TABLE OF CONTENTS

Item

Page

Part I

1. Business 1
1A. Risk Factors 5
1B. Unresolved Staff Comments 13
2. Properties 13
3. Legal Proceedings 13
4. Mine Safety Disclosures 13

Part II

5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14
6. Selected Financial Data 14
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
7A. Quantitative and Qualitative Disclosures About Market Risk 24
8. Financial Statements and Supplementary Data 24
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 24
9A. Controls and Procedures 24
9B. Other Information 24

Part III

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

Part IV

15. Exhibits, Financial Statement Schedules 26
16. Form 10-K Summary 27
Signatures 28
Index to Financial Statements and Schedule F-1

Item
Page

Part I

1.
Business
1
1A.
Risk Factors
28
1B.
Unresolved Staff Comments
57
2.
Properties
57
3.
Legal Proceedings
57
4.
Mine Safety Disclosures
59

Part II

5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
60
6.
[Reserved]
60
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
60
7A.
Quantitative and Qualitative Disclosures About Market Risk
70
8.
Financial Statements and Supplementary Data
70
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
70
9A.
Controls and Procedures
70
9B.
Other Information
71
9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
71

Part III

10.
Directors, Executive Officers and Corporate Governance
72
11.
Executive Compensation
72
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
72
13.
Certain Relationships and Related Transactions, and Director Independence
72
14.
Principal Accountant Fees and Services
72

Part IV

15.
Exhibits and Financial Statement Schedules
73
16.
Form 10-K Summary
75

Signatures
76

Index to Financial Statements and Schedule
F-1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K ~~and the documents incorporated herein by reference contain~~contains “forward-looking statements” –as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include 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 raise capital on favorable terms, if at all, to allow us to meet our debt service obligations and to fund our working capital needs; (2) the effect that the recent COVID-19 pandemic may have on our ability to raise capital and on our business; (3) our ability to maintain or grow our revenue and successfully implement our other business strategies to make up for the revenue we have historically received from Buffalo Wild Wings corporate-owned restaurants and its franchisees after our existing relationships with them terminated in November 2019; (4) the negative impact that measures we recently implemented and may implement to reduce our operating expenses and planned capital expenses (including investments in our business) may have on our ability to effectively manage and operate our business; (5) our ability to comply with our financial covenants in our loan and security agreement with Avidbank and its right to declare a default if we do not, which could lead to all payment obligations becoming immediately due and payable; (6) our ability to compete effectively within the highly competitive interactive games, entertainment and marketing services industries, including our ability to successfully commercially launch attractive product offerings, and the impact of new products and technological change, especiallythose identified in the ~~mobile~~“Summary of Principal Risk Factors” below and ~~wireless markets, on our operations and competitiveness; (7) our ability to adequately protect our proprietary rights and intellectual property; and (8)~~ the other risks and uncertainties described in Part I, Item 1A “Risk Factors” of this ~~report~~Annual Report on Form 10-K 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,~~Annual Report on Form 10-K, which speak only as of the date of this ~~report.~~Annual Report on Form 10-K. We are including this cautionary note to make applicable, and take advantage of, the safe harbor provisions of the PSLRA. Except as required by law, we do not undertake, and expressly disclaim any obligation, to ~~revise~~disseminate, after the date hereof, any updates or ~~update~~revisions to any such forward-looking ~~statement~~statements to reflect ~~future~~any change in expectations or events, conditions or ~~circumstances.~~

~~PART I~~

~~ITEM 1.~~ ~~Business~~

~~About Our Business and How We Talk About It~~

We deliver interactive entertainment and innovative technology to our partners in a wide range of verticals – from bars and restaurants to casinos and senior living centers. By enhancing the overall guest experience, we believe we help our hospitality partners acquire, engage, and retain patrons.

~~Through social fun and friendly competition, our platform creates bonds between our hospitality partners and their patrons, and between patrons themselves.~~ circumstances on which any such statements are based.

We believe this unique experience increases dwell time, revenue, and repeat business for venues – and has also created a large and engaged audience which we connect with through our in-venue TV network. Over 1 million hours of trivia, card, sports and arcade games are played on our network each month.

We generate revenue by charging subscription fees to our partners for access to our 24/7 trivia network, by charging equipment fees to select partners for use of tablets and other equipment, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling digital-out-of-home (DOOH) advertising direct to advertisers and on national ad exchanges, by licensing our entertainment and trivia content to other parties, and by providing professional services such as custom game design or development of new platforms on our existing tablet form factor. Up until February 1, 2020, we also generated revenue by hosting live trivia events. (See Note 18 tothat the ~~consolidated financial~~expectations reflected in forward-looking statements ~~included in Item 8 of this report.)~~

We own several trademarks and consider the Buzztime®, Playmaker®, Mobile Playmaker, and BEOND Powered by Buzztime trademarks to be among our most valuable assets. These and our other registered and unregistered trademarks used in this ~~document~~Annual Report on Form 10-K are ~~our property. Other trademarks are~~based upon reasonable assumptions at the ~~property~~time made. However, given the risks and uncertainties, you should not rely on any forward- looking statements as a prediction of ~~their respective owners.~~

actual results, developments or other outcomes. You should read these forward-looking statements with the understanding that we may be unable to achieve projected results, developments or other outcomes and that actual results, developments or other outcomes may be materially different from what we expect.

Unless otherwise indicated ~~references~~ in this ~~report: (a)~~Annual Report on Form 10-K, “Brooklyn” refers to ~~“Buzztime,” “NTN,~~Brooklyn ImmunoTherapeutics, Inc., a Delaware corporation (formerly known as NTN Buzztime, Inc.), and “Brooklyn LLC” refers to Brooklyn ImmunoTherapeutics LLC, a wholly owned subsidiary of Brooklyn. All references to “our company,” “we,” “us” or “our” mean Brooklyn and ~~“our”~~its subsidiaries, including Brooklyn LLC, unless stated otherwise or the context otherwise requires.

SUMMARY OF PRINCIPAL RISK FACTORS

You should carefully consider the summary of principal risk factors below, together with the more detailed risk factors related to our business and industry described under “Risk Factors” contained in Item 1A of this Annual Report on Form 10-K. The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows, which could result in a decline in the market price of our common stock.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

We will require substantial additional capital to fund our operations, and if we fail to obtain the necessary financing, we may not be able to complete the development and commercialization of any of our product candidates.

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We face business disruption and related risks resulting from the pandemic of the novel coronavirus (COVID-19), which could have a material adverse effect on our business plan.

Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

We are substantially dependent on the success of our internal development programs and our product pipeline candidates may not successfully complete clinical trials, receive regulatory approval or be successfully commercialized.

Our current or future product candidates may cause undesirable side effects or have other properties when used alone or in combination with other approved products or investigational new drugs that could halt their clinical development, prevent their marketing approval, limit their commercial potential or result in significant negative consequences.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We face significant competition and if our competitors develop and market products that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

We rely, and expect to continue to rely, on third parties to conduct our clinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.

If we are unable to obtain and maintain patent and other intellectual property protection for our products and product candidates, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products and product candidates may be adversely affected.

iii

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PART I

ITEM 1.

Business

Background

On March 25, 2021, BIT Merger Sub, Inc., a wholly owned subsidiary of Brooklyn (then known as NTN Buzztime, Inc.) merged with and into Brooklyn LLC, with Brooklyn LLC surviving as a wholly owned subsidiary of Brooklyn. This transaction, which we refer to NTN Buzztime, Inc. and its consolidated subsidiaries; (b) to “network subscribers,” “customers,” or “partners” refer to venues that subscribe to our network service; (c) to “consumers,” “patrons” or “players” refer toas the individuals that engage in our games, events, and entertainment experiences available at venues and (d) to “venues” or “sites” refer to locations (such as a bar or restaurant) of our customers at which our games and entertainment experiences are available to consumers.

~~Recent Developments~~

The effect of the COVID-19 pandemic on the restaurant and bar industry has been rapid and its scope and magnitude is uncertain at this time. Various levels of governmental authorities have recommended or mandated restrictions on the business operations of restaurants and bars across the United States. We have been and will continue to evaluate steps we can take in an effort to mitigate these effects on our business.

On March 12, 2020, we entered into an amendment to the loan and security agreement that we entered into with Avidbank in September 2018 for a $4,000,000 four-year term loan. In connection with entering into the amendment, we made a $433,000 payment on our term loan, which includes the $83,333 monthly principal payment plus accrued interest for March 2020 and a $350,000 principal prepayment, thereby reducing the outstanding principal balance of our term loan to $2.0 million. Additionally, under the terms of the amendment, the maturity date of our term loanMerger, was changed from September 28, 2022 to December 31, 2020, and the amount and timing of our payment obligations accelerated significantly. See “PART II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Avidbank Term Loan,” below, for additional information.

~~In January 2020, we sold all of our assets used to conduct the live hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation for approximately $1.4 million in cash.~~

~~Since January 1, 2020, we have reduced our headcount by 35 to reduce expenses and operational cash uses. As of March 16, 2020, we have 38 full time employees and 1 part time employee.~~

~~In November 2019, our relationship with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees terminated~~completed in accordance with the terms of an agreement and plan of merger and reorganization dated August 12, 2020 among Brooklyn (then known as NTN Buzztime, Inc.), BIT Merger Sub, Inc. and Brooklyn LLC. In accordance with such agreement and plan of merger, on March 25, 2021, Brooklyn amended its restated certificate of incorporation in order to effect:

prior to the Merger, a reverse stock split of its common stock, par value $0.005 per share, at a ratio of one-for-two; and

following the Merger, a change in its corporate name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”

On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.

The Merger has been accounted for as a reverse acquisition in accordance with United States generally accepted accounting principles, or GAAP. Under this method of accounting, Brooklyn LLC was deemed the “acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the Merger are those of Brooklyn LLC, and the historical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.

Our principal executive offices are located at 10355 Science Center Drive, Suite 150, San Diego, CA 92121 and our phone number is (212) 582-1199. We maintain a website at www.brooklynitx.com. Information contained on, or accessible through, our website is not a part of and is not incorporated by reference into this Annual Report on Form 10-K.

Overview

We are a clinical-stage biopharmaceutical company focused on exploring the role that cytokine-based therapy can have on the immune system in treating patients with cancer, both as a single agent and in combination with other anti-cancer therapies. We are seeking to develop IRX-2, a novel cytokine-based therapy, to treat patients with cancer. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing and cell therapy technology through a license with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021, which we refer to as the Acquisition.

IRX-2

IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines. Together, these cytokines are believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.

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While IRX-2 is a cytokine mixture, one of its active components is IL2, a cytokine-signaling molecule with pleiotropic effects on the immune system. IL2 is a protein that regulates the activities of white blood cells (leukocytes, including lymphocytes) that are responsible for immunity. IL2 is part of the body’s natural response to microbial infection, and in discriminating between foreign, or non-self and “self,” IL2 mediates its effects by binding to IL2 receptors, which are expressed by lymphocytes. The major sources of IL2 are activated CD4⁺ T lymphocytes and activated CD8⁺ T lymphocytes.

Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells. We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies.

Regarding IRX-2 development, our strategy is:

•

Advance our product candidate IRX-2 through clinical development. IRX-2 is a human blood cell-derived cytokine therapy being studied for multiple types of cancer, including squamous cell cancer of the head and neck. Enrollment in the ongoing Phase 2b INSPIRE trial, or the INSPIRE trial, has been completed, with top-line data estimated to be available by the third quarter of 2022.

•

Advance additional studies. Once INSPIRE trial data are released, we plan to use those results as a catalyst in addition to data from the other clinical trials in the program, see “—Clinical Program” below, with multiple data read-outs anticipated in 2022 and later.

•

Pursue partnerships to advance the IRX-2 clinical program. We are pursuing partnership opportunities with certain leading biopharmaceutical companies for the development and commercialization of IRX-2.

•

Regulatory strategy. We believe that our assets may present opportunities for potential breakthroughs in the treatment of cancer and other indications. We will endeavor to seek breakthrough therapy designation with regulatory agencies for IRX-2 for one or more indications.

•

Intellectual Property. We continue to pursue additional intellectual property based on data from our IRX-2 clinical studies.

Pre-Clinical Results

Our findings to date from our nonclinical studies of IRX-2 include murine acute toxicology as well as acute and chronic toxicology in non-human primates. These studies detected circulating associated cytokines yet were associated with benign toxicological findings.

Clinical Program

IRX2 currently remains under development and has not yet been approved for marketing authorization in any jurisdiction. The ongoing company sponsored development program is investigating use of IRX2 as an immunotherapeutic neoadjuvant (pre-surgical) and adjuvant (post-operative) treatment for advanced head and neck squamous cell carcinoma, or (“HNSCC”). Studies in other indications and combinations are being pursued in the investigator sponsored study program.

HNSCC

The HNSCC development program is being conducted under U.S. Food and Drug Administration (“FDA”) Investigational New Drug (IND) 11137 filed on June 30, 2003 and is ongoing. The HNSCC program has received fast track designation, approved November 7, 2003, and orphan drug designation, conferred on July 7, 2005, from the FDA. We have not submitted a request for orphan drug designation in the European Union, although we may seek such designation in the future.

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Clinical studies in humans with HNSCC involving IRX‑2 show immune marker activation in patients treated with IRX‑2. In a prior Phase 2a clinical trial, a correlation was shown between marker activation and disease-free survival in head and neck cancer. Results from this study were used to support the initiation of the INSPIRE trial involving 105 patients with HNSCC. Details of this trial can be found at clinicaltrials.gov (NCT02609386). The trial study schema can be found below.

Historical Background of the Inspire Study

The IRX-2 regimen has been studied in patients HNSCC in two previous open-label, multi-center studies. Also, a phase 1 trial evaluated the IRX-2 regimen as a therapy for advanced disease, which reported that the IRX-2 regimen was well tolerated.

In 2011, results were reported for a Phase 2a trial of IRX-2. This trial was an open-label study involving 27 patients, 26 of whom completed the study. The primary endpoint of the study was to further evaluate the safety and efficacy of the immunotherapy regimen including IRX-2 in the neoadjuvant setting in previously untreated patients with advanced (Stage II to IVa) HNSCC. The primary study objective was to demonstrate the safety of this immunotherapy regimen based on adverse events (“AEs”), changes in clinical laboratory measures (hematology, chemistry, and urinalysis), vital signs, and physical examinations. Secondary objectives were clinical, pathologic, and radiographic tumor response; and patient disease-free survival (“DFS”) and overall survival (“OS”).

Most recombinant cytokines, such as IL-2, are tested in the same manner as traditional oncology drugs, where the maximum tolerated dose is sought. Typical cytokine therapies in cancer treatment use extremely high doses, in the millions of units per administration. Thus, AEs such as fever, hypotension, malaise, anemia, leukopenia, and hepatic and renal dysfunction are commonly reported, and often lead to discontinuation of the treatment. IV administration of cytokines is frequently associated with an acute phase reaction characterized by rigors, fever, an increase in neutrophils, a decrease in lymphocytes, and changes in hormone levels. By contrast, the IRX-2 regimen, which contains physiologic quantities of cytokines, showed greatly improved tolerability over typical recombinant cytokine therapies.

The results of the Phase 2a study were published in December 2011 in the journal Head and Neck. The article reported that IRX-2 showed an immunologically mediated antitumor effect, suggested by pronounced lymphocytic infiltration. Lymphocytic infiltration was measured by a 100-mm Visual Analog Scale (“VAS”) score, in which 100 mm signified lymphocyte infiltration of the entire primary tumor section and 0 mm signified no lymphocyte infiltration in the tumor specimen. The mean VAS score for all 24 patients was 22.6 mm on the samples obtained at surgery. Patients were grouped into a low VAS score (below the overall mean) and high VAS score (above the overall mean) cohorts. There were 14 patients in the low VAS score cohort with scores between 2 and 21 (median of 9.5), and there were 10 patients in the high VAS score cohort with scores between 27 and 66 (median of 37.0). Patients in the high-LI group included fewer oral cavity patients (50% in high LI vs 60% in low LI) but were similar with respect to tumor sites. Seventy percent of high-LI patients were stage IV, whereas only 60% of low LI were stage IV. The LI score was used to determine whether the degree of LI correlated with survival. Patients with a high-LI score had an improved survival trend compared to those with low LI, and superior to the survival rate for the combined overall group. (See below.)

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Interestingly, LI in resected tumor specimens was considered high in 40% of the patients. The 10 patients with a high-LI score showed an improved survival trend in comparison to the low-LI group (n = 15) and to the entire study population (n = 26). It is difficult to directly compare these subgroups, because there was some imbalance, with a slightly higher per-centage of oral cavity patients in the low-LI group. However, in the absence of a randomized control, it is impossible to directly attribute the LI to the immuno-therapy regimen. In addition, tumor reductions were observed at the end of the 21-day regimen in 11 patients, and a 75% reduction of glycolytic activity in the tumor and lymph nodes on posttreatment PET scans in one patient.

With regard to the primary endpoint, eight serious adverse events (SAEs) were reported during treatment and the 30-day postoperative period in 7 patients, including 3 patients with aspiration pneumonia, 1 patient with asthma exacerbation secondary to upper respiratory infection, 1 patient with a postoperative wound infection, 1 patient with a neck abscess, and 1 patient with an episode of alcohol withdrawal. Only 1 case of aspiration pneumonia was deemed life threatening (grade 4). None of the SAEs was considered related to treatment except for the postoperative wound infection, which was considered possibly related. Other minor (grade 1 or 2) AEs included headache (30%), injection-site pain (22%), nausea (22%), constipation (15%), dizziness (15%), fatigue (11%), and myalgia (7%).

After over more than 36 months of follow-up, 11 of the 27 patients enrolled in the Phase 2a study had experienced tumor relapse (n = 1) or death (n = 10). The pattern of first HNSCC relapse included 3 patients with primary site recurrence, 2 with recurrences in the neck, and 2 with distant metastases. Of the 10 patients who died, 6 died of cancer (1 from a new primary) and 4 died of other causes. The 1-year, 2-year, and 3-year DFS probabilities after surgery were 72%, 64%, and 62%, respectively. Of the 26 patients whose primary tumor was resected surgically, 2 patients died during the first year and 5 patients died during the second year after surgery. The probability of surviving after surgery was 92% the first year, 73% the second year, and 69% the third year, which was considered to be an encouraging survival rate compared to historical norms in patients with HNSCC.

