CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect future events, results, performance, prospects and opportunities, including statements related to our strategic plans, capital expenditures, industry trends and financial position of NTN Buzztime, Inc. and its subsidiaries. Forward-looking statements are based on information currently available to us and our current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as "expects," "anticipates," "could," "targets," "projects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "would," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements which refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that may be difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, under the section entitled "Risk Factors," and in Item 1A of Part II of this Quarterly Report on Form 10-Q, and in other reports we file with the Securities and Exchange Commission from time to time. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

OVERVIEW

We historically have operated principally through two operating divisions:
Entertainment and Hospitality. The Entertainment division generates revenue primarily from the Buzztime iTV Network which distributes an interactive television promotional game network to restaurants, sports bars, taverns and pubs, primarily in North America. Additionally, we generate revenue by selling advertising for distribution via our interactive television network.

The Hospitality division has been discontinued. It was comprised of NTN Wireless Communications, Inc. ("NTN Wireless") and NTN Software Solutions, Inc. ("Software Solutions"). In 2006, we determined that the operation of the Hospitality division was not a strategic fit with our core business and committed to a divestiture plan. These operations have been reclassified as discontinued operations for all periods presented. NTN Wireless provided revenues from producing and distributing guest and server paging systems to restaurants and other markets. Software Solutions developed and distributed customer management software to manage reservations and table service in restaurants. Software Solutions also provided professional help desk services and outsourced software development and support and maintenance services.

In March 2007, we completed the sale of substantially all of the assets of NTN Wireless. In October 2007, we sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development. Additionally, we completed the wind down of our professional help desk and support and maintenance services during the third quarter of 2008. We do not expect to incur any additional expenses related to the help desk and support and maintenance function in subsequent periods.

Restructuring of Operations

During the third quarter of 2008, we ceased our operations in the United Kingdom. The closure of operations involved the termination of six employees, relocation of nearly all assets to the United States and disposal of certain other assets. As of the date we ceased operations, UK operations accounted for less than 1% of the total subscriber sites.

The Entertainment Division

The out-of-home Buzztime iTV Network has engaged in business in the hospitality industry for 25 years as a promotional platform providing interactive entertainment to patrons in restaurants and sports bars. The iTV Network distributes a wide variety of engaging interactive multi-player games, including trivia quiz shows, play-along sports programming, casino-style and casual games to our Network. Patrons use our wireless game controllers, or Playmakers, to play along with the Buzztime games which are displayed on television screens. Buzztime players can compete with other players within their hospitality venue and also against players in other Network 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 June 30, 2009, we had 3,561 United States Network subscribers and 310 Canadian subscribers. Approximately 29% of our Network subscribers come from leading national chains in the casual-dining restaurant segment such as Buffalo Wild Wings, TGI Friday's, Old Chicago and Damon's Grill.

Through the transmission of interactive game content stored on a site server at each location, our Buzztime iTV 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 iTV 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 iTV Network's venues.

We also generate revenue from distributing and licensing our Buzztime-branded content and related technology to consumer platforms, with a focus on interactive networks such as cable TV, satellite TV and mobile phones. Our distribution efforts focus on licensing real-time, mass-participation games such as trivia, head-to-head multi-player games such as Texas Hold'em and single-player games such as solitaire.

Our games are available as a premium monthly subscription service to Echostar DISH and Bell ExpressVu satellite customers in the U.S. and Canada, respectively. Revenue from our distribution division is derived primarily from license fees and royalties from third-party licensees who distribute Buzztime content to end-users, as well as from third-party development and production fees.

The Hospitality Division (Discontinued Operations)

NTN Wireless earned revenue from the sale of on-site wireless paging products primarily to restaurants but also hospitals, church and synagogue nurseries, salons, business offices and retail establishments in North America. In restaurants, these products were provided to customers while waiting for a table and activated to let them know when their table was ready, as well as to restaurant staff to alert them to certain issues, such as when hot food is ready to be served.

