenant hereunder, and such failure continues for fifteen (15) days after notice by Landlord, Landlord shall have the right (but not the obligation) to make such payment or perform such other act without waiving or releasing Tenant from its obligations. All sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the rate specified in Section 22.4, shall be payable to Landlord on demand. Landlord shall have the same rights and remedies in the event of nonpayment by Tenant as in the case of default by Tenant in the payment of the rent.

22.4 Late Charge; Interest on Overdue Payments. The parties acknowledge that late payment by Tenant of Minimum Monthly Rent or any Additional Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impractical to determine, including, but not limited to, processing and accounting charges, administrative expenses, and additional interest expenses or late charges that Landlord may be required to pay as a result of late payment on Landlord's obligations. Therefore, if any installment of Minimum Monthly Rent or Additional Rent is received by Landlord after the due date, and without regard to whether Landlord gives Tenant notice of such failure or exercises any of its remedies upon an Event of Default, Tenant shall pay a late charge equal to one percent (1%) of the overdue amount if such amount is not paid by the first day after its due date; two percent (2%) of the overdue amount if such amount is not paid by the second day after its due date; three percent (3%) of the overdue amount if such amount is not paid by the third day after its due date; four percent (4%) of the overdue amount if such amount is not paid by the fourth day after its due date; or five percent (5%) of the overdue amount if such amount is not paid by the fifth day after its due date, as Additional Rent hereunder; provided that no more than twice in any twelve (12) month period, such charge shall not apply so long as the overdue amount is paid in full within ten (10) days after written notice by Landlord to Tenant. The parties hereby agree that such late charge represents a fair and reasonable estimate of the damages Landlord will incur by reason of late payment by Tenant. In addition, any amount due from Tenant that is not paid when due shall bear interest at a rate equal to one percent (1%) over the then current Bank of America prime or reference rate or ten percent (10%) per annum, whichever is greater, but not in excess of the maximum permissible legal rate (which currently is 10% per annum), from the date such payment is due until the date paid by Tenant. Landlord's acceptance of any interest or late charge shall not constitute a waiver of Tenant's default or prevent Landlord from exercising any other rights or remedies available to Landlord.

22.5 Landlord's Right to Require Advance Payment of Rent; Cashier's Checks. If Tenant is late in paying any component of rent more than three (3) times during the Lease Term, Landlord shall have the right, upon notice to Tenant, to require that all rent be paid three (3) months in advance. Additionally, if any of Tenant's checks are returned for nonsufficient funds, or if Landlord at any time serves upon Tenant a Three Day Notice to Pay Rent or Quit (pursuant to California Civil Code Sections 1161 et seq. or any successor or similar unlawful detainer statutes), Landlord may, at its option, require that all future rent (including any sums demanded in any subsequent three (3) day notice) be paid exclusively by money order or cashier's check.

23. DEFAULT BY LANDLORD.

23.1 Notice to Landlord. Landlord shall not be in default under this Lease unless Landlord fails to perform an obligation required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord and to each Mortgagee as provided in Section 23.2, specifying the nature of the alleged default; provided, however, that if the nature of the obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such 30-day period and thereafter diligently prosecutes the same to completion.

23.2 Notice to Mortgagees. Tenant agrees to give each mortgagee or trust deed holder on the Premises or the Project ("Mortgagee"), by certified mail, a copy of any notice of default served upon Landlord, provided that Tenant has been previously notified in writing of the address of such Mortgagee. Tenant further agrees that if Landlord fails to cure such default within the time provided for in this Lease, then the Mortgagees shall have the option to cure such default within that time, or if such default cannot reasonably be cured within that time, then such additional time as may be necessary if, within said time period, any Mortgagee has commenced and thereafter diligently prosecutes the same to completion (including but not limited to commencement of foreclosure proceedings if necessary to effect such cure).

23.3 Limitations on Remedies Against Landlord. Except for any claim based on willful misconduct, in the event Tenant has any other claim or cause of action against Landlord: (a) Tenant's sole and exclusive remedy shall be against Landlord, and no manager and/or member of Landlord shall be liable for any deficiency, (b) no manager and/or member of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to secure jurisdiction over Landlord), (c) no service of process shall be made against any manager and/or member of Landlord (except as may be necessary to secure jurisdiction over the partnership), and no such manager and/or member shall be required to answer or otherwise plead to any service of process, (d) no judgment shall be taken against any manager and/or member of Landlord and any judgment taken against any manager and/or member of Landlord may be vacated and set aside at any time, and (e) no writ of execution will ever be levied against the assets of any manager and/or member of Landlord. The covenants and agreements set forth in this Section shall be enforceable by Landlord and/or by any manager and/or member of Landlord. If Landlord fails to give any consent that a court later holds Landlord was required to give under the terms of this Lease, Tenant shall be entitled solely to specific performance and such other remedies as may be specifically reserved to Tenant under this Lease, but in no event shall Landlord be responsible for monetary damages (including incidental and consequential damages) for such failure to give consent unless Landlord has been adjudged to have acted with gross negligence or willful misconduct. As an express condition of the foregoing limitations, if Landlord intends to transfer a twenty-five percent (25%) or greater interest in Landlord, Landlord’s Net Assets or the Project to any other entity, Landlord shall give Tenant written notice of its intention to do so no more than sixty (60) calendar days and no less than fourteen (14) calendar days prior to the intended date of the transfer. Despite giving such notice, Landlord is not required to subsequently transfer such interest.

24. GENERAL PROVISIONS.

24.1 Action or Defense. Any claim, demand or right of any kind by either party that is based upon or arises in any connection with the Lease or negotiations prior to its execution shall be barred unless the claiming party commences an action thereon or initiates a legal proceeding by reason thereof within two (2) years after the date of the occurrence of the event, act or omission to which the claim, demand or right relates. Each party acknowledges and understands that, after having had an opportunity to consult with legal counsel, the purpose of this paragraph is to shorten the time period within which a party would otherwise have to raise such claims, demands or rights.

24.2 Waiver of Jury Trial. Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim (including any claim of injury or damage and any emergency and other statutory remedy in respect thereof) brought by either against the other on any matter arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, or Tenant's use or occupancy of the Premises.

24.3 Attorneys' Fees. If either party brings any legal action or proceeding, declaratory or otherwise, arising out of this Lease, including any suit by Landlord to recover rent or possession of the Premises or to otherwise enforce this Lease, the losing party shall pay the prevailing party's costs and attorneys' fees and costs incurred in such proceeding.

24.4 Authority. Each party represents and warrants that it has full power and authority to execute and fully perform its obligations under this Lease pursuant to its governing instruments, without the need for any further action, and that the person(s) executing this Agreement on behalf of each party are the duly designated agents of such party and are authorized to do so. Prior to execution of this Lease, each party shall supply the other with such evidence as the other may request regarding the authority to enter into this Lease. Any actual or constructive taking of possession of the Premises by Tenant shall constitute a ratification of this Lease by Tenant.

24.5 Binding Effect. Subject to the provisions of Article 18 restricting transfers by Tenant and subject to Section 24.27 regarding transfer of Landlord's interest, all of the provisions of this Lease shall bind and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns.

24.6 Brokers. Tenant warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this transaction except only the broker(s) set forth in Section 1.12 of the Basic Lease Provisions, and it knows of no other real estate broker or agent who is entitled to a commission in connection with this transaction. Tenant agrees to indemnify, protect, hold harmless and defend Landlord from and against any obligation or liability to pay any commission or compensation to any other party arising from the act or agreement of Tenant. Upon execution of this Lease, Landlord shall pay the brokers a commission in accordance with a separate agreement between Landlord and the brokers.

24.7 Construction. The headings and captions used in this Lease are for convenience only and are not a part of the terms and provisions of this Lease. In any provision relating to the conduct, acts or omissions of Tenant, the term "Tenant" shall include Tenant, its subtenants and assigns and their respective agents and employees. Any use in this Lease, or in any addendum, amendment or other document related hereto, of the terms "lessor" or "lessee" to refer to a party to this Lease shall be deemed to be references to Landlord and Tenant, respectively.

24.8 Counterparts . This Lease may be executed in multiple copies, each of which shall be deemed an original, but all of which shall constitute one Lease binding on all parties after all parties have signed such a counterpart.

24.9 Entire Agreement. This Lease, together with any and all exhibits, schedules, riders and addenda attached or referred to herein, constitutes the entire agreement between the parties with respect to the subject matter hereof. There are no oral or written agreements or representations between the parties hereto affecting this Lease, and this Lease supersedes, cancels and merges any and all previous verbal or written negotiations, arrangements, representations, brochures, displays, models, photographs, renderings, floor plans, elevations, projections, estimates, agreements and understandings if any, made by or between Landlord and Tenant and their agents, with respect to the subject matter, and none thereof shall be used to interpret, construe, supplement or contradict this Lease. This Lease and all amendments thereto is and shall be considered to be the only agreement between the parties hereto and their representatives and agents. There are no other representations or warranties between the parties, and all reliance with respect to representations is solely based upon the representations and agreements contained in this Lease.

24.10 Exhibits. Any and all exhibits, schedules, riders and addenda attached or referred to herein are hereby incorporated herein by reference.

24.11 Intentionally Omitted.

24.12 Force Majeure. If either party is delayed in performing any of its obligations hereunder due to strikes, labor problems, inability to procure utilities, materials, equipment or transportation, governmental regulations, weather conditions, riots, insurrection, or war, or other events beyond such party’s control, then the time for performance of such obligation shall be extended to the extent reasonably necessary as a result of such event.

24.13 Governing Law. This Lease shall be governed, construed and enforced in accordance with the laws of the State of California.

24.14 Joint and Several Liability. If more than one person or entity executes this Lease as Tenant, each of them is jointly and severally liable for all of the obligations of Tenant hereunder.

24.15 Modification. The provisions of this Lease may not be modified or amended, except by a written instrument signed by all parties.

24.16 Modification for Lender. If, in connection with obtaining financing or refinancing for the Premises or the Project, Landlord's lender requests reasonable modifications to this Lease, Tenant will not unreasonably withhold or delay its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder or materially and adversely affect Tenant's rights hereunder.

24.17 Nondiscrimination. Tenant for itself and its officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, agrees to comply fully with any and all laws and other requirements prohibiting discrimination against any person or group of persons on account of race, color, religion, creed, sex, marital status, sexual orientation, national origin, ancestry, age, physical handicap or medical condition, in the use occupancy or patronage of the Premises and/or of Tenant's business. Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord's officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, from and against all damage and liability incurred by Landlord in the event of any violation of the foregoing covenant or because of any event of or practice of discrimination against any such persons or group of persons by Tenant or its officers, directors, shareholders, partners, members, principals, employees, agents, representatives, and other related entities and individuals, and their respective successors and assigns, in accordance with the indemnification provisions of Article 13.

24.18 Notice. Any and all notices to either party shall be personally delivered, sent by recognized courier service (such as Federal Express or United Parcel Service), or sent by certified mail, return receipt requested, postage prepaid, addressed to the party to be notified at the address specified in Section 1.1, or at such other address as such party may from time to time designate in writing. Notice shall be deemed delivered on the date of personal delivery, one the date of delivery by such courier service, or three (3) business days after deposit in the U.S. Mail, certified, return receipt requested. Provided, however, that any notice required pursuant to California Code of Civil Procedure Sections 1161 et seq. may be given as provided in such sections.

24.19 Partial Invalidity. If any provision of this Lease is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Lease shall not be affected thereby. Each provision shall be valid and enforceable to the fullest extent permitted by law.

24.20 Intentionally Omitted.

24.21 Quiet Enjoyment. Landlord agrees that Tenant, upon paying the rent and performing the terms, covenants and conditions of this Lease, may quietly have, hold and enjoy the Premises from and after Landlord's delivery of the Premises to Tenant and until the end of the Lease Term; subject, however, to the lien and provisions of any mortgage or deed of trust to which this Lease is or becomes subordinate.

24.22 Recording. Tenant shall not record this Lease or any memorandum hereof without Landlord's prior written consent.

24.23 Relationship of the Parties. Nothing contained in this Lease shall be deemed or construed as creating a partnership, joint venture, principal-agent, or employer-employee relationship between Landlord and any other person or entity (including, without limitation, Tenant) or as causing either party hereto to be responsible in any way for the debts or obligations of such other person or entity.

24.24 Intentionally Omitted.

24.25 Rights of Redemption Waived. Tenant hereby expressly waives any and all rights of redemption under any present or future laws in the event Tenant is evicted or dispossessed for any cause, or in the event Landlord obtains possession of the Premises by reason of Tenant's violation of any of the covenants and conditions of this Lease or otherwise.

24.26 Time of the Essence. Time is of the essence of each and every provision of this Lease.

24.27 Transfer of Landlord's Interest. In the event of any transfer or transfers of Landlord's interest in the Premises, other than a transfer for security purposes only, the transferor shall be automatically relieved of any and all obligations and liabilities on the part of the Landlord accruing from and after the date of such transfer, provided, however, that any funds in the hands of Landlord at the time of such transfer in which Tenant has in interest shall be turned over to the transferee and any amount then due and payable to Tenant by Landlord under any provisions of this Lease shall be paid to Tenant, if being intended hereby that the covenants and obligations contained in this Lease on the part of Landlord shall, subject as aforesaid, be binding on Landlord, its successors and assigns, only during and in respect of their respective successive period of ownership.

24.28 Waiver. No provision of this Lease or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed. A waiver of any such breach shall not be deemed a waiver of any preceding or succeeding breach of the same or any other provision. No delay or omission by Landlord in exercising any of its remedies shall impair or be construed as a waiver thereof, unless such waiver is expressly set forth in a writing signed by Landlord. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent.

