TABLE OF CONTENTS

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated herein by reference contain “forward-looking statements” – that is statements related to future events, results, performance, prospects and opportunities, including statements related to our strategic plans and targets, revenue generation, product availability and offerings, capital needs, capital expenditures, industry trends and our financial position. Forward-looking statements are based on information currently available to us, on our current expectations, estimates, forecasts, and projections about the industries in which we operate and on the beliefs and assumptions of management. Forward looking statements often contain words such as “expects,” “anticipates,” “could,” “targets,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would,” and similar expressions. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances, are forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in any forward-looking statements. For us, particular factors that might cause or contribute to such differences include (1) our ability to compete effectively within the highly competitive interactive games, entertainment and marketing services industries, (2) the impact of new products and technological change, especially in the mobile and wireless markets, on our operations and competitiveness, (3) our ability to maintain or improve our relationship with Buffalo Wild Wings, who together with its franchisees accounted for a significant portion of our revenues, (4) our ability to maintain an adequate supply of the tablet and related equipment used in our BEOND product line, (5) our ability to adequately protect our proprietary rights and intellectual property, (6) our ability to raise additional funds in the future if necessary, on favorable terms,terms; we have borrowed substantially all amounts available to us under existing credit facilities and, subject to limited exceptions, our loan and security agreement with East West Bank prohibits us from borrowing additional amounts from other lenders, (7) our ability to significantly grow our subscription revenue and implement our other business strategies, (8) our ability to successfully and (8)efficiently manage the design, manufacturing and assembly process of our BEOND tablet platform and (9) the other risks and uncertainties described in Part I, Item 1A “Risk Factors” of this report and described in other documents we file from time to time with the Securities and Exchange Commission, or SEC, including our Quarterly Reports on Form 10-Q. Readers are urged not to place undue reliance on the forward-looking statements contained in this report or incorporated by reference herein, which speak only as of the date of this report. Except as required by law, we do not undertake any obligation to revise or update any such forward-looking statement to reflect future events or circumstances.

PART I

About Our Business and How We Talk About It

We provide andeliver interactive entertainment and marketing servicesinnovative dining technology to bars and restaurants in North America. Our customers license our customizable solution to differentiate themselves via competitive fun by offering guests trivia, card, sports and single player games, nationwide competitions, and by offering self-service dining features including dynamic menus, touchscreen ordering and secure payment. Our platform for hospitalitycan improve operating efficiencies, create connections among the players and venues that offers games, events, and entertainment experiences to their patrons. Our interactive entertainment network helps our network subscribers to acquire, engage and retain patrons.amplify guests’ positive experiences. Built on an extended network platform, thisour interactive entertainment system has historically allowed multiple players to interact at the venue, and now also enables competition between venues, referred to as massively multiplayer gaming. Our current tablet platform, which we refer to as Buzztime Entertainment On Demand, or BEOND, was first introduced as a pilot program in December 2012, was expanded commercially during 2013, and the expansion was scaled during 2014. We continue to enhance our network architecture and the BEOND technologytablet platform and player engagement paradigms. We also continue to support our legacy network product line, which we refer to as Classic.

We currently generate revenue by charging subscription fees for our service to our network subscribers, by leasing equipment (including tablets used in our BEOND tablet platform and the cases and charging trays for the tablets) to certain network subscribers, by hosting live trivia events, and by selling advertising aired on in-venue screens and as part of customized games and directly from consumers who pay to play or use the premium productsgames. In 2014, we began offering viapay-to-play single player games to certain customers. During the second quarter of 2015, we made a strategic change in our BEOND platform in 2014. These premium products currently includecontent model by making single player games available on both a free-to-consumer (in exchange for an arcadeincreased subscription fee) and pay-to-play basis. This change required us to delay the general availability of pay-to-play games as we retooled its content, workflow and positioning. As a digital music jukebox.result, during 2015, we generated additional subscription fee revenue from those venues offering free-to-consumer single player games. We began rolling out the new pay-to-play single player games during the second quarter of 2016.

Currently, approximately 3,000 venues in the U.S. and Canada subscribe to our interactive entertainment network, of which approximately 37% are using our BEOND platform. We currently have over six million player registrations, and over 80Over 136 million games were played on our network during 2014. Additionally, our mobile application has been installed on over one million consumer mobile devices. Approximately 46%2016, and as of December 31, 2016, approximately 54% of our network subscriber venues are related toaffiliated with national and regional restaurants and includerestaurant brands, including Buffalo Wild Wings, Old Chicago, Aroogas, Buffalo Wings & Rings, Old Chicago, Native New Yorker,Grill & Wings, Houlihans, Beef O’Brady’s, Boston Pizza, and Boston Pizza.Arooga’s.

We own several trademarks and consider the Buzztime®, Playmaker®, Mobile Playmaker, and BEOND Powered by Buzztime and Play Along trademarks to be among our most valuable assets. These and our other registered and unregistered trademarks used in this document are our property. Other trademarks are the property of their respective owners.

Unless otherwise indicated, references in this report: (a) to “Buzztime,” “NTN,” “we,” “us” and “our” refer to NTN Buzztime, Inc. and its consolidated subsidiaries; (b) to “network subscribers” or “customers” refer to hospitality venues that subscribe to our network service; (c) to “consumers” or “players” refer to the individuals that engage in our games, events, and entertainment experiences available at our customers’ venues and (d) to “hospitality locations,” “venues” or “sites” refer to locations (such as a bar or restaurant) of our customers at which our games, events, and entertainment experiences are available to consumers.

Recent Developments

Amendments to East West Bank Credit Facility

In April 2014,2015, we completed an underwritten public offering inentered into a loan and security agreement with East West Bank, pursuant to which, we issuedcould request advances in an aggregate outstanding amount at any time up to the lesser of $7,500,000, which we refer to as the revolving line, or an amount equal to our borrowing base, in each case, less the aggregate outstanding principal amount of prior advances. In March 2016, we entered into a totalfirst amendment to the loan and security agreement to allow us the ability to request advances in an aggregate outstanding amount at any time up to the lesser of 12,765,000(a) $7,500,000, which we refer to as the revolving line, or (b) the sum of $2,000,000 (which we refer to as the “sublimit”) plus the amount equal to our borrowing base, in each case, less the aggregate outstanding principal amount of prior advances. The first amendment also amended certain financial covenants. In December 2016, we entered into a second amendment to the loan and security agreement to extend the due date of all advances under the revolving line from December 31, 2017 to January 15, 2018. In February 2017, we entered into a third amendment to the loan and security agreement to extend the maturity date of the $2,000,000 sublimit from March 31, 2017 to June 15, 2017, to establish the minimum adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, targets for each of our 2017 fiscal quarters, to remove the monthly compliance check of churn rate targets and to amend when compliance with minimum deposit amounts is measured. For additional information regarding this credit facility, see “PART II—ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” below.