A second finding of the study was that some tumors showed some decrease in overall size after the immunotherapy regimen. Overall tumor shrinkage was modest, although in 4 patients, independent, objective imaging documented a greater than 10% decrease in tumor size. This was unexpected and encouraging after only 3 weeks of presurgical neoadjuvant immunotherapy. No patient achieved a true partial response by modified Response Evaluation Criteria in Solid Tumors (RECIST) criteria. Increases in tumor measurements were also seen in some patients, but most patients showed negligible change in tumor dimensions. We believe that these findings suggest the safety of the neoadjuvant regimen, although final decisions on whether a drug product is safe and effective can only be made by the FDA.

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The phase 2a trial did not include a randomized control cohort. However, the manuscript published in Head & Neck in December 2011 stated the authors’ belief that the safety results and feasibility of this immunotherapy regimen were intriguing enough to warrant further study and appropriate comparison in a randomized trial.

The INSPIRE study is an open label, randomized, multi-center, multi-national Phase 2b clinical trial intended for patients with Stage II, III or IVA untreated SCC of the oral cavity who are candidates for resection with curative intent. Subjects were randomized 2:1 to either Regimen 1 or Regimen 2 and treated for 21 days prior to surgery and then postoperatively with a booster regimen given every three months for one year (a total of four times.)

Regimen 1: IRX-2 Regimen with cyclophosphamide, indomethacin, zinc-containing multivitamins, omeprazole and IRX-2 as neoadjuvant and adjuvant therapy.

Regimen 2: Regimen 1 with cyclophosphamide, indomethacin, zinc-containing multivitamins, omeprazole but without IRX-2 as neoadjuvant and adjuvant therapy.

Treatments were allocated to study subjects using minimization with a stochastic algorithm based on the range method. Minimization will account for the major prognostic factors for SCC of the oral cavity (T and N stage) and study center to avoid imbalances in treatment allocation within centers.

Postoperatively, subjects first received standard adjuvant radiation or chemoradiation therapy as determined by the investigators per NCCN guidelines, and then also received Booster Regimen 1 or 2 as determined in the prior randomization.

Subjects will be followed for the Primary, Secondary and Exploratory endpoints. Protocol mandated follow-up will end four years after randomization of the last patient.

The Neoadjuvant IRX-2 Regimen is a 21-day pre-operative regimen of cyclophosphamide on Day 1, indomethacin, zinc-containing multivitamins and omeprazole on Days 1-21, and subcutaneous IRX-2 injections in bilateral mastoid insertion regions for 10 days between Days 4 and 21, as shown in the table below:

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Agent	Dose	Route of Administration	Treatment Days
Cyclophosphamide	300 mg/m2	IV	1
IRX-2	230 units daily (Bilateral injections of 115 units)	Subcutaneous at or near the mastoid insertion of both sternocleidomastoid muscles	Any 10 days between Days 4 and 21
Indomethacin	25 mg TID	Oral	1-21
Zinc-Containing Multivitamins	1 tablet containing 15-30 mg of zinc	Oral	1-21
Omeprazole	20 mg	Oral	1-21

The Booster IRX-2 Regimen is given at 3, 6, 9 and 12 months (-14 to +28 days) after surgical resection. It is a 10- day post-operative regimen of cyclophosphamide on Day 1, indomethacin, zinc-containing multivitamins and omeprazole on Days 1-10 and subcutaneous IRX-2 injections in bilateral deltoid regions for 5 days between Days 4 and 10 as shown in the table below:

Agent	Dose	Route of Administration	Treatment Days
Cyclophosphamide	300 mg/m2	IV	1 Every 3 months.
IRX-2	230 units daily (Bilateral injections of 115 units)	Subcutaneous into bilateral deltoid regions	Any 5 days between Days 4 and 10 Every 3 months.
Indomethacin	25 mg TID	Oral	Days 1-10 Every 3 months.
Zinc-Containing Multivitamins	1 tablet containing 15-30 mg of zinc	Oral	Days 1-10 Every 3 months.
Omeprazole	20 mg daily	Oral	Days 1-10

Regimen 2, the control arm of the study, is identical, except that subjects will not receive IRX-2.

The primary objective of the study is to determine if the event-free survival (EFS) of subjects treated with Regimen 1 is longer than for subjects treated with Regimen 2. The secondary objections of the study are (i) to determine if OS of subjects treated with Regimen 1 is longer than for subjects treated with Regimen 2, (ii) to compare the safety of each Regimen, and (iii) to compare the feasibility of each booster regimen.

Other Indications

Other than the phase 2b INSPIRE trial, all clinical studies using IRX-2 are investigator-sponsored studies for which we are providing IRX‑2 as the study drug and financial support to conduct the trial. These studies include:

Monotherapy studies:

•

BR-101 - A study involving 16 patients with neoadjuvant breast cancer performed at the Providence Portland Medical Center. Details of this trial can be found at clinicaltrials.gov (NCT02950259).

•

CIN-201 - An open label single arm Phase 2 trial of the IRX‑2 regimen in women with cervical squamous intraepithelial neoplasia 3 or squamous vulvar intraepithelial neoplasia 3. Details of this trial can be found at clinicaltrials.gov (NCT03267680).

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Combination studies:

•

BAS-104 - A basket study originally intended to enroll 100 patients with metastatic bladder, renal, non-small cell lung cancer, or NSCLC, melanoma, and head and neck cancer being held at the Moffitt Cancer Center, using IRX‑2 in conjunction with Opdivo® (Nivolumab), an immunotherapy cancer treatment marketed by Bristol-Myers Squibb Company. This trial was discontinued after 11 subjects were enrolled due to insurance reimbursement challenges. Details of this trial can be found on clinicaltrials.gov (NCT03758781).

•

HCC-107 - A study involving 28 patients with metastatic hepatocellular carcinoma, or HCC, being held at City of Hope Medical Center, HonorHealth Research Institute, and Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Opdivo®, a cancer treatment marketed by Bristol-Myers Squibb Company. Details of this trial can be found at clinicaltrials.gov (NCT03655002).

•

GI-106 - A study involving 20 patients with metastatic gastric and gastroesophageal junction cancers (GI) being held at City of Hope Medical Center, HonorHealth Research Institute, and Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Keytruda® (Pembrolizumab), an immunotherapy cancer treatment marketed by Merck. Details of this trial can be found at clinicaltrials.gov (NCT03918499).

•

MHN-102 - A study involving 15 patients with metastatic head and neck cancer being held at the H. Lee Moffitt Cancer Center and Research Institute and University of Michigan Health System using IRX‑2 in conjunction with Imfinzi (Durvalumab), a cancer treatment marketed by AstraZeneca plc. Details of this trial can be found at clinicaltrials.gov (NCT03381183).

•

BR-202 - A study involving 30 patients with neoadjuvant triple negative breast cancer, held at the Providence Portland Medical Center using IRX‑2 in conjunction with a programmed cell death protein 1, or PD1, and chemotherapy treatments. Details of this trial can be found at clinicaltrials.gov (NCT04373031).

Impact of COVID-19 Pandemic

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our development plans, and on the ability to conduct our clinical trials. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted.

The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical trials. While our INSPIRE trial in patients with squamous cell carcinoma of the oral cavity is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result of the pandemic.

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Engineered Cellular and Genetic Medicines

We are advancing our gene-editing and cell therapy technology in oncology, blood disorders and monogenic disorders through a license with Factor and through the Acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021. We expect that the first generation product candidates resulting from the Acquisition will be derived from unedited (that is, not gene modified), induced pluripotent stem cells (“iPSC”)-derived allogeneic mesenchymal stem cells (“iMSC”). We expect to begin preclinical development of iMSC for clinical indications for which inhibiting inflammation and/or supporting recovery of bone marrow stromal cells is required. The prior work of Novellus and NoveCite with iMSC shows evidence for preclinical efficacy in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS). Interactions with the FDA provided guidance on Chemistry, Manufacturing and Controls (“CMC”), and manufacturing plans, which will be undertaken in a similar manner for additional iMSC applications. We expect that second generation iMSC products will involve gene editing, for which we anticipate using the stepwise addition of genes provided by the in-licensed Factor Bioscience gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations. Development of processes to advance CMC and manufacturing will follow the experience from first generation iMSC products. We expect clinical indications for gene-modified iMSC will include solid tumors and other conditions associated with episodic and/or chronic inflammation. We are also exploring opportunities to advance in vivo gene therapies for monogenic and other diseases by combining the NoveSlice gene editing technology in combination with ToRNAdo^TM, the in-licensed lipid nanoparticle (or “LNP”) technology.

Pluripotent Stem Cell-Derived MSC

MSC, also known as mesenchymal stromal cells, were originally discovered and isolated from bone marrow in the 1970s and have been isolated from various tissue sources including muscle, umbilical cord, liver, placenta, skin, amniotic fluid, synovial membrane, and tooth root. MSC have been intensely investigated for clinical applications within the last decades with a very strong record of safety and tolerability. However, the majority of registered clinical trials applying MSC therapy for diverse human diseases have fallen short of expectations, despite the encouraging pre-clinical outcomes in varied animal disease models. This can be attributable to inconsistent properties of MSC across studies as a result of variations in tissue source, donor variability, as well as isolation and manufacturing methodologies.

The generation of MSC from an iPSC source eliminates many of the sources of variability attributable to tissue derived MSC. Sources of reduced variability include the use a single tissue source and single donor as well as the ability to make larger cell banks due to the more extensive proliferation capacity of iMSC. Moreover, development of iMSC products can leverage decades of valuable manufacturing, preclinical and clinical experience with MSC. Brooklyn plans to create “off-the-shelf” iMSC products in clinical indications that harness their anti-inflammatory and tumor homing properties. Further, gene editing of iPSC can produce a stable source for iMSC that are endowed with additional therapeutically beneficial properties that are not present in tissue derived MSC or native iMSC.

Bone Marrow Transplant and Inflammatory Diseases

Brooklyn is exploring the use of iMSC to address primary graft failure or poor graft function after bone marrow or hematopoietic stem cell transplantation, or BM/HSCT in addition to potential applications in the prevention and/or treatment of graft vs host disease. Preclinical studies will be conducted to demonstrate the ability of iMSC to target the bone marrow and influence the microenvironment. In addition, we have assembled an advisory board of world class experts in BM/HSCT to guide the clinical trial design and selection of clinical populations that are most likely to show benefit of a secondary transplant after treatment with iMSC.

Tumor Localized Delivery of Immune Stimulating Cytokines

The ability of MSC to migrate and navigate to sites of inflammation, including tumors, makes MSC attractive for delivery of oncology therapeutics. We intend to use gene editing of iPSC to produce a cell line with expression of the immune stimulatory cytokines, which then can be used to generate iMSC that express both IL-7 and IL-15. Following systemic delivery of the gene edited iMSC, we believe that migration and homing to tumor sites will result in a localized and more sustained delivery of these potent cytokines in the tumor microenvironment without producing the side effects that occur with high dose systemic administration of these cytokines.

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Precision In vivo Genetic Medicines

We believe that the ability to engineer target site-specific DNA endonucleases with high fidelity (gene editing) has opened a new therapeutic arena for addressing the underlying genetic basis of disease. Gene editing systems that possess both high specificity (low off-target editing) and high efficiency for on-target editing enable the in vivo use of the gene editing machinery to specifically modify patient DNA in target tissues and thus address the genetic underpinnings of numerous disease states. Brooklyn’s in-licensed technologies are being leveraged to develop genetic medicines that can achieve precision in vivo gene editing to address disorders that occur primarily as a result of mutations in a single gene. The initial disease and gene targets being pursued include familial transthyretin amyloidosis (TTR gene mutations) and Stargardt disease (ABC4A gene mutation).

Autologous and Allogeneic Cell Therapy

Cellular reprogramming refers to the process of generating pluripotent stem cells from non-pluripotent somatic cells (e.g., dermal fibroblasts obtained through a skin biopsy) by the forced expression of key genes and factors important for maintaining the defining properties of pluripotent cells. We believe the in-licensed technology for mRNA-based cellular reprogramming is highly efficient and safer than methods that utilize viral vectors or plasmid DNA for expression of reprogramming factors because it eliminates the chance of DNA integration and potential for creating mutations in genomic DNA. Also, our proprietary reprogramming process utilizes daily repeated transfection of mRNA for expression of reprogramming factors and can achieve a rapid generation of iPSC clones (in 2 weeks) from patient tissue biopsy. This rapid and efficient process therefore reduces the potential negative impact of low quantity biopsy material and enhances reproducibility of autologous iPSC generation. Furthermore, by delivering mRNA for a gene editing nuclease, genomic modifications, including correction of mutations, can be simultaneously performed thus streamlining overall manufacturing time to produce gene-corrected autologous cells. We expect that this approach, leveraging the proprietary in licensed technologies, can be employed to produce cell therapies addressing genetic diseases (e.g., sickle cell disease) of infectious diseases (e.g. HIV). In addition, we have the potential to generate off-the-shelf (allogeneic) iPSC derived cell therapies for truly personalized cell therapy application in patients with genetic diseases.

Recent Developments

Listing on The Nasdaq Global Market

We transferred the listing of our common stock to The Nasdaq Global Market effective October 25, 2021, after voluntarily withdrawing the listing from the NYSE American stock exchange. The common stock continues to trade under the stock symbol “BTX.”

PIPE Transaction

On March 6, 2022, we entered into a Securities Purchase Agreement with an investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of approximately 6,857,000 units (the “Units”), each of which consisted of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) one warrant (the “Common Warrants”) to purchase one share of common stock, for an aggregate purchase price of approximately $12.0 million. The PIPE Transaction closed on March 9, 2022.

Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.

Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires five-and-one-half years from the date of issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.

In connection with the PIPE Transaction, we and the PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which we agreed to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. We agreed to use our best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved.

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Purchase Agreements

On April 26, 2021, we and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed a purchase agreement, or the First Purchase Agreement. Pursuant to the First Purchase Agreement, we had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of our common stock. Sales of common stock by us were subject to certain limitations, and could occur from time to time, at our sole discretion. In consideration for Lincoln Park’s entry into the First Purchase Agreement, we issued Lincoln Park approximately 56,000 shares of common stock. As of December 31, 2021, we had issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, we and Lincoln Park executed a second purchase agreement, or the Second Purchase Agreement, and together with the First Purchase Agreement, the Purchase Agreements. Pursuant to the Second Purchase Agreement,we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40.0 million of shares of our common stock. Sales of common stock by us are subject to certain limitations, and may occur from time to time, at our sole discretion. In consideration of Lincoln Park’s entry into the Second Purchase Agreement, we issued to Lincoln Park 50,000 shares of common stock.

Under the Second Purchase Agreement, we may direct Lincoln Park to purchase up to 60,000 shares of common stock on any business day, which we refer to as a Regular Purchase, which amount may be increased up to 120,000 shares based on the closing price of the common stock, provided that Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $2.0 million. The purchase price per share for each such Regular Purchase is based off of the common stock’s market immediately preceding the time of sale.

The Second Purchase Agreement also prohibits us from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares of common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of common stock. We have the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of common stock to Lincoln Park under the Second Purchase Agreements depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the common stock and determinations by us as to the appropriate sources of funding for us and our operations.

As of December 31, 2021, we had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of $34.1 million. Pursuant to the securities purchase agreement in respect of the PIPE Transaction, we are prohibited from issuing additional shares under the Second Purchase Agreement for a period of one -year immediately following the closing of the PIPE Transaction.

Acquisition of Novellus

On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc. entered into an agreement and plan of acquisition, or the Acquisition Agreement, with (a) Novellus LLC, (b) Novellus, Inc., the sole equity holder of Novellus, Ltd. and, prior to the closing under the Acquisition Agreement, a wholly owned subsidiary of Novellus, LLC, and (c) a seller representative. Novellus, Ltd. is a pre-clinical stage biotechnology company organized under the laws of Ireland that is developing engineered cellular medicines using its licensed, patented non-immunogenic mRNA, high-specificity gene editing, mutation-free and footprint-free cell reprogramming and serum-insensitive mRNA lipid delivery technologies. The Acquisition closed contemporaneously with the execution and delivery of the Acquisition Agreement.

We delivered consideration for the Acquisition totaling approximately $124.0 million, which consisted of (a) $22.8 million in cash and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.

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We expect the Acquisition will advance our evolution into a platform company with a pipeline of next generation engineered cellular, gene editing and cytokine programs. The completion of the Acquisition relieves Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene editing and cell therapy products, remains unchanged.

License and Royalty Agreements

Cell and Gene Therapy

On April 26, 2021, Brooklyn LLC entered into an exclusive license agreement, or the License Agreement, with Novellus, Ltd. and Factor, or the Licensors, to license the Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle cell disease, and beta thalassemia. Through the License Agreement, Brooklyn LLC acquired an exclusive worldwide license to develop and commercialize certain cell-based therapies to treat cancer and rare blood disorders, including sickle cell disease, based on patented technology and know-how of Novellus, Ltd.

The License Agreement provides that Brooklyn LLC pay the Licensors a total of $4.0 million in connection with the execution of the License Agreement, all of which has been paid. Brooklyn LLC was obligated to pay to the Licensors additional fees of $5.0 million in October 2021 and $7.0 million in October 2022.

The completion of our July 16, 2021 acquisition of Novellus, Inc., the sole equity holder of Novellus, Ltd., relieves us from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreements with ~~Buffalo Wild Wings~~Factor under the License Agreement remain unchanged. Brooklyn LLC is obligated to pay Factor $2.5 million in October 2021, which has been paid, and ~~such franchisees.~~

~~Strategic Process~~

~~Our board~~$3.5 million in October 2022.

Under the terms of ~~directors continues~~the License Agreement, Brooklyn LLC is required to ~~explore~~use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and ~~evaluate strategic alternatives~~regulatory milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Brooklyn LLC will be obligated, in the case of development and regulatory milestones, to make milestone payments to Licensor in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Brooklyn LLC fails to timely achieve certain delineated milestones, the Licensors may have the right to terminate the rights of Brooklyn LLC under provisions of the License Agreement relating to those milestones.