24.29 Right of First Offer . Provided that, at the time Tenant is entitled to any benefit under this Section, there exists no Event of Default on the part of Tenant under this Lease nor any condition that with the giving of notice or the passage of time or both would constitute an Event of Default on the part of Tenant under this Lease, Landlord agrees that it will offer to lease any unleased portion of the Project contiguous to the Premises (the “Additional Space”) to Tenant prior to offering the Additional Space to any other person. Tenant shall have five (5) business days after the receipt of such offer to accept or reject the same. Tenant’s failure to accept the same in writing unconditionally and without change within such five (5) business-day period shall constitute a rejection of such offer. The rental rate and term of occupancy applicable to the Additional Space shall be as determined by Landlord in its sole discretion. If Landlord’s offer is rejected or deemed rejected, the Landlord shall be free to let the Additional Space to any person, on terms and conditions determined by Landlord (which may be more or less advantageous than those offered to Tenant). If Landlord has not received a proposal from a potential tenant that leads to the consummation of a lease for the Additional Space within six (6) months of the date Tenant rejects or is deemed to have rejected Landlord’s offer, then Landlord shall not let the Additional Space without re-offering the same to Tenant pursuant to the terms of this Section. No brokerage commissions or fees shall be payable by Landlord in connection with any such expansion. This Section shall not apply (i) to any use or leasing of the Additional Space by Landlord or any affiliate of Landlord, (ii) to the renewal or modification of the lease of any existing tenant, or (iii) the exercise of any option to extend the term of any lease or exercise of or any other right by any existing tenant. The Right of First Offer provided in this Section is personal to Tenant, the original tenant, and can not be transferred to, or exercised, by any other person or entity. Additionally, this Right of First Offer shall expire on the expiration or earlier termination of the Term of this Lease.

25. TENANT IMPROVEMENTS.

25.1 Space Plan; Construction.

(a) Landlord shall arrange to have certain tenant improvements (the “Tenant Improvements”) constructed in the Premises. The Tenant Improvement programming and design will be contracted with a designer reasonably acceptable to Landlord. The Tenant Improvement designer shall prepare working drawings except mechanical, engineering and plumbing, which shall be prepared on a design-build basis by Burger Construction . Such Tenant Improvements shall be substantially set forth on a space plans to be agreed to by Landlord and Tenant (the "Space Plan"). The construction of the Tenant Improvements shall be arranged and paid for directly (up to the amount of the Tenant Improvement Allowance) by Landlord, as soon as reasonably practical after the full execution of this Lease. As used herein, the term "Tenant Improvements" (and the costs associated therewith) include the preparation of drawings, plans and specifications, permit fees, design, architectural, engineering and consultant fees, and all other work and costs associated with the construction of the Tenant Improvements (collectively, "Tenant Improvement Costs"). Tenant agrees that Landlord's obligations with respect to the alteration and improvement of the Premises is limited strictly to the items and tasks particularly described on the plans and specifications to be approved by Tenant as set forth herein, and that Landlord shall have no obligation to provide or pay for any item or service not specifically detailed thereon, and that Landlord’s obligation to pay for the Tenant Improvements is limited to the Tenant Improvement Allowance set forth in Section 1.16 hereof. Tenant further acknowledges and agrees that Tenant shall be responsible for and shall pay for any cost attributed to the Tenant Improvements that exceed the Tenant Improvement Allowance.

(b) For clarity, the Tenant Improvement Allowance includes an allowance for Tenant’s purchase of furniture, fixtures and equipment (“FF&E”) up to the amount provided in section 25.4 below. If Landlord and Tenant mutually agree that additional Tenant Improvements in the Premises are to be paid for by the Tenant, the improvements shall be done by the Landlord’s contractor and Tenant shall promptly reimburse Landlord for the cost of the work.

25.2 Changes to Tenant Improvements. In addition, if Tenant desires any material changes or additions to or modifications of the Tenant Improvements shown on the approved Space Plan, Tenant shall request such changes in writing, which request shall be accompanied by a sufficiently detailed description of the requested change, and, if requested by Landlord, a set of working drawings for such requested change. Landlord shall have the right to approve such requested change, or disapprove such requested change if in Landlord's sole judgment the requested change will have an adverse effect on the value or other characteristics of the Premises for resale or re-letting. If Landlord does approve such requested change, Tenant shall bear 100% of the increased Tenant Improvement Costs attributable to such changes (and shall deposit 100% of the cost of the work covered by such change order with Landlord prior to Landlord commencing such changes). Tenant shall additionally bear 100% of the Tenant Improvement Costs and other liabilities and consequences of any delays in the work caused by the integration of such change, any delays in the work to be done caused by Tenant, and any deficiencies, errors or omissions in any plans, specifications or other documents provided by Tenant. Any delay in the completion of the Tenant Improvements caused by Tenant's change orders or otherwise by Tenant shall not delay the Commencement Date nor the time when rent under the Lease shall begin to accrues and to be payable.

25.3 Tenant Responsibilities. It is specifically understood that Landlord does not now make nor in the future will make any representation or warranty with respect to the suitability for Tenant's use of the Premises, as the same will be improved by the work to be done in accordance with the plans and specifications to be approved by Tenant as set forth herein. If for any reason and at any time after Tenant occupies the Premises following build out of the Tenant Improvements and approval by the City of Carlsbad, any board or agency of the City of Carlsbad, or any other governmental authority having jurisdiction (i) imposes any additional requirements with respect to the improvement of the Premises or any other part of the Project, (ii) requires any additional or different systems or equipment to be installed and/or maintained in or at the Premises or any other part of the Project, or (iii) requires any changes to the Plans and Specifications, and if any such imposition or requirement arises out of or is connected with in any way Tenant's contemplated or actual use of the Premises or any part thereof, then Tenant shall bear all of the cost and expense of complying with such imposition or requirement, and all costs of any delay occasioned thereby, and any rent otherwise due and not abated hereunder shall not be abated during any such period of delay. Tenant shall indemnify, hold harmless and defend Landlord from and against any and all claims, actions, damages, liability, costs, and expenses, including attorneys' fees and costs, arising out of any such imposition, requirement or delay. In particular, Tenant shall do and/or bear the costs of any and all construction, alterations, improvements and retrofittings required to be made to the Premises and/or the Project, arising out of any such imposition, requirement or delay.

25.4. FF&E Allowance . Tenant, shall, at its option, be reimbursed by Landlord (within 30 days of receipt by Landlord of the documentation set forth herein) or entitled to a credit against its payments of rent due hereunder of up to $5.00 per rentable square foot (which based on 28,458 rentable square feet equals $142,290.00 ) to reimburse Tenant for expenses incurred by Tenant to purchase furniture, fixtures and equipment (“FF&E”) for the Premises; said credit or payment to be provided (a) to the extent that the Tenant Improvement Allowance exceeds the cost of the Tenant Improvements and (b) upon Tenant providing to Landlord reasonable written documentation showing the costs incurred by Tenant for such items and verification by Landlord that such FF&E is located within the Premises.

THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND/OR SIGNATURE BY TENANT IS NOT A COMMITMENT BY LANDLORD OR ITS AGENTS TO RESERVE THE PREMISES OR TO LEASE THE PREMISES TO TENANT OR ANY OTHER PERSON. THIS LEASE SHALL BECOME EFFECTIVE AND LEGALLY BINDING ONLY UPON FULL EXECUTION AND DELIVERY BY BOTH LANDLORD AND TENANT. UNTIL LANDLORD DELIVERS A FULLY EXECUTED COUNTERPART HEREOF TO TENANT, LANDLORD HAS THE RIGHT TO OFFER AND TO LEASE THE PREMISES TO ANY OTHER PERSON TO THE EXCLUSION OF TENANT.

EXECUTED , by Landlord and Tenant as of the date first written above.

TENANT:

By:	/s/ Michael Bush
Title:	President and CEO

By:	/s/ Kendra Berger
Title:	CFO

LANDLORD:

BECKMAN/CARLSBAD, I, LLC, a California limited liability company

By:

Willian Beckman

EXHIBIT "A"

PRELIMINARY SPACE PLAN

EXHIBIT "B"

RULES AND REGULATIONS

The following Rules and Regulations shall apply to the Project. Tenant agrees to comply with the same and to require its agents, employees, contractors, customers and invitees to comply with the same. Landlord shall have the right from time to time to amend or supplement these Rules and Regulations, and Tenant agrees to comply, and to require its agents, employees, contractors, customers and invitees to comply, with such amended or supplemented Rules and Regulations, provided that (a) notice of such amended or supplemental Rules and Regulations is given to Tenant, and (b) such amended or supplemental Rules and Regulations apply uniformly to all tenants of the Project. If Tenant or its subtenants, employees, agents, or invitees violate any of these Rules and Regulations, resulting in any damage to the Project or increased costs of maintenance of the Project, or causing Landlord to incur expenses to enforce the Rules and Regulations, Tenant shall pay all such costs to Landlord as Additional Rent. In the event of any conflict between the Lease and these or any amended or supplemental Rules and Regulations, the provisions of the Lease shall control.

All garbage and refuse shall be disposed of in the Landlord-designated location outside of the Premises, shall be placed in the kind of container specified by Landlord, and shall be prepared for collection in the manner and at the times and places specified by Landlord. . Tenant shall not burn any trash or garbage of any kind in or about the Premises. If Landlord supplies janitorial services to the Premises, Tenant shall not, without Landlord's prior written consent, employ any person or persons other than Landlord's janitorial service to clean the Premises.

No aerial, satellite dish, transceiver, or other electronic communication equipment shall be erected on the roof or exterior walls of the Premises, or in any other part of the Project, without Landlord's prior written consent, which Landlord may or may not provide in its sole discretion. Any aerial, satellite dish, transceiver, or other electronic communication equipment so installed without Landlord's prior written consent shall be subject to removal by Landlord without notice at any time and without liability to Landlord.

No loudspeakers, televisions, phonographs, radios, or other devices shall be used in a manner so as to be heard or seen outside of the Premises without Landlord's prior written consent. Tenant shall conduct its business in a quiet and orderly manner so as not to create unnecessary or unreasonable noise. Tenant shall not cause or permit any obnoxious or foul odors that disturb the public or other occupants of the Project. If Tenant operates any machinery or mechanical equipment that causes noise or vibration that is transmitted to the structure or parts of the Project to such a degree as to be objectionable to Landlord or to any other occupant of the Project, Tenant shall install and maintain, at Tenant's expense, such vibration eliminators or other devices sufficient to eliminate the objectionable noise or vibration.

Tenant shall keep the outside areas immediately adjoining the Premises clean and free from dirt, rubbish, delivered items and other materials to the satisfaction of Landlord. If Tenant fails to cause such outside areas to be maintained as required within twelve (12) hours after verbal notice that the same do not so comply, Tenant shall pay a fee equal to the greater of Fifty Dollars ($50.00) or the costs incurred by Landlord to clean up such outside areas.

5.	Tenant shall not store any merchandise, inventory, equipment, supplies, finished or semi-finished products, raw materials or other articles of any nature outside the Premises without Landlord's prior written consent.

Tenant and Tenant's subtenants, employees, agents, or invitees shall park only the number of cars allowed under the Lease and only in those portions of the parking area designated for that purpose by Landlord. Upon request by Landlord, Tenant shall provide the license plate numbers of the cars of Tenant and Tenant's employees in order to facilitate enforcement of this regulation. Tenant and Tenant's employees shall not store vehicles or equipment in the parking areas, or park in such a manner as to block any of the accessways serving the Project and its occupants.

The Premises shall not be used for lodging, sleeping, cooking, or for any immoral or illegal purposes, or for any purpose that will damage the Premises or the reputation thereof. Landlord reserves the right to expel from the Project any person who is intoxicated or under the influence of liquor or drugs or who shall act in violation of any of these Rules and Regulations. Tenant shall not conduct or permit any sale by auction on the Premises. No video, pinball, or similar electronic game machines of any description shall be installed, maintained or operated upon the Premises without the prior written consent of Landlord.

8.	Neither Tenant nor Tenant's employees or agents shall disturb, solicit, or canvas any occupant of the Project, and Tenant shall take reasonable steps to discourage others from doing the same.

9.	Tenant shall not keep in, or allow to be brought into, the Premises or Project any pet, bird or other animal, other than "seeing-eye" dogs or other animals under the control of and specifically assisting any disabled person.

10.

The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be disposed of therein. The expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant. Tenant shall not waste or use any excessive or unusual amount of water.

11.	If required by circumstances unique to Tenant’s use and occupancy of the Premises, Tenant shall use, at Tenant's cost, such pest extermination contractor as Landlord may direct and at such intervals as Landlord may require.

12.	Intentionally Omitted.

13.

Tenant shall notify Landlord no less than 24 hours in advance of its intentions to move freight, furniture, fixtures, equipment, inventory or other substantial items into or out of the Premises or other portions of the Project. Tenant shall be responsible for repair of any damage caused by the moving of freight, furniture or other objects into, within, or out of the Premises or the Project. No heavy objects (such as safes, furniture, equipment, freight, etc.) shall be placed upon any floor without Landlord's prior written approval as to the adequacy of the allowable floor loading at the point where the objects are intended to be moved or stored. Landlord may specify the time of moving to minimize any inconvenience to other occupants of the Project. Prior to Tenant moving any of the items references in this paragraph, Tenant shall place plywood or fiberboard approved by the Landlord over the full path of travel from the point of loading/unloading to and from the Premises. If Tenant is utilizing the elevator for all or a portion of the moving, Tenant shall always use Landlord-approved elevator blankets, elevator floor protection and elevator lobby frame protection.