Registered Direct Offering

As previously reported, in a registered direct offering that closed on November 4, 2016, we sold 412,071 shares of our common stock (including shares issued upon exerciseand received net proceeds of approximately $2.7 million, after deducting estimated offering expenses. We are using and will continue to use the net proceeds of the offering for general corporate purposes, which may include working capital, general and administrative expenses, capital expenditures and implementation of our strategic priorities.

Reverse/forward split of our common stock

At our 2016 annual meeting of stockholders, our stockholders approved an over-allotment option). amendment to our restated certificate of incorporation to give effect to, first, a reverse split of our outstanding common stock at an exchange ratio of 1-for-100 and, then, immediately following such reverse split, a forward split of our outstanding common stock at a ratio that is not less than 2-for-1 nor greater than 4-for-1, with the final ratio to be selected by our board of directors in its sole discretion. Our board of directors set the final ratio of the forward split at 2-for-1. We refer to the reverse split and to the forward split, together, as the “reverse/forward split.”

The public offering price for each shareeffective date of the reverse/forward split was June 16, 2016. As of immediately prior to the reverse/forward split, we had 92,439,174 of common stock outstanding, and subsequent to the reverse/forward split, we had 1,848,597 shares of common stock outstanding. Approximately $3,000 was $0.55,paid to cashed-out stockholders who owned less than 100 shares immediately prior to the reverse split.

Notice of non-compliance with NYSE MKT continued listing standard

As previously reported, in November 2015, we received a letter from the NYSE Regulation Inc. stating that we are not in compliance with Section 1003(a)(iii) of the NYSE MKT Company Guide because we reported stockholders’ equity of less than $6 million as of September 30, 2015 and had net losses in five of our most recent fiscal years ended December 31, 2014. In December 2015, we submitted a plan to NYSE Regulation advising of actions we have taken or will take to regain compliance with Section 1003(a)(iii) by May 13, 2017. In January 2016, NYSE Regulation notified us that it has accepted our plan and granted us a plan period that extends through May 13, 2017 to regain compliance with Section 1003(a)(iii).

In April 2016, as previously reported, we received a second letter from NYSE Regulation stating that we are not in compliance with Section 1003(a)(ii) of the Company Guide because we reported stockholders’ equity of less than $4 million as of December 31, 2015 and had net losses in three of our four most recent fiscal years ended December 31, 2015. As a result, we continue to be subject to the procedures and requirements of Section 1009 of the Company Guide. Because this instance of noncompliance is in addition to our noncompliance with Section 1003(a)(iii) of the Company Guide discussed above, we were not required to submit a new compliance plan.

Under Section 1003(a)(i) of the Company Guide, the NYSE MKT will normally consider suspending dealings in, or removing from the list, securities of an issuer which has stockholders’ equity of less than $2 million if such issuer has sustained losses from continuing operations and/or net losses in two of its three most recent fiscal years. We had net losses in two of our three most recent fiscal years ended December 31, 2015. Our stockholders’ equity at September 30, 2016 was $1.8 million, and accordingly, we were below compliance with Section 1003(a)(i), as well. However, due to the offering discussed above, we raised approximately $2.7 million in that offering, and our stockholders’ equity at December 31, 2016 was approximately $4.1 million.

The listing of our common stock on the NYSE MKT is being continued during the plan period pursuant to an extension. The NYSE Regulation staff reviews us periodically for compliance with initiatives outlined in our plan. If we are not in compliance with the listing requirements with which we are currently not in compliance by May 13, 2017 or if we do not make progress consistent with our plan during the plan period, NYSE Regulation staff will initiate delisting proceedings as appropriate. See “ITEM 1A. RISK FACTORS—Risks Relating to the Market for Our Common Stock—Our common stock could be delisted or suspended from trading on the NYSE MKT if we do not regain compliance with continued listing criteria with which we are currently not compliant or if we fail to meet any other continued listing criteria,” below. We have continued to make progress consistent with our plan during the plan period. Raising capital in the offering discussed above is consistent with the initiatives outlined in our plan to regain compliance, however, the amount raised in that offering did not increase our stockholders’ equity to the amount required to regain compliance with all of the listing requirements in Section 1003(a). We are continuing to explore options to address our non-compliance, including by raising additional capital through additional equity financings.

Our Strategy

Below is a discussion of our strategy and highlights of current accomplishments and milestones achieved during 2016 and year to date in 2017:

Scale digital menu and payment functionality.We are heavily focused on delivering digital menu and payment functionality on the tablet platform, which we believe will improve the operational and marketing value of our product offering. This expanded functionality will help us deliver an enhanced guest experience. After ensuring our tablet met the Payment Card Industry, or PCI, compliance standards applicable to our platform, we launched a digital menu and payment functionality pilot test at Buffalo Wild Wings at 15 sites, which was completed in October 2016. Subsequent to the pilot test, we received certification on our EMV functionality, which enables additional payment security and fraud protection for our restaurant partners. In March 2017, we announced that Buffalo Wild Wings chose us to be its provider of digital menu, order, and payment functionality. Rolling out this functionality will be a key focus for us in 2017.

Improve value and price for our “independent” customers.During 2016, we continued to focus on, and we received $7,020,750 in gross proceeds fromare continuing to focus on, entertainment, which is a key source of value to our independent customers. We entered into several partnerships during the offering. The net proceeds fromyear, which centered on driving guest traffic at our customer’s venues, increasing the offering were approximately $6,369,000, after deducting underwriting discounts of 7%guest community and offering expenses.improving loyalty. Such partnerships included the Washington Redskins, FanDuel, and Fandango.

With respect to price, we continued to make progress on our hardware design and quality in order to reduce expense and to give us the ability to offer flexibility in our pricing for quality independent customers. During the fourth quarter of 2016, we began deploying our own proprietary tablet. Building our own tablet gives us control over the product specifications and allows us to gain control over the supply chain, which should help ensure stability, all of which has resulted in reduced hardware expenses and allowed us to offer multiple pricing options for our independent customers. Our Strategy

We have historically operated under a subscription-based model whereproprietary tablet also gives us more flexibility to expand our primary sourceproduct offering and enter adjacent markets. During the fourth quarter of revenue was monthly subscription fees from network subscribers. Although2016, Harbor Retirement Associates, LLC, which manages the HarborChase senior care communities, agreed to install our BEOND platform offering in all of its new communities. During 2017, we expect that subscription fees will remaincontinue working on hardware design and costs and enhancing our primary source of revenue, we believe there are other transactional consumer revenue streams that could grow as a result ofproduct offering on our investment in the BEONDnew tablet platform, such as expanding the capabilities of our digital signage package and continuing to explore new adjacent markets.