The Licensors are responsible for preparing, filing, prosecuting and maintaining all patent applications and patents under the License Agreement. If, however, the Licensors determine not to maintain a particular licensed patent or not to prepare, file and prosecute a licensed patent, Brooklyn LLC will have the right, but not the obligation, to assume those responsibilities in the territory at its expense.

Novellus, Ltd. is a pre-clinical development, manufacturing, and technology licensing entity focused on ~~maximizing shareholder value, while~~engineered cellular medicines. Novellus, Ltd. has developed mRNA-based cell reprogramming and gene editing technologies to create engineered cellular medicines. The synthetic mRNA is non-immunogenic—it is capable of successfully evading the cellular innate immune system and then is capable of expressing high levels of proteins for cell reprogramming and gene editing. The mRNA may be formulated for injection into target tissues for cellular uptake and therapeutic treatment.

The synthetic mRNA technology may be used to edit gene mutations or expressed gene-editing proteins to treat genetic and rare diseases. It may also ~~exploring~~be used to reprogram human non-pluripotent cells into induced pluripotent stem cells )(iPSC). The iPSC may then be differentiated into populations of varying therapeutic cell types. The reprogramming technology offers a rapid and ~~evaluating~~patient specific therapy using the engineered stem cells created from iPSC that may avoid the cost, complexity and safety issues associated with viral vector gene editing approaches.

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Novellus, Ltd. also has licenses from Factor to use over 70 granted patents throughout the world covering synthetic mRNA, RNA-based gene editing, and RNA-based cell reprogramming, in addition to specific patents covering methods for treating specific diseases. There are also more than 60 pending patent applications throughout the world focused on these and other aspects of the technology. The patent coverage includes granted patents and pending patent applications in the United States, Europe, and Japan, along with other major life sciences markets.

Novellus, Ltd. is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Novellus, Ltd. will be obligated, in the case of development and regulatory milestones, to make milestone payments of up to $51 million in aggregate to Factor and, in the case of commercialization milestones, specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Novellus, Ltd. fails to timely achieve certain delineated milestones, Factor may have the right to terminate Novellus, Ltd.’s rights under provisions of the License Agreement relating to those milestones.

There can be no assurance that Brooklyn LLC can successfully develop and commercialize the technology licensed under the License Agreement.

IRX-2

Unless otherwise stated below, each royalty to be paid under these license and royalty agreements is payable until the last patent for IRX-2 expires and runs in perpetuity unless earlier terminated pursuant to the terms described below. There are no milestone payments due under any of these agreements.

License Agreement with the University of South Florida Research Association

On June 28, 2000, IRX Therapeutics, a predecessor of Brooklyn LLC, entered into a series of License Agreements (collectively, the “USF License Agreement”) with the University of South Florida Research Association, Inc. (“Research Association”). Pursuant to the USF License Agreement, as amended, the Research Association licensed to IRX Therapeutics the exclusive worldwide rights to certain patents on IRX-2 in exchange for royalties equal to 7% of the gross product sales of IRX-2 (as defined in the USF License Agreement). The USF License Agreement was assigned to Brooklyn LLC in connection with the sale of the assets of IRX Therapeutics to Brooklyn in November 2018. The Research Association has the right to terminate the USF License Agreement (i) upon Brooklyn LLC’s entering into bankruptcy or insolvency on a voluntary or involuntary basis, (ii) upon the failure to pay royalties due and payable upon thirty days’ notice, or (iii) upon a material breach or default of the Agreement by Brooklyn LLC, unless such breach or default is cured within a thirty-day notice period. Brooklyn may terminate the USF License Agreement for any reason upon six months’ notice to the Research Association.

Royalty Agreement with certain former IRX Therapeutics investors

On May 1, 2012, IRX Therapeutics entered into a royalty agreement (the “IRX Investor Royalty Agreement”) with certain investors who participated in a financing ~~alternatives~~transaction. The IRX Investor Royalty Agreement was assigned to ~~increase~~Brooklyn LLC in November 2018 when Brooklyn LLC acquired the ~~likelihood~~assets of IRX Therapeutics. Pursuant to the IRX Investor Royalty Agreement, if and when Brooklyn LLC becomes obligated to pay royalties to the Research Association under the USF License Agreement, it will pay an additional royalty of 1% of gross sales to an entity organized by the investors who participated in such financing transaction. There are no termination provisions in the IRX Investor Royalty Agreement.

Collaborator License Agreement

Effective June 28, 2018, IRX Therapeutics terminated its Research, Development and Option Facilitation Agreement (the “Termination Agreement”) and its Options Agreement with a collaborative partner (the “Collaborator”), pursuant to a Termination Agreement. In connection with the Termination Agreement, all of the rights granted to the Collaborator under the RDO and Option Agreements were terminated, and IRX Therapeutics had no obligation to refund any payments received from the Collaborator. The Termination Agreement was assigned to Brooklyn LLC in connection with the sale of the assets of IRX Therapeutics to Brooklyn in November 2018.

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As consideration for entering into the Termination Agreement, the Collaborator will receive a royalty equal to 6% of revenues from the sale of IRX-2, for the period of time beginning with the first sale of IRX-2 through the later of (i) the twelfth anniversary of the first sale of IRX-2, or (ii) the expiration of the last IRX patent or other exclusivity of IRX-2, all as more particularly set forth in the Termination Agreement. Each party under the Termination Agreement may terminate the agreement (i) upon a material breach of the Termination Agreement by the other party that is not cured within sixty days (or thirty days if such breach is due to Brooklyn LLC’s non-payment of royalties), or (ii) upon the other party entering into bankruptcy on a voluntary or involuntary basis where such petition is not dismissed, discharged, bonded or stayed within ninety days.

Investor Royalty Agreement

On November 6, 2018, Brooklyn LLC entered into a royalty agreement (the “Brooklyn Investor Royalty Agreement”) with Brooklyn Immunotherapeutics Investors LP (“Investors LP”) and Brooklyn Immunotherapeutics Investors GP (“Investors GP”), which entities provided the financing required by Brooklyn LLC in connection with Brooklyn LLC’s acquisition of the assets of IRX Therapeutics. Under the Brooklyn Investor Royalty Agreement, Brooklyn LLC is required to pay compensatory royalties equal to 4% of gross sales of IRX-2 on an annual basis, 3% of which is to be paid to Investors LP and 1% of which is to be paid to Investors GP (all as more particularly set forth in the Royalty Agreement). This royalty continues in perpetuity.

In anticipation of the Merger, on March 22, 2021, Brooklyn LLC entered into an Amended and Restated Royalty Agreement and Distribution Agreement, or the Amended Royalty Agreement, with Investors GP, Investors LP, and certain beneficial holders of GP and LP. Pursuant to the Amended Royalty Agreement, among other things, we are required to pay compensatory royalties equal to 4% of net revenues of IRX-2, on an annual basis, of which 3% is to be paid to certain beneficial holders of LP and 1% is to be paid to certain beneficial holders of GP. The royalty continues in perpetuity.

The Royalty Agreement specifies royalty payments to certain beneficial holders, including:

Charles Cherington, one of our directors and stockholders has a right to receive 4.20% of the Specified Royalty;

entities affiliated with George P. Denny III (Denny Family Partners II, LLC, the George P. Denny Trust, and the R. Breck Denny Trust), a former director and current stockholder have a right to receive a total of 4.39% of the Specified Royalty;

an entity affiliated with Nicholas J. Singer (PCI BI LLC), a former director and current stockholder, has a right to receive a total of 2.10% of the Specified Royalty

entities affiliated with Yiannis Monovoukas (The Yiannis Monovoukas Family 2013 Revocable Trust FBO Alexi Monovoukas, The Yiannis Monovoukas Family 2013 Revocable Trust FBO Aresti Monovoukas, and The Yiannis Monovoukas Family 2013 Revocable Trust FBO Christian Monovoukas), a former director and stockholder have a right to receive a total of 1.40% of the Specified Royalty; and;

an entity affiliated with John D. Halpern (The John D. Halpern Revocable Trust), one of our stockholders, has a right to receive 3.50% of the Specified Royalty.

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Patent Portfolio

As of April 12, 2022, we owned or controlled approximately 9 patent families filed in the United States and other major markets worldwide, including 99 granted, 10 pending and 11 published patent applications, directed to novel compounds, formulations, methods of treatments and platform technologies. Patent protection for IRX-2 includes:

Summary Description of Patent or Patent Application	United States or Foreign Jurisdiction	Earliest Effective Date of Patent Application

IRX-2 Modified Manufacturing Process	Granted: US (No. 8,470,562), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL, SW), AU, CA, JP, MX, TR	US: 4/14/2009 EP: 4/14/2009

Method of Reversing Immune Suppression of Langerhans Cells	Granted: US (Nos. 9,333,238 and 9,931,378), EP (BE, CH, DE, DK, ES, FI, FR, GB, LI, NL), AU, CA Published: CN, HK	US: 6/8/2012 (No. 9,333,238), 4/13/2016 (No. 9,931,378) EP: 12/8/2010

Method of Increasing Immunological Effect	Granted: US (Nos. 7,993,660 and 8,591,956), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL), AU, CA, JP Published: HK	US: 8/9/2011 (No. 7,993,660), 11/26/2013 (No. 8,591,956) EP: 11/26/2008

Vaccine Immunotherapy	Granted: US (Nos. 6,162,778, 9,492,517, 9,492,519, 9,539,320 and 9,566,331), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL), AU, CA, HK, JP	US: 7/24/2007 (No. 6,162,778), 10/8/2009 (No. 9,492,517), 11/15/2011 (No. 9,539,230), 2/20/2013 (No. 9,566,331), 7/12/2013 (No. 9,492,519) EP: 5/17/2010

Immunotherapy for Reversing Immune Suppression	Granted: US (No. 7,731,945), AU	US: 10/26/2002

Vaccine Immunotherapy for Immune Suppressed Patients	Granted: US (Patent Nos. 6,977,072, 7,153,499, 8,784,796, 9,789,172 and 9,789,173), CA, JP	US: 10/26/2001 (No. 6,977,072), 5/5/2003 (No. 7,153,499), 7/12/2013 (No. 8,784,796), 6/4/2014 (Nos. 9,789,172 and 9,789,173)

Immunotherapy for Immune Suppressed Patients	Granted: EP (BE, CH, DE, ES, FR, GB, IT, NL, LI)	EP: 3/9/2007

Composition for the Treatment of Advanced Prostate Cancer	Granted: CA Published: EP, HK

Uses of PD-1/PD-L1 Inhibitors and/or CTLA-4 Inhibitors with a Biologic Containing Multiple Cytokine Components	Pending: AU, CA, EP, IL, JP, KR, NZ, PH, SG, US Published: BR, CN, EA, IN, MX, ZA

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US – United States of America EP – European Patent Convention BE – Belgium CH – Switzerland DE – Germany DK – Denmark ES – Spain FI – Finland GB – Great Britain IT – Italy LI – Lichtenstein NL – Netherlands SW – Sweden AU – Australia BR - Brazil CA – Canada CN – Peoples’ Republic of China EA – Eurasian Patent Organization HK – Hong Kong IL – Israel IN - India JP – Japan KR – Republic of Korea (South Korea) MX – Mexico PH – Philippines SG - Singapore TR – Turkey ZA – South Africa

Patent Families

Descriptions of our patent families with issued patents in the United States or European Union are as follows:

IRX-2 Modified Manufacturing Process - A method of making a primary cell derived biologic, including the steps of: (a) removing contaminating cells from mononuclear cells (“MNCs”) by loading leukocytes onto lymphocyte separation medium (“LSM”), and washing and centrifuging the medium with an automated cell processing and washing system; (b) storing the MNCs overnight in a closed sterile bag system; (c) stimulating the MNCs with a mitogen and ciprofloxacin in a disposable cell culture system to produce cytokines; (d) removing the mitogen from the mononuclear cells by filtering; (e) incubating the filtered MNCs in a culture medium; (f) producing a clarified supernatant by filtering the MNCs from the culture medium; (g) producing a chromatographed supernatant by removing DNA from the clarified supernatant by anion exchange chromatography; and (h) removing viruses from the chromatographed supernatant by filtering with dual 15 nanometer filters in series, thereby producing a primary cell derived biologic, wherein the primary cell derived biologic comprises IL-1.beta., IL-2, and IFN-.gamma.

Method of Reversing Immune Suppression of Langerhans Cells - A method of treating human papillomavirus (“HPV”), by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV and inducing an immune response to HPV. A method of overcoming HPV-induced immune suppression of Langerhans cells (“LC”), by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV and activating LC. A method of increasing LC migration towards lymph nodes, by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV, activating LC, and inducing LC migration towards lymph nodes. A method of generating immunity against HPV, by administering an effective amount of a primary cell derived biologic to a patient infected with HPV, generating immunity against HPV, and preventing new lesions from developing.

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Method of Increasing Immunological Effect - A method of increasing immunological effect in a patient by administering an effective amount of a primary cell derived biologic to the patient, inducing immune production, blocking immune destruction, and increasing immunological effect in the patient. Methods of treating an immune target, treating a tumor, immune prophylaxis, and preventing tumor escape.

Vaccine Immunotherapy/Composition for the Treatment of Advanced Prostate Cancer – A method providing compositions and methods of immunotherapy to treat cancer or other antigen-producing diseases or lesions. According to one embodiment of the invention, a composition is provided for eliciting an immune response to at least one antigen in a patient having an antigen-producing disease or lesion, the composition comprising an effective amount of a cytokine mixture, preferably comprising IL-1, IL-2, IL-6, IL-8, IFN-gamma. (gamma) and TNF- alpha (alpha). The cytokine mixture acts as an adjuvant with the antigen associated with the antigen-producing disease or lesion to enhance the immune response of the patient to the antigen. Methods are therefore also provided for eliciting an immune response to at least one antigen in a patient having an antigen-producing disease or lesion utilizing the cytokine mixture of the invention. The compositions and methods are useful in the treatment of antigen-producing diseases such as cancer, infectious diseases or persistent lesions.

Immunotherapy for Reversing Immune Suppression - A method for overcoming immune suppression including the steps of inducing production of naïve T-cells and restoring T cell immunity. A method of vaccine immunotherapy includes the steps of inducing production of naïve T cells and exposing the naïve T cells to endogenous or exogenous antigens at an appropriate site. Additionally, a method for unblocking immunization at a regional lymph node includes the steps of promoting differentiation and maturation of immature dendritic cells, thus, for example, exposing tumor peptides to T cells to gain immunization of the T cells. Further, a method of treating cancer and other persistent lesions includes the steps of administering an effective amount of a natural cytokine mixtures an adjuvant to endogenous or exogenous administered antigen to the cancer or other persistent lesions; preferably the natural cytokine mixture is administered with thymosin.

Vaccine Immunotherapy for Immune Suppressed Patients - A method for overcoming mild to moderate immune suppression includes the steps of inducing production of naive T-cells and restoring T-cell immunity. A method of vaccine immunotherapy includes the steps of inducing production of naive T-cells and exposing the naive T-cells to endogenous or exogenous antigens at an appropriate site. Additionally, a method for unblocking immunization at a regional lymph node includes the steps of promoting differentiation and maturation of immature dendritic cells at a regional lymph node and allowing presentation of processed peptides by resulting mature dendritic cells, thus, for example, exposing tumor peptides to T-cells to gain immunization of the T-cells. Further, a method of treating cancer and other persistent lesions includes the steps of administering an effective amount of a natural cytokine mixture as an adjuvant to endogenous or exogenous administered antigen to the cancer or other persistent lesions.

Immunotherapy for Immune Suppressed Patients – A method providing compositions of a natural cytokine mixture (“NCM”) for treating a cellular immunodeficiency characterized by T lymphocytopenia, one or more dendritic cell functional defects such as those associated with lymph node sinus histiocytosis, and/or one or more monocyte functional defects such as those associated with a negative skin test to NCM. The invention includes methods of treating these cellular immunodeficiences using the NCM of the invention. The compositions and methods are useful in the treatment of diseases associated with cellular immunodeficiencies such as cancer. Also provided are compositions and methods for reversing tumor-induced immune suppression comprising a chemical inhibitor and a non-steroidal anti-inflammatory drug (“NSAID”). The invention also provides a diagnostic skin test comprising NCM for predicting treatment outcome in cancer patients.

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Patent Term and Term Extensions

Individual patents have terms for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, utility patents issued for applications filed in the United States and the European Union are granted a term of 20 years from the earliest effective filing date of a non-provisional patent application. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office, or the USPTO, delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the restoration period cannot extend the patent term beyond 14 years from FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically are also 20 years from the earliest effective filing date. All taxes or annuities for a patent, as required by the USPTO and various foreign jurisdictions, must be timely paid in order for the patent to remain in force during this period of time.

The actual protection afforded by a patent may vary on a product-by-product basis, from country to country, and can depend upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Our patents and patent applications may be subject to procedural or legal challenges by others. We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For more information, see the section titled “Risk Factors-Risks Related to Our Intellectual Property.”

Supply and Manufacturing

Brooklyn has considerable experience in manufacturing the investigational active pharmaceutical ingredient (“API”) currently in the clinic. In recent years, we maintained internal API manufacturing capabilities. We are currently investigating the option of outsourcing API manufacturing to an experienced contract manufacturing organization (“CMO”), as we had historically done, to mitigate the overhead costs of internal manufacturing and leverage process development expertise to streamline and eliminate some of the more manual processes, thereby reducing risk of product microbial contamination. The CMO selected will have the capability to produce high quality product to meet both the investigational and anticipated commercial demands. There will be technology transfer and process validation costs, which will be carefully considered in any decision. We have established long-standing contract manufacturing relationships for fill/finish and packaging of the clinical supplies of IRX-2. As with any supply program, obtaining raw materials of the correct quality, and the performance of our contract manufacturing sites cannot be guaranteed. Due to the current demand for CMO services and supply chain issues in the COVID-19 pandemic environment we cannot ensure that we will be successful in obtaining such raw materials on terms acceptable to us, if at all.

We expect to similarly rely on contract manufacturing relationships for any products that we may in-license or acquire in the future. However, there can be no assurance that we will be able to successfully ~~execute our~~contract with such manufacturers on terms acceptable to us, or at all.