14.

Without Landlord's prior written consent, no drapes or sunscreens of any nature shall be installed in the Premises and the sash doors, sashes, windows, glass doors, lights and skylights that reflect or admit light into the building shall not be covered or obstructed. Tenant shall not mark, drive nails, screw or drill into, paint, or in any way deface any surface or part of the Project. Notwithstanding the foregoing, Tenant may hang pictures, blackboards, or similar objects, provided Tenant first confirms that doing so will not damage plumbing, wiring or other building systems. The expense of repairing any breakage, stoppage, or damage resulting from a violation of this rule shall be borne by Tenant.

15.

No electrical wiring, electrical apparatus, or additional electrical outlets shall be installed in the Premises without Landlord's prior written approval. Any such installation not so approved by Landlord may be removed by Landlord at Tenant's expense. Tenant may not alter any existing electrical outlets or overburden them beyond their designed capacity. Landlord reserves the right to enter the Premises, with reasonable notice to Tenant, for the purpose of installing additional electrical wiring, plumbing and other utilities for the benefit of Tenant or adjoining tenants. Landlord will direct electricians as to where and how telephone and affixed wires are to be installed in the Premises. The location of telephones, call boxes, and other equipment affixed to the Premises shall be subject to the prior written approval of Landlord.

16.	Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

17.	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.

18.	If Tenant occupies any air-conditioned space, Tenant shall keep entry doors opening onto corridors, lobby or courtyard closed at all times.

19.

Tenant shall not paint any wall of the Premises without Landlord's prior written consent. Prior to surrendering the Premises upon expiration or termination of the Lease, Tenant shall restore the wall to its original condition as of the Commencement Date, reasonable wear and tear excepted. Tenant shall not affix any floor covering to the floor of the Premises except as approved by Landlord.

20.

Any directory of the Project will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom. Except for the initial signage as described in the Lease, Tenant shall pay the costs of having Tenant's name added or changed to any building directory or door signage.

21.

Landlord reserves the right at any time to exclude or expel from the Project any person who, in Landlord's judgment, is in violation of any of the Project Rules and Regulations. Landlord shall not be liable for damages for any error with regard to the admission to or exclusion from the Project of any person.

_________________________________________

Tenant's Initials

SCHEDULE 1

DISCLOSURE OF ACTIONS AND RIGHTS UNDER SECTION 12.3(a)

Exhibit 10.22

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") was made and entered into on April 12, 2010, by and between NTN Buzztime, Inc., a Delaware corporation (the "Company"), and Michael Bush, an individual (the "Executive"), and is amended and restated, effective April 12, 2010.

RECITALS

THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:

A. The Company desires that the Executive be employed by the Company to carry out the duties and responsibilities described below, all on the terms and conditions hereinafter set forth, effective as of April 12, 2010 (the "Effective Date").

B. The Executive desires to accept such employment on such terms and conditions.

C. This Agreement shall govern the employment relationship between the Executive and the Company from and after the Effective Date and supersedes and negates all previous agreements with respect to such relationship.

NOW, THEREFORE , in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:

1.	Retention and Duties .

1.1

Retention; Authorization to Work in the United States . Subject to the terms and conditions expressly set forth in this Agreement, the Company does hereby hire, engage and employ the Executive and the Executive does hereby accept and agree to such hiring, engagement and employment. Executive's employment with the Company is "at-will" and either the Company or Executive may terminate his employment with the Company at any time for any or no reason, subject to the terms and conditions set forth in this Agreement. The period of time during which Executive remains employed by the Company is referred to as the "Period of Employment." Notwithstanding anything else set forth in this Agreement, the Company's hiring of Executive is conditioned upon, prior to the Effective Date, Executive passing a background check, negative alcohol/drug screen result and compliance with federal 1-9 requirements.

1.2

Duties . During the Period of Employment, the Executive shall serve the Company as its Chief Executive Officer (the "CEO") and shall have the powers, duties and obligations of management typically vested in the office of the CEO, of a corporation, subject to the directives of the Company's Board of Directors (the "Board") and the corporate policies of the Company as they are in effect and as amended from time to time throughout the Period of Employment (including, without limitation, the Company's business conduct and ethics policies). Specifically, the CEO will work closely with the Board and senior management to launch and execute the overall strategic and operational direction for the Company. The Executive will establish Company policies and objectives in accordance with board directives to achieve sustainable and cumulative growth over time. Moreover, the CEO will establish responsibilities and procedures for attaining objectives and reviews of operations and financial statements to evaluate achievement of those objectives. During the Period of Employment, the Executive shall report to the Board. Upon the termination of the Executive's employment for any reason other than Cause as defined in Section 4.4, the Executive may retain his board seat at the Board's discretion.

1.3

No Other Employment . During the Period of Employment, the Executive shall both (i) devote substantially all of the Executive's business time, energy and skill to the performance of the Executive's duties for the Company, and (ii) hold no other employment. The Company shall have the right to request the Executive to resign from any board or similar body on which he may then serve if the Board reasonably determines that the Executive's business related to such service is then in competition or conflicts with any business of the Company or any of its affiliates, successors or assigns. Nothing in this Section 1.3 shall be construed as preventing Executive from engaging in the investment of his personal assets.

1.4

No Breach of Contract . The Executive hereby represents to the Company that: (i) the execution and delivery of this Agreement by the Executive and the Company and the performance by the Executive of the Executive's duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or otherwise bound; (ii) the Executive has no information (including, without limitation, confidential information and trade secrets) relating to any other person or entity which would prevent, or be violated by, the Executive entering into this Agreement or carrying out his duties hereunder; and (iii) except as set forth on Exhibit A hereto, the Executive is not bound by any confidentiality, trade secret or similar agreement (other than this Agreement and the Confidentiality and Work for Hire Agreement attached hereto as Exhibit B (the "Confidentiality and Work for Hire Agreement") with any other person or entity.

1.5

Location . The Executive acknowledges that the Company's principal executive offices are currently located in Carlsbad, California. The Executive agrees that he will work from the Company's principal executive offices. The Executive acknowledges that he may be required to travel from time to time in the course of performing his duties for the Company.

2.	Compensation .

2.1

Base Salary . The Executive's base salary (the " Base Salary ") shall be paid in accordance with the Company's regular payroll practices in effect from time to time, but not less frequently than in monthly installments. The Executive's initial Base Salary shall be at an annualized rate of Three Hundred Seventy Five Thousand Dollars ($375,000). The Company may review the Executive's Base Salary annually and may increase the Executive's Base Salary from the rate then in effect based on such review.

2.2

Incentive Bonus. During the Period of Employment, the Executive shall be eligible to receive an annual incentive bonus (" Incentive Bonus ") in an amount to be determined by the Board in its sole discretion, based on the achievement of performance objectives established by the Board for that particular period. The Executive's target potential Incentive Bonus amount for the 2010 calendar year shall be set at 50% of the Executive's Base Salary. For calendar year 2010 the Executive's Incentive Bonus shall be pro rated based on hire date and any approved leave of absence and shall be based on and subject to the requirements set forth in the 2010 NTN Buzztime Executive Incentive Plan.

For purposes of clarity, the Executive's target potential Incentive Bonus for 2010 prior to any pro rating shall be One Hundred Eighty Seven Thousand Five Hundred Dollars ($187,500), which is equal to fifty percent (50%) of his initial Base Salary. A portion of the Incentive Bonus for 2010 will be guaranteed in the amount of $50,000, which amount will be paid by March 15, 2011.

The Board will in its sole discretion reserve the possibility to award an Incentive Bonus of up to 100% of the Executive's Base Salary for demonstrated extraordinary performance.

The Executive will participate in establishing the Incentive Bonus targets for 2011 and present to the Board (1) such recommendations with respect to such targeted levels that Executive determines in good faith are advisable, or (2) such other modifications to the bonus program for 2010 (including, without limitation, any other performance factors on which the Incentive Bonus determination may be based) as the Executive determines in good faith are advisable. The Board will consider in its sole discretion adjusting such targeted levels and making such adjustment to the Incentive Bonus program in good faith based on the Executive's recommendations, but shall have no obligation to make any such adjustment.

The Incentive Bonus, if any, will be paid to the Executive within thirty (30) days after receipt of the independent auditor's report on the Company's annual financial statements for the year in question, but no in event later than March 15 of the year following the year that the Incentive Bonus relates; provided that the Incentive Bonus will not be deemed earned and will not be paid to the Executive unless the Executive is employed by the Company on such payment date. Payment of the Incentive Bonus, if any, will be subject to withholdings in accordance with the Company's standard payroll procedures.

2.3

Stock Option Grants . Subject to this Section 2.3, the Company will grant to the Executive an initial option (the "Initial Option") to purchase 1,750,000 shares of the Company's common stock, $0.005 par value per share ("Common Stock").

The exercise price per share for the Initial Option will be equal to the fair market value of a share of the Common Stock on the date the Initial Option is granted.

In addition, subject to Executive's continuing employment on such dates and approval, in each case, by the compensation committee of the Company's board of directors, (i) the Company will grant to the Executive on or about the first anniversary date of the Effective Date an option (the " Anniversary Option ") to purchase 500,000 shares of Common Stock. The Initial Option and the Anniversary Option are collectively referred to as the " Options ". The exercise price per share for the Anniversary Option will be equal to the fair market value of a share of the Common Stock on the date such Option is granted.

Each of the Options will be intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to the maximum extent possible within the limitations of the Code. . Each of the Option shall become vested as to 25% of the total number of shares of Common Stock on the first anniversary of the Award Date. The remaining 75% of the total number of shares of Common Stock shall become vested in 36 substantially equal monthly installments, with the first installment vesting on the last day of the month following the month in which the first anniversary of the Award Date occurs and an additional installment vesting on the last day of each of the 35 consecutive months thereafter. The vesting of each installment of each of the Options will occur only if such vesting date occurs during the Executive's continued employment by the Company through the respective vesting date. The maximum term of each of the Options will be ten (10) years from the date of grant thereof, subject to earlier termination upon the termination of the Executive's employment with the Company, a change in control of the Company and similar events. The Initial Option shall be granted under the NTN Buzztime, Inc. 2010 Performance Incentive Plan (the "Plan"), a copy of which has been provided to the Executive, and shall be contingent upon Shareholder approval of the Plan and subject to such further terms and conditions as set forth in a written stock option agreement to be entered into by the Company and the Executive to evidence the Options (the "Option Agreement ") . The Option Agreement shall be in substantially the form attached hereto as Exhibit C . The Anniversary Option, if any, will be granted under the Company's equity incentive plan(s) as then in effect and shall be subject to the terms and conditions of such plan(s) and to such further terms and conditions as set forth in a written stock option agreement to be entered into by the Company and the Executive to evidence such Option.

Upon the occurrence of a Change in Control, 50% of the then unvested portion of the Options shall accelerate and the remaining portion of unvested Options may be accelerated by the Board, in its discretion. For purposes hereof, a "Change in Control" means any of the following transactions if approved by the Board of Directors: (i) the consummation of a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity regardless of which entity is the survivor, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company, such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or (ii) consummation of the sale or disposition by the Company of all or substantially all of the Company's assets.

2.4

Retention Bonus. Executive shall be entitled to a sum equal to Twenty Five Thousand Dollars ($25,000.00) ("Retention Pay"), less Executive's authorized deductions and subject to withholdings in accordance with the Company's standard payroll procedures. The Retention Pay shall be due to Executive upon completion of six (6) months' continued employment and payable on the next regularly scheduled payroll. In the event of a separation without cause initiated by NTN or by the Executive before the completion of six (6) months, the Executive shall not be eligible to receive the Retention Pay.

Benefits.

3.1

Retirement, Welfare and Fringe Benefits. During the Period of Employment, the Executive shall be entitled to participate in all employee pension and welfare benefit plans and programs, and fringe benefit plans and programs, made available by the Company to the Company's employees generally, in accordance with the eligibility and participation provisions of such plans and as such plans or programs may be in effect from time to time. Without limiting the generality of the foregoing, during the Period of Employment, the Company shall provide to the Executive the following benefits:

(a)

At no expense to the Executive, coverage of the Executive, his spouse (if any) and any of his children who qualify as "dependents" within the meaning of Section 152 of the Code under a major medical insurance program with an annual cumulative deductible amount of no more than $2,250.

3.2

Reimbursement of Business Expenses. The Company will reimburse Executive for all reasonable business expenses the Executive incurs during the Period of Employment in the course and scope of the Executive's duties, subject to the Company's expense reimbursement policies in effect from time to time. Executive will be required to provide substantiation of all of such expenses on Company approved expense report forms in accordance with Company policies. These payments may be made as direct payments of the Executive's invoices or bills or by reimbursement to the Executive of costs that are incurred. The Executive will be responsible for all income and employment taxes due on such payments; the Company will not provide a gross-up payment to cover such tax liabilities. Any reimbursement of expenses that would constitute nonqualified deferred compensation subject to Code Section 409A, as defined in Section 23 below, shall not affect the Executive's right to reimbursement of any other such expense in any other taxable year, shall be made, if at all, not later than the end of the calendar year following the calendar year in which the expense was incurred, and shall not be subject to liquidation or exchange for any other benefit.

3.3

Paid Time Off . During the Period of Employment, the Executive shall accrue paid time off ("PTO") and shall be permitted time off in accordance with the Company's PTO policies in effect from time to time. Executive shall accrue no less than three weeks of PTO per year. The Executive shall also be entitled to all other holiday and leave pay generally available to other executives of the Company.