Refine our commercial execution.We are focused on increasing our site count of both independent customers and chain customers. Receiving a reference from a national chain account, such as Buffalo Wild Wings, is critical to our chain efforts, and our ability to demonstrate Buffalo Wild Wings as a strategic user of the menu, order and pay functionality is critical to receiving that reference. For our independent customers, we continue to model and test our go-to-market efforts by improving our sales processes, technology and people. During 2016, we have made progress on ramping up our outbound sales team. We continue to make improvements in our demand generation programs and expect to see results from these programs in 2017. Additionally, we continue to work with our distribution partner Heartland Digital Dining. Through a dealer network, Digital Dining offers its own integrated restaurant management system as well as third-party offerings, such as our BEOND platform, to hospitality venues. During 2016, we became the only tableside menu, order, pay and entertainment platform that Digital Dining’s dealer network could offer to hospitality venues. During the fourth quarter of 2016, we sold our BEOND platform to a few hospitality venues through this channel.

Monetize the network.We intend to grow the consumer audience by engaging them more with improved entertainment experiences and providing premium content that we can monetize through direct payment. In addition to the free-to-consumer games we provide to certain customers, we launched a pay-to-play premium games lobby during the second quarter of 2016 and are in approximately 500 sites as of March 7, 2017. We expect to continue rolling out the games lobby at additional sites throughout 2017, which we expect to result in accretive revenue generated directly from the consumers who play or use our premium products. Our strategy for achieving revenue growth includes the following:

Geographic Areason a pay-to-play basis.

The following table presentsAdditionally, we continued to leverage our network with on-tablet local and national advertising campaigns. Most recently, we completed a four-month Anheuser-Busch program called Let’s Go. This program was built around the geographic breakdownNFL season, and our BEOND tablet platform was used to provide a companion to the NFL season with scores and stats available for a consumer’s favorite team. Let’s Go also added an interactive bobble head feature, where consumers could build and customize their own bobble head, complete with NFL licensed jerseys and gear. We believe this program demonstrated the power of our revenuebrands connecting with target consumers and delivering great experiences for the last two fiscal years.consumers within the restaurant venues.

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

Competition

We face direct competition in venues and face competition for total entertainment and marketing dollars in the marketplace from other companies offering similar content and services. A relatively small number of direct competitors are active in the hospitality marketing services and entertainment markets, including Ziosk and E la Carte, Inc., Ziosk, Touchtunes Interactive Networks, The Answer Is . . . Productions Inc., AMI Rowe, and Livewire/Incredible Technologies, Inc. Competing forms of technology, entertainment, and marketing available in hospitality venues include on-table bar and restaurant entertainment systems, music and video-based systems, live entertainment and games, cable, satellite and pay-per-view programming, coin-operated single-player games/amusements, and traffic-building promotions like happy hour specials and buffets.

In addition, we are increasingly competing with games, apps and other forms of entertainment offerings available directly to consumers on their smart phones and tablets.

Buzztime Significant Customer

Our customers range from small independently operated bars and restaurants to bars and restaurants operated by national chains. This results in diverse venue sizes and locations. Currently, approximately 3,000As of December 31, 2016, 2,814 venues in the U.S. and Canada subscribesubscribed to our interactive entertainment network. For the years ended December 31, 2014 and 2013, we generatednetwork, of which, approximately $11,438,000 and $7,648,000, respectively, of revenue from43% were Buffalo Wild Wings corporate-owned restaurants and its franchisees which represented 44%(collectively, “Buffalo Wild Wings”). For the years ended December 31, 2016 and 32% of our total2015, revenue for those years, respectively. generated from Buffalo Wild Wings was as follows:

As of December 31, 2014, approximately $1,558,000 was2016 and 2015, amounts included in accounts receivable from Buffalo Wild Wings corporate-owned restaurants and its franchisees, all of which was received by February 2015, compared to $259,000 as of December 31, 2013.follows:

Backlog

We historicallygenerally do not have not had a significant backlog at any time because we have been able tonormally can deliver and install new systems at venueshospitality locations within a 30 day period. Duringthe delivery schedule requested by customers (generally within three to four weeks). However, during 2014, we encountered challenges with the assembly of the cases for our BEOND tablet, which prevented us from delivering and installing new systems within the 30 day period, thereby creating a backlog. As of December 31, 2014, customer agreements worth approximately $1,416,000 were affected by the backlog. We determined the worth of such agreements based on the sum of the annualized amount of the subscription fees, which is recognized as revenue as the service is provided, and the amount of equipment lease revenue, if any, subject to such agreements, which is recognized as revenue upon installation. Asinstallation of March 24,the equipment leased. During 2015, the worth of agreements affected by the backlog was approximately $2,723,000. Although our current backlog has increased compared to our backlog at December 31, 2014, we believe we have resolved the case assembly issue, and as a result, we expectreturned to eliminate the backlog during 2015. See “Item 1A. Risk Factors—A disruption in the supply of equipment could negatively impact our subscriptionsnormal delivery and revenue.”installation schedule with no significant backlog.

Licensing, Trademarks, Copyrights and Patents

A majority of the gaming content available on our BEOND platform is internally developed. The balance is licensed from third parties. We also license third party content for our pay-to-play and free-to-consumer games lobby. The amounts paid for such third party licensed content was not material during either 2016 or 2015. All of the gaming content available on our Classic platform is internally developed.

Our intellectual property assets, including patents, trademarks, and copyrights, are important to our business and, accordingly, we have programs in place designedactively seek to protect these assets.the proprietary technology that we consider important to our business. No single patent or copyright is solely responsible for protecting our products.

We keep confidential as trade secrets our technology, know-how and software. Some of the hardware we use in our operations is customized, and all of it is purchased from outside vendors. We enter into agreements with third parties with whom we conduct business, which contain provisions designed to protect our intellectual property and to limit access to, and disclosure of, our proprietary information. We also enter into confidentiality and invention assignment agreements with our employees and contractors.