Contract manufacturers are subject to ongoing periodic and unannounced inspections by the FDA, the Drug Enforcement Administration (“DEA”) and corresponding state agencies to ensure strict compliance with current ~~long-term operating~~good manufacturing practices (“cGMPs”) and ~~strategic plan~~other state and federal regulations. Our contractors, if any, in Europe face similar challenges from the event the strategic process does not result in a transaction. Our board of directors has not set a timetable for the strategic process nor has it made any decisions relating to any strategic alternatives at this time,numerous European Union and ~~no assurance can be given as to the outcome of the process.~~member state regulatory agencies and authorized bodies. We do not ~~intend~~have control over third-party manufacturers’ compliance with these regulations and standards, other than through contractual obligations. If our contractors are deemed out of compliance with cGMPs, product recalls could result, inventory could be destroyed, production could be stopped, and supplies could be delayed or otherwise disrupted, which could have a materially adverse effect on our business.

If we need to ~~disclose~~change manufacturers after commercialization, the FDA and corresponding foreign regulatory agencies must approve these new manufacturers in advance, which will involve testing and additional ~~details~~inspections and associated regulatory submissions to ensure compliance with FDA regulations and standards, which collectively may result in significant lead times, delay and cost. Furthermore, switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly or on terms acceptable to us, or at all.

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Regulatory Matters

Government regulation and product approval

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, record-keeping, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Drugs and biologics must be approved by the FDA through the New Drug Application, (NDA) process or the Biologic License Application (BLA) process before they may be legally marketed in the United States. Henceforth, we will use the term “marketing application” or MA to apply to both.

There are two centers within the FDA that are responsible for the review and approval of drug marketing applications and general regulatory oversight: the Center for Drug Evaluation and Research, or CDER, and the Center for Biologics Evaluation and Research, or CBER. While all conventional drug products are regulated by CDER, biologic products can be regulated by either CDER or CBER, depending on the product’s classification.

The majority of BLA submissions are assigned to CBER; however, BLAs for certain biologic product categories are reviewed by CDER. These product categories include monoclonal antibodies for in vivo use, most proteins for therapeutic use, and categories such as cytokines, enzymes, and other novel proteins. Based on this, it is likely that a BLA submission for IRX-2 would fall under the jurisdiction of CDER. Regardless of the category, NDAs for all drug products fall under the jurisdiction of CDER.

In the United States, drugs are subject to rigorous regulation by the FDA under the federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, and biologics under the FDCA, the Public Health Services Act (PHSA), and their implementing regulations. Additionally, drugs and biologics are subject to other federal and state statutes. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug or biologics may be marketed in the United States generally involves the following:

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completion of pre-clinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations;

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submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin and which must include approval by an institutional review board, or IRB, at each clinical site before the trials are initiated;

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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice, or GCP, an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors;

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submission to, and acceptance by, the FDA of a MA;

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satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

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potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and

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FDA review and approval of the MA.

The testing and approval process require substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.

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United States drug development process

Once a pharmaceutical candidate is identified for development it enters the pre-clinical testing stage. Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Prior to beginning human clinical trials, a sponsor must submit an Investigational New Drug Application (“IND”) to the FDA, which includes the results of the pre-clinical tests, together with manufacturing information and analytical data. Some pre-clinical or non-clinical testing may continue even after the IND is submitted. In addition to including the results of the pre-clinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the trial lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of one or more qualified investigators in accordance with federal regulations and GCP.

Clinical trials must be conducted under protocols detailing the objectives of the trial and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, an Institutional Review Board, or IRB, affiliated with each institution participating in the clinical trial must review and approve each protocol before any clinical trial commences at that institution. All research subjects must provide informed consent, and informed consent information must be submitted to the IRB for approval prior to initiation of the trial. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if adverse events or other certain types of other changes occur.

Human clinical trials are typically conducted in three phases. A fourth, or post-approval, phase may include additional clinical studies. These phases generally include the following, and may be sequential, or may overlap or be combined:

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Phase 1 clinical trials involve the initial introduction of the drug or biologic into human subjects. These studies are designed to determine the safety of usually single doses of the compound and determine any dose limiting intolerance, as well as evidence of the metabolism and pharmacokinetics of the drug in humans. For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product is indicated.

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Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and efficacy of the drug or biologic for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks.

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In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical efficacy, optimal dosage and safety within an expanded population which may involve geographically diverse clinical trial sites. Generally, but not always, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a marketing application.

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Phase 4 clinical trials are studies required of or agreed to by a sponsor that are conducted after the FDA has approved a product for marketing. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement. Failure to promptly conduct Phase 4 clinical trials where necessary could result in withdrawal of approval for products approved under accelerated approval regulations.

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While Phase 1, Phase 2, and Phase 3 studies are generally required for approval of a marketing application, certain drugs and biologics may not require one or more steps in the process depending on other testing and the situation involved. Additionally, the FDA, an IRB, or the sponsor may stop testing at any time if results show patients being exposed to unnecessary health risks or overly dangerous side effects. Prior to the initiation of a clinical trial or at any time during the conduct of studies with human subjects, the FDA may place a study on clinical hold where patients may not be enrolled until questions around potential safety issues with investigational products are addressed.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the mechanism of action and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other requirements, the manufacturer must develop methods for testing the identity, strength, quality, potency, and purity of the final product. Additionally, appropriate packaging must be selected and validated, and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life.

United States drug review and approval process

Following completion of clinical studies, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA or BLA in order to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may require additional testing or information, may require that the product labeling be modified, may impose a post-approval study and other commitments or reporting requirements or other restrictions on product distribution, or may deny the application. The timing of final FDA review and action varies greatly but can take years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States may commence only when an NDA or BLA is approved.

FDA approval of a marketing application is required before marketing of the product may begin in the United States. The MA must include the results of product development, pre-clinical studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and controls utilized in manufacture of the product. In addition, a MA must also demonstrate purity, specifically in terms of showing that the final product does not contain extraneous material. The FDA has 60 days from its receipt of the MA to review the application to ensure that it is sufficiently complete for substantive review before accepting it for filing. The FDA may request additional information rather than accept an MA for filing. In this event, the MA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The submission of an MA is also subject to the payment of a substantial application fee (for FDA fiscal year 2022 this fee may exceed 3 million dollars, although a waiver of such fee may be obtained under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought). Further, the sponsor of an approved MA is subject to an annual program fee, which for FDA fiscal year 2022 is $369,413 per prescription drug product. User fees typically increase annually. The approval process is lengthy and complex, and the FDA may refuse to approve an MA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. The FDA reviews an application to determine, among other things, whether a product is safe and effective for its intended use. Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability.

If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter. The complete response letter outlines the deficiencies in the submission and often requires additional testing or information in order for the FDA to reconsider the application. Even after submitting this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. With limited exceptions, the FDA may withhold approval of a MA regardless of prior advice it may have provided or commitments it may have made to the sponsor.

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Once an MA is approved, changes to the conditions of approval, including additional indications, are made by the submission of a supplement to the MA The supplemental NDA, or sNDA, or the supplemental BLA, or sBLA must contain all of the information necessary to support the change. In the case of a new indication, that information usually consists of at least one clinical trial, and often more. Like an MA, FDA determines whether the supplemental application is sufficiently complete to permit review before it is filed. FDA then reviews the supplemental application. The FDA can either approve or issue a complete response letter outlining the deficiencies.

Manufacturing Readiness

As part of the approval process, the FDA must inspect and approve each manufacturing facility. Among the conditions of approval is the requirement that a manufacturer’s quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure continued compliance, and the FDA conducts periodic inspections to verify compliance. If we, or our contract manufacturers, fail to comply or cannot remedy regulator identified deficiencies, then we may be prohibited from marketing product.

If the FDA grants approval, the approval will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated through clinical studies. Further, a product may be marketed only in those dosage forms and for those indications approved in the MA. Certain changes to an approved MA, including, with certain exceptions, any significant changes to labeling, require approval of a supplemental application before the drug may be marketed as changed. Any products that we manufacture or distribute pursuant to FDA approvals are subject to continuing monitoring and regulation by the FDA, including compliance with cGMP and the reporting of adverse experiences with the drugs. The nature of marketing claims that the FDA will permit us to make in the labeling and advertising of our products will generally be limited to those specified in FDA approved labeling, and the advertising of our products will be subject to comprehensive monitoring and regulation by the FDA. Products whose review was accelerated may carry additional restrictions on marketing activities, including the requirement that all promotional materials are pre-submitted to the FDA. Claims exceeding those contained in approved labeling will constitute a violation of the FDCA. Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including corrective advertising, cessation of violative promotion, withdrawal of approval, recall, seizure of products, warning letters, injunctions, fines and/or civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.

Failure to comply with applicable federal, state and foreign laws and regulations would likely have a material adverse effect on our business. In addition, federal, state and foreign laws and regulations regarding the ~~strategic~~manufacture and sale of new drugs are subject to future changes.

Post-approval requirements and consideration

Once a MA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs and biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. As a condition of MA approval, the FDA may also require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug or biologic outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements to Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug or biologic.

Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new MA supplement before the change can be implemented. An MA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing MA supplements as it does in reviewing MAs.

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Adverse event reporting and submission of periodic reports is required following FDA approval of an MA. The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Foreign regulatory requirements

In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory agency is satisfied that we have presented adequate evidence of safety, quality and efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries. The regulatory approval and oversight process ~~unless~~in other countries includes all of the risks associated with regulation by the FDA and ~~until~~certain state regulatory agencies as described above.

Under the European Union regulatory system, applications for drug approval may be submitted either in a centralized or decentralized manner. Under the centralized procedure, a single application to the European Medicines Agency may lead to an approval granted by the European Commission which permits marketing of the product throughout the European Union. The decentralized procedure provides for mutual recognition of nationally approved decisions and is used for products that do not comply with requirements for the centralized procedure. Under the decentralized procedure, the holders of national marketing authorization in one of the countries within the European Union may submit further ~~disclosure~~applications to other countries within the European Union, who will be requested to recognize the original authorization based on an assessment report provided by the country in which marketing authorization is ~~appropriate~~held.

Pharmaceutical pricing and reimbursement

In both United States and foreign markets, our ability to commercialize our products successfully, and to attract commercialization partners for our products, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as Medicare and Medicaid, managed care organizations, private commercial health insurers and pharmacy benefit managers, or ~~necessary.~~

~~Our Strategy~~

~~Our focus~~PBMs. Third party payors are increasingly challenging the prices charged for ~~2020 is~~medicines and examining their cost effectiveness, in addition to ~~enhance~~their safety and efficacy. We may need to conduct expensive pharmacoeconomic or other studies in order to further demonstrate the ~~player experience~~value of our ~~product offering, expand~~products. Even with the ~~audience~~availability of such studies, our products may be considered less safe, less effective or less cost-effective than alternative products, and third-party payors may not provide coverage and reimbursement for our product ~~offering, maximize~~candidates, in whole or in part.

Political, economic and regulatory influences are subjecting the ~~social impact of our network, and monetize our network.~~

~~Buzztime Basic~~~~. Our tablet product offering has repeatedly~~health care industry in the United States to fundamental changes. There have been, proven to have a positive business impact for the venues who offer it to their customers. We call that impact the Buzztime Network Effect. However, we have had challenges acquiring new venues because delivering the robust, real time, multi-player experience available through our tablet product offering requires extensive amounts of equipment and expertise to deploy. That equipment and expertise results in a relatively high entry price point, which limits our market opportunity.

To address this problem, following months of development and research, during the second quarter of 2019 we began field testing a lower cost, entry-level product that we call Buzztime Basic. We believe that this capital-light, entry-level offering will enable customers to achieve the Buzztime Network Effect with less financial risk. To date, we have deployed Buzztime Basic on a market-by-market basis and are currently in more than approximately 150 locations.

The brains behind Buzztime Basic is Site Hub, our redesigned personal computer, about the size of a deck of cards, that streams our content to television screens within the venue. Currently, a majority of our trivia content is available for streaming through Site Hub. Following the launch of our mobile app in 2019, players may now play our trivia games on their mobile phones through our mobile app.

~~Mobile App~~~~. During 2019, we released an open beta version of our mobile app,~~ and we expect there will continue to ~~release updates as we receive feedback from~~be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our ~~customers~~business, including the Patient Protection and ~~evaluate how~~Affordable Care Act of 2010 (the “Affordable Care Act”).

We anticipate that in the United States, Congress, state legislatures, and private sector entities will continue to ~~improve both the experience~~consider and ~~social hooks~~may adopt healthcare policies intended to ~~enable more viral growth in today’s environment. To this end, during the first quarter~~curb rising healthcare costs. These cost containment measures could include:

Table of 2020, we launched a social login integration and have seen an increase in player registrations as a result. During 2020, we expect to launch player promotions focused on driving increased mobile downloads and on targeted audience programs such as Trivia for Charity. The app can be found in both the Apple App store and Google Play. Our app allows players to use their own mobile device to play along with most of our network trivia games within our customer’s venues. The app is a complement to our tablet platform experience and is the primary means of playing our trivia games in Buzztime Basic.

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controls on government-funded reimbursement for drugs;

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mandatory rebates or additional charges to manufacturers for their products to be covered on Medicare Part D formularies;

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controls on healthcare providers;

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controls on pricing of pharmaceutical products, including the possible reference of the pricing of United States drugs to non-United States drug pricing for the same product;

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challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through other means;

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reform of drug importation laws;

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entering into contractual agreements with payors; and

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expansion of use of managed-care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person

~~Hardware~~.

We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business. Any cost containment measures, including those listed above, or other healthcare system reforms that are adopted may have a ~~core competency~~material adverse effect on our business prospects.

Further, the pricing of pharmaceutical products generally, and particularly the pricing of orphan drugs, has recently received scrutiny from the press and from members of Congress in ~~designing, manufacturing, deploying~~both parties. Some members of the medical community have also made statements in the press on the pricing of orphan drugs. The impact of this scrutiny on the pricing of orphan drugs and ~~supporting tablet-enabled solutions~~other pharmaceutical products generally cannot be determined with any certainty at this time.

The Biologics Price Competition and Innovation Act of 2009, which was included in the Affordable Care Act, authorized the FDA to approve similar versions of innovative biologics, commonly known as biosimilars. Under the Affordable Care Act, a manufacturer may submit an application for ~~our partners. We believe our tablets~~licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biologic product or “reference product.” Manufacturers may not submit an application for a biosimilar to the FDA until four years following approval of the reference product, and the FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if IRX-2 or any other biologic product we may acquire or in-license, if approved, are deemed to be reference products eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.

Orphan Drug Exclusivity

Some jurisdictions, including the United States and Europe, may designate drugs or biologic products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983 (ODA), the FDA may grant orphan drug designation to drugs or biologic products intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or more ~~durable~~ than ~~off-the-shelf tablets~~200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. In the United States, orphan drug designation must be requested before submitting an application for marketing approval. An orphan drug designation does not shorten the duration of the regulatory review and approval process. The grant of an orphan drug designation request does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and efficacy of a product candidate must be established through adequate and well-controlled studies. If a product which has been granted orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to ~~consumers, and we can customize our tablets~~an orphan drug exclusivity period, which means the FDA may not approve any other application to market the same drug for the same disease or condition for a period of seven years, except in limited circumstances, such as where an alternative product demonstrates clinical superiority to the product with orphan exclusivity. In addition, holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of our customers. As previously announced, in the third quarter of 2019, we signed a second order with our partner that services the correctional facility industry for approximately $3,000,000. We began delivering tablets under that order in the fourth quarter of 2019, which will continue into the first quarter of 2021. During the third quarter of 2019 we also signed an agreement with Spendgo, a leading digital marketing and loyalty platform,patients. Failure to use our tablets in its customer locations. We began fulfilling initial orders from Spendgo during the fourth quarter of 2019, and we anticipate a steady pace of re-orders. Lastly, we have two hardware pilot opportunities with large casual dining organizations thatdo so could result in ~~tablet orders during 2020.~~

~~Advertising~~~~. During~~ the ~~first quarter~~withdrawal of ~~2019, we rolled out our new, modernized ad platform to a subset~~marketing exclusivity for the drug.

Table of ~~our customers. We completed the rollout to all existing customers~~Contents

The orphan drug exclusivity contained in the ~~second quarter. This new advertising system gives us access to ad buying platforms where digital advertising inventory is bought~~ODA has been the subject of recent scrutiny from the press, from some members of Congress and sold on public exchanges and private marketplaces. We continue to work with advertising sales companies to help us improve our advertisement sales and with an advertisement technology company to improve our ad loading, management, and delivery and testing capabilities. We can use advertising to monetize Buzztime Basic, as well as our entire network. We had quarter-over-quarter advertising revenue growth during 2019. We recognized approximately $50,000 of revenue during the third quarter of 2019 and more than $75,000from some in the ~~fourth quarter of 2019. Although we have approximately 40%~~medical community. There can be no assurance that the exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our products.

The European Orphan Drug Regulation is considered for drugs intended to diagnose, prevent or treat a life-threatening or very serious condition afflicting five or fewer ~~sites during~~per 10,000 people in the ~~first quarter of 2020 than we did~~EU, including compounds that for ~~most of 2019, we expect~~serious and chronic conditions would likely not be marketed without incentives due to ~~recognize approximately $180,000 in advertising revenue~~low market return on the ~~public exchange during~~sponsor’s development investment. The medicinal product considered should be of significant benefit to those affected by the condition. Benefits of being granted Orphan Medicinal Product Designation are significant, including ten years of marketing exclusivity and a potential two-year extension. The EU Community and Member States may not accept or grant for ten years a new marketing authorization or application for another drug for the ~~first quarter~~same therapeutic indication as the orphan drug, although the ten-year period can be reduced to six years if, after the end of ~~2020. If we successfully expand our market reach, we expect~~the fifth year, available evidence establishes that ~~our network will become more attractive~~the product is sufficiently profitable not to ~~third parties who desire to advertise~~justify maintenance of the marketing exclusivity. A supplementary protection certificate may extend the protection six months beyond patent expiration if that is later than the orphan drug exclusivity period. To apply for the supplementary protection, a pediatric investigation plan, or PIP, must be included in the ~~venues~~market application. In Europe all drugs now seeking marketing authorization need to have a PIP agreed with the European Medicines Agency (EMA) before it can be approved, even if it is a drug being developed specifically for a pediatric indication. If a product is developed solely for use in the pediatric population, then a Pediatric Use Marketing Authorization, or PUMA, may provide eight years of data exclusivity and ten years of marketing exclusivity.