4.	Termination .

4.1

Termination of Employment . The Executive's employment by the Company may be terminated either by the Company or by Executive at any time for any or no reason and with or without Cause (in any case, the date that the Executive's employment by the Company terminates and which constitutes a "separation from service" within the meaning of Section 409A of the Code is referred to as the "Separation Date").

4.2

Benefits Upon Termination . If the Executive's employment with the Companyis terminated for any reason by the Company or by the Executive, the Company shall have no further obligation to make or provide to the Executive, and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits except as follows:

(a)

The Company shall pay the Executive (or, in the event of his death, the Executive's estate) any Accrued Obligations (as defined in Section 4.4) within 10 days following the Separation Date;

(b)

If the Executive's employment with the Company is terminated by the Company without Cause (as defined in Section 4.4) or Executive terminates for Good Reason, the Company shall pay (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions and subject to the requirements of Section 4.3, an amount equal to the sum of one (1) month of severance pay for every two (2) months the Executive is employed to a maximum of six (6) months calculated at the Executive's then-current Base Salary rate in effect on the Separation Date as severance pay, which shall be payable in substantially equal installments on a bi-weekly basis over a period of 6 months. The first installment of any severance pay payable under this Section 4.2(b) shall commence in the next regularly scheduled payroll date following the 45-day period after the Separation Date, in which Executive is required to execute and not revoke the general release agreement in accordance with Section 4.3 in order to receive benefits under this Section 4.2(b).

(c)

In the event of any termination of Executive's employment for any reason, including any termination by the Company without Cause, the Executive's outstanding stock options, restricted stock and other equity-based awards, including the Initial Option and the Anniversary Option, if any, shall continue to be governed in accordance with their terms (including, without limitation, the terms applicable to a termination of the Executive's employment).

(d)

Notwithstanding the foregoing provisions of this Section 4.2, if the Executive breaches his obligations under the Confidentiality and Work for Hire Agreement and/or Section 6, 7 or 8 of this Agreement at any time, from and after the date of such breach, the Executive will no longer be entitled to, and the Company will no longer be obligated to pay, any remaining unpaid portion of any benefits provided in Section 4.2(b).

The foregoing provisions of this Section 4.2 shall not affect: (i) the Executive's receipt of benefits otherwise due to terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan; (ii) the Executive's rights under COBRA to continue participation in medical, dental, hospitalization and life insurance coverage; or (iii) the Executive's receipt of benefits otherwise due in accordance with the terms of the Company's 401(k) plan (if any). In no event shall the Company's obligations to the Executive exceed the sum of the Accrued Obligations, the benefits provided in Section 4.2(b), if applicable, and the benefits contemplated by this paragraph, regardless of the manner of the Executive's termination.

4.3

Release; Exclusive Remedy .

(a)

This Section 4.3 shall apply notwithstanding anything else contained inthis Agreement or any stock option, restricted stock or other equity-based award agreement to the contrary. Notwithstanding any provision in this Agreement to the contrary, as a condition precedent to any Company obligation to the Executive pursuant to Section 4.2(b) or any agreement or obligation to accelerate vesting of any equity-based award in connection with the termination of the Executive's employment, the Executive shall, upon or promptly following his Separation Date, (i) sign and not revoke a general release agreement in a form prescribed by the Company, and provided further that such general release agreement is executed and becomes effective no later than forty-five (45) days following the Executive's Separation Date and (ii) at the Board's discretion, provide the Company with a written resignation from the Board as contemplated by Section 1.2. The Company shall have no obligation to make any payment to the Executive pursuant to Section 4.2(b) (or to accelerate the vesting of any equity-based award in the circumstances as may otherwise be contemplated by the applicable award agreement) unless and until the general release agreement contemplated by this Section 4.3 becomes irrevocable by the Executive in accordance with all applicable laws, rules and regulations and, at the Board's discretion, the Executive shall have tendered the written resignation from the Board as contemplated by Section 1.2.

(b)

The Executive agrees that the general release agreement described in Section 4.3(a) will include a complete release of all known and unknown claims pursuant to California Civil Code Section 1542 and will require that the Executive acknowledge, as a condition to the payment of any benefits under Section 4.2(b), as applicable, that the payments contemplated by Section 4.2 (and any applicable acceleration of vesting of an equity-based award in accordance with the terms of such award in connection with the termination of the Executive's employment) shall constitute the exclusive and sole remedy for any termination of his employment, and the Executive will be required to covenant, as a condition to receiving any such payment (and any such accelerated vesting), not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement. All amounts paid to the Executive pursuant to Section 4.2 shall be paid without regard to whether the Executive has taken or takes actions to mitigate damages.

4.4

Certain Defined Terms .

(a)

As used herein, " Accrued Obligations " means:

(i)

any Base Salary that had accrued but had not been paid (including accrued and unpaid personal time off) on or before the Separation Date; and.

(ii)

any reimbursement due to the Executive pursuant to Section 3.2 for expenses incurred by the Executive on or before the Separation Date.

(b)

As used herein, "Cause" shall mean, as reasonably determined by the Board (excluding the Executive, if he is then a member of the Board), (i) any act of personal dishonesty taken by the Executive in connection with his responsibilities as an employee of the Company which is intended to result in substantial personal enrichment of the Executive and is reasonably likely to result in material harm to the Company, (ii) the Executive's conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business, (iii) a willful act by the Executive which constitutes misconduct and is materially injurious to the Company, (iv) continued willful violations by the Executive of the Executive's obligations to the Company after there has been delivered to the Executive a written demand for performance from the Company which describes the basis for the Company's belief that the Executive has willfully violated his obligations to the Company.

(c)

As used herein, " Good Reason " shall mean that Executive has without his written consent sustained a material diminution in the Executive's job responsibilities, duties and/or authority; provided that the Executive gives notice to the Company of the existence of the Good Reason condition within thirty (30) days of the initial existence of the Good Reason condition and the Company is provided thirty (30) days after receipt of the Executive's notice to remedy the Good Reason condition; provided further that the Executive must terminate his employment within sixty (60) days from the initial existence of the Good Reason condition if the Company does not remedy such condition.

4.5

Limitation on Benefits.

(a)

Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the " Benefits ") would be subject to the excise tax (the " Excise Tax ") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received all of the Benefits (such reduced amount if referred to hereinafter as the " Limited Benefit Amount "). Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the Limited Benefit Amount, the Company shall reduce or eliminate the Benefits by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.

(b)

A determination as to whether the Benefits shall be reduced to the Limited Benefit Amount pursuant to this Agreement and the amount of such Limited Benefit Amount shall be made by the Company's independent public accountants or another certified public accounting firm of national reputation designated by the Company (the " Accounting Firm ") at the Company's expense. The Accounting Firm shall provide its determination (the " Determination "), together with detailed supporting calculations and documentation to the Company and the Executive within five (5) days of the date of termination of the Executive's employment, if applicable, or such other time as requested by the Company or the Executive (provided the Executive reasonably believes that any of the Benefits may be subject to the Excise Tax), and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to any Benefits, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Benefits. Unless the Executive provides written notice to the Company within ten (10) days of the delivery of the Determination to the Executive that he disputes such Determination, the Determination shall be binding, final and conclusive upon the Company and the Executive.

5.	Proprietary Information; Inventions and Developments . Concurrently with entering into this Agreement, the Executive will execute the Confidentiality and Work for Hire Agreement.

Confidentiality . The Executive hereby agrees that the Executive shall not at any time (whether during or after the Executive's employment with the Company), directly or indirectly, other than in the course of the Executive's duties hereunder, disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below); provided, however, that this Section 6 shall not apply when (i) disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the Executive to disclose or make available such information (provided, however, that the Executive shall promptly notify the Company in writing upon receiving a request for such information), or (ii) with respect to any other litigation, arbitration or mediation involving this Agreement, including but not limited to enforcement of this Agreement. The Executive agrees that, upon termination of the Executive's employment with the Company, all Confidential Information in the Executive's possession that is in written, digital or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by the Executive or furnished to any third party, in any form except as provided herein; provided, however, that the Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (a) was publicly known at the time of disclosure to the Executive, (b) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Company by any person or entity, or (c) is lawfully disclosed to the Executive by a third party. As used in this Agreement, the term "Confidential Information" means: information disclosed to the Executive or known by the Executive as a consequence of or through the Executive's relationship with the Company, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Company Group.

Protective Covenant . The Executive acknowledges and agrees that should he accept a position (other than an officer whose function substantially relates to financial matters) of any business or organization where his duties, or those of others who report directly or indirectly to him, include any activities in the fields of electronically simulated trivia and sports games or interactive television efforts in the hospitality industry, which in the reasonable judgment of the Company is, or as a result of the Executive's engagement or participation would become, directly competitive with any aspect of the business of the Company Group (a "uCovered Position"), that such position would inevitably lead to a disclosure of Confidential Information in contravention of Section 6. Accordingly and without limiting the provisions of Section 6, the Executive agrees that during the Period of Employment, the Executive shall not accept employment in a Covered Position. The Executive expressly acknowledges and agrees that the foregoing restriction is reasonable and necessary in order to protect the Confidential Information of the Company Group.

8.	Anti-Solicitation.

8.1

Business Relationships . The Executive promises and agrees that during the Period of Employment, the Executive will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner or participant in any business, influence or attempt to influence customers, vendors, suppliers, joint venturers, associates, consultants, agents, or partners of the Company or any of its affiliates (collectively, the " Company Group "), either directly or indirectly, to divert their business away from the Company Group, to any individual, partnership, firm, corporation or other entity then in competition with the business of any entity within the Company Group, and he will not otherwise materially interfere with any business relationship of any entity within the Company Group.

8.2

Executives . The Executive promises and agrees that during the Period of Employment and for a period of one (1) year thereafter, the Executive will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner of or participant in any business, solicit (or assist in soliciting) any person who is then, or at any time within six (6) months prior thereto was, an employee of an entity within the Company Group who earned annually $25,000 or more as an employee of such entity during the last six (6) months of his or her own employment to work for (as an employee, consultant or otherwise) any business, individual, partnership, firm, corporation, or other entity whether or not engaged in competitive business with any entity in the Company Group.

Withholding Taxes . Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

10.

Assignment . This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that in the event of a merger, consolidation, or transfer or sale of all or substantially all of the assets of the Company with or to any other individual(s) or entity, this Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of such successor and such successor shall discharge and perform all the promises, covenants, duties, and obligations of the Company hereunder.

11.	Number and Gender . Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

12.	Section Headings . The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

13.

Governing Law . This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.

14.

Severability . If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

15.

Entire Agreement . This Agreement, together with the Option Agreements and the Exhibits contemplated hereby, including the Confidentiality and Work for Hire Agreement and Mutual Agreement to Arbitrate, embodies the entire agreement of the parties hereto respecting the matters within its scope. This Agreement supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein.

16.

Modifications . This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto. Without limiting the foregoing, the at-will nature of Executive's employment by the Company may only be modified in a writing approved by the Company's Board of Directors and executed by both the Company and the Executive.

17.

Waiver . Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

18.

Arbitration . Any controversy arising out of or relating to the Executive's employment (whether or not before or after the expiration of the Period of Employment), any termination of the Executive's employment, this Agreement, the Confidentiality and Work for Hire Agreement referred to in Section 5, the Option Agreement or any otheragreements relating to the grant to Executive of equity-based awards, including any Anniversary Option, the enforcement or interpretation of any of such agreements, or because of an alleged breach, default, or misrepresentation in connection with any of the provisions of any such agreement, including (without limitation) any state or federal statutory claims, shall be submitted to arbitration in accordance with the provisions set forth on Exhibit D hereto.

Nothing in this Agreement or the attached Exhibit D shall prohibit or limit the parties from seeking provisional remedies under California Code of Civil Procedure section 1281.8, including, but not limited to, injunctive relief from a California court of competent jurisdiction. Without limiting the foregoing, the Executive and the Company acknowledge that any breach of any of the covenants or provisions contained in Section 6, 7 or 8 of this Agreement or in the Confidentiality and Work for Hire Agreement could result in irreparable injury to either of the parties hereto for which there might be no adequate remedy at law, and that, in the event of such a breach or threat thereof, the non-breaching party shall be entitled to obtain a temporary restraining order and/or a preliminary injunction and a permanent injunction restraining the other party hereto from engaging in any activities prohibited by any covenant or provision in Section 6, 7 or 8 of this Agreement or in the Confidentiality and Work for Hire Agreement or such other equitable relief as may be required to enforce specifically any of such covenants or provisions.

19.

Insurance . The Company shall have the right at its own cost and expense to apply for and to secure in its own name, or otherwise, life, health or accident insurance or any or all of them covering the Executive, and the Executive agrees to submit to any usual and customary medical examination and otherwise cooperate with the Company in connection with the procurement of any such insurance and any claims thereunder.

20.

Notices .

(a)

All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, or (iii) sent by registered or certified mail, postage prepaid, return receipt requested. Any notice shall be duly addressed to the parties as follows:

(i)

if to the Company:

NTN Buzztime, Inc.

5966 La Place Court, Suite 100

Carlsbad, CA 92008 Attn: Board of Directors

(ii)

if to the Executive, the to address most recently on file in the payroll records of the Company.

(b)

Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 20 for the giving of notice. Any communication shall be effective when delivered by hand, when otherwise delivered against receipt therefor, or five (5) business days after being mailed in accordance with the foregoing.

21.

Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

22.