Software Solutions generated revenue from the licensing of proprietary seating management and reservation management systems software to restaurants, casinos and other venues. Software Solutions also provided professional help desk services and outsourced software development and support and maintenance services to Domino's Pizza and their franchisees and other quick service restaurant locations.

In March 2007, we completed the sale of substantially all of the assets of NTN Wireless for $2.4 million and recognized a gain, net of tax, of approximately $396,000. In October 2007, we sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development we were providing. The intellectual property sold constituted substantially all of the remaining operating assets of our Hospitality division, which had originally consisted of our Software Solutions and Wireless businesses. We have accounted for our Hospitality division as a reportable segment but we have presented its operations as discontinued operations since the fourth quarter of 2006. We have completed the dissolution and do not anticipate any further costs related to the dissolution of the professional help desk and support and maintenance services.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (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, the provision for income taxes including the valuation allowance, bad debts, investments, purchase price allocations related to acquisitions, intangible assets and contingencies. We base our estimates on historical experience and on 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 from these estimates under different assumptions or conditions. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company's financial condition and results and require management's most subjective judgments.

There have been no material changes in our critical accounting policies, estimates and judgments during the quarter ended June 30, 2009 compared to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended December 31, 2008, except for the following addition:

Purchase Accounting - We have accounted for our acquisitions pursuant to SFAS No. 141R, "Business Combinations." We have recorded all acquired tangible and intangible assets and all assumed liabilities based upon their estimated fair values. All estimated fair values are preliminary and subject to change. As a result of the valuation procedures performed, we recorded $1,273,000 in customer relationship intangible assets, $599,000 in unpatented technology, $64,000 of assumed liabilities and a $285,000 earnout liability. 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 while approximately, $300,000 will be amortized over the three months ending August 31, 2009. The unpatented technology intangible asset will be amortized on a straight line basis over a period of 60 months and recorded in direct expenses. The useful lives and amortization methods reflect the estimated period of time by which the underlying intangible asset benefits will be realized. We recorded $119,000 in amortization expense related to these intangible assets during the three months ended June 30, 2009.

RESULTS OF OPERATIONS

Our Hospitality division is classified as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The operating results for these businesses have been separately classified and reported as discontinued operations in the condensed consolidated financial statements.

Results of Continuing Operations

Three months ended June 30, 2009 compared to the three months ended June 30, 2008

Continuing operations, which consists of the Entertainment division, generated a net loss of $282,000 for the three months ended June 30, 2009, compared to net loss of $2,129,000 for the three months ended June 30, 2008.

Revenue

Revenue from continuing operations decreased $732,000 or 10%, to $6,285,000 for
the three months ended June 30, 2009 from $7,017,000 for the three months ended
June 30, 2008, primarily due to a decrease in average return generated per site
related to a strategic reduction in pricing. Comparative site count information
for Buzztime iTV Network is as follows:

                   Network subscribers
                      As of June 30,
                    2009           2008
United States         3,561         3,402
Canada                  310           307
United Kingdom            -            37
Total                 3,871         3,746

Direct Costs and Gross Margin

The following table compares the direct costs and gross margin from continuing
operations for 2009 and 2008:

                              Three months ended
                                   June 30,
                             2009            2008
Revenue                   $ 6,285,000     $ 7,017,000
Direct costs                1,524,000       1,980,000
Gross margin              $ 4,761,000     $ 5,037,000
Gross margin percentage           76%             72%

Gross margin as a percentage of revenue improved to 76% for the three months ended June 30, 2009 compared to 72% in the prior year period. The increase in the gross margin percentage is primarily the result of a reduction in depreciation expense as equipment became fully depreciated, a decrease in communication costs due to the conversion of sites to DSL from satellite communications, a reduction in gaming content costs due to our reduced utilization of consultants and a decrease in direct salaries as a result of a reduced headcount. Additionally, the increase in the gross margin percentage is partially offset by the decrease in average return generated per site related to a strategic reduction in pricing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $2,141,000 or 31%, to $4,859,000 for the three months ended June 30, 2009 from $7,000,000 for the three months ended June 30, 2008. Selling, general and administrative expenses decreased due to several factors. Salary expenses decreased $538,000 due to reductions in headcount. Severance expenses decreased $453,000 due to the resignation of the CEO in the prior year, which resulted in full recognition of his severance. Marketing expenses decreased $537,000 due to a change in our marketing strategy, including reducing direct mail campaigns, and scheduling of promotions and trade shows. Consulting services decreased $402,000 as we decreased our overall utilization of external consulting services. Bad debt expense decreased $165,000 in 2009 compared to 2008 predominately due to recoveries of certain accounts previously written off. Legal expenses decreased $140,000 due to a decrease in fees regarding corporate governance matters and a trademark infringement case.