We believe the duration of our patents is adequate relative to the expected lives of our products. We consider the following United States patents to be important to the protection of our products and service:

We have trademark protection for the names of our key proprietary programming, products, and services to the extent that we believe trademark protection is appropriate. We are expanding our efforts to protect these investments. We consider the Buzztime, Playmaker, Mobile Playmaker, BEOND Powered by Buzztime and Play AlongPlayersPlus trademarks and our other related trademarks to be valuable assets, and we seek to protect them through a variety of actions. Our content, branding, and some of our game titles, such as Countdown, SIX, and Showdown are also protected by copyright and trademark law.

Geographic Markets

As of December 31, 2016, 2,814 venues in the U.S. and Canada subscribed to our interactive entertainment network. The following table presents the geographic breakdown of our revenue for the last two fiscal years.

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

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,December 2012, we received approval from the Federal Communications Commission, orthe FCC,for our 900 MHz classic playmakers, and in December 2012, we received approval fromor the FCC, for our BEOND tablet charging trays.trays, and in September 2015, we received FCC approval for our third generation BEOND tablet cases with and without payment electronics. The BEOND tablets we currently use have been certified by its manufacturer.

In addition to laws and regulations applicable to businesses generally, we are also subject to laws and regulations that apply directly to the interactive entertainment and product marketing industries. Additionally, state and federal governments may adopt additional laws and regulations that address issues related to certain aspects of our business such as:

As part of our service, we operate games of chance and games of skill. These games are subject to regulation in many jurisdictions. Our games are played just for fun and winner recognition. None of our games award anything of value to winners. Included in our offering are a number of interactive card games, such as Texas Hold’em poker. These card games are restricted in certain jurisdictions. The laws and regulations that govern these games, however, vary in formfrom jurisdiction to jurisdiction and are subject to legislative and regulatory change, 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 and 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

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, and proxy statements and other information we file or furnish pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website atwww.buzztime.com/business/investor-relations/ under the headingSEC Filings as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC. In addition, we make available on that same website under the headingCorporate Governance our (i) our code of conduct and ethics; (ii) our corporate governance guidelines; and (iii) the charter of each active committee of our board of directors. We intend to disclose any amendment to, or a waiver from, a provision of our code of conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in paragraph (b) of Item 406 of Regulation S-K by posting such information on that website.

Materials we file with the SEC may also 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 a website atwww.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 24, 2015,7, 2017, we employed approximately 137109 people on a full-time basis and 238293 people on a part-time basis. We also utilize independent contractors for specific projects and hire as many as 6 seasonal employees as needed to produce our play-along sports games during various professional and collegiate sports seasons.projects. None of our employees are represented by a labor union, and we believe our employee relations are satisfactory.

Our Corporate History

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

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:report.

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

We face intense competition in the markets in which we operate. We face significant competition for entertainment and marketing services in hospitality venues from other companies offering similar content and services. Our services also compete with games, apps and other forms of entertainment offerings available directly to consumers on their smart phones and tablets. See “Business—Competition.“ITEM 1. Business—Competition,” above. 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, our 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.

The increased availability of the internet and wireless networks provides consumers with an increasing number of alternatives to our entertainment offerings. With this increasing competition and the rapid pace of change in product and service offerings, 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 competing companies and technologies. 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, especially in the mobile and wireless markets, 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 and market penetration of our technologies, products, and services. In particular, the mobile and wireless device, content, applications, social media, and entertainment markets are highly competitive and rapidly changing. Accordingly, our future performance will depend on our ability to:

If we do not compete successfully in developing new products and keep pace with rapid technological change, we will be unable to achieve profitability or sustain a meaningful market position.

We may not be successful in developing and marketing new products and services that respond to technological and competitive developments, changing customer needs, and consumer preferences. We may have to incur substantial costs to modify or adapt our products or services to respond to these developments, customer needs, and changing preferences. 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 receive a significant portion of our revenues from Buffalo Wild Wings, corporate-owned restaurants and its franchisees, and any decrease in the amount of their business could materially and adversely affect our cash flow and revenue.

For the year ended December 31, 2014,2016, Buffalo Wild Wings corporate-owned restaurants and its franchisees accounted for approximately 44%40%, or $11,438,000,$8,913,000, of our total revenue. As of that date, approximately $1,558,000$261,000 was included in accounts receivable, allreceivable. If a significant number of which was received by February 2015. Ifthe Buffalo Wild Wings a significant number ofcorporate-owned restaurants or its franchisees, or any other customer who may in the future represent a significant portion of our revenue, 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.

A disruption in the supply of equipment could negatively impact our subscriptions and revenue.

The BEOND tablet is currently manufactured by one

During the fourth quarter of 2016, we began having an unaffiliated third party manufacture an Android-based tablet built to our specifications. Other than a small amount of inventory of the third-party tablet we have historically used in our BEOND platform, we expect to use our own tablet on a going-forward basis. The third party manufacturing our own tablet also manufactures our tablet equipment—tablet charging trays and wetablet cases. We currently do not have an alternative manufacturing source for or an alternative device to, the tablet. We purchase the BEOND tablets from various unaffiliated third parties, and we purchase each piece of the BEONDour own tablet equipment (consisting of tablet case components and tablet charging trays) from a different unaffiliated third party with respect to each piece of equipment. A different third party assembles the tablet cases. We currently do not have an alternative supply source foror the tablet equipment or an alternativealternatives for the tablet case assembler.equipment.

If the sole manufacturer of our own tablet is delayed in delivering tablets to us, becomes unavailable, has product quality issues, or shortages occur, in addition to not realizing the benefits of having a tablet manufactured to our specifications, we would need to return to the historical third-party tablets or find an alternative device. Similarly, if the sole manufacturer of the tablet or any of our sole suppliers or our sole tablet case assemblerequipment is delayed in delivering the tablets and related equipment to us, becomebecomes unavailable, havehas product quality issues, or shortages occur, we may be unable to timely obtain replacement tablet equipment. For example, during 2014, we encountered challenges with the assembly of the cases for our BEOND tablet, which prevented us from delivering and installing new systems within the time frame requested by customers, thereby creating a backlog. Asbacklog of approximately $1,416,000 as of December 31, 2014, customer subscription agreements worth approximately $1,416,000 were affected by the backlog. We determined the worth of such agreements based on the sum of the annualized amount of the subscription fees, which is recognized as revenue as the service is provided, and the amount of equipment lease revenue, if any, subject to such agreements, which is recognized as revenue upon installation. As of March 24, 2015, the worth of agreements affected by the backlog was approximately $2,723,000.2014. See “ITEM 1. BUSINESS—Backlog,” above. Although our current backlog is higher than our backlog at December 31, 2014, we believe we will reduce or eliminate the backlog related tofixed our case assembly issues duringissue in 2015 however,and currently do not have any significant backlog, no assurances can be given in that regard and that challenge could continue or other challenges couldwill not arise, including challenges related to transitioning to new versionsour own tablet. Delays, unavailability of the tablet that may require different cases, charging trays or other equipment. Delays, unavailability oftablet equipment, product quality issues and shortages could hurtdamage our reputation and customer loyalty, cause subscription cancellations, increase our expense and reduce our revenue. See also “Our business could be adversely impacted if the sole manufacturer of our own tablet and tablet equipment is not able to meet our manufacturing quality standards,” below.