Legal Counsel; Mutual Drafting . Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

23.	Code Section 409A .

(a)

It is intended that any amounts payable under this Agreement and the Company's exercise of authority or discretion hereunder shall comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (" Code Section 409A ") so as not to subject the Executive to any interest or additional tax imposed under Code Section 409A. To the extent that any amount payable under this Agreement would trigger the additional tax imposed by Code Section 409A, the Agreement shall be modified to avoid such additional tax yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive.

(b)

Without limiting the generality of the foregoing, and notwithstanding any provision in this Agreement to the contrary, any payments made from the date of the Executive's termination of employment through March 15th of the calendar year following such termination, are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and thus payable pursuant to the "short-term deferral" rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations; to the extent such payments are made following said March 15th, they are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations made upon an involuntary separation from service and payable pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations, to the maximum extent permitted by said provision, with any excess amount being regarded as subject to the distribution requirements of Section 409A(a)(2)(A) of the Code, including, without limitation, the requirement of Section 409A(a)(2)(B)(i) of the Code. For purposes of the foregoing, if upon Executive's separation from service he is then a "specified employee" (within the meaning of Code Section 409A), then to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of "nonqualified deferred compensation" subject to Code Section 409A payable as a result of and within six (6) months following such separation from service under this Agreement until the earlier of (i) the first business day of the seventh month following Executive's separation from service, or (ii) ten (10) days after the Company receives notification of Executive's death. If the Company determines that any other payments hereunder fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of the Code, then the payment of such benefit shall be delayed to the minimum extent necessary so that such payments are not subject to the provisions of Section 409A(a)(1) of the Code. Any payments that are delayed as a result of this Section 23(b) shall be paid without interest.

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the Effective Date.

"COMPANY"

NTN Buzztime, Inc.,

a Delaware corporation

By: /s/ Kendra Berger

Name: Kendra Berger

Title: CFO

"EXECUTIVE"

/s/ Michael Bush

Michael Bush

EXHIBIT A

CONFIDENTIALITY DISCLOSURE

EXHIBIT B

NTN BUZZTIME, INC.

CONFIDENTIALITY AND WORK FOR HIRE AGREEMENT

EXHIBIT C

NTN BUZZTIME, INC.

2010 PERFORMANCE INCENTIVE PLAN

EXECUTIVE INCENTIVE STOCK OPTION AGREEMENT

EXHIBIT D

MUTUAL AGREEMENT TO ARBITRATE

This Mutual Arbitration Agreement ("Arbitration Agreement") is entered into between NTN Buzztime, Inc. ("the Company") and Terry Bateman, an individual (the "Executive").

Agreement to Arbitrate Certain Disputes and Claims

Executive and Company agree that they will submit any claim, dispute, and/or controversy relating to or arising from Executive's employment with Company to final and binding arbitration. Arbitration shall be the exclusive means of resolving the claim, dispute and/or controversy regardless of whether it is based on tort, contract, statute, equity and/or other laws. This shall include, but not be limited to, claims of wrongful termination, discrimination, harassment, conversion, theft of trade secrets, unfair competition, damage to person or property, breach of contract, defamation, violation of any other non-criminal federal, state or other governmental common law, statute, regulation or ordinance. This Arbitration Agreement shall apply to actions initiated by Executive or Company.

Company and Executive understand and agree that arbitration of the disputes and claims covered by this Arbitration Agreement shall be the sole and exclusive mechanism for resolving any and all existing and future disputes or claims arising out of Executive's recruitment to or employment with the Company or the termination thereof, except as specified below.

Claims Not Subiect to Arbitration

Company and Executive further understand and agree that the following disputes and claims are not covered by this Arbitration Agreement and shall therefore be resolved as required by the law then in effect:

Executive's claims for workers' compensation benefits, unemployment insurance, or state or federal disability insurance.

Either party's request for temporary injunctive relief prior to resolution of the dispute on its merits in an arbitration proceeding.

Any other dispute or claim that has been expressly excluded from arbitration by statute or binding legal precedent.

This Arbitration Agreement does not prevent Executive from filing a charge with certain local, state or federal administrative agencies such as the United States Equal Employment Opportunity Commission or the California Department of Fair Employment and Housing, or prevent Executive from filing for unemployment insurance or workers' compensation benefits. Nothing in this Arbitration Agreement limits Executive's rights, or those of the Company, to seek provisional relief pursuant to California Code of Civil Procedure section 1281.8 or any similar statute of applicable jurisdiction.

Final and Binding Arbitration; Waiver of Trial Before Court, Jury or Government Agency

Company and Executive understand and agree that the arbitration of disputes and claims under this Arbitration Agreement shall be instead of a trial before a court or jury or a hearing before a government agency. Company and Executive understand and agree that, by signing this Arbitration Agreement, Company and Executive are expressly waiving any and all rights to a trial before a court or jury or before a government agency regarding any disputes and claims which Company and Executive now have or which Company and Executive may in the future have that are subject to arbitration under this Arbitration Agreement, except as provided in the preceding section.

Arbitration Procedures

Any arbitration held under this Arbitration Agreement shall be conducted before a single neutral arbitrator and shall be administered by the Judicial Arbitration and Mediation Service ("JAMS") or its successor, unless the parties otherwise stipulate. The party initiating arbitration must provide written notice of the request to arbitrate to the other party and to JAMS within the applicable statute(s) of limitations. Written notice to the Company is to be directed to the Company's Human Resources Department. The arbitration shall be conducted in accordance with the JAMS Employment Arbitration Rules and Procedures (the "JAMS Rules"), available for review at http://www.jamsadr.com , as those rules are in effect at the time of the arbitration; provided, however, that the arbitrator shall allow the discovery authorized by California Code of Civil Procedure section 1283.05 or any other discovery required by California law. The parties shall attempt to jointly select the single neutral arbitrator. If they are unable to reach agreement, the procedures contained in the JAMS Rules shall apply, or JAMS shall appoint the single arbitrator. The parties are entitled to be represented by counsel during the arbitration. To the extent that any of the JAMS Rules or anything in this Arbitration Agreement conflicts with any arbitration procedures required by California law, the arbitration procedures required by California law shall govern.

In the event JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association ("AAA") in accordance with AAA's employment arbitration rules, available for review at http://www.adr.org , as those rules are in effect at the time of the arbitration, subject to the same terms and conditions as arbitration with JAMS as referenced in the preceding paragraph.

Place of Arbitration

The arbitration shall take place in San Diego County, California, or, at the Executive's option, in the county in which the Executive works, or last worked, for the Company. The parties may agree to hold the arbitration at any other place mutually agreeable to both of them.

Discovery

The arbitrator shall allow the discovery authorized by California Code of Civil Procedure section 1283.05 or any other discovery required by California law.

Written Arbitration Award

In making an award, the Arbitrator shall have the authority to make any finding and determine any remedy congruent with applicable law, including an award of compensatory or punitive damages. In reaching a decision, the Arbitrator shall adhere to relevant law and applicable legal precedent, and shall have no power to vary therefrom.

The Arbitrator shall issue a written award that sets forth the essential findings and conclusions on which the award is based. The Arbitrator shall have the authority to award any relief authorized by law in connection with the asserted claims or disputes. The Arbitrator's award shall be final and binding on both the Company and Executive and it shall provide the exclusive remedy(ies) for resolving any and all disputes and claims subject to arbitration under this Arbitration Agreement. The Arbitrator's award shall be subject to correction, confirmation, or vacation, by a competent California court as provided by California Code of Civil Procedure Section 1285.8 et seq and any applicable California case law setting forth the standard of judicial review of arbitration awards. The arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.

Governing Law

Company and Executive understand that this Arbitration Agreement and its validity, construction and performance shall be governed by the laws of the State of California, without reference to rules relating to conflicts of law. Any dispute(s) and claim(s) to be arbitrated under this Arbitration Agreement shall be governed by the laws of the State of California, without reference to rules relating to conflicts of law.

Costs of Arbitration

The Company will bear the arbitrator's fee and any other type of expense or cost that the employee would not be required to bear if he or she were free to bring the dispute(s) or claim(s) in court as well as any other expense or cost that is unique to arbitration. If the Executive is the party initiating arbitration, he will be required to contribute to the administrative costs of the arbitration the same amount which he would have paid as a filing fee in order to commence the action in a civil court of law. The Company and Executive shall each bear their own attorneys' fees incurred in connection with the arbitration, and the arbitrator will not have authority to award attorneys' fees unless a statute or contract at issue in the dispute specifically authorizes the award of attorneys' fees to the prevailing party, in which case the arbitrator shall have the authority to make an award of attorneys' fees as required or permitted by applicable law. If there is a dispute as to whether the Company or Executive is the prevailing party in the arbitration, the Arbitrator will decide this issue.

Severability

Company and Executive understand and agree that if any term or portion of this Arbitration Agreement shall, for any reason, be held to be invalid or unenforceable or to be contrary to public policy or any law, then the remainder of this Arbitration Agreement shall not be affected by such invalidity or unenforceability but shall remain in full force and effect, as if the invalid or unenforceable term or portion thereof had not existed within this Arbitration Agreement.

Complete Agreement

Company and Executive understand and agree that this Arbitration Agreement and the Employment Agreement to which this agreement is attached contain the complete agreement between the Company and Executive regarding the subjects covered hereby; that it supersedes any and all prior representations and agreements between us, if any. This Arbitration Agreement may be modified only in a writing, expressly referencing this Arbitration Agreement and Executive by full name, and signed by the Chief Executive Officer of the Company. Any such written modification must also expressly state the intention of the parties to modify this Arbitration Agreement.

Knowing and Voluntary Agreement

The Executive is advised to consult with attorneys of his or her own choosing before signing this Arbitration Agreement, and acknowledges that he or she has had an opportunity to do so. By signing this Arbitration Agreement, Executive agrees that he or she has read this Arbitration Agreement carefully and understand that by signing it, he or she is waiving all rights to a trial or hearing before a court or jury or government agency of any and all disputes and claims regarding Executive's employment with the Company or the recruitment to or termination thereof (except as otherwise stated herein).

Consideration

The parties' mutual agreement to arbitrate the claims identified herein, and the Company's agreement to pay most of the costs associated with the arbitration, provide good and sufficient consideration for the mutual promises to arbitrate.

PLEASE READ CAREFULLY. BY SIGNING THIS AGREEMENT, EMPLOYEE AND THE COMPANY ARE GIVING UP THEIR RIGHT TO FILE A LAWSUIT IN A COURT OF LAW AND TO HAVE THEIR CASE HEARD BY A JUDGE OR JURY AS TO ANY CLAIMS COVERED BY THIS AGREEMENT TO ARBITRATE.

Date: 12-28-10	/s/ Michael Bush Michael Bush

Date: 12-28-10	NTN Buzztime, Inc. /s/ Kendra Berger By: Kendra Berger Title: CFO

Exhibit 10.25

January 27, 2011

Vladimir Edelman

611 W. 239 th Street

Bronx, New York

Re: Offer of Employment

Dear Vlad:

NTN Buzztime, Inc. (“NTN”) is pleased to offer you the position of EVP & Chief Content Officer, reporting to Michael Bush, Chief Executive Officer. Your anticipated start date will be February 7, 2011. This offer and your employment relationship will be subject to the terms and conditions of this letter.

Your initial salary will be $8,461.539 per pay period ($220,000 annualized), less applicable withholdings, paid bi-weekly in accordance with NTN’s normal payroll practices. This position is exempt therefore you will not receive overtime pay if you work more than 8 hours in a workday or 40 hours in a workweek.

You will be eligible to participate in NTN’s Corporate Incentive Plan, which is designed to encourage and reward performance excellence pursuant to the terms of the plan. The target bonus for your position is 35% of your base salary, subject to Board approval for the 2011 plan. Bonuses are typically paid on an annual basis during the 1st Quarter but no later than March 15 th . In addition, subject to NTN’s Board of Directors’ approval, you will be granted incentive stock options to purchase 175,000 shares of NTN’s common stock in accordance with the NTN Buzztime, Inc. 2010 Employee Stock Option Plan (the “Plan”) and related option documents. The option will vest over a period of four (4) years and expire at the end of ten (10) years in accordance with the terms of the Plan and Stock Option Agreement.

Upon the commencement of your employment the company shall pay a one-time lump sum payment of Fifty Five Thousand Dollars ($55,000) for relocation and commuting costs from Bronx, New York to the San Diego, California metropolitan area. This payment will be a direct payment to you to cover actual and reasonable costs associated with relocation and any initial commuting expense. Portions or possibly all of the relocation and commuting payment may be subject to withholding tax such federal, state, and local income employment, or other taxes as may be required pursuant to any applicable law or regulation.

You will also be eligible for all benefits available to other full-time NTN employees, in accordance with NTN’s benefit plan documents. Such benefits include participation in NTN’s medical, dental, vision, life and other group insurance programs on the first of the month following your hire date and participation in NTN’s 401(k) Program occurs on a quarterly enrollment date; 1/1, 4/1, 7/1 and 10/1. NTN reserves the right to change or eliminate these benefits on a prospective basis at any time.

If you accept our offer, your employment with NTN will be “at-will.” This means your employment is not for any specific period of time and can be terminated by you at any time for any reason. Likewise, NTN may terminate the employment relationship at any time, with or without cause or advance notice. In addition, NTN reserves the right to modify your position, duties or reporting relationship to meet business needs and impose appropriate discipline. Any change to the at-will employment relationship must be by a specific, written agreement signed by you and NTN’s Chief Executive Officer.