Depreciation and Amortization Expense

Depreciation and amortization expense (excluding depreciation and amortization included in direct operating costs) increased $68,000, to $213,000 for the six months ended June 30, 2009 from $145,000 in the prior year due to the acquisition of intangible assets, which has resulted in increased amortization expense.

Interest Income and Expense

Interest income decreased $22,000, to $21,000 for the three months ended June 30, 2009 from $43,000 in the prior year. The decrease was due to lower rate of return as well as a decrease in our average cash balance invested in interest bearing securities.

Interest expense for the three months ended June 30, 2009 is $10,000 and we did not incur interest expense during the three months ended June 30, 2008. The increase in interest expense is the result of equipment leases we entered into.

Income Taxes

We expect to incur minimal federal and state income tax liability in 2009 related to our U.S. operations. We also expect to pay income taxes in Canada due to the profitability of NTN Canada. Our tax provision for the three months ended June 30, 2009 decreased $82,000 compared to the $64,000 provision for income taxes recorded for the three months ended June 30, 2008. We continue to provide a 100% valuation allowance against our deferred tax assets related to certain net operating losses as realization of such tax benefits is not assessed as more likely than not.

Results of Discontinued Operations

Three months ended June 30, 2009 compared to the three months ended June 30,
2008

The wind down of our discontinued operations was completed in the third quarter
of 2008; therefore, there is no activity to report for the three months ended
June 30, 2009. The operating results of the discontinued operations are as
follows for the three months ended June 30, 2008:

                                                 June 30,
                                                   2008
Operating revenues                              $    4,000
Operating expenses                                 220,000
Operating loss                                  $ (216,000 )
Other                                                    -
Loss from discontinued operations, net of tax   $ (216,000 )

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:

                                    Three months ended
                                 June 30,        June 30,
                                   2009            2008
Net loss per GAAP               $ (282,000 )   $ (2,345,000 )
Interest income, net               (11,000 )        (43,000 )
Depreciation and amortization      723,000          818,000
Income taxes                       (18,000 )         64,000
EBITDA                          $  412,000     $ (1,506,000 )

Our operations generated EBITDA levels as presented below:

                                        Three months ended June 30, 2009
                                                     Discontinued
                                Entertainment         operations         Total
Net loss per GAAP               $     (282,000 )     $           -     $ (282,000 )
Interest income, net                   (11,000 )                 -        (11,000 )
Depreciation and amortization          723,000                   -        723,000
Income taxes                           (18,000 )                 -        (18,000 )
EBITDA                          $      412,000       $           -     $  412,000




                                         Three months ended June 30, 2008
                                                     Discontinued
                                 Entertainment        operations          Total
Net loss per GAAP               $    (2,129,000 )   $     (216,000 )   $ (2,345,000 )
Interest income, net                    (43,000 )                -          (43,000 )
Depreciation and amortization           818,000                  -          818,000
Income taxes                             64,000                  -           64,000
EBITDA                          $    (1,290,000 )   $     (216,000 )   $ (1,506,000 )

Six months ended June 30, 2009 compared to the six months ended June 30, 2008

Continuing operations, which consists of the Entertainment division, generated a net loss of $537,000 for the six months ended June 30, 2009, compared to net loss of $4,412,000 for the six months ended June 30, 2008.

Revenue

Revenue from continuing operations decreased $1,718,000 or 12%, to $12,481,000 for the six months ended June 30, 2009 from $14,199,000 for the six months ended June 30, 2008, primarily due to a decrease in average revenue generated per site related to a strategic reduction in pricing.