If our manufacturersmanufacturer and/or suppliers were to go out of business or otherwise become unable to meet our needs for reliable 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 business could be adversely impacted if the sole manufacturer of our tablet and our tablet equipment is not able to meet our manufacturing quality standards.

As discussed above, one unaffiliated third party manufactures our own tablet and our tablet equipment. Continued improvement in supply-chain management and manufacturing of our own tablet and tablet equipment and manufacturing quality and product testing are important to our business. Flaws in the design and manufacturing of our own tablet or tablet equipment or both (by us or our supplier) could result in substantial delays in shipment and in substantial repair, replacement or service costs, could damage our reputation and customer loyalty, could cause subscription cancellations, and could increase our expense and reduce our revenue. Costs associated with tablet or tablet equipment defects due to, for example, problems in our design and manufacturing processes, could include: (a) writing off the value of inventory; (b) disposing of items that cannot be fixed; (c) recalling items that have been shipped; and (d) providing replacements or modifications. These costs could be significant and may increase expenses and lower gross margin.

As previously reported, in early 2014, we began to manufacture, design and manage the supply chain of the equipment related to our BEOND second generation tablet platform in-house and experienced problems with the design and manufacturing processes. As a result, during 2015, we recognized approximately $979,000 of repair expense related to the second generation in-house designed BEOND tablet equipment that we have had to repair or deem we will need to repair in the future. We can give no assurances that the amount of repair expense that we have accrued with respect to tablet equipment that we estimate will need repair in the future is adequate. If more equipment needs repair than the amount currently estimated, we may have to accrue for additional repair expense.

During 2015, due to our design and manufacturing process problems discussed above with the second generation tablet platform equipment, we re-evaluated the strategy of managing the manufacture, design and supply chain in-house. In connection with that re-evaluation, we determined to write off approximately $797,000 of tablet components that became obsolete due to upcoming changes in the tablet platform. Also during 2015, and as part of our re-evaluation, we out-sourced the supply-chain management and manufacturing of certain equipment related to our third generation BEOND tablet platform to an unaffiliated third party manufacturer. This relationship is in its early stages, and we are unable to predict if it will be successful. Among other things, the equipment manufactured by this manufacturer may not meet our quality standards. For example, during the fourth quarter of 2015, some of the tablet cases produced by this manufacturer had quality defects, and although we have not yet incurred any direct costs associated with addressing these defects, all of which have been or will be borne by the manufacturer, our tablet case inventory level may decrease as a result. See also “A disruption in the supply of equipment could negatively impact our subscriptions and revenue,” above.

There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our equipment will be sufficient to permit us to avoid equipment quality issues. Significant equipment quality issues could have a material adverse effect on our business, results of operations or financial condition.

If we do not adequately protect our proprietary rights and intellectual property or we are subjected to intellectual property claims by others, 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 have a small number of patents and patent applications pending in jurisdictions related to our business activities. 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 expense. 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 expense. 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 believe that the success of our business also depends on such factors as the technical expertise and innovative capabilities of our employees. It is our policy that all employees and consultants sign non-disclosure agreements and assignment of invention agreements. Our competitors, 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 any such claim could be time-consuming and costly to us, adversely affecting our financial condition.

From time to time, we hire or retain employees or consultants who may have worked for other companies developing products similar to those that we offer. These other companies may claim that our products are based on their products and that we have misappropriated their intellectual property. Any such claim could cause us to incur substantial costs, which in turn could materially adversely affect our business.

We may be liable for the content and services we make available on our Buzztime network and the internet.

We make content and entertainment services available on our Buzztime network and the internet which includes games and game content, software, and a variety of other entertainment content. The availability of this content and services and our branding 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.

Our cash flow may not cover our 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:

In addition, in order to fully execute on our long-term strategic initiatives discussed above under the section entitled “Our“ITEM 1. Business—Our Strategy,” we believe we will likely require additional funding.

If we need to raise additional funds in the future, such funds may not be available on favorable terms, or at all. 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 continue to develop and implement our BEOND technology platform and product line, develop or enhance our other products and services, successfully execute our business plan or any or all of our strategic initiatives, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.

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 $5,030,000$2,923,000 and $1,053,000$7,226,000 for the years ended December 31, 20142016 and 2013,2015, respectively, and have an accumulated deficit of $117,845,000$128,026,000 as of December 31, 2014.2016. We may also incur future operating and net losses, due in part to expenditures required to continue to implement our business strategies, including the continued development and implementation of our BEOND technology platform and product line. Despite significant expenditures, we may not be able to achieve or maintain profitability. Moreover, even 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. See also “—Risks Relating to the Market for Our Common Stock—Our common stock could be delisted or suspended from trading on the NYSE MKT if we do not regain compliance with continued listing criteria with which we are currently not compliant or if we fail to meet any other continued listing criteria,” below.

We may not be able to significantly grow our subscription revenue and implement our other business strategies.

Our success depends on our ability to increase market awareness and encourage the adoption of the Buzztime brand and our Buzztime network among hospitality venues 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 Buzztime network. In addition, our efforts to improve our game platform and content may not succeed in generating additional demand for our products or in strengthening the loyalty and retention of our existing customers. The degree of market adoption of our Buzztime network 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 developing our BEOND tablet platform that allows for consumer play across the digital platform, developing more premium productscontent that allow us to grow the revenue stream directly from consumers, developing dynamic menuing and point-of-sale, or POS, integration competency, and growing our marketing services and sponsorship revenues. Implementing these strategies will require us to dedicate significant resources to, among other things, fully developing and implementing our BEOND technology platform and product line, expanding our other product offerings, customizing our products and services to meet the unique needs of select accounts, and expanding and improving our marketing services and promotional efforts. We may be unable to implement these strategies as currently planned.