This offer is contingent upon the following:

·	Signing NTN’s Ethics Policy (See enclosed);

Vladimir Edelman

Page 2

·	Compliance with federal I-9 requirements (please bring suitable documentation with you on your first day of work verifying your identity and legal authorization to work in the United States);

·	Satisfactory completion of a background investigation to include criminal, credit, education verification, and reference checks; and

·	Negative drug/alcohol screen result. Please make arrangements to have your drug test within 24 hours of receipt of this letter. Details of how to do this are enclosed.

This letter, including the enclosed Ethics Policy, and the NTN Buzztime, Inc. 2010 Employee Stock Option Plan referenced above, constitutes the entire agreement between you and NTN relating to this subject matter and supersedes all prior or contemporaneous agreements, understandings, negotiations or representations, whether oral or written, express or implied, on this subject. This letter may not be modified or amended except by a specific, written agreement signed by you and NTN’s Chief Executive Officer.

This offer will expire on January 31, 2011. To indicate your acceptance of NTN’s offer on the terms and conditions set forth in this letter, please sign and date this letter in the space provided below and return it to Human Resources no later than January 31, 2011 by either mail, fax (760-707-1591) or scan sent to shannon.kehle@buzztime.com.

We hope your employment with NTN will prove mutually rewarding, and we look forward to having you join us.

Sincerely,

/s/ Michael Bush

Michael Bush

Chief Executive Officer

* * *

I have read this offer letter in its entirety and agree to the terms and conditions of employment. I understand and agree that my employment with NTN is at-will, which means either you or NTN may terminate the employment relationship at any time with or without cause or advance notice.

Dated	Feb 8, 2011		/s/ Vladimir Edelman
			Vladimir Edelman

Exhibit 10.26

KEEP

THIS COPY

Master Equipment Lease

NTN Buzztime, Inc.		3-10125
Name of Lessee		Master Equipment Lease No.

5966 La Place Court		9/29/09
Street Address		Date

Carlsbad, CA 92008
City, State and Zip Code

Form of Organization: o sole proprietor x Corporation o limited liability company o partnership o other _________

Delaware		2033004
Lessee State of Organization		State of Organization No.

1. LEASE:

Data Sales Co., Inc. ("Lessor"), by its acceptance hereof at its home office, agrees to lease to Lessee and Lessee agrees to lease from Lessor, in accordance with the terms and conditions hereinafter set forth, the items of equipment and other property (the "Equipment") described in each equipment schedule ("Equipment Schedule") in the form of Exhibit "A" attached hereto, executed from time to time pursuant to this Master Equipment Lease ("Master Equipment Lease"). Each Equipment Schedule shall incorporate the terms of this Master Equipment Lease and shall constitute a separate and enforceable lease of the Equipment described in such Equipment Schedule. Any reference to the "Lease" shall mean each such Equipment Schedule (including all amendments, addenda or riders thereto) to the extent it incorporates this Master Equipment Lease. In the event of any conflict between the terms of an Equipment Schedule and the terms of this Master Equipment Lease, the terms of the Equipment Schedule shall prevail.

2. DEFINITIONS:

A. The "Installation Date" means the date determined in accordance with the Equipment Schedule.

B. The "Commencement Date" means the first day of the month following the Installation Date, unless the Installation Date occurs on the first day of a month, in which case the Commencement Date shall be the Installation Date.

3. TERM OF LEASE:

The term of the Lease as to Equipment designated on the Equipment Schedule shall begin on the Installation Date in accordance with the Equipment Schedule, and shall continue for an initial period ending that number of months from the Commencement Date as is specified on the Equipment Schedule (the "Initial Term"). THE LEASE IS NON-CANCELABLE FOR THE INITIAL TERM and Lessee has no right of prepayment unless such right is specifically granted to Lessee in the Equipment Schedule. Lessee shall execute and deliver to Lessor a Certificate of Delivery and Acceptance.

("Acceptance") on the date the Equipment has been installed and accepted by Lessee, and Lessor shall have no obligation to advance funds for the Equipment's purchase unless and until Lessor receives such Acceptance.

Except as otherwise provided in the Equipment Schedule or any amendment thereto, Lessee or Lessor may terminate the Lease at the expiration of the Initial Term by giving the other at least two (2) months prior written notice of termination. If neither party gives such notice, then the term shall automatically be extended on the same rental terms for successive periods of one (1) month until terminated by either Lessee or Lessor giving the other at least two (2) months written notice of termination.

4. RENTAL PAYMENTS:

The monthly rental payments for each item of Equipment (the "Monthly Rental Payments") shall be set forth in the applicable Equipment Schedule, shall begin to accrue on the Installation Date of the Equipment and shall be due and payable by Lessee in advance on the first day of each month. If the Installation Date does not fall on the first day of the month, the rental for that period of time from the Installation Date until the first day of the succeeding month shall be a pro rata portion of the Monthly Rental Payment, calculated on a 30-day basis, due and payable on the Installation Date. Lessee shall pay a late charge on all Monthly Rental Payments unpaid after the due date thereof equal to one and one-half percent (1-1/2%), or the highest rate permissible by law, whichever is less.

5. NET AND NON-CANCELABLE LEASE:

This is a net Lease and Lessee's obligation to pay the rent and other amounts due hereunder is unconditional and not subject to abatement, reduction or set off, defense, counterclaim or interruption of any kind. The Lease is a non-cancelable lease and will not terminate in the event of any damage to or destruction of the equipment. The lease may be terminated only as expressly provided herein. To the extent permitted by law, Lessee waives the right to (i) cancel the Lease; (ii) repudiate the Lease; (iii) revoke acceptance of the equipment; (iv) recover damages from Lessor for any breaches of warranty or for any other reasons; (v) grant a security interest in the equipment to a third party; (vi) deduct from rents all or any part of claimed damages resulting from Lessors default, if any.

6. PAYMENT OF TAXES:

Lessee shall also pay all taxes, however designated, which are levied or based on the Lease, the Equipment or its purchase, use, lease, operation, control or value, including, without limitation, personal property taxes, state and local privilege or excise taxes based on gross revenue, and any penalties or interest in connection therewith, or taxes or amounts in lieu thereof paid or payable by Lessor or Lessee in respect of the foregoing, but excluding taxes based on Lessors net income. Charges for taxes, penalties and interest, if any, shall be promptly paid by Lessee. In the event Lessee defaults in the payment of any such tax, Lessor may pay such tax and shall be promptly reimbursed by Lessee, with interest (plus attorneys' fees and costs if any) as additional rent.

7. ARTICLE 2A LEASE; DISCLAIMER OF WARRANTIES:

This Lease is a true lease, which is a "finance lease", as that term is defined under Uniform Commercial Code ("UCC") Article 2A-103. Lessor has not selected, manufactured or supplied the Equipment. Lessee has selected the Equipment from the manufacturer, supplier or distributor of the Equipment (the "Vendor"). Lessor acquired the Equipment or the right to possession and use of the Equipment only in connection with this Lease. Either Lessee has assigned to Lessor its acquisition agreement for the Equipment on or before signing this Lease or Lessee's approval of the contract evidencing Lessor's purchase of the Equipment is a condition to the effectiveness of this Lease (and Lessee's execution of this Lease evidences its approval of said contract). Lessor hereby informs Lessee that Lessee may have rights under the contract evidencing Lessor's purchase of the Equipment and advises Lessee to contact the Vendor for a description of any such rights. If Lessee has entered into any acquisition agreement with Vendor, Lessee shall perform all of the obligations set forth therein as if this Lease did not exist. LESSOR HAS NOT MADE AND MAKES NO, AND HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR EXPRESS OR IMPLIED WARRANTY WHATSOEVER HEREUNDER, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PURPOSE, OR OTHERWISE, REGARDING THE EQUIPMENT OR ANY PART OR THE DESIGN, QUALITY, OPERATION OR CONDITION THEREOF OR WITH RESPECT TO PATENT INFRINGEMENT OR THE LIKE. Lessor hereby grants, transfers and assigns to Lessee during the term of this Lease all of its right, title and interest in any express or implied warranties, indemnities or service agreements of the Vendor which are assignable by Lessor. Lessor shall permit Lessee, as Lessee's sole remedy, to enforce any such representation, warranty, indemnity or service agreement against the Vendor in the name of Lessor, and not against Lessor or Assignee (as hereinafter defined).

Lessee acknowledges that it is not relying on Lessor's skill or judgment to select or furnish goods suitable for any particular purpose and that there are no warranties which are not contained in this Lease. LESSOR SHALL NOT BE LIABLE FOR DAMAGES, INCLUDING SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, arising out of or in connection with the performance of the Equipment or the use thereof by Lessee and shall not be liable for any special, incidental or consequential damages, arising out of or in connection with Lessors failure to perform its obligations hereunder. Upon written request from the Lessee, Lessor shall take all reasonable action requested by Lessee to enforce any manufacturers warranty express or implied, relating to the condition or performance of the Equipment which is enforceable by Lessor in its own name, provided, however, that Lessor shall not be obligated to resort to litigation to enforce any such warranty unless Lessee shall pay all expenses incurred in connection therewith. Similarly, if any such warranty shall be enforceable by Lessee in its own name, Lessee shall take reasonable action requested by Lessor to enforce any such warranty Lessee shall indemnify and hold Lessor and its assigns harmless from any liability, claim, loss, damage or expense (including reasonable attorneys' fees) of any kind or nature caused, directly or indirectly by (1) inadequacy of any Equipment for any purpose, (2) any deficiency or defect in any Equipment, (3) the use or performance of any Equipment, (4) any interruption or loss of service, use or performance of any Equipment, (5) any patent, copyright, or other infringement, or (6) any loss of business or other consequential damage whether or not resulting directly from any or all of the above. Lessee acknowledges that it has made the selection of the Equipment based on its own judgment, and expressly disclaims any reliance upon statements made by Lessor. Lessee acknowledges that Lessor has made no statements or representations upon which Lessee is relying in leasing the Equipment, and that this Lease contains all agreements and understandings between the parties.

8. RISK OF LOSS:

A. Lessor shall not be responsible for, nor shall the Monthly Rental Payments or other sums due hereunder abate for any reason, including, but not limited to, any interruption in or loss of the service or use of the Equipment or any part thereof, or any loss or damage caused thereby, or by error in programming or instruction to the Equipment, latent defect, wear and tear, or gradual deterioration of the Equipment or any part thereof.

B. Lessee assumes and shall bear the entire risk of partial or complete loss, theft, damage, destruction or other interruption or termination of use of the Equipment from any cause whatsoever, from the date of delivery of the Equipment to Lessee until the Equipment is returned to and received by Lessor.

During the term of the Lease, and until the Equipment is redelivered to Lessor, Lessee shall be liable for the prompt repair of the Equipment at its sole expense. If the Equipment or any portion thereof is lost, stolen, destroyed or damaged beyond repair, Lessee, at its option, will (i) continue to make the Monthly Rental Payments, and, at Lessee's sole expense, replace the Equipment with equipment of identical manufacture and equal or greater capacity, utility and residual value to that of the Equipment replaced (in which case Lessee will transfer title to the replacement Equipment to the Lessor free of all liens, claims and encumbrances), or (ii) pay Lessor on the next Monthly Rental Payment date following the loss, theft, damage or destruction of the Equipment an amount equal to the replacement value or the minimum casualty value, whichever is greater, attached to the applicable Equipment Schedule for such Equipment in effect on the date of the loss, theft, damage or destruction thereof and all rent accrued on such Equipment up to the date of payment and all other amounts then due in connection with such Equipment. Upon such payment, the Equipment Schedule, or portion thereof, as applicable, will terminate with respect to the Equipment so paid for, and Lessor will transfer full ownership and title to such Equipment to Lessee, free of liens, claims and encumbrances created by Lessor.

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9. INSURANCE AND INDEMNITY:

Lessee shall at all times during the term of this Lease, at its own expense, maintain: (A) all-risk property damage insurance covering the Equipment in an amount not less than the greater of (i) the replacement value of the Equipment, or (ii) the minimum casualty value of such Equipment as set forth in the Equipment Schedule, and (B) public liability coverage in such amounts, and with such companies as are in general usage by companies owning or operating similar property and engaged in a business similar to Lessees. The insurance required by this Section 9 may be obtained by Lessee by endorsement on any blanket insurance policies maintained by Lessee or its parent. All insurance so maintained shall provide for a thirty-day (30) prior written notice to Lessor and Assignee of any cancellation or reduction of coverages and an option in favor of Lessor or Assignee to prevent cancellation by payment of premiums, which shall promptly be repaid by Lessee, and further shall provide that all insurance proceeds shall be payable to the Lessee, Lessor and any Assignee as their respective interests may appear. Lessor and any such Assignee shall be named as loss payee and additional insured on all public liability insurance policies so maintained. Lessee shall furnish to Lessor copies of such insurance policies and satisfactory insurance certificates on or before the Installation Date. Lessee's above obligation shall commence on the date of delivery of the Equipment and shall continue until the Initial Term (or any extension or renewal thereof) of each Equipment Schedule expires and the Equipment is returned to Lessor. By this Section 9, Lessor does not modify or limit any provision of this Lease relating to disclaimer of warranties and liability, or indemnity.

Lessee assumes all risk and liabilities, whether or not covered by insurance, and shall indemnify and hold Lessor and its assigns (including any Assignee) harmless of and from any liability, claim, loss, damage or expense (including reasonable attorneys' fees) for injuries or deaths of persons and for damage to property, howsoever arising from or incident to the use, operation or storage of the Equipment, whether such injury or death to person be of agents or employees of Lessee or be of third persons and whether such damage to property be of Lessee, or to property of others.