Direct Costs and Gross Margin

The following table compares the direct costs and gross margin from continuing
operations for 2009 and 2008:

                            Six months ended June 30,
                              2009              2008
Revenue                   $  12,481,000     $ 14,199,000
Direct costs                  3,026,000        4,076,000
Gross margin              $   9,455,000     $ 10,123,000
Gross margin percentage             76%              71%

Gross margin as a percentage of revenue improved to 76% for the six months ended June 30, 2009 compared to 71% in the prior year period. The increase in the gross margin percentage is primarily the result of a reduction in depreciation expense as equipment became fully depreciated, a decrease in communication costs due to the conversion of sites to DSL from satellite communications, a reduction in gaming content costs due to our reduced utilization of consultants and a decrease in direct salaries as a result of a reduced headcount. Additionally, the increase in the gross margin percentage is partially offset by the decrease in average return generated per site related to a strategic reduction in pricing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $4,574,000 or 32%, to $9,691,000 for the six months ended June 30, 2009 from $14,265,000 for the six months ended June 30, 2008. Selling, general and administrative expenses decreased due to several factors. Salary expenses decreased $1,254,000 due to a reduction in headcount. Severance expenses decreased $444,000 due to the resignation of the CEO in the prior year, which resulted in full recognition of his severance. Marketing expenses decreased $924,000 due to a change in our marketing strategy, including reducing direct mail campaigns, and scheduling of promotions and trade shows. Consulting services decreased $784,000 as we decreased our overall utilization of external consulting services. Software disposal expenses decreased $258,000 as the first quarter of 2008 included a $292,000 impairment charge. Other taxes decreased $148,000 primarily due to the finalization of the sales settlement with the state of Texas. Bad debt expense decreased $315,000 in 2009 compared to 2008 predominately due to recoveries of certain accounts previously written off and an increased recovery rate. Commission expense decreased $66,000 due to decrease of the commission rate paid per sale. Research and development expenses decreased $64,000 because we did not expend any funds towards R&D during the six months ended June 30, 2009. Legal expenses decreased $122,000 due to a decrease in fees regarding corporate governance matters and a trademark infringement case.

General expenditures related to seminars, supplies, telephone, professional tax services and payroll processing fees decreased approximately $162,000.

Depreciation and Amortization Expense

Depreciation and amortization expense (excluding depreciation and amortization included in direct operating costs) increased $73,000, to $340,000 for the six months ended June 30, 2009 from $267,000 in the prior year due to the acquisition of intangible assets, which has resulted in increased amortization expense.

Interest Income and Expense

Interest income decreased $38,000, to $64,000 for the six months ended June 30, 2009 from $102,000 in the prior year. The Company's average cash balance invested in interest bearing securities decreased which resulted in less interest income.

Interest expense increased $12,000 to $12,000 for the six months ended June 30, 2009 from $0 for the six months ended June 30, 2008. The increase in interest expense is the result of equipment leases we entered into.

Income Taxes

We expect to incur minimal federal and state tax liability in 2009 related to our U.S. operations. 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 $13,000 for the six months ended June 30, 2009. Our tax provision decreased $92,000 for the six months ended June 30, 2009 compared to the $105,000 provision for income taxes recorded for the six months ended June 30, 2008. We continue to provide a 100% valuation allowance against our deferred tax assets related to certain net operating losses as realization of such tax benefits is not assessed as more likely than not.

Results of Discontinued Operations

Six months ended June 30, 2009 compared to the six months ended June 30, 2008

The wind down of our discontinued operations was completed in the third quarter
of 2008; therefore, there is no activity to report for the six months ended June
30, 2009. The operating results of the discontinued operations are as follows
for the six months ended June 30, 2008:

                                                 June 30,
                                                   2008
Operating revenues                              $   21,000
Operating expenses                                 528,000
Operating loss                                  $ (507,000 )
Other                                                    -
Loss from discontinued operations, net of tax   $ (507,000 )

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:

                                      Six months ended
                                 June 30,         June 30,
                                   2009             2008
. . .