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

In addition to laws and regulations applicable to businesses generally, we are also subject to laws and regulations that apply specifically to the the interactive entertainment and product marketing industries. In addition, we operate games of chance and, in some instances, award prizes. These games are regulated in many jurisdictions and the laws and regulations vary from jurisdiction to jurisdiction. See “ITEM 1. BUSINESS—Government Regulations.”

We may find it necessary to eliminate, modify, suspend, or cancel certain features of our products (including the games we offer) in certain jurisdictions based on the adoptions of new laws and regulations or changes in law or regulations or the enforcement thereof, which could result in additional development costs and/or the loss of customers and revenue.

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 and to distribute our services to the locations of our Buzztime network subscribers. We currently transmit our data to our customers via broadband internet connections including telephone and cable TV networks. Both our communications systems and those of third parties on which we rely 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. 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, damage to or failure of our systems, any 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 to our customers, 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 customers’ venues could also decrease customer loyalty and satisfaction and result in a cancellation of our services.

Our management turnover creates uncertainties.

We have experienced significant changes in our senior management team over the past several years. For example, Ram Krishnan was appointed as our chief executive officer in September 2014 and, before he was appointed, we had three different individuals and an interim committee serve as our chief executive officer or perform the functions of a chief executive between February 2009 and September 2014. Allen Wolff was appointed as our chief financial officer in December 2014, and was appointed as our chief financial officer and executive vice president effective February 1, 2016 due to his expanded responsibilities following the departure of our former chief revenue officer, our former chief development officer, our former chief product officer and our former senior vice president of sales and marketing during 2014 and 2015. 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. Periods of transition in senior management leadership are often difficult as the new executives gain detailed knowledge of our operations and due to cultural differences and friction that may result from changes in strategy and style. Without consistent and experienced leadership, our employees, customers, creditors, stockholders, and others may lose confidence in us.

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

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 and retain talented professionals in order for our business to grow. There is significant competition for the individuals 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 individuals in the future to sustain and grow our business, and we may not be successful in motivating and retaining the individuals 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.

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

From time to time, state and provincial tax authorities have made inquiries as to whether or not a portion of our services might require the collection of sales and use taxes from customers in those jurisdictions. Many jurisdictions are expanding their interpretation of their sales and use tax statutes to subject more activities to tax. While in the past, the sales and use tax assessments we have paid have not had a significant adverse effect on our operations, such assessments may increase in the future and could adversely affect our operations.

We have incurred significant net operating loss carryforwards that we will likely be unable to use.

As of December 31, 2014,2016, we had federal income tax net operating loss or NOL,(“NOL”) carryforwards of approximately $59.7 million,$65,291,000, which will begin to expire in 2017. As of December 31, 2014,2016, we had state income tax NOL carryforwards of approximately $25.5 million,$35,969,000, portions of which will continue expiring in 2015.2017. 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 NOL carryforwards. We have established a full valuation allowance for substantially all of our deferred tax assets, including the NOL carryforwards, since we do not believe we are likely to generate future taxable income to realize these assets.

We are subject to cybersecurity risks and incidents.

Our business involves storing and transmitting payment information of our customers and certain personal information of consumers (such as their name, date of birth, and email address). In the future, we may store and transmit additional personal information of consumers, particularly as the services of the BEOND tablet platform become more advanced to include POS integration. While we have implemented measures designed to prevent security breaches and cyber incidents, any failure of these measures and/or any material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, system downtimes and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.

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 the U.S. and 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, problems with collecting accounts receivable, 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.

We could become subject to additional regulations and compliance requirements as we introduce features in direct payments from patrons.

To the extent we expandIn preparation for expanding features and functionality to our BEOND tablet platform that involve us accepting credit card and other forms of payments directly from patrons, we anticipate that we could experience risks associated with becoming subject to additional regulations and compliance requirements (includingcertified our compliance with payment card association operating rules and certification requirements, including the Payment Card Industry (“PCI”) Data Security Standard v3.1 as a service provider, and rules governing electronic funds transfers) and fraud.will be required to do so annually. Compliance with additional regulations and requirements may be difficult for us or even impossible;us; thereby limiting or prohibiting our ability to grow the amount of revenue we receive directly from patrons. In addition if we become subject to these additional regulations and requirements, if we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card and debit card payments from patrons.

Risks Relating to the Market for Our Common Stock

Our common stock could be delisted or suspended from trading on the NYSE MKT if we fail to maintaindo not regain compliance with continued listing criteria with which we are currently not compliant or if we fail to meet any other continued listing criteria.

TheAs previously reported in November 2015, we are not in compliance with the continued listing standards of the NYSE MKT will normally consider suspending dealingsMKT. Specifically, we are not in or delisting, securities selling for a substantial periodcompliance with Section 1003(a)(iii) 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 MKT deems such action to be appropriate under the circumstances. While the NYSE MKT does not provide bright line minimum share price standards for continued listing,Company Guide (the “Company Guide���) because we believe that a pricereported stockholders’ equity of less than $1.00 per share for$6 million as of September 30, 2015 and had net losses in five of our most recent fiscal years ended December 31, 2014. As a substantialresult, we became subject to the procedures and requirements of Section 1009 of the Company Guide. We were required to submit a plan to NYSE Regulation, Inc. advising of actions we have taken or will take to regain compliance with Section 1003(a)(iii) of the Company Guide by May 13, 2017. We submitted such a plan in December 2015. In January 2016, NYSE Regulation notified us that it has accepted our plan and granted us a plan period of time may be investigated. Our common stock has traded below $1.00 per share since July 2007.that extends through May 13, 2017 to regain compliance with Section 1003(a)(iii).

In April 2016, we received a letter from NYSE Regulation stating that we are not in compliance with Section 1003(a)(ii) of the Company Guide because we reported stockholders’ equity of less than $4 million as of December 31, 2015 and had net losses in three of our four most recent fiscal years ended December 31, 2015. As a result, we continue to be subject to the procedures and requirements of Section 1009 of the Company Guide. Because this instance of noncompliance was in addition to our noncompliance with Section 1003(a)(iii) of the Company Guide, we were not required to submit a new compliance plan.

Under Section 1003(a)(i) of the Company Guide, the NYSE MKT will normally consider suspending dealings in, or delisting,removing from the list, securities of an issuer which has stockholders'stockholders’ equity of less than $6,000,000$2 million if such issuer has sustained losses from continuing operations and/or net losses in two of its fivethree most recent fiscal years. Although our stockholders' equity was more than $6,000,000 as of December 31, 2014, weWe had losses from continuing operations and/or net losses in eachtwo of our fivethree most recent fiscal years.years ended December 31, 2015. Our stockholders’ equity at September 30, 2016 was $1.8 million, and accordingly, we were below compliance with Section 1003(a)(i), as well. However, due to the offering discussed above, we raised approximately $2.7 million in that offering, and our stockholders’ equity at December 31, 2016 was approximately $4.1 million.