Fast Track Designation and Accelerated Approval

The FDA is required to facilitate the development, and expedite the review, of drugs or biologics that are intended for the treatment of a serious or life-threatening disease or condition for which ~~our network~~there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast-track program, the sponsor of a new product candidate may request that FDA designate the product candidate for a specific indication as a fast-track drug concurrent with, or after, the filing of the IND for the product candidate. FDA must determine if the product qualifies for fast-track designation within 60 days of receipt of the sponsor’s request.

Under the fast track program and FDA’s accelerated approval regulations, FDA may approve a product for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the product from the market on an expedited basis. All promotional materials for products approved under accelerated regulations are subject to prior review by FDA.

In addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent interactions with FDA, FDA may initiate review of sections of a fast-track drug’s MA before the application is complete. This rolling review is available ~~thereby further increasing our advertising revenue.~~

~~Products~~if the applicant provides, and ~~Services~~

~~Our principal~~FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin until the last section of the MA is submitted. Additionally, the fast-track designation may be withdrawn by the FDA if they believe that the designation is no longer supported by data emerging in the clinical trial process.

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Priority Review

Under FDA policies, a product candidate is eligible for priority review, or review within a six to eight-month time frame from the time a complete MA is submitted, if the product candidate is intended for the treatment, diagnosis, or prevention of a serious or life-threatening condition, demonstrates the potential to address an unmet medical need, or provides a significant improvement compared to marketed drugs.

Disclosure of clinical trial information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and ~~service~~disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is ~~our interactive entertainment system that offers trivia, card, sports and arcade games through an extended network platform. Generally,~~then made public as part of the ~~subscription~~registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. Finally, there can be no assurance that fast track designation will result in a faster review process.

Anti-Kickback, False Claims Laws, Stark Law & the Prescription Drug Marketing Act

In addition to FDA restrictions on marketing of pharmaceutical products, other state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback prohibition, statutes and false claims statutes. The federal healthcare program Anti-Kickback Statute, or Anti-Kickback Statute, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and patients, prescribers, purchasers and formulary managers on the other. Violations of the Anti-Kickback Statute are punishable by imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the Anti-Kickback Statute and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

Federal law includes a provision commonly known as the “Stark Law.” This law prohibits a physician (defined to include a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor) from referring Medicare and Medicaid patients to certain types of entities with which the physician or any of the physician’s immediate family members have a financial relationship, unless an exception to the law’s prohibition is met. Subject to adherence to their respective criteria requirements, the self-referral prohibition contains a number of exceptions, including exceptions covering employment or independent contractor arrangements, space and equipment leases, and recruitment agreements. Sanctions within the Stark Law include significant civil penalties including over $25,000 for each violation, over $169,000 for schemes to circumvent the Stark Law restrictions, and up to $10,000 for each day an entity fails to report required information and exclusion from the federal healthcare programs. Violations of the Stark Law may also result in payment denials, false claim recoveries, civil monetary penalties, and/or federal program exclusion. Further, several states have enacted statutes similar in scope and purpose to the Stark Law. These state laws may mirror the federal Stark Law or may be different in scope. The available guidance and enforcement activity associated with such state laws varies considerably.

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The Physician Payments Sunshine Act, created under the ACA, and its implementing regulations require manufacturers of approved prescription drugs, devices, biologics, and medical supplies, for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually collect and report information on payments or transfers of value to physicians and teaching hospitals, as well as investment interests held by physicians and their immediate family members. The information reported each year is made publicly available on a searchable website. Failure to submit required information may result in civil monetary penalties.

In addition, several states now require prescription drug companies to report expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual physicians in these states. Other states prohibit various other marketing-related activities. Still other states require the posting of information relating to clinical studies and their outcomes. In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the United States Prescription Drug Marketing Act, or PDMA, a part of the FDCA. In addition, Title II of the Federal Drug Quality and Security Act of 2013, known as the Drug Supply Chain Security Act, or DSCSA, has imposed new “track and trace” requirements on the distribution of prescription drug products by manufacturers, distributors, and other entities in the drug supply chain. The DSCSA requires product identifiers (i.e., serialization) on prescription drug products in order to eventually establish an electronic interoperable prescription product system to identify and trace certain prescription drugs distributed in the United States and preempts existing state drug pedigree laws and regulations on this topic. The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers. The FDA is the process of finalizing regulations addressing wholesale distributors and third-party logistics providers. We serialize our product at both the package and homogeneous case level, pass serialization and required transaction information to our ~~platform,~~customers, and believe that we ~~provide~~comply with all such requirements.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the ~~equipment~~Health Information Technology for Economic and Clinical Health Act, sets standards governing the ~~platform to network subscribers (including tablets, cases~~conduct of certain electronic healthcare transactions and ~~charging trays~~protects the security and privacy of protected health information that is stored or transmitted electronically. These include standards for common healthcare transactions, such as: claims information, plan eligibility, payment information and the tablets), though we have also leased such equipment to certain network subscribers. We also monetize our network by offering it as an advertising platform through which parties can advertise their productsuse of electronic signatures; unique identifiers for providers, employers, health plans and ~~services across the thousands of TV~~individuals; and ~~tablet screens in our network. In 2017, we began licensing our~~security, privacy, breach notification and enforcement. HIPAA transaction regulations establish form, format and data content ~~to customers to be installed on equipment they obtain from other parties. In 2018, we began selling the tablets, cases and charging trays~~requirements for the tablets used in our platform to customers who may not subscribe to our network but who can use the equipment in their business for other purposes. In 2019, we released our mobile trivia app, allowing our customers’ patrons to play our trivia games on their mobile devices in addition to on our tablets.

Our primary network subscribers are bars and restaurants in North America, which we target directly through our internal sales organization. In April 2016, we began offering our platform in adjacent markets,most electronic healthcare transactions, such as ~~senior centers and casinos, which we target through third parties who have existing business relationships with potential customers in such markets.~~

We primarily develop the content and functionality available through our platform internally. We use an Android-based tablet customized to our specifications by a single unaffiliated third-party manufacturer. Such third-party also manufactures the cases and charging trays for the tablets and sources the raw materials used to manufacture those cases and trays. In 2019, we redesigned the personal computer installed in venues to stream our content to televisions and tablets within the venue.healthcare claims that are submitted electronically. The ~~redesigned personal computer, which we call Site Hub, has a smaller form factor (about the size of a deck of cards) compared to our historical personal computer.~~

~~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 UpShow, The Chive and other broadcast entertainment service providers. Competing forms of technology, entertainment, and marketing available in hospitality venues include games, apps and other forms of entertainment offerings available directly to consumers on their smart phones and tablets, on-table bar and restaurant entertainment systems, music and video-based systems, live entertainment and live trivia games, cable, satellite and pay-per-view programming, coin-operated single-player games/amusements, and traffic-building promotions like happy hour specials.

~~Buzztime Significant Customer~~

Our customers range from small independently operated bars and restaurants to bars and restaurants operated by national chains in the U.S. and Canada (including Buffalo Wild Wings, Old Chicago Buffalo Wings & Rings, Old Chicago, Native Grill & Wings, Beef O’Brady’s, Boston Pizza, and Arooga’s). This results in diverse venue sizes and locations. As of December 31, 2018, 2,639 venues subscribed to our interactive entertainment network and approximately 56% of our network subscriber venues were affiliated with national and regional restaurant brands. As of December 31, 2019, those numbers declined to 1,440 venues and to approximately 26%, in each case, primarily dueHIPAA privacy regulations establish comprehensive requirements relating to the termination of our relationship with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019. For the years ended December 31, 2019 and 2018, revenue generated from all Buffalo Wild Wings corporate-owned restaurants and its franchisees was as follows:

Year Ended
December 31,

2019 2018
Buffalo Wild Wings revenue $ 6,820,000 $ 10,180,000
Percent of total revenue 34 % 44 %

~~As of December 31, 2019 and 2018, amounts included in accounts receivable from Buffalo Wild Wings corporate-owned restaurants and its franchisees was as follows:~~

As of
December 31,

2019 2018
Buffalo Wild Wings accounts receivable $ 158,000 $ 552,000
Percent of total accounts receivable, net 13 % 48 %

~~Backlog~~

~~We generally do not have a significant backlog because we normally can deliver and install new systems within the delivery schedule requested by customers (generally within three to four weeks).~~

~~Licensing, Trademarks, Copyrights and Patents~~

A majority of the gaming content available on our 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 of the years ended December 31, 2019 or 2018.

Our intellectual property assets, including patents, trademarks, and copyrights, are important to our business and, accordingly, we actively seek to protect the proprietary technology 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. Most of the hardware we~~ use in our platform is purchased from a third party and customized for use with our service. 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~~protected health information. ~~We also enter into confidentiality~~The HIPAA security regulations establish minimum standards for the protection of protected health information that is stored or transmitted electronically. The HIPAA breach notification regulations establish the applicable requirements for notifying individuals, the HHS, and ~~invention assignment agreements with our employees~~the media in the event of a data breach affecting protected health information. Violations of the privacy, security and ~~contractors.~~

~~We believe the duration of our patents is adequate relative~~breach notification regulations are punishable by civil and criminal penalties.

In addition to the ~~expected lives~~federal HIPAA regulations, most states also have laws that regulate the collection, storage, use, retention, security, disclosure, transfer and other processing of ~~our products.~~ health information and other confidential, sensitive and personal data. Certain of these laws grant individuals rights with respect to their information, and we may be required to expend significant resources to comply with these laws. For example, various states, such as California and Massachusetts, have implemented privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of personally identifiable information, including protected health information. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies.

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Competition

We ~~consider~~have competitors both in the ~~following~~ United States and ~~Canadian patents to be important to the protection~~internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. Some of these companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and ~~service:~~

~~Patent No.~~	~~Description~~	~~Expiration Date~~
~~8,562,438~~	~~System and method for television-based services~~	~~4/21/2031~~
~~8,562,442~~	~~Interactive gaming via mobile playmaker~~	~~6/3/2031~~
~~2741999 (CAN)~~	~~Interactive gaming via mobile playmaker~~	~~6/3/2031~~
~~8,790,186~~	~~User-controlled entertainment system, apparatus and method~~	~~2/6/2034~~
~~8,898,075~~	~~Electronic menu system and method~~	~~9/11/2032~~
~~9,044,681~~	~~System and method for television-based services~~	~~10/13/2033~~
~~9,358,463~~	~~Interactive gaming via mobile playmaker~~	~~10/16/2033~~
~~9,498,713~~	~~User-controlled entertainment system, apparatus and method~~	~~2/6/2034~~
~~10,410,188~~	~~Electronic check splitting system, method and apparatus~~	~~8/2/2036~~

~~We have trademark protection for~~collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the ~~names~~product candidates that we develop obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our ~~key proprietary programming,~~competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or marketing approval or discovering, developing and commercializing products in our field before we do.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical 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 and PlayersPlus trademarks and our other related trademarks to be valuable assets, and we seek to protect them through a varietybiotechnology companies. These treatments consist both of ~~actions. Our content, branding, and some of our game titles,~~small molecule drug products, such as ~~Countdown, SIX, and Showdown are also protected by copyright and trademark law.~~

~~Government Contracts~~

We provide our content distribution services through our network to colleges, universities, and a few 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 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 December 2012, we received approval from the Federal Communications Commission, or the FCC, for our tablet charging trays, and in September 2015, we received FCC approval for our third-generation tablet cases with and without payment electronics. The 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:

	●	~~user privacy;~~

	●	~~copyrights;~~

	●	~~gaming, lottery and alcohol beverage control regulations;~~

	●	~~consumer protection;~~

	●	~~the distribution of specific material or content; and~~

	●	~~the characteristics and quality of interactive entertainment products and services.~~

As part of our service, we operate games of chance and skill, including several interactive card games, such as Texas Hold’em poker. These games are subject to regulation in many jurisdictions, and some games are restricted in certain jurisdictions. The laws and regulations that govern these games, however, vary from jurisdiction to jurisdiction and are subject to legislative and regulatory change,traditional chemotherapy, as well as ~~law enforcement discretion. Most of~~novel immunotherapies. Our commercial opportunities could be reduced or eliminated if our ~~games~~competitors develop and commercialize products that are ~~played solely~~safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain FDA, European Medicines Agency (“EMA”) or other marketing approval for ~~fun and winner recognition, however,~~their products more rapidly than we ~~recently began awarding nominal cash prizes to winners of certain trivia competitions. We~~ may ~~find it necessary to eliminate, modify, or cancel certain of our offerings in certain jurisdictions based on changes in law, regulations and law enforcement discretion,~~obtain approval for ours, which could result in ~~additional development costs and/or~~our competitors establishing a strong market position before we are able to enter the ~~possible loss~~market. Even if the product candidates we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness.

Human Capital Resources

Employees

We perform in a highly competitive industry and recognize that our continued success relies upon our ability to attract, develop and retain a diverse team of ~~customers~~talented individuals. We place high value on the satisfaction 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 at~~www.buzztime.com/business/investor-relations/~~ ~~under the heading~~~~SEC 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 heading~~~~Corporate Governance~~ ~~our (i) our code of conduct and ethics; (ii) our corporate governance guidelines; and (iii) the charter of each active committee~~well-being of our ~~board of directors. We intend to disclose any amendment to, or a waiver from, a provision of our code of conduct~~employees and ~~ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions~~operate with fair labor standards 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.~~

~~The SEC maintains a website at~~~~www.sec.gov~~ ~~that contains reports, proxy~~industry-competitive compensation and ~~information statements, and other information regarding our company that we file electronically with the SEC.~~

~~Employees~~

benefits. As of ~~March 16, 2020,~~April 12, 2022, we ~~had 38~~ have ten full-time employees, which includes five research and ~~1 part-time employee. We also engage independent contractors for specific projects.~~development positions and five administrative positions. None of our employees are ~~represented~~covered by collective bargaining agreements.

Compensation, Benefits and Development

Our approach to employee compensation and benefits is designed to deliver cash, equity and benefit programs that are competitive with those offered by leading companies in the biotechnology and pharmaceutical industries to attract, motivate and retain talent with a ~~labor union,~~focus on encouraging performance, promoting accountability and ~~we believe~~adherence to our ~~employee relations are satisfactory.~~

values and alignment with the interests of our stockholders.

Our ~~Corporate History~~

~~NTN Buzztime, Inc. was incorporated in Delaware in 1984 as Alroy Industries and changed its corporate name~~base pay program aims to ~~NTN Communications, Inc. in 1985. The name was changed~~compensate staff members relative to ~~NTN Buzztime, Inc. in 2005 to better reflect~~ the ~~growing role~~value of the ~~Buzztime consumer brand.~~

contributions of their role, which takes into account the skills, knowledge and abilities required to perform each position, as well as the experience brought to the job. We may also provide our employees with opportunities to earn cash and equity incentive compensation to reward the achievement of company-wide goals that are established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our company. Our employees are also eligible for the grant of equity awards under our long-term incentive program that are designed to align interests of our employees with that of our stockholders. All employees also participate in a regular performance measurement process through which staff receive performance and development feedback, which is taken into account in determining annual compensation.

Our benefit programs are generally broad-based, promote health and overall well-being and emphasize saving for retirement. All employees are eligible to participate in the same health and retirement savings plans.

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Code of Business Conduct and Ethics

We are committed to conducting business in accordance with the highest ethical standards. Our Code of Conduct and Ethics emphasizes the importance of integrity, honesty, forthrightness, respect and fairness. Our Code of Conduct and Ethics applies to all our employees, including those who are integrated into the Company through acquisitions.

Health, Safety and Well-Being

We actively promote the safety, health and well-being of our employees. We have continued to focus on employee safety throughout the COVID-19 pandemic by implementing extensive safety measures, including without limitation, on-site COVID-19 testing protocols and flexible remote working options for most of our employees.

~~ITEM 1A~~~~. Risk Factors~~

ITEM 1A. Risk Factors

Our business, financial condition and operating results can be affected by ~~several~~many factors, whether currently known or unknown, many of which are not exclusively within our control, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our financial condition and operating results to differ materially from historical or anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price. We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this ~~report.~~

Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

~~Risk Factors That May Affect~~

Risks Related to Ownership of our Common Stock

We have a limited operating history and have never generated any product revenue.

We are a clinical-stage biopharmaceutical company with a limited operating history. We were formed on September 27, 2018, for the purpose of consummating a business combination with IRX Therapeutics, Inc., which business combination was consummated on November 6, 2018. Since inception, we have incurred significant net losses. As of December 31, 2021, we had an accumulated deficit of approximately $159.7 million. Since inception, we have financed our operations with capital contributions from the former beneficial holders of Brooklyn LLC’s Class A membership interests, as well as through the sale of our securities under the Purchase Agreements with Lincoln Capital and in connection with the PIPE Transaction.

Our ~~Business~~

ability to generate product revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the necessary regulatory approvals for, our product candidates in development, including IRX-2. We ~~need~~have never been profitable, have no products approved for commercial sale, and have not generated any product revenue. It is possible that none of our product candidates will be approved for marketing. Failure to ~~raise capital~~obtain regulatory approvals, or delays in obtaining regulatory approvals, may adversely affect the successful commercialization of any drugs or biologics that Brooklyn or its partners develop, may impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain, and/or may adversely affect our receipt of revenues or royalties.

Because of the numerous risks and uncertainties associated with product development, we are unable to ~~meet~~predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Neither will we be able to predict the state of market competition which would adversely affect our ~~debt service obligations~~potential revenues from product sales. Our expenses could increase beyond expectations if we are required by the FDA or comparable non-U.S. regulatory authorities to ~~Avidbank~~perform studies or clinical trials in addition to those that we currently anticipate. Even if any of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with their commercial launch. If we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be negatively impacted.

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Furthermore, we sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings or commercialization objectives. From time to ~~fund~~time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, the receipt of marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of our ~~working capital needs. Our inability~~control. All of these milestones are based on a variety of assumptions, which may cause the timing of achievement of the milestones to ~~raise sufficient capital would~~vary considerably from our estimates. If we fail to achieve milestones in the timeframes we expect, the commercialization of our product candidates may be delayed, we may not be entitled to receive certain contractual payments, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

We may not be successful in our efforts to identify and acquire or in-license additional product candidates, or to enter into collaborations or strategic alliances for the development and commercialization of any such future product candidates.