10. MAINTENANCE, REPAIRS, INSTALLATION AND RETURN:

Unless otherwise agreed to by Lessor in writing, Lessee shall, at its expense, obtain and keep in full effect, throughout the term of this Lease, a contract from the manufacturer of the Equipment (or another reputable maintenance organization approved by Lessor) providing for prime shift maintenance service (as that term is defined by the manufacturer) and will otherwise maintain the Equipment in good working order and appearance and make all necessary adjustments and repairs thereto. Lessee will at all times cooperate with Lessor in allowing the manufacturer or Lessor to control and install all engineering changes on the Equipment as when determined necessary or desirable by the manufacturer or Lessor. Upon termination of the Lease, Lessee, at its sole expense, shall return the Equipment, together with manufacturer's certificate of authenticity, if provided, to Lessor, or to such other location within the Continental U.S. designated by Lessor, in good condition and repair excepting only reasonable wear and tear, and eligible for a manufacturer's standard, full service maintenance contract. If the Equipment returned is not so eligible, Lessee shall reimburse Lessor for the cost of qualifying the Equipment for such maintenance contract eligibility. Lessee shall pack the Equipment to be so returned in accordance with the manufacturer's guidelines.

If Lessee fails to return the Equipment in accordance with the preceding paragraph upon the expiration of the Initial Term or any extension thereof, Lessee shall be obligated to pay to Lessor per diem rent until the Equipment is returned in addition to all other remedies available to Lessor pursuant to Section 16 hereunder.

Lessee will provide the required suitable electric current to operate the Equipment, with all appropriate facilities as specified by the manufacturer. Lessee will grant access to the Equipment to Lessor, its designee, or the manufacturer, during normal working hours for inspection, repair, maintenance, installation or engineering changes, and for any other reasonable purpose. Lessee shall immediately notify Lessor of all details concerning any accident arising out of the alleged or apparent improper manufacture, functioning or operation of the Equipment.

11. ALTERATION AND ATTACHMENTS:

No alterations or attachments to the Equipment shall be made without first obtaining in each instance the prior written approval of Lessor, which approval shall not unreasonably be withheld. If, after such written approval has been obtained, the alterations or attachments interfere with the normal or satisfactory maintenance, operation or insurability of the Equipment, or any part thereof, in such manner as to increase the cost of maintenance or insurance thereof, or create a safety hazard, Lessee will, upon notice from Lessor to that effect, promptly remove the alterations or attachments and restore the Equipment to its normal condition. In the case of increased cost of maintenance and insurance, or either, Lessee shall pay such increase.

12. ASSIGNMENTS:

Lessee may not assign the Lease or any of Lessee's rights hereunder or sublease any Equipment or its use without the prior written consent of Lessor or any such assignment or sublease shall be void. Any permitted sublessee or assignee of Lessee must execute an assumption of this Lease in form and substance acceptable to Lessor, but no sublease or assignment shall relieve Lessee of any of its obligations or liabilities under this Lease.

Lessor may assign or transfer this Lease to an assignee or may grant a security interest in all or part of this Lease, the Equipment and/or sums payable hereunder as collateral security for any loans or advances made or to be made to Lessor by a financial institution (such assignee or financial institution, herein, the "Assignee"), Lessee hereby consents to such assignment, transfer and/or grant of security interest. Lessee, upon receipt of notice of any such transfer, assignment, or grant to an Assignee and instructions from Lessor, shall pay all outstanding Monthly Rental Payments and all other sums when due under this Lease (hereafter, collectively, the "Payments"), to such Assignee in the manner specified in said instructions, and Lessee's obligation to make the Payments to such Assignee shall be absolute and unconditional. Upon notice of any intended transfer, assignment, or granting of a security interest: (a) Lessee shall promptly submit to Lessor such documents as may be reasonably required by the intended Assignee, in form and substance satisfactory to the intended Assignee, including, without limitation: (i) A certificate that the equipment was delivered and accepted; (2) if Lessee is a corporation, a certified copy of resolutions adopted by Lessee's Board of Directors authorizing execution of the Lease; (3) an acknowledgement to the Lessor's transfer, assignment or granting of a security interest; (4) a UCC Financing Statement; (b) In the event of any such assignment, transfer, or granting of a security interest: (1) Lessee shall send copies of any notices which are required hereunder to be sent to Lessor to the Assignee as well as to Lessor; (2) Lessee shall not permit the Lease to be amended or any provision thereof to be waived without the prior written consent of the Assignee; (3) Lessee agrees not to look to the Assignee to perform any of Lessor's obligations hereunder; (4) Lessee agrees that Assignee shall be exclusively entitled to all of the rights and remedies provided to the Lessor under the Lease; (c) no such transfer, assignment or granting of a security interest by Lessor shall relieve Lessor of any of its obligations hereunder the Lease, or shall limit Lessee's rights to look to Lessor for the performance for such obligations.

SNTN Buzztime, Inc. Master Lease rl

Notwithstanding any assignment, transfer or grant by Lessor, and so long as the Lessee shall not be in default hereunder, neither Lessor, nor any Assignee, shall interfere with Lessee's right of quiet enjoyment and use of the Equipment. In the event that Lessor notifies Lessee of its intention to transfer, assign, or grant a security interest in all or any part of this Lease, the Equipment and/or sums payable hereunder, Lessee agrees to execute such documents as may be reasonably necessary to secure and/or complete such transfer, assignment or grant.

13. USE OF EQUIPMENT:

The Equipment will be kept by Lessee in its sole possession and control, will at all times be located at the location stated in the Equipment Schedule, and will not be removed therefrom, without prior written consent of Lessor, which shall not be unreasonably withheld. Notwithstanding the preceding sentence, Lessor shall allow Lessee, in the normal course of Lessee's business, to locate Equipment at Lessee's customer premises where Lessee has an existing contract with said customer to provide services and where delivery of such services requires Equipment to be located at Lessee's customer's premises. Lessee shall provide to Lessor the address of Equipment located at customer premises as soon as it is reasonably available and provide updated address should Equipment be re-located during the Lease. Lessee and Lessee's applicable customers will not use the Equipment for any purpose other than which it was designed and in accordance with the manufacturer's specification. Lessee and Lessee's applicable customers will keep and maintain the Equipment free and clear of all liens, charges and encumbrances (except any placed thereon by Lessor). This Lease shall be binding upon, and shall inure to, the benefit of the parties hereto and their respective successors and assigns.

14. TRANSPORTATION AND INSTALLATION:

The Equipment is to be installed at the location indicated on the Equipment Schedule.

All transportation, rigging, drayage, and any other charges for the delivery of the Equipment to Lessee's premises shall be paid by the Lessee, unless indicated otherwise on the Equipment Schedule. All installation charges shall be paid by Lessee unless indicated otherwise on the Equipment Schedule. All charges for the deinstallation shall be paid by Lessee. Transportation, rigging, and drayage from Lessee's premises at the termination of the Lease shall be arranged for by Lessor and paid by Lessee.

15. DEFAULT:

Any one of the following events shall constitute an "Event of Default" hereunder: (a) Lessee shall fail to pay when due any installment of rent or other amount due hereunder; (b) Lessee shall fail to observe or perform any other agreement to be observed or performed by Lessee hereunder; (c) Lessee, any guarantor of the Lease, or any partner of Lessee if Lessee is a partnership shall cease doing business as a going concern or make an assignment for the benefit of creditors; (d) Lessee, any guarantor of the Lease, or any partner of Lessee if Lessee is a partnership shall voluntarily file, take any action to authorize the filing, or have filed against it involuntarily, a petition for liquidation, reorganization, adjustment of debt or similar relief under the federal or state bankruptcy or insolvency law; (e) a trustee, receiver, or liquidator be appointed for Lessee, any guarantor of the Lease, or for all or a substantial part of the assets of Lessee or any guarantor; (f) any individual Lessee or individual guarantor of the Lease, or partner of Lessee if Lessee is a partnership, shall die; (g) an event of default shall occur under any other obligation Lessee or any guarantor of the Lease owes to Lessor; (h) an event of default by Lessee shall occur under any agreement involving Lessee's or a guarantor's indebtedness to a lender for borrowed money; or (i) Lessee shall have terminated its corporate existence, consolidated with, merged into, or conveyed or leased substantially all of its assets as an entity to any person unless:(i) such person executes and delivers to Lessor an agreement satisfactory in form and substance to Lessor, in its sole discretion, containing such person's effective assumption and its agreement to pay, perform, comply with and otherwise be liable for all of Lessee's obligations having previously arisen, or then or thereafter arising, under the Lease together with any documents, Agreements investments, certificates, opinions and filings by Lessor; and (ii) Lessor (and any Assignee) is satisfied as to the creditworthiness of such person.

16. REMEDIES:

Upon the occurrence of an Event of Default and at any time thereafter, Lessor or Assignee may exercise from time to time any one or more of the following remedies: (a) terminate this Lease as to any portion or all of the Equipment; (b) take immediate possession of any or all of the Equipment; wherever situated, and for such purpose enter upon any premises without liability for so doing or requirement to post bond in any legal proceeding; (c) hold, use, lease, sell or otherwise dispose of any or all of the Equipment in such manner as Lessor in its sole discretion may decide. With respect to any exercise of its rights to recover and/or dispose of any Equipment, Lessee acknowledges and agrees that Lessor shall have no obligation, subject to the requirements of commercial reasonableness, to clean up or otherwise prepare the Equipment for disposition; (d) accelerate the due date of all remaining rent payments due hereunder for the entire remaining Initial Term of this Lease or any amendment thereto, including any renewal term then in effect, whereupon said amounts shall be immediately due and payable; (e) recover the sum of: (i) any accrued and unpaid rent, plus (ii) the present value of all future rentals reserved in this Lease and contracted to be paid over the unexpired Initial Term of this Lease (or any renewal period then in effect), discounted at the rate of four percent (4%) per annum; plus (iii) the anticipated residual value of the Equipment as of the expiration of this Lease or any renewal thereof discounted at the rate of four percent (4%) per annum, (iv) any indemnity payment, if then determinable; (v) all reasonable costs and expenses incurred by Lessor in any repossession, recovery, storage, repair, sale, release or other disposition of the Equipment, including but not limited to costs of transportation, possession, storage, refurbishing, advertising and broker's fees together with all attorney's fees and cost incurred in connection therewith or otherwise resulting from Lessee's default (including any incurred at trial, on appeal or any other proceeding) of the foregoing at the rate of one and one-half (1 1/2%) per month ("default interest") (f) expend such monies as Lessor deems appropriate to cure or mitigate the effect of the Event of Default, or to protect the Lessor's interest in the Equipment and this Lease, with all such sums to be immediately reimbursed to Lessor by Lessee; (g) setoff Lessee's security deposit or any other property of Lessee held by Lessor against any amount owed by Lessee to Lessor; and (h) exercise any other remedy permitted by law, equity or any other agreements with Lessee or any guarantor of this Lease. No remedy given in this paragraph is intended to be exclusive and each shall be cumulative. No express or implied waiver by Lessor of any Event of Default shall constitute a waiver of any subsequent Event of Default.

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17. REPRESENTATIONS AND WARRANTIES BY LESSEE:

Lessee represents and warrants to Lessor that: (a) the Lease constitutes the Lessee's legal, valid and binding obligation and is enforceable against Lessee in accordance with its terms; (b) Lessee's entry into and performance under the Lease will not result in any breach, default or violation under Lessee's charter documents (articles of incorporation and bylaws in the case of a corporation or partnership agreement in the case of a partnership or articles of organization and operating agreement in the case of a limited liability company) or any other agreement to which Lessee is a party or to which it or its property is subject; (c) there are no suits or proceedings pending or threatened before any court, government agency or arbitrator which, if determined adversely to Lessee, would have a material adverse effect on its financial condition or ability to perform its obligations under the Lease; (d) that any financial statements or other information which Lessee has fumished Lessor concerning the business or condition of Lessee was true, correct and complete at the time furnished or as of the date of such financial statements; (e) the Equipment shall remain personal property; with respect to any Equipment that is the subject of any sale and leaseback transaction pursuant hereto, Lessee has good title to, rights in, and/or power to transfer all of the same. The Equipment is removable from and is not essential to the premises upon which it is located regardless of its attachment to realty, and Lessee agrees to take such action at its expense as may be necessary to prevent any third party from acquiring any interest in the Equipment as a result of its attachment to realty with respect to all of the Equipment leased hereto.

18. GENERAL:

A. The Equipment remains the personal property of Lessor and may be removed at any time, without notice, after termination of this Lease. The Equipment is removable from and is not essential to the premises at which the Equipment is located.

B. At Lessor's request, Lessee shall affix to the Equipment and each unit or element thereof, in a prominent place, appropriate tags, decals, or plates stating that the Equipment is owned by Lessor, and Lessee shall not cause or permit any such tags, decals, or plates to be removed, defaced or covered in any way.

C. Each Equipment Schedule (and this Master Equipment Lease to the extent incorporated therein), shall constitute the entire agreement between Lessor and Lessee with respect to the lease of the Equipment described in each Equipment Schedule. No waiver, consent, modification or change of terms of this Lease shall bind either party, including Lessor's Assignee, unless in writing and signed by an officer of the waiving party, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

D . Each Equipment Schedule shall be executed in counterparts. Only that counterpart of an Equipment Schedule marked "Secured Party's Original" (together with a copy of this Master Equipment Lease) shall constitute "chattel paper" under the UCC and be effective to transfer Lessor's rights therein and all other counterparts of such Equipment Schedule have been marked to indicate that they are not the "Secured Party's Original."