The listing of our common stock on the NYSE MKT is being continued during the plan period pursuant to an extension. The NYSE Regulation staff reviews us periodically for compliance with initiatives outlined in our plan. If we are unablenot in compliance with the listing requirements with which we are currently not in compliance by May 13, 2017 or if we do not make progress consistent with our plan during the plan period, NYSE Regulation staff will initiate delisting proceedings as appropriate. We have continued to complymake progress consistent with our plan during the plan period. Raising capital in the offering discussed above is consistent with the initiatives outlined in our plan to regain compliance, however, the amount raised in that offering did not increase our stockholders’ equity to the amount required to regain compliance with all of the listing requirements in Section 1003(a). We are continuing to explore options to address our non-compliance, including by raising additional capital through additional equity financings. We can give no assurances that we will be able to address our non-compliance with the NYSE MKT continued listing requirementsstandards or, even if we do, that we will be able to maintain the listing of our common stock may be suspended from trading on and/or delisted from the NYSE MKT. Alternatively, in order to avoid delisting for having a low trading price for a substantialOur common stock could be delisted because we do not make progress consistent with our plan during the plan period, because we do not regain compliance with Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) by May 13, 2017, or because we fall below compliance with other NYSE MKT listing standards. In addition, we may bedetermine to pursue business opportunities or grow our business at levels or on timelines that reduces our stockholders’ equity below the level required to effect a reverse splitmaintain compliance with NYSE MKT continued listing standards. The delisting of our common stock. Thestock for whatever reason could, among other things, substantially impair our ability to raise additional capital; result in a loss of institutional investor interest and fewer financing opportunities for us; and/or result in potential breaches of representations or covenants of our warrants or other agreements pursuant to which we made representations or covenants relating to our compliance with applicable listing requirements. Claims related to any such breaches, with or without merit, could result in costly litigation, significant liabilities and diversion of our management’s time and attention and could have a material adverse effect on our financial condition, business and results of operations. In addition, the delisting of our common stock for whatever reason may materially impair our stockholders'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

If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market.

If our common stock was delisted or suspended from trading on the NYSE MKT, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market.

The market price of our common stock historically has been and likely will continue to be highly volatile and our common stock is thinly traded.

The market price for our common stock historically has been highly volatile, and the market for our common stock has from time to time experienced significant price and volume fluctuations, based both on our operating performance and for reasons that appear to us unrelated to our operating performance. Our stock is also thinly traded, which can affect market volatility, which could significantly impairaffect the market price of our abilitycommon stock without regard to raise capital.our operating performance. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, including:

The realization of any of the foregoing could have a dramatic and adverse impact on 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.

In a private placement we completed in November 2013, we issued 6,000,000120,000 shares of our common stock and warrants to purchase 3,600,00072,000 shares of our common stock at an exercise price of $0.40$20.00 per share. A registration statement registering the resale of all of those shares is currently effective and we are obligated to use commercially reasonable efforts to maintain such registration statement continuously effective until all such registered shares have been sold.

In addition, since 2009, in connection with acquisitions, we issued (directly or upon the exercise of warrants issued in connection with such acquisitions) an aggregate of approximately 2,798,00056,000 shares of our common stock. As of December 31, 2014,2016, there were outstanding warrants to purchase an aggregate of 6,600,000132,000 shares of common stock at exercise prices ranging from $0.40$20.00 to $1.50$75.00 per share (including the warrants to purchase 3,600,00072,000 shares we issued in our November 2013 private placement). In addition, as of December 31, 2014,2016, there were approximately 156,000 shares of our Series A Preferred Stock outstanding. The holders of such shares may elect to convert them into shares of our common stock at any time. Based on the current conversion price, we would issue approximately 484,00011,000 shares of our common stock if all of the outstanding shares of our Series A Preferred Stock were so converted. Generally, all of the shares of common stock we issued in connection with the acquisitions, the shares we may issue upon exercise of warrants and the shares of common stock we may issue upon conversion of the Series A Preferred Stock may be sold under Rule 144 of the Securities Act of 1933, subject to any applicable holding period with respect to the shares issued upon exercise of warrants the exercise price of which is paid with cash.

As of December 31, 2014,2016, there were also approximately 7,222,000165,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from $0.14$6.50 to $3.33$35.00 per share. A registration statementRegistration statements registering such shares of common stock isare currently effective.

Accordingly, a significant number of shares of our common stock could be sold at any time. Depending upon market liquidity at the time our common stock is resold by the holders thereof, such resales could cause the trading price of our common stock to decline. In addition, the sale of a substantial number of shares of our common stock, or anticipation of such sales, could make it more difficult for us to obtain future financing. To the extent the trading price of our common stock at the time of exercise of any of our outstanding options or warrants exceeds their exercise price, such exercise will have a dilutive effect on our stockholders.

Raising additional capital may cause dilution to our existing stockholders and may restrict our operations.

We may raise additional capital at any time and may do so through one or more financing alternatives, including public or private sales of equity or debt securities directly to investors or through underwriters or placement agents. For example,As discussed above, we are exploring options to address our non-compliance with the NYSE MKT continued listing standards, in April 2014, we sold 12,765,000 shares ofparticular, options to address our common stock in an underwritten public offering.low stockholders’ equity. We currently have a shelf registration statement on file under which we could sell up to approximately $18$25 million worth of securities. See also “Our ability to raise capital may be limited by applicable laws and regulations,” below. Raising capital through the issuance of common stock (or securities convertible into or exchangeable or exercisable for shares of our common stock) may depress the market price of our stock and may substantially dilute our existing stockholders. In addition, our board of directors may issue preferred stock with rights, preferences and privileges that are senior to those of the holders of our common stock. Debt financings could involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens or make investments and may, among other things, preclude us from making distributions to stockholders (either by paying dividends or redeeming stock) and taking other actions beneficial to our stockholders. In addition, investors could impose more one-sided investment terms and conditions on companies that have or are perceived to have limited remaining funds or limited ability to raise additional funds. The lower our cash balance, the more difficult it is likely to be for us to raise additional capital on commercially reasonable terms, or at all.

Our ability to raise capital may be limited by applicable laws and regulations.