We may seek to identify and acquire or in-license novel product candidates. The process by which we identify them may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

●

potential product candidates may, upon further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance;

●

potential product candidates may not be effective in treating their targeted diseases; or

●

the acquisition or in-licensing transactions can entail numerous operational and functional risks, including exposure to unknown liabilities, disruption of our business, or incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected acquisition or integration costs.

We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. We also cannot be certain that, following an acquisition or in-licensing transaction, we will achieve the revenue or specific net income that justifies such transaction. Further, time and resources spent identifying, acquiring and developing potential product candidates may distract management’s attention from our primary business or other development programs. Additional product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development. If we are unable to identify and acquire suitable product candidates for clinical development, this would adversely impact our business strategy, financial position and share price.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms of both their potential for marketing approval and commercialization, and there can be no assurance that the products we focus on will succeed. Because we must decide where to focus our resources, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may later prove to have greater commercial potential.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

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International expansion of our business exposes us to business, legal, regulatory, political, operational, financial and economic risks associated with conducting business outside of the United States.

Part of our business strategy involves potential expansion internationally with third-party collaborators to seek regulatory approval for our product candidates outside the United States. Doing business internationally involves a number of risks, including but not limited to:

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multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses;

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failure by us or our collaborators to obtain appropriate licenses or regulatory approvals for the sale or use of IRX-2 or any other product candidate we may acquire or in license;

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difficulties in managing foreign operations;

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complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;

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financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;

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reduced protection for intellectual property rights;

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natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

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failure to comply with the United States Foreign Corrupt Practices Act, or FCPA, including its books and records provisions and its anti-bribery provisions, the United Kingdom Bribery Act 2010, or U.K. Bribery Act, and similar anti-bribery and anti-corruption laws in other jurisdictions, for example by failing to maintain accurate information and control over sales or distributors’ activities.

Any of these risks, if encountered, could significantly harm our future international expansion and operations and consequently, negatively impact its financial condition, results of operations and ~~business.~~

cash flows.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon the ability to attract highly qualified managerial, scientific and medical personnel. In order to induce valuable employees to remain with us, we intend to provide employees with stock options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in the price of the common stock that it will not be able to control and may at any time be insufficient to counteract more lucrative offers from other companies.

Our management team has expertise in many different aspects of drug development. However, we will need to hire additional personnel as we continue to develop our product candidates. Competition for skilled personnel in the pharmaceutical industry is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. Other pharmaceutical companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what Brooklyn has to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates would be limited.

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Risks Related to our Financial Position and Capital Requirements

We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or fail to become commercially viable. We have never generated any product revenue, and we cannot estimate with precision the extent of our future losses. We do not currently have any products that are available for commercial sale, and we may never generate product revenue or achieve profitability.

We expect that our research and development expenses in connection with our development programs for product candidates will continue to be significant. In addition, as we prepare for and if we obtain regulatory approval for any of our product candidates, we expect to incur increased sales, marketing and manufacturing expenses. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have harmed and will continue to harm our results of ~~December 31, 2019,~~operations, financial position and working capital.

There can be no assurance that we ~~had cash, cash equivalents~~will be profitable even if we successfully commercialize IRX - 2 or any other product candidate we may acquire or in-license (including any products that may be developed from the licensed technology with Factor and ~~restricted cash~~Novellus, Ltd.). If we do successfully obtain regulatory approval to market any of ~~$3,409,000. As~~our product candidates, our revenue will be dependent upon, in part and among other things, the size of ~~December 31, 2019, $2,750,000 was outstanding under our term loan with Avidbank,~~the markets in the territories for which we gain regulatory approval, the number of competitors in such markets, the accepted price for any such product candidate and whether we own the commercial rights for those territories. If the indication approved by regulatory authorities is ~~gross~~narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of any ~~unamortized debt issuance costs that are recorded as~~of our product candidates, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a ~~reduction of long-term debt. Since January 1, 2020, we paid $750,000~~quarterly or annual basis. Failure to become and remain profitable may adversely impact the market price of the ~~principal amount of~~common stock and our term loan, thereby reducing the principal amount outstanding as of March 19, 2020 to $2,000,000. The maturity date of our term loan is December 31, 2020 and we are required to make monthly principal payments ranging from $125,000 to $300,000 plus accrued interest beginning in April 2020. Subject to limited exceptions, our loan and security agreement with Avidbank prohibits us from borrowing additional amounts from other lenders.

~~We need~~ability to raise capital and continue operations.

We own only a 25% interest in NoveCite, Inc., and that interest may be diluted unless we invest additional funds.

In July 2021, we acquired 25% of the outstanding common stock of NoveCite, Inc. As a result, we will only be entitled to ~~meet~~a portion of any benefits that flow from the development by NoveCite, Inc. of any product candidates. In the event that NoveCite, Inc. issues additional equity securities in the future, our ~~debt service obligations~~percentage ownership would be diluted unless we were to ~~Avidbank~~invest additional funds. Dilution of our equity ownership would decrease our portion of any benefit that might be derived from a NoveCite, Inc. product candidate’s successful development. If we were to determine that it would be in the best interests of our company and ~~fund~~stockholders to invest additional amounts in NoveCite, Inc. to prevent dilution of our ~~working capital needs.~~ interests, the required funds may not be available to us on reasonable terms, or at all.

We ~~currently have no arrangements for such capital~~may not generate the expected benefits of our Acquisition and ~~no assurances~~it could disrupt our ongoing business, distract our management and increase our expenses.

We entered into the Acquisition Agreement to acquire all the outstanding equity interests of Novellus, Inc. and Novellus, Ltd., which we collectively refer to as Novellus, with the expectation that the Acquisition will result in various benefits, including accelerating our research and development efforts in the gene editing and mRNA spaces. Achieving the anticipated benefits of the Acquisition is subject to a number of uncertainties, including whether our business and the business of Novellus can be ~~given~~integrated in an efficient and effective manner. We cannot assure you that we will be able to accurately forecast the performance or ultimate impact of the Acquisition.

It is possible that the integration process following the Acquisition could take longer than anticipated and could result in unforeseen expenses, the disruption of our ongoing business, processes and systems, or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect our ability to achieve the anticipated benefits of the Acquisition. There may be increased risk due to integrating financial reporting and internal control systems. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits, expense savings and synergies of the Acquisition will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect our future business, financial condition, operating results and prospects.

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We have incurred and will continue to incur non-recurring expenses in connection with the Acquisition, including legal, accounting and other expenses. Additional unanticipated costs may be incurred following consummation of the Acquisition during the integration of the business of Novellus into our business. We cannot be certain that the realization of efficiencies related to the integration of Novellus will offset in the near term, or at all, the transaction and integration costs of the Acquisition and any losses from undiscovered liabilities not covered by indemnification provisions from the sellers of Novellus under the Acquisition Agreement or otherwise.

We may acquire businesses, assets or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses, assets or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new acquisition. Difficulties may prevent us from realizing its expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.

Brooklyn expects to spend substantial capital to complete the development of, seek regulatory approvals for and commercialize IRX-2, perhaps with development partners, as well as any of other product candidate it may develop. We will require additional capital to complete the development and potential commercialization of our product candidates. Because the length of time and activities associated with successful development of our product candidates are highly uncertain, we are unable to estimate with certainty the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

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the timing, progress, costs and results of our INSPIRE trial for the treatment of squamous cell cancer of the head and neck;

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the costs of any other clinical trials we may initiate, including the costs to conduct the study and to produce the supply of product that may be required for our own studies or for investigator-sponsored studies;

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the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;

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the cost of filing, prosecuting, defending and enforcing its patent claims and other intellectual property rights;

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the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against it or any of its current or future product candidates;

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the effect of competing market developments;

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the cost and timing of completion of commercial-scale manufacturing activities;

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the cost of establishing sales, marketing and distribution capabilities for our products in regions where we choose to commercialize our products on our own; and

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the initiation, progress, timing and results of the commercialization of our product candidates, if approved for commercial sale.

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Based on currently available information and our ongoing operations, we believe that our existing cash, inclusive of the funding committed by certain beneficial holders of Brooklyn LLC’s Class A membership interests and received under the Purchase Agreements with Lincoln Capital and in connection with the PIPE Transactions, will not be sufficient for us to fund our operating expenses and capital expenditure requirements through the twelve-month period subsequent to the issuance date of this report. We intend to raise ~~such~~additional sources of capital, ~~when needed,~~which could be in the form of debt, grants or equity. We cannot be certain that additional capital will be available on acceptable terms, or at all. ~~The effects of the recent COVID-19 pandemic on macroeconomic conditions and the capital markets will likely make it more challenging to raise capital.~~ If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of any product candidate, or potentially discontinue operations altogether. In addition, attempting to secure additional capital ~~we will need to implement additional measures to reduce operating expenses~~may divert the time and ~~to preserve capital, any of which may further adversely affect our operations. The going concern explanatory paragraph included in the report~~attention of our ~~independent registered public accounting firm on~~management from day-to-day activities and harm its product candidate development efforts. Because of the numerous risks and uncertainties associated with the development and potential commercialization of its product candidates, we are unable to estimate the amounts of increased capital outlays, operating expenditures and capital requirements associated with its current product development programs.

Raising additional funds by issuing equity securities may cause dilution to existing holders, raising additional funds through debt financings may involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our ~~consolidated financial statements as of and for the year ended December 31, 2019 could also impair our ability~~operations or require us to ~~raise capital. See also, “~~~~The measures we recently implemented and may implement~~relinquish proprietary rights.

We expect that significant additional capital will be needed in the future to ~~reduce operating expenses~~continue our planned operations. Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances and ~~to preserve~~license and development agreements or other collaborations. To the extent that we raise additional capital by issuing equity securities, existing stockholder ownership may experience substantial dilution, and the securities may include preferred shares with liquidation or other preferences that could ~~adversely affect our business and~~harm the rights of a common stockholder.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not ~~realize the operational or financial benefits from such actions,” “~~be favorable to us. If we ~~fail~~are unable to ~~comply with~~raise additional funds when needed, we may be required to delay, limit, reduce or terminate its product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market themselves.

Risks Related to our ~~debt service obligations or with our financial covenants to Avidbank, it may declare a default,~~Business and Industry

We face business disruption and related risks resulting from the pandemic of the novel coronavirus (COVID-19), which could ~~lead to all payment obligations becoming immediately due and payable and~~ have a material adverse effect on our business plan.

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Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

Our computer systems, as well as those of various third parties on which it relies, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development and other programs. For example, the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of any product candidate could be delayed.

Our future success will depend heavily on the success of our development of IRX-2, successful clinical development of our in-licensed cell and gene therapy technologies and any other products we may acquire, license or develop (including any products that may be developed from the licensed technology if Brooklyn exercises its option to license certain technology from Novellus). We expect to continue our efforts and expenditures related to the continued clinical evaluation of our lead product candidate, IRX-2, and the monotherapy and combination studies related thereto. We expect to continue our efforts towards the commercialization of such product candidates following regulatory approval, if received. Additionally, we expect to devote substantial resources and efforts to the preclinical and clinical evaluation of new cell and gene therapy product platforms that we may acquire or in-license (including any products that may be developed from the licensed technology with Factor and Novellus, Ltd.). Accordingly, our business currently depends heavily on the successful completion of our clinical trials for its product candidates and subsequent regulatory approval and commercialization of such product candidates. Our ability to successfully commercialize IRX-2 and any other product we may acquire, license or develop, will depend on, among other things, our ability to:

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successfully complete pre-clinical studies and clinical trials deemed adequate by regulatory authorities and obtain and maintain regulatory approval for the marketing of our product candidates;

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receive regulatory approvals from the FDA, the EMA and other similar regulatory authorities;

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establish and maintain collaborations with third parties for the development and/or commercialization of our product candidates, or otherwise build and maintain strong development, sales, distribution and marketing capabilities that are sufficient to develop products and launch commercial sales of any approved products, including establishing sales, marketing and distribution systems for our product candidates;

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obtain coverage and adequate reimbursement from payors such as government health care systems, pharmacy benefit managers, and insurance companies and achieve commercially attractive levels of pricing;

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secure acceptance of our product candidates from physicians, health care payors, patients and the medical community;

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produce, through a validated process, in manufacturing facilities inspected and approved by regulatory authorities, including the FDA, sufficiently large quantities of our product candidates to permit successful commercialization;

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manage our spending as expenses increase due to government mandated post-approval clinical trials and commercialization;

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obtain and enforce sufficient intellectual property rights for any approved products and product candidates, maintain, expand and protect our intellectual property portfolio;

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add operational, financial, and management information systems; personnel, including personnel to support its clinical, manufacturing and planned future commercialization efforts and operations as a public company;

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conduct internal or contract manufacturing meeting specifications and in compliance with applicable cGMPs; and

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initiate and continue relationships with third-party suppliers and manufacturers or continue to further develop our own manufacturing capabilities and have commercial quantities of our product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA and other regulatory requirements.

Conducting pre-clinical studies in animals and clinical studies in humans is a lengthy, time-consuming, and expensive process. In order to obtain FDA approval to market a new pharmaceutical product, we must demonstrate proof of safety and efficacy of the product. We cannot be certain that our clinical trials for our product candidates will be successful or that any of our product candidates will receive approval from the FDA, the EMA or any other comparable regulatory authority.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are, and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and in other countries that each have differing regulations. While we have submitted an IND in the United States and comparable drug approval filings with certain foreign regulatory authorities, the timing of the filing for marketing approval in the United States or comparable filing in other nations is unknown. We must provide these regulatory authorities with data from preclinical studies and clinical trials that demonstrate our product candidates are safe and effective for specific indications before they can be approved for commercial distribution. Securing regulatory approval requires the submission of extensive preclinical, nonclinical and clinical data and other supporting information for each proposed therapeutic indication, in order to establish the product’s safety and efficacy for each intended use. In the case of biologics the data must also include potency and purity for each product. There are risks associated with this process that may include:

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preclinical studies and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays;

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we cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all;

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it may take several years and require significant expenditures to complete the preclinical studies and clinical trials necessary to commercialize a product candidate, and delays or failure are inherently unpredictable and can occur at any stage.

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we may also be required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we contemplate, which may lead to us incurring additional unplanned costs or result in delays in clinical development;

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we may be required to redesign or otherwise modify our plans with respect to an ongoing or planned clinical trial and changing the design of a clinical trial can be expensive and time consuming; and

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an unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. It may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

In order to obtain FDA approval to market a new pharmaceutical product, we must demonstrate proof of safety and efficacy of the product in humans. To meet these requirements, we must conduct “adequate and well controlled” clinical studies. The length of time to complete these studies may vary substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more per study. We cannot be certain that our clinical trials for our product candidates will be successful or that any of our product candidates will receive approval from the FDA, the EMA or any other comparable regulatory authority. Of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the submission of a new drug marketing application to the FDA and even fewer are approved for commercialization. The FDA or other foreign regulatory authorities may delay, limit or deny approval of any of our product candidates for many reasons, including:

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We may not be able to demonstrate that any product candidate is safe or effective as a treatment for any of our currently or future targeted indications to the satisfaction of the FDA or other relevant regulatory authorities.

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The relevant regulatory authorities may require additional pre-approval studies or clinical trials which would increase our costs and prolong development timelines or could grant conditional approval with a requirement to perform additional studies at a significant cost.

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The results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or other relevant regulatory authorities for marketing approval.

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The FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials, including the design of its future pivotal Phase 3 clinical trials.

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Contract Research Organizations (“CROs”) that we may retain to conduct clinical trials may take actions outside of our control, or otherwise commit errors or violations of protocols, that adversely impact our clinical trials and ability to obtain market approvals.

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The FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient to demonstrate that the clinical and other benefits of these products outweigh their safety risks.

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The FDA or other relevant regulatory authorities may disagree with our interpretation of data or significance of results from the nonclinical studies and clinical trials of IRX - 2 or any other product candidate we may acquire or in-license or may require that it conduct additional studies.

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The FDA or other relevant regulatory authorities may not accept data generated from our clinical trial sites.

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If our MA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory authority, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of such application or may recommend that the FDA or other relevant regulatory authority require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions.

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The FDA or other relevant regulatory authorities may require development of a REMS, or its equivalent, as a condition of approval.

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The FDA or other relevant regulatory authorities may require additional post-marketing studies and/or a patient registry, which would be costly.

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The FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to support the quality of IRX - 2 or any other product candidate we may acquire or in-license.

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The FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturer or our own manufacturing processes or facilities.

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The FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.

Many of the factors that cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for our product candidates. The FDA, EMA or any other comparable regulatory authority may disagree with our clinical trial design and our interpretation of data from clinical trials or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials. In connection with clinical trials of our product candidates, we face a number of risks, including risks that:

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a product candidate is ineffective or inferior to existing approved products for the same indications;

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patients may die or suffer adverse effects for reasons that may or may not be related to the product candidate being tested;

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a product candidate causes or is associated with unacceptable toxicity or has unacceptable side effects;

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the results may not confirm the positive results of earlier trials;

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we are unable to manufacture sufficient quantities of stable and qualified materials under cGMP for use in clinical studies;

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we fail to recruit a sufficient number of patients or we have slower than expected rates of patient recruitment;

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modification of clinical study protocols is necessary;

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there may be changes in regulatory requirements for clinical studies;

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there is a lack of effectiveness during clinical studies;

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there is an emergence of unforeseen safety issues;

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there may be delays, suspension, or termination of the clinical studies due to the IRB responsible for overseeing the study at a particular study site;

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there could be government or regulatory delays or “clinical holds” requiring suspension or termination of the studies; and

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our collaborators may be unable or unwilling to perform under their contracts.

Delays associated with products for which we are directly conducting clinical studies may cause us to incur additional operating expenses. An unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. It may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

Furthermore, even if we do receive regulatory approval to market our product candidates, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the product.