E . All notices and other communications hereunder shall be in writing and shall be transmitted by hand, overnight courier, United States first class mail or certified mail (return receipt requested), postage prepaid. Such notices and other communications shall be addressed to the respective party at the address set forth above or at such other address as any party may from time to time designate by notice duly given in accordance with this section. Notices shall be deemed received on the earlier of (i) three days after deposit, postage prepaid, in the United States mail, if sent by United States first class, certified, or registered mail; (ii) the next day after delivery to an overnight courier, expenses prepaid, or (iii) the date of actual delivery if delivered by hand.

F. Any provision hereof prohibited by, or unlawful or unenforceable under, any applicable law of any jurisdiction shall, at the sole option of the Lessor, be ineffective as to such jurisdiction without invalidating the remaining provisions of this Lease; provided, however, that where the provisions of any such applicable law may be waived, they are hereby waived by Lessee to the full extent permitted by law, and this shall be deemed to be a valid and binding Lease enforceable in accordance with its terms.

H. TITLE:

Title to the Equipment shall at all times remain with Lessor and Lessee shall protect and defend the title of Lessor and keep it free of all claims and liens other than those of Lessee hereunder or created by Lessor. If the Lease shall be construed by a court to be a lease "intended as security" and not a "true" lease, then Lessee, to secure all of Lessee's payment and performance obligations under the Lease, hereby grants to Lessor a first priority security interest in the Equipment and any and all insurance or other proceeds of the property and other collateral to which a security interest is granted.

I. This Lease shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors, assigns and permitted sublessees (subject, with respect to Lessee, to the provisions of Section 12 setting forth restrictions on Lessee's ability to assign this Lease or sublease the Equipment).

J. Lessee hereby authorizes Lessor to execute and/or file against Lessee in any public filing office deemed advisable by Lessor, any and all UCC financing statements (and amendments thereto) describing the Equipment and this Lease, and Lessee further irrevocably appoints Lessor as Lessee's attorney in fact to execute and/or file any and all such UCC financing statements (and amendments thereto) as Lessor considers advisable.

The filing of UCC Financing Statements against Lessee is precautionary and shall not be evidence that the Lease is intended as security.

K. Notwithstanding any other provisions of this Lease Agreement to the contrary, Lessee agrees, following the execution of the Lease by Lessee, to provide to Lessor at Lessor's demand, from time to time, any and all information reasonably required to establish Lessee's creditworthiness, including, but not limited to, financial statements and profit and loss statements, for the current period and for the proceeding three fiscal years. Lessor agrees that such information shall be kept confidential.

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During the term of the Lease, as an additional condition of Lessee's performance, Lessee agrees to provide financial statements to Lessor within a reasonable period following the end of Lessee's fiscal year.

Lessee and Lessor do each hereby warrant and represent that their respective signatories whose signatures appear below have been and are on the date of this Lease duly authorized by all necessary and appropriate action to execute this Lease.

L. This Lease shall be governed by the laws of the State of Minnesota (without giving effect to principles of conflicts of law thereof). Lessee hereby: (i) irrevocably submits to the jurisdiction of any state or federal court located in Minnesota, over any action or proceeding to enforce or defend any matter arising from or related to this Lease; (ii) irrevocably waives, to the fullest extent Lessee may effectively do so, the defense of an inconvenient forum to the maintenance of any such action or proceeding; and (iii) agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this paragraph shall affect or impair Lessor's right to serve legal process in any manner permitted by law or Lessor's right to bring any action or proceeding against Lessee or its property in the courts of any other jurisdiction.

M. LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS LEASE OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Master Equipment Lease on the dates specified below. This Master Equipment Lease shall not become effective until accepted by Lessor, as evidenced by its signature below.

617160.5

SNTN Buzztime, Inc. Master Lease rl

INCUMBENCY CERTIFICATE

The undersigned certifies that (s)he is Kendra Berger Secretary of NTN Buzztime, Inc. , a Corporation organized under the laws of the State of Delaware (hereinafter called "the Corporation") and that, as such, (s)he is authorized to execute this certificate on behalf of the Corporation, and further certifies that each of the persons specified below is a duly elected, qualified and acting officer of the Corporation, in the capacity or capacities so specified, and that the signature appearing opposite his or her name is his or her true signature.

NAME	TITLE	SIGNATURE

Kendra Berger	CFO and Secretary	/s/ Kendra Berger

Terry Bateman	CEO and President	/s/ Terry Bateman

The undersigned, on behalf of the Corporation, further certifies, covenants and represents as follows:

1. That any of the foregoing named officers is duly authorized on behalf of the Corporation to execute and deliver any Promissory Note, Security Agreement, Loan Agreement, Equipment Lease Agreement, Equipment Purchase Agreement, Equipment Sale Agreement, Bill of Sale, Completion Certificate, Assignment, UCC forms and other related documents to Data Sales Co., Inc. and to bind the Corporation thereby, until directed otherwise by the Board of Directors of the Corporation. Any modification or rescission of the authority described herein by the Board of Directors of the Corporation shall be mailed or delivered to Data Sales Co., Inc. in order to be effective.

2. That the Corporation is duly organized, existing and in good standing under the laws of the State of it's incorporation.

3. That the documents referred to in Paragraph 1 above, when executed, constitute the legal, valid and binding obligations of the Corporation, enforceable in accordance with their respective terms.

4. That the authorization, execution, delivery and performance of said documents do not violate any provision of the Corporation's certificate of Incorporation or By-Laws or any restrictions imposed upon the Corporation by any governmental authority or court and do not result in the breach of any encumbrance or security interest upon any asset of the Corporation under any indenture, agreement, or instrument to which the Corporation is a party.

		Dated and Sealed this 7th day of October, 2009 (Corporate Seal) ____________________________________________ Kendra Berger, Secretary

MINIMUM CASUALTY VALUE

FOR ALL EQUIPMENT SCHEDULES

MASTER LEASE 3-10125 AGREEMENT DATED 9/29/09

Between data sales co., Inc. ("Lessor")

And NTN Buzztime. Inc. ("Lessee")

Pursuant to Article 8B (ii) of the Master Lease Agreement, the Minimum Casualty Value payable with respect to any item of Equipment in the above referenced Equipment Schedule will be the percent of Lessor's Acquisition Cost of such item set forth opposite the Monthly Rental Payment number due on the date such Minimum Casualty Value is payable.

Payment of the Minimum Casualty Value will be in addition to the then due Monthly Rental Payment for the Equipment.

On Due Date of Monthly Rental Payment No.	Percentage of the Acquisition Cost Of the Equipment	On Due Date of Monthly Rental Payment No.	Percentage of the Acquisition Cost Of the Equipment

1	110%	25	60%
2	110%	26	60%
3	110%	27	60%
4	110%	28	60%
5	110%	29	60%
6	110%	30	60%
7	100%	31	50%
8	100%	32	50%
9	100%	33	50%
10	100%	34	50%
11	100%	35	50%
12	100%	36	50%
13	80%	37	40%
14	80%	38	40%
15	80%	39	40%
16	80%	40	40%
17	70%	41	35%
18	70%	42	35%
19	70%	43	35%
20	70%	44	35%
21	70%	45	35%
22	70%	46	35%
23	70%	47	35%
24	70%	48	35 %

Addendum A

Credit for shipment delay

Due to the delay in shipping product to Buzztime, DMS agrees to the following changes in the contract:

1. Penalty for delay in original production schedule:

●

DM Sourcing agrees to issue a credit of $26 per unit for 1,500 Playmaker units that must be purchased from another manufacturer.

●

Total credit will be $39,000.

●

The credit will be applied against the first three 1,000-unit orders placed with DM Sourcing:

▪

First order: $13,000 credit to be deducted from invoice total

▪

Second order: $13,000 credit to be deducted from invoice total

▪

Third order: $13,000 credit to be deducted from invoice total

●

NTN Buzztime's total purchase commitment will be reduced by 1,500 units to 28,500.

2 . Contingent penalty for future delays:

In the event that DM Sourcing fails to deliver Beta test units by September 17, 2009, the following penalty terms will apply:

●

DM agrees to issue a credit of $26 per unit for 3,000 Playmaker units that must be sourced from another manufacturer.

●

Total credit will be $26,000.

●

The credit will be applied against the fourth and fifth 1,000-unit orders placed with DM Sourcing:

▪

Fourth order: $13,000 credit to be deducted from invoice total

▪

Fifth order : $13,000 credit to be deducted from invoice total

●

NTN Buzztime's total purchase commitment will be reduced by 1,000 units to 27,500.

●

If the September 17 Beta unit delivery milestone is not met, NTN Buzztime in its sole discretion shall have the right to terminate the agreement.

●

Should Approved product not be available to NTN Buzztime by December 1, 2009 —NTN Buzztime will have the right to terminate the agreement and DMS will refund the entire deposit of $38,000.

Revocable Assignment

For

Third Party Leasing

Revocable Assignment

For

Third Party Leasing

Customer, (as set forth below), hereby assigns to Assignee, (as set forth below), under the terms and conditions in this Assignment, its rights to purchase equipment and related software and services (the "Products") from Dell Marketing L.P. ("Dell"). The Products will be sold to Assignee under the terms and conditions of this Assignment and Dell's terms and conditions of sale set as forth on the applicable invoice(s) between Assignee and Dell (collectively, the "Sales Documents").

Assignment. Assignee, or Customer on behalf of Assignee, will provide to Dell the purchase order(s) for each order of the Products and in such purchase order(s) will indicate that Assignee is purchasing from Dell for lease to Customer. Customer and Assignee understand and agree that Assignee may only purchase the Products for the purpose of leasing the Products to Customer and may not purchase the Products for its own use or to lease or sell to other third parties.

Consent to Assignment effective dates: the period of 9/23/2009 to 9/22/2010

Customer's Continuing Responsibility. Customer agrees that it shall remain liable and responsible for all obligations under the Sales Documents regardless of whether Assignee has executed this Assignment. Assignee's payment obligation under this Assignment is to pay Dell within five (5) business days of the date Customer accepts the Products under the terms of the lease between Assignee as Lessor and Customer as Lessee. However, if Dell has not received payment from Assignee within thirty (30) days of Dell's invoice, Customer agrees to pay to Dell within five (5) days of Dell's request for all invoice balances due on all Products except any Product that Dell has accepted for return under the Dell Total Satisfaction Return Policy. In addition to Dell's other remedies, Dell may discontinue providing warranty, service and technical support or hold shipments if payments to Dell are late.

3.	Warranties, Licenses and Service. Assignee agrees that all rights with respect to warranties, licenses and service, and all rights under the Sales Documents, other than ownership rights of equipment, shall be for the benefit of Customer.

4.	Approval of Subsequent Assignments. Assignee may not assign its rights and obligations under this Assignment or the Sales Documents without Dell's prior written approval.

Integration/Modifications. This Assignment constitutes the entire agreement and understanding between the parties on the subject matter hereof and supersedes and merges all prior agreements related thereto. No modification of or amendment to this Assignment shall be effective unless in writing signed by the parties and stating the parties' intent by such instrument to amend this Assignment. This Assignment shall not be supplemented or modified by any course of dealing or other trade usage.

The parties have signed this Assignment on the dates below their signatures. The effective date of this Assignment is the latest of those dates.

NTN Buzztime, Inc.		Date Sales Co., Inc.
Customer Assignor		Leasing Company/Assignee

By:	/s/ Kendra Berger	By:	/s/ Paul C. Breckner
			Paul C. Breckner President/CEO

Date:	10/1/09	Date:	9/29/09

Dell Marketing L. P.

By:

Date:

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Certain active subsidiaries of the Company as of December 31, 2010 are listed below. The names of certain subsidiaries, which considered in the aggregate would not constitute a significant subsidiary, have been omitted.

Subsidiary		State Or Country Of Organization

Buzztime Entertainment, Inc.		Delaware

NTN Wireless Communications, Inc.		Delaware

Software Solutions, Inc.		Delaware

NTN Canada, Inc.		Canada

NTN Buzztime Limited		United Kingdom

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-167352, 333-122024, 333-60814, 333-17247, 333-12777, and 033-95776 on Form S-8, and in Registration Statement Nos. 333-111538, 333-105429, 333-51650, 333-80143, 333-69383, 333-40625, and 333-14129 on form S-3 of our report dated March 25, 2011, relating to the consolidated financial statements and the financial statement schedule of NTN Buzztime, Inc. and Subsidiaries, appearing in this Annual Report on Form 10-K for the year ended December 31, 2010.

/s/ Mayer Hoffman McCann P.C.

San Diego, California

March 25, 2011

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Bush, Chief Executive Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this report on Form 10-K of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: March 25, 2011		/s/ Michael J. bush
		Michael J. Bush, Chief Executive Officer NTN Buzztime, Inc.

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kendra Berger, Chief Financial Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this report on Form 10-K of the Company;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: March 25, 2011		/s/ K ENDRA B ERGER
		Kendra Berger, Chief Financial Officer NTN Buzztime, Inc.

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2010, I, Michael J. Bush, Chief Executive Officer of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Annual Report on Form 10-K of the Registrant for the year ended December 31, 2010, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Dated: March 25, 2011		/s/ Michael J. bush
		Michael J. Bush, Chief Executive Officer NTN Buzztime, Inc.

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFIER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2010, I, Kendra Berger, Chief Financial Officer of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Dated: March 25, 2011		/s/ K ENDRA B ERGER
		Kendra Berger, Chief Financial Officer NTN Buzztime, Inc.