Over the past few years we have raised capital through the sale of our equity securities. The offerings we completed in April 2014 and November 2016 were equity offerings conducted under the “shelf” registration statement on Form S-3. Using a shelf registration statement on Form S-3 to raise additional capital generally takes less time and is less expensive than other means, such as conducting an offering under a Form S-1 registration statement. However, our ability to raise capital using a shelf registration statement may be limited by, among other things, current SEC rules and regulations. Under current SEC rules and regulations, we must meet certain requirements to use a Form S-3 registration statement to raise capital without restriction as to the amount of the market value of securities sold thereunder. One such requirement is that we periodically evaluate the market value of our outstanding shares of common stock held by non-affiliates, or public float, and if, at an evaluation date, our public float is less than $75.0 million, then the aggregate market value of securities sold by us or on our behalf under the Form S-3 in any 12-month period is limited to an aggregate of one-third of our public float. After taking into account the shares we sold in the offering that closed in November 2016, our public float is currently approximately $15.0 million and therefore we are currently subject to the one-third of our public float limitation. Assuming our public float remains the same amount the next time we are required to evaluate it, we will only be able to sell an additional approximately $2.3 million using the “shelf” registration statement. If our ability to utilize a Form S-3 registration statement for a primary offering of our securities is limited to one-third of our public float, we may conduct such an offering pursuant to an exemption from registration under the Securities Act or under a Form S-1 registration statement, and we would expect either of those alternatives to increase the cost of raising additional capital relative to utilizing a Form S-3 registration statement.

In addition, under current SEC rules and regulations, our common stock must be listed and registered on a national securities exchange in order to utilize a Form S-3 registration statement (i) for a primary offering, if our public float is not at least $75.0 million as of a date within 60 days prior to the date of filing the Form S-3 or a re-evaluation date, whichever is later, and (ii) to register the resale of our securities by persons other than us (i.e., a resale offering). While currently our common stock is listed on the NYSE MKT equities market, there can be no assurance that we will be able to maintain such listing. See also “Our common stock could be delisted or suspended from trading on the NYSE MKT if we do not regain compliance with continued listing criteria with which we are currently not compliant or if we fail to meet any other continued listing criteria,” above.

Our ability to timely raise sufficient additional capital also may be limited by the NYSE MKT’s stockholder approval requirements for transactions involving the issuance of our common stock or securities convertible into our common stock. For instance, the NYSE MKT requires that we obtain stockholder approval of any transaction involving the sale, issuance or potential issuance by us of our common stock (or securities convertible into our common stock) at a price less than the greater of book or market value, which (together with sales by our officers, directors and principal stockholders) equals 20% or more of our then outstanding common stock, unless the transaction is considered a “public offering” by the NYSE MKT staff. In addition, certain prior sales by us may be aggregated with any offering we may propose in the future, further limiting the amount we could raise in any future offering that is not considered a public offering by the NYSE MKT staff and involves the sale, issuance or potential issuance by us of our common stock (or securities convertible into our common stock) at a price less than the greater of book or market value. The NYSE MKT also requires that we obtain stockholder approval if the issuance or potential issuance of additional shares will be considered by the NYSE MKT staff to result in a change of control of our company.

Obtaining stockholder approval is a costly and time-consuming process. If we are required to obtain stockholder approval for a potential transaction, we would expect to spend substantial additional money and resources. In addition, seeking stockholder approval would delay our receipt of otherwise available capital, which may materially and adversely affect our ability to execute our business strategy, and there is no guarantee our stockholders ultimately would approve a proposed transaction. A public offering under the NYSE MKT rules typically involves broadly announcing the proposed transaction, which often times has the effect of depressing the issuer’s stock price. Accordingly, the price at which we could sell our securities in a public offering may be less, and the dilution existing stockholders experience may in turn be greater, than if we were able to raise capital through other means.

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, or to make changes in our board of directors. For example, our certificate of incorporation (i) prohibits stockholders from filling vacancies on our board of directors, calling special stockholder meetings, or taking action by written consent, and (ii) requires a supermajority vote of at least 80% of the total voting power of our outstanding shares, voting together as a single class, to remove our directors from office or to amend provisions relating to stockholders taking action by written consent or calling special stockholder meetings.

Additionally, our certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change of control of our company. Some of these provisions:

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 certificate of incorporation, restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, 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 of directors could cause the market price of our common stock to decline.

ITEM 1B.      Unresolved Staff Comments

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

We lease approximately 28,000 square feet of office space in Carlsbad, California. The term of the lease is from June 2011 through November 2018, and we are entitledhave the option to renew the lease for an additional five-year extension. We also lease approximately 7,500 square feet of warehouse space in Hilliard, Ohio. The term of this lease is from May 2013 through April 2017.2018. The facilities that we lease are suitable for our current needs and are considered adequate to support expected growth.

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 legal proceedings could materially adversely affect our business, results of operations, or financial condition. In addition, defending any claim requires resources, including cash to pay legal fees and expenses, and our limited financial resources could severely impact our ability to defend any such claim.

Also from time to time, state and provincial tax agencies have made, and we anticipate will make in the future, inquiries as to whether our service offerings are subject to taxation in their jurisdictions. Many states have expanded their interpretation of their sales and use tax statutes, which generally had the effect of increasing the scope of activities that may be subject to such statutes. We evaluate inquiries from state and provincial tax agencies on a case-by-case basis and have favorably resolved the majority of these inquiries in the past, though we can give no assurances as to our ability to favorably resolve such inquiries in the future. Any such inquiry could, if not resolved favorably to us, materially adversely affect our business, results of operations, or financial condition.

We are currentlyIn the past, we have been involved in sales tax inquiries with certain states and provinces. As a result of those inquiries, we recorded a total net liability of $17,000 and $27,000$25,000 as of December 31, 2014 and 2013, respectively,2015 with respect to tax assessments to which we may be subject as a result of such inquiries. Based on the guidance set forth by the Financial Accounting Standards Board (“FASB) Accounting Standards Codification (“ASC”) No. 450,Contingencies, we deemed the likelihood that we will be required to pay all or part of these assessments as reasonably possible. During the year ended December 31, 2014,2016, we prevailed in one provincial taxresolved all matters under inquiry, resulting in a receivable of approximately $108,000 and a reversal of a liability of approximately $25,000. We received the $108,000 in January 2015.previously recognized $25,000 was sufficient under the assessments.

Not Applicable.

PART II

Our common stock is listed on the NYSE MKT under the symbol “NTN.” Set forth below are the high and low sales prices (adjusted for the reverse/forward split effected on June 3, 2016) for our common stock forduring the two most recent fiscal years:years.