The failure of clinical studies to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical studies would delay the filing of its marketing application with the FDA and, ultimately, our ability to commercialize its product candidates and generate product revenues. Any change in, or termination of, our clinical studies could materially harm our business, financial condition, and results of operations. Any of these events could harm our business,” and “~~Raising additional capital~~operations and could negatively impact the price of our common stock.

Results of preclinical studies and early clinical trials may ~~cause dilution~~not be predictive of results of future clinical trials.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in the results of completed clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. For example, results from the INSPIRE trial of IRX-2 may not be positive or replicated at clinical trial sites in a later stage clinical trial conducted by us or our collaborators. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support marketing approval.

Preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

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Clinical studies required for our product candidates may involve combination with other products which may result in unpredictable outcomes

In some cases, IRX-2 and any other product we may acquire or in-license (including any products that may be developed from the licensed technology if Brooklyn exercises its option to exclusively license certain technology from Novellus) may be expected to be used in combination with approved therapies that may have significant adverse event profiles. During the course of treatment, these patients could suffer adverse medical events or die for reasons that may or may not be related to our ~~existing stockholders and may restrict~~product candidates. We cannot ensure that safety issues will not arise with respect to our ~~operations,” below.~~

~~Due to the termination~~product candidates in clinical development. In addition, several of our ~~relationships~~IRX-2 studies focus on IRX-2 in conjunction with ~~Buffalo Wild Wings corporate-owned restaurants~~current preferred treatments for certain types of cancer, including head and ~~most of its franchisees~~neck cancers. If the drugs being studied in ~~November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows~~conjunction with IRX-2 are found to be faulty in any way, or if they fall out of favor as a preferred treatment, our clinical studies may be adversely ~~effected. In addition,~~effected, as we may have to restart such studies with the ~~recent COVID-19 pandemic~~newer, preferred treatment in conjunction with IRX-2. Any delay in obtaining or failure to obtain required approvals could ~~further decrease~~negatively impact our ~~revenues~~ability to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and ~~our operating results and cash flows could be further~~ adversely ~~effected.~~

~~For~~impact the ~~year ended December 31, 2019, Buffalo Wild Wings corporate-owned restaurants and its franchisees accounted for approximately 34%, or $6,820,000,~~price of our ~~total revenue.~~ common stock.

We ~~continue~~may find it difficult to ~~seek~~enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.

Identifying and qualifying patients to ~~add network subscribers~~participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on our ability to recruit patients to participate as well as the completion of required follow-up periods. Patients may be unwilling to participate in our clinical trials because of negative publicity from adverse events related to novel therapeutic approaches, competitive clinical trials for similar patient populations, the existence of current treatments or for other reasons. Enrollment risks are heightened with respect to certain indications that we may target for one or more of our product candidates that may be rare diseases, which may limit the pool of patients that may be enrolled in our planned clinical trials. The timeline for recruiting patients, conducting trials and ~~other sources~~obtaining regulatory approval of ~~revenue to offset the revenue we lost~~our product candidates may be delayed, including as a result of the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, however, we have not yet been successful in doing so and there is no assurance that we will be.

In addition, the effect of the recent COVID-19 pandemic on the restaurant and bar industry has been rapid and its scope and magnitude is uncertain at this time. Various levels of governmental authorities have recommended or mandated restrictions on the business operations of restaurants and bars across the United States. The extent to which the effects of the COVID-19 pandemic adversely affects our business and operating results is uncertain at this time and will depend on many factors and future developments, including the scope and nature of future governmental guidelines, recommendations, restrictions or orders. The businesses of restaurants and bars that subscribe to our service or of those considering subscribing to our service will likely be adversely affected by theongoing effects of the COVID-19 pandemic, which could result in ~~such restaurants~~increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether.

We may not be able to identify, recruit and ~~bars deciding~~enroll a sufficient number of patients, or those with the required or desired characteristics, to complete our clinical trials in a timely manner. For example, due to the nature of the indications that we are initially targeting, patients with advanced disease progression may not be suitable candidates for treatment with our product candidates and may be ineligible for enrollment in our clinical trials. Therefore, early diagnosis in patients with our target diseases is critical to our success. Patient enrollment and trial completion is affected by factors including the:

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size of the patient population and process for identifying subjects;

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design of the trial protocol;

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eligibility and exclusion criteria;

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safety profile, to date, of the product candidate under study;

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perceived risks and benefits of the product candidate under study;

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perceived risks and benefits of our approach to treatment of diseases;

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availability of competing therapies and clinical trials;

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severity of the disease under investigation;

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degree of progression of the subject’s disease at the time of enrollment;

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proximity and availability of clinical trial sites for prospective subjects;

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ability to obtain and maintain subject consent;

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risks that enrolled patients will drop out before completion of the trial;

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patient referral services of physicians; and

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ability to monitor subjects adequately during and after treatment.

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or ~~suspend our service or to not subscribe to it,~~planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize our product candidates. For example, we may be sued if any product we develop or any materials that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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decreased demand for our product candidates;

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injury to our reputation;

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withdrawal of clinical trial participants;

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costs to defend the related litigation;

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a diversion of management’s time and its resources;

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substantial monetary awards to trial participants or patients;

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product recalls, withdrawals or labeling, marketing or promotional restrictions;

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the inability to commercialize our product candidates; and

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a decline in the value of the common stock.

Any inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We intend to obtain product liability insurance covering our clinical trials. Although we will maintain such insurance, any claim that may be brought against us could result in a ~~minimum,~~court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed its coverage limitations or that are not covered by its insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Undesirable or clinically unmanageable side effects could occur and cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.

If unacceptable side effects arise in the development of our product candidates, we, the FDA or comparable foreign regulatory authorities, IRBs, or independent ethics committees at the institutions in which our studies are conducted, or the Data Safety Monitoring Board, or DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We may be required to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may harm our business, financial condition and prospects significantly.

Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following consequences could occur:

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regulatory authorities may withdraw their approval of the product or seize the product;

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we, or any collaborators, may need to recall the product, or be required to change the way the product is administered or conduct additional clinical trials;

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additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the product;

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we may be subject to fines, injunctions or the imposition of civil or criminal penalties;

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regulatory authorities may require the addition of labeling statements, such as a boxed warning or a contraindication;

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we, or any collaborators, may be required to create a medication guide outlining the risks of the previously unidentified side effects for distribution to patients;

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we, or any collaborators, could be sued and held liable for harm caused to patients;

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the product may become less competitive; and

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our reputation may suffer.

Risks Related to New, Cutting Edge Technologies

Because our gene-editing and cell therapy product candidates are based on novel technologies, we cannot assure that we will be successful, or predict the related cost and time we will spend, in initiating, conducting and completing clinical development, and obtaining the necessary regulatory and reimbursement approvals, required for commercialization.

Cellular immunotherapies, stem cell therapies, gene-edited, and iPSC-derived cell therapies represent relatively new therapeutic areas, and the FDA has cautioned consumers about potential safety risks associated with them. To date, there are relatively few approved cell therapies. As a result, the regulatory approval process for a gene-editing or cellular therapy product candidates are uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies and therapeutic approaches. For example, there are no new FDA approved products with a label designation that supports the use of a product to treat and reduce the severity of ARDS in patients with COVID-19, which makes it difficult to determine the clinical endpoints and data required to support an application or regulatory approval, and the time and cost required to obtain regulatory approval in the United States for our product candidate.

Cell reprogramming technology and cell therapy products using allogenic MSCs derived from iPSCs represent novel therapeutic approaches, and to our knowledge no iPSC-derived cell products are currently approved for commercial sale anywhere in the world. As such, it is difficult to accurately predict the type and scope of challenges that we will incur during development of our respective product candidates. We thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of product candidates. In addition, because the iPSC-derived cell product candidates are in the pre-clinical stage, no human data are yet available to assess the effects of treatment. Animal models and assays may not accurately predict the safety and efficacy of our product candidates in our target patient populations, and appropriate models and assays may need to be developed for demonstrating the safety, efficacy and purity of the product candidates, as required by the FDA and other regulatory authorities for ongoing clinical development and regulatory approval.

Regulatory processes in the United States governing cell therapy products have changed frequently and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for approval of these product candidates. For example, within the FDA, the Center for Biologics Evaluation and Research, CBER, restructured and created a new Office of Tissues and Advanced Therapies, OTAT, to better align its oversight activities with FDA Centers for Drugs and Medical Devices. It is possible that over time new or different divisions may be established or be granted the authority for regulating cell and/or gene therapy products, including iPSC-derived cell products. As a result, we may be required to change regulatory strategies or to modify applications for regulatory approval, which could delay and impair our ability to complete the pre-clinical and clinical development and manufacture of, and obtain regulatory approval for, our product candidates. Changes in regulatory authorities and advisory groups, or any new requirements or guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of the product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with the FDA and other regulatory authorities, and our product candidates will likely be reviewed by an FDA advisory committee. We also must comply with applicable requirements, and if we fail to do so, we may be required to delay or discontinue development of our product candidates. Delays or unexpected costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring the product candidates to market could impair our ability to generate sufficient product revenues to maintain our respective businesses.

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The pre-clinical and clinical development, manufacture, and regulatory requirements for approval of the product candidates may be more expensive and take longer than for other more well-known or extensively studied pharmaceutical or biopharmaceutical product candidates, due to a lack of prior experiences on the side of both developers and regulatory agencies. Additionally, we may be required to modify or change pre-clinical and clinical development plans or manufacturing activities and plans or be required to meet stricter regulatory requirements for approval. Any such modifications or changes could delay or prevent our ability to develop, manufacture, obtain regulatory approval or commercialize the product candidates, which would adversely affect our ~~near-term revenues~~business, financial condition and results of operations.

Gene editing product candidates we may develop based on our license agreements with Factor and Novellus are based on new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if we are able to obtain such approval. Gene editing technology is relatively new, and no products based on such technology have been approved in the U.S. or the E.U. to date, and only a limited number of clinical trials of product candidates based on gene-editing technologies have been commenced. As such, it is difficult to accurately predict the developmental challenges we may incur if we exclusively license the technology from Factor, as we proceed through product discovery or identification, preclinical studies and clinical trials. There may be long-term effects from treatment with any such product candidates that we may develop that we cannot predict at this time. Any product candidates we may develop may interact with genetic material (RNA/DNA) and because animal genetic materials differ from human genetic material, past testing of any such product candidates in animal models may not be predictive of results in human clinical trials for safety or efficacy. As a result of these factors, it is more difficult to predict the time and cost of such product candidate development, and we cannot predict whether the application of gene editing technology, or other similar or competitive gene editing technologies, will result in the identification, development and regulatory approval of any products. There can be no assurance that any development problems we may experience related to such gene editing technology or any of our research programs that use such technology will not cause significant delays or anticipated costs, or that such development problems can be solved. Any of these factors may prevent us from completing preclinical studies or clinical trials based on such technology or from commercializing any such product candidates on a timely or profitable basis, if at all.

The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidate. No products based on gene-editing technologies have been approved by regulators to date. As a result, the regulatory approval process for product candidates using such technology is uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for product candidates using this technology in either the United States or the E.U. or how long it will take to commercialize any product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects may be harmed.

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Regulatory requirements in the United States and in other jurisdictions governing gene therapy products have changed frequently and may continue to change in the future. In January 2020, the FDA issued several new guidance documents on gene therapy products. The FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research to consolidate the review of gene therapy and related products, and established the Cellular, Tissue and Gene Therapies Advisory Committee to advise this review. In addition to the government regulators, the IBC and IRB of each institution at which we conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, the EMA governs the development of gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines. These regulatory review agencies and committees and the new requirements or guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of any product candidates we may develop if we exercise our option agreements with Novellus or lead to significant post-approval limitations or restrictions. As we advance any such product candidates, we will be required to consult with these regulatory agencies and committees and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

Risks Related to Regulatory Requirements

We are subject to extensive and costly government regulation.

Product candidates employing medical technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective foreign equivalents. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. Even if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. For example, regulatory agencies may approve a product candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. Regulators may approve a product candidate for a smaller patient population, a different drug formulation or a different manufacturing process, than we are seeking. If we are unable to obtain necessary regulatory approvals, or more limited regulatory approvals than we expect, our business, prospects, financial condition and results of operations may suffer.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

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Changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. Varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product commercially unviable.

Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and wastes generated in our manufacturing facility. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from the use of hazardous materials, we could be held liable for any resulting damages, and the amount of the liability could exceed our resources. We could also incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

If we, our collaborators, or our contract manufacturing organizations fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.

Any fast-track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify for priority review vouchers.

Our product candidate, IRX-2, has received fast track designation in head and neck cancers. If a drug or biologic is intended for the treatment of a serious or life-threatening condition and the drug or biologic demonstrates the potential to address unmet medical needs for this condition, the drug or biologic sponsor may apply for FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for a priority review. The FDA has broad discretion to grant these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant them. We may also seek fast track designation for IRX-2 in the other indications or for future products we may seek to develop. Even if we are granted fast track designation or priority review, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may also withdraw fast track designation if it believes that the designation is no longer supported by data from Brooklyn’s clinical development program.

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Orphan Drug Designation and Fast Track Designation may not actually lead to a faster review process.

Under the Prescription Drug User Fee Act, the FDA has a goal of responding to NDAs or BLAs for new molecular entities within 10 months of the date that it is filed for standard review, but the timeframe is also often extended. We have in the past sought and we may in the future seek approval of IRX-2 or any other product candidate we may acquire or license under programs designed to accelerate the FDA’s review and approval of NDAs or BLAs. For example, fast track designation is a process designed to facilitate the development and expedite the review of drugs and biologics to treat serious conditions that fill an unmet clinical need. The purpose is to get important new drugs and biologics to the patient earlier. In our case, IRX-2 has been granted fast track designation for the treatment of head and neck cancer. In the future, we may request fast track designation from the FDA for other diseases or for other products we may acquire or in-license, but we cannot assure that we will obtain such designations. Further, even if we obtain fast track designation, the designation does not guarantee FDA approval of any NDA or BLA that we file, that the development program or review timeline will ultimately be shorter than if we had not obtained the designations, or that the FDA will not request additional information, including requesting additional clinical studies (although potentially a post-marketing requirement), during its review. Any request for additional information or clinical data could delay the FDA’s timely review of any NDA or BLA that we submit.

Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not mean that we will be successful in obtaining marketing approval of our current and future product candidates in other jurisdictions.

Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction, while a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval. We do not have experience in obtaining reimbursement or pricing approvals in international markets. Further, pricing obtained in other jurisdictions may impact pricing realized in the United States and in other jurisdictions where the product is approved.

Obtaining marketing approvals and compliance with regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries outside of the United States. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Healthcare legislative reform measures and constraints on national budget social security systems may have a material adverse effect on our business orand results of operations.

Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated or complex methods of controlling healthcare costs and those methods are not always specifically adapted for new technologies such as those we are developing. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in the United States, the Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars; addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increases the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extends the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjects manufacturers to new annual fees and taxes for certain branded prescription drugs; and provides incentives to programs that increase the federal government’s comparative effectiveness research.

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In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.5 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and due to subsequent legislative amendments, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The CARES Act, the Consolidated Appropriations Act of 2021, and the Act to Prevent Across-the-Board Direct Spending Cuts suspended the 2% sequestration mandated by the Budget Control Act of 2011 and the American Relief Act of 2011 through December 31, 2021. In December 2021, Congress extended the suspension of the automatic 2% reduction through March 2022 and reduced the sequestration adjustment to 1% beginning on April 1, 2022 through June 30, 2022, with the full 2% reduction for sequestration resuming thereafter. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We cannot anticipate whether Congress will further extend the sequestration and when the sequestration reimbursement will return.

Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, in November 2018, CMS issued a proposed rule for comment that would, among other things, provide Medicare prescription drug plans under Part D more transparency in pricing and greater flexibility to negotiate discounts for, and in certain circumstances exclude, drugs in the six “protected” formulary classes and allow Medicare Advantage plans to use certain drug management tools such as step therapy for physician-administered drugs. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Biden administration has each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of these governments and other payors to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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the demand for our product candidates, if we obtain regulatory approval;

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our ability to set a price that we believe is fair for our products;

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our ability to generate revenue and achieve or maintain profitability;

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the level of taxes that we are required to pay; and

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the availability of capital.

Any denial in coverage or reduction in reimbursement from Medicare or any other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

Risks Related to the Commercialization of Brooklyn’s Product Candidates

We may be unable to successfully scale up manufacturing of IRX-2 or newer gene editing or cellular products in sufficient quality and quantity, which may delay or prevent us from commercializing the product even if approved for marketing by the FDA or other regulatory agencies.

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In order to commercialize IRX -2 or any other product candidate we may acquire or in-license (including any products that may be developed from the licensed technology from Factor or via the Novellus acquisition), we will need to manufacture them in large quantities. We would need to scale up the manufacturing process to enable production of commercial quantities of IRX-2, likely at a qualified contract manufacturer, if approved, and we are currently exploring options for implementing scale-up activities in anticipation of study completion and submitting applications for marketing approval, if supported by study data. However, we may be unable to successfully increase manufacturing capability in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities.

Further, in order to release and demonstrate stability of product candidates for future commercial use, our analytical methods must be validated in accordance with regulatory guidelines. We may not be able to successfully validate or maintain validation of analytical methods during scale-up or demonstrate adequate purity, stability or comparability of the biological product candidates in a timely or cost-effective manner, or at all. Even if we believe our manufacturing processes meet all the regulatory manufacturing requirements, the FDA will review those processes and the manufacturing facility as part of the review of any future MA for IRX-2, if submitted after completion of the INSPIRE trial. If we ~~fail~~are unable to ~~comply with~~successfully scale up the manufacture of IRX-2 in sufficient quality and quantity, or if we encounter validation issues, the development, testing, and clinical trials of future product candidates, may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product, including IRX-2, may be delayed or may not be successfully achieved.

Even if we are able to commercialize any product candidate that we may develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives that could harm our ~~debt service obligations~~business.

The commercial success of our current or ~~with~~future product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of its product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our ~~financial covenants~~products. Even if coverage is provided, the approved reimbursement amount may not be high enough to ~~Avidbank,~~allow us to establish and maintain pricing sufficient to realize a meaningful return on our investment.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may ~~declare a default,~~negatively impact the revenues it is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to successfully commercialize our product candidate will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could ~~lead~~affect our ability to sell our product candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

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There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable non-U.S. regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we may commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment ~~obligations becoming immediately due~~rates from both government-funded and ~~payable and~~private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect on our ~~financial condition and business.~~

As of March 19, 2020, the outstanding principal balance of our term loan with Avidbank is $2,000,000. Under our loan and security agreement with Avidbank, as amended, the maturity date of our term loan is December 31, 2020, we are required to make monthly principal payments ranging from $125,000 to $300,000 plus accrued interest beginning in April 2020, our asset coverage ratio must be no less than 1.25 to 1.00 as of the last day of each calendar month and at all times our minimum liquidity must be not less than the outstanding principal of our term loan. See “PART II—ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Avidbank Term Loan,” below. There can be no assurance we will be able to meet our term loan debt service obligations and fund our working capital needs or that we will be in compliance with our financial covenants in the future or that Avidbank will waive any non-compliance in the future. Among other factors, fluctuations in our operating results, ~~could result in violation of these covenant. See “~~Due to the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows to be adversely effected. In addition, the recent COVID-19 pandemic could further decrease our revenues and our operating results and cash flows could be further adversely effected,”~~above~~.

If we default on our monthly payment obligations to Avidbank or if we fail to comply with our financial covenants, Avidbank may declare a default, which could lead to all payment obligations becoming immediately due and payable, which would have a material adverse effect on our financial condition and business. Avidbank has a first-priority security interest in all our personal property and may foreclose on our personal property to satisfy our payment obligations.

The measures we recently implemented and may implement in the future to reduce operating expenses and to preserve capital could adversely affect our business and we may not realize the operational or financial benefits from such actions.

We recently implemented measures to reduce operating expenses and to preserve capital. For example, since January 1, 2020, we reduced our headcount from 74 to 39 employees, and we eliminated certain capital expenditures and investments in our business that we planned to make during 2020. We may implement additional measures and further eliminate planned capital expenditures and investments in our business in the future. In addition to distracting management from the core operations of our business, any of these actions may negatively impact our ability to ~~effectively manage, operate and grow our business,~~raise capital needed to ~~introduce new offerings to our customers, to increase market awareness and encourage the adoption of the Buzztime brand~~commercialize products and our ~~Buzztime network,~~overall financial condition.

If we are unable to ~~retain customers,~~develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates.

We currently have no marketing, sales or distribution capabilities and have limited sales or marketing experience within our organization. If one or more of our product candidates is approved, we intend either to ~~generate revenue. For example,~~establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize that product candidate, or to outsource this function to a third party. There are risks involved with either establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.

Recruiting and training an internal commercial organization is expensive and time consuming and could delay any product launch. Some or all of these costs may be incurred in advance of any approval of any of our product candidates. If the ~~reduction in headcount resulted in the loss~~commercial launch of a ~~number of long-term employees, the loss of institutional knowledge~~product candidate for which we recruit a sales force and ~~expertise~~establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly and ~~the reallocation~~our investment would be lost if we cannot retain or reposition our sales and ~~combination of certain roles and responsibilities across the organization, all of which could adversely affect our operations.~~marketing personnel. In addition, we may not be able to ~~effectively realize all~~hire a sales force in the ~~cost savings anticipated by~~United States or other target market that is sufficient in size or has adequate expertise in the ~~reductions in operational~~medical markets that we intend to target.

Factors that may inhibit our efforts to commercialize our product candidates on our own include:

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the inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future product that we may develop;

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the lack of complementary treatments to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability to us from these revenue streams is likely to be lower than if we were to market and sell any product candidates that we develop ourselves. In addition, we may ~~incur unanticipated charges~~not be successful in entering into arrangements with third parties to sell and market our product candidates or ~~make cash payments~~may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we may not be successful in commercializing our product candidates.

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The market opportunities for any current or future product candidate we develop, if and when approved, may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and therefore may be small.

Cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only for third-line use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy, immunotherapy or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not effective. We may initially seek approval of IRX-2 and any other product candidates we develop as a therapy for patients who have received one or more prior treatments. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is no guarantee that product candidates we develop, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

The number of patients who have the cancers we are targeting may turn out to be lower than we expect or may change as we develop the product candidate (e.g., lower rates of smoking around the globe may lead to lower incidence levels of head and neck cancer at the time of approval). Additionally, the potentially addressable patient population for our current programs or future product candidates, if and when approved, may be limited. Even if we obtain significant market share for any product candidate, if and when approved, if the potential target populations are small, we may never achieve profitability without obtaining marketing approval for additional indications, including use as first- or second-line therapy.

The life sciences industry is highly competitive. We are currently developing therapeutics that will compete, if approved, with other products and therapies that currently exist, are being developed or will in the future be developed, some of which we may not currently be aware. Competitors who are developing products in the same fields or that target the same indications as us with products that have a similar mechanism of action may experience problems with its products that could identify problems that would potentially harm our business.

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or marketing approval or discovering, developing and commercializing products in our field before we do.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, such as traditional chemotherapy, as well as novel immunotherapies. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that ~~were not previously contemplated~~are safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain FDA, EMA or other marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if the product candidate we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness.

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Smaller and other early-stage companies may also prove to be significant competitors. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. In addition, the biopharmaceutical industry is characterized by rapid technological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our product candidates obsolete, less competitive or not economical.

If we fail to maintain orphan drug exclusivity for IRX-2 or we fail to obtain or maintain such exclusivity for any future product candidate we may license, our competitors may sell products to treat the same conditions, and our revenues would be significantly adversely affected.

In July 2005 the FDA granted orphan drug designation for IRX-2 for head or neck cancer. In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. The company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the stated disease or condition for a period of seven years, with an ~~adverse effect~~additional six months if for a pediatric indication. Orphan drug exclusive marketing rights may be lost if the FDA later determines that the request for designation was materially defective, a subsequent product is deemed clinically superior, or if the manufacturer is unable to deliver sufficient quantity of the drug.

In the E.U., the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU Community and for which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the medicinal product. An EU orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

Because the extent and scope of patent protection for IRX-2 may be particularly limited, orphan drug designation is especially important. We plan to rely on the orphan exclusivity period to maintain a competitive position. However, if we cannot maintain orphan exclusivity for our IRX-2, our competitors may then sell the same drug to treat the same condition and our revenues will be reduced. Also, without strong patent protection, competitors may sell a generic version upon the expiration of orphan exclusivity, if our patent position is not upheld.

Even if we obtain orphan drug designation for our future product candidates, we may not fulfill the criteria for exclusivity, or we may not be the first to obtain marketing approval for any orphan indication. Further, even if we obtain orphan drug exclusivity for a particular product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. The FDA can discontinue Orphan Drug exclusivity after it has been granted if the orphan drug cannot be manufactured in sufficient quantities to meet demand.

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The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, payors and others in the medical community.

We have never commercialized a product, and even if we obtain any regulatory approval for our product candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and payors accepting our product candidates as effective, safe and cost-effective. Any product that we bring to the market may not gain market acceptance by physicians, patients, payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.

The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the potential efficacy and potential advantages over alternative treatments;

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the frequency and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;

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the frequency and severity of any side effects resulting from follow-up requirements for the administration of our product candidates;

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the relative convenience and ease of administration;

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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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the strength of marketing and distribution support and timing of market introduction of competitive products;

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formulary acceptance;

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publicity concerning our products or competing products and treatments; and

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sufficient third-party insurance coverage and adequate reimbursement.

Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product, if approved for commercial sale, will not be known until after it is commercially launched. Our efforts to educate the medical community and payors on the benefits of our product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.

Risks Related to Brooklyn’s Dependence on Third Parties

We or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors or potential collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could harm the results of our operations.

We are exposed to the risk that our employees or affiliates’ employees and contractors, including any prospective or current principal investigators, CROs, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA or other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing and the FDA’s GCP or cGMP standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

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Activities subject to these laws also involve the improper use or misrepresentation of information obtained during clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in data being eliminated from the final analysis of studies, regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting them from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person, including any person who may have engaged in any fraud or misconduct, or government agency could allege such fraud or other misconduct, even if none occurred. Furthermore, we rely on our CROs and clinical trial sites to adequately report data from ongoing clinical trials. Any failure by such parties to adequately report safety events to us in a timely manner from any such trials may also affect the approvability of our product candidates or cause delays and disruptions for the approval of any of our product candidates, if at all. If we or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors are alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar agreement and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, suspension or ~~results~~delay in Brooklyn’s clinical trials, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs or formulary and pharmacy benefit management programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings, and additional reporting requirements and oversight, any of ~~operations.~~

~~The effects of the COVID-19 pandemic on the operating results of our Canadian business could result in a goodwill impairment charge in 2020,~~ which could ~~adversely affect our future operating results.~~

We have goodwill resulting from the excess of costs over the fair value of assets we acquired in 2003 related to our Canadian business. As of December 31, 2019, that goodwill was $696,000. Goodwill and intangible assets acquired in a purchase combination that are determined to have an indefinite useful life are not amortized, but instead are assessed annually, or at interim periods, for impairment based on qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the Reporting Unit is less than its carrying amount. If there are indications of impairment, then we perform a quantitative impairment test.

If the impact of the COVID-19 pandemic is significant to the operating results of our Canadian business, the recorded goodwill relating to our Canadian business may be impaired, which would result in a non-cash impairment charge in future periods. We cannot accurately predict the amount and timing of any impairment charge at this time, however, any such impairment charge could have an adverse effect on our financial results.

~~Our success depends on~~harm our ability to ~~recruit and retain skilled professionals.~~

The success of our business depends on our ability to identify, hire, and retain knowledgeable and experienced programmers, creative designers, application developers, and sales and marketing personnel. If we cannot motivate and retain knowledgeable and experienced professionals, our business, financial condition, and results of operations will suffer. There is significant competition from other businesses for individuals with the experience and skills required to successfully operate our business and results of operations.

Outside of the INSPIRE trial, each of the trials involving IRX-2 that are currently being performed are investigator-sponsored trials. Outside our providing study drug and ~~other measures~~financial support for these studies, we ~~recently implemented~~have less involvement and less control of these studies than we would if these were our studies. Negative results from these studies could have material adverse effects on our business despite our lack of control.

We may seek to ~~reduce operating expenses may decrease~~enter into collaborations with third parties for the ~~morale~~development and commercialization of our ~~remaining employees and make retaining them more challenging. Moreover, in light of the small number of employees on our staff~~product candidates. If we fail to ~~manage our key functions,~~enter into such collaborations, or such collaborations are not successful, we may not be able to ~~adequately support current~~capitalize on the market potential of IRX-2 or any other product we may acquire or in-license.

We may seek third-party collaborators for development and commercialization of IRX-2 or any other product we may acquire or in-license. Our likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, non-profit organizations, government agencies, and biotechnology companies. We will face significant competition in seeking appropriate collaborators. We may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because such product candidates may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. We are currently party to a limited number of such arrangements and have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. If and when we collaborate with a third party for development and commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Collaborations involving our product candidates currently pose, and will continue to pose, the following risks to it:

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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

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collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on preclinical or clinical study results, changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

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collaborators may delay clinical studies, provide insufficient funding for a clinical study program, stop a clinical study or abandon a product candidate, repeat or conduct new clinical studies or require a new formulation of a product candidate for clinical testing;

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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

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collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate its intellectual property or proprietary information or expose it to potential litigation;

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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and

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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business ~~initiatives~~combination, the continued pursuit and emphasis on its product development or ~~attract or retain customers, which risk~~commercialization program could be ~~increased if~~delayed, diminished or terminated.

Risks Relating to Brooklyn’s Intellectual Property

If we are unable to ~~retain existing personnel.~~

~~We cannot assure you that~~obtain and maintain patent and other intellectual property protection for our ~~exploration of strategic alternatives will result in us pursuing a transaction~~products and product candidates, or ~~that any such transaction would be successfully completed, and there may be negative impacts on our business and stock price as a result~~if the scope of the ~~process of exploring strategic alternatives.~~

~~In December 2018, we announced that~~patent and other intellectual property protection obtained is not sufficiently broad, our ~~board of directors was exploring~~competitors could develop and ~~evaluating strategic alternatives focused on maximizing shareholder value, and that we engaged a financial advisor~~commercialize products similar or identical to assist in the process. Although our engagement with the financial advisor has ended, the strategic process is ongoing. Our board of directors has not set a timetable for the strategic process nor has it made any decisions relating to any strategic alternatives at this time. No assurance can be given as to the outcome of the process, including whether the process will result in a transaction or that any transaction that is agreed to will be completed. Whether the process will result in a transaction,ours, and our ability to ~~complete a transaction, if~~successfully commercialize our board of directors decides to pursue one, will depend on numerous factors, some of which are beyond our control, including the interest of potential acquirers or strategic partners in a potential transaction with our company, the value potential acquirers or strategic partners attribute to our businessproducts and ~~its prospects, market conditions, and industry trends. Our stock price~~product candidates may be adversely ~~affected if~~affected.

Our ability to compete effectively will depend, in part, on our ability to maintain the ~~process does~~proprietary nature of our technology and manufacturing processes. We rely on research, manufacturing and other know-how, patents, trade secrets, license agreements and contractual provisions to establish our intellectual property rights and protect our products and product candidates. These legal means, however, afford only limited protection and may not result in a transaction or if a transaction is not completed. Even if a transaction is completed, there can be no assurance that it will be successful or have a positive effect on shareholder value. Our boardadequately protect our rights. As of ~~directors may also determine that no transaction is~~April 12, 2022, our intellectual property portfolio included 16 patents in the ~~best interest of our stockholders.~~

United States and an additional 92 patents around the world.

In ~~addition, our financial results~~certain situations, and ~~operations~~as considered appropriate, we have been and may continue to be adversely affected by the strategic process and by the uncertainty regarding its outcome. The attention of management and of our board of directors has been diverted from our core business operations to the processsought, and we have diverted capital and other resources to the process that otherwise could have been used in our business operations, and we will continue to do so until the process is completed. We could incur substantial expenses associated with identifying and evaluating potential strategic alternatives, including those related to employee retention payments, equity compensation, severance pay and legal, accounting and financial advisor fees. In addition, the process could lead us to lose or fail to attract, retain and motivate key employees, and to lose or fail to attract customers or business partners, and could expose us to litigation. The public announcement of a strategic alternative may also yield a negative impact on operating results if prospective or existing service providers are reluctant to commit to new or renewal contracts or if existing customers decide to move their business to a competitor.

~~We do not~~ intend to disclose developments or provide updates on the progress or status of the strategic process until our board of directors deems further disclosure is appropriate or required. Accordingly, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our company could cause our stock price to fluctuate significantly.

~~We have experienced significant losses and expect to incur significant losses in the future.~~

We have a history of significant losses, including net losses of $2,047,000 and $259,000 for the years ended December 31, 2019 and 2018, respectively, and have an accumulated deficit of $131,457,000 as of December 31, 2019. We expect to incur future operating and net losses, due in part to expenditures required to continue to ~~implement~~seek to protect our ~~business strategies, including~~proprietary position by filing patent applications in the ~~continued development~~United States and, ~~implementation of our technology platform~~in at least some cases, one or more countries outside the United States relating to current and future products and product ~~line. Despite significant expenditures,~~candidates that are important to our business. However, we ~~may not achieve~~cannot predict whether the patent applications currently being pursued will issue as patents, or ~~maintain profitability. Even if~~whether the claims of any resulting patents will provide us with a competitive advantage or whether we ~~achieve profitability,~~will be able to successfully pursue patent applications in the ~~level of profitability cannot be predicted~~future relating to our current or future products and ~~may vary significantly from quarter to quarter~~product candidates. Moreover, the patent application 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 American if we~~approval processes are ~~determined to be non-compliant with any of the NYSE American continued listing standards,” below.~~

expensive and time-consuming. We may not ~~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. For example, we face significant competition in the hospitality market from companies offering services that compete with ours. Our services also compete with games, apps and other forms of entertainment offerings available directly to consumers on their mobile devices. See “ITEM 1. Business—Competition,” above. Many of our current and potential competitors enjoy substantial competitive advantages, including greater financial resources that they can deploy for content development, research and development, strategic acquisitions, alliances, joint ventures, and sales and marketing. As a result, our current and potential competitors may respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or consumer preferences.

~~With the rapid pace of change in product and service offerings, we must also~~ be able to ~~compete~~file and prosecute all necessary or desirable patent applications at a reasonable cost or in ~~terms~~a timely manner. Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of ~~technology, content,~~inventions made in the course of development and ~~management strategy.~~commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to seek additional patent protection. It is possible that defects of form in the preparation or filing of patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we fail to ~~provide competitive, engaging, quality services~~establish, maintain or protect such patents and ~~products, it will~~other intellectual property rights, such rights may be ~~challenging to gain new customers~~reduced or eliminated. If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and ~~we will lose customers to competitors. Increased competition~~such applications may ~~also~~never result in ~~price reductions, fewer customer orders, reduced gross margins, longer sales cycles, reduced revenue,~~valid, enforceable patents.

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Even if they are unchallenged, our patents and ~~loss of market share.~~

~~New products and rapid technological change~~patent applications, if issued, may ~~render~~not provide us with any meaningful protection or prevent competitors from designing around our ~~operations obsolete~~patent claims by developing similar or ~~noncompetitive.~~

~~The emergence of new entertainment products and~~alternative technologies ~~changes~~or therapeutics in ~~consumer preferences, the adoption of new industry standards, and other factors~~a non-infringing manner. For example, a third party may ~~limit the life cycle and market penetration of our technologies, products, and services. Our future performance depends on our ability to:~~

	●	~~identify and successfully respond~~develop a competitive therapy that provides benefits similar to ~~emerging technological trends and industry standards in our market;~~

	●	~~identify and successfully respond to changing consumer needs, desires, or tastes;~~

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

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

	●	~~bring appealing technology to market quickly at cost-effective prices.~~

~~Our inability to succeed in~~ one or more of our product candidates but that falls outside the ~~above areas~~scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected.

Other parties, many of whom have substantially greater resources and have made significant investments in competing technologies, have developed or may develop technologies that may be related or competitive with our approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with our patent applications, either by claiming the same compositions, formulations or methods or by claiming subject matter that could dominate our patent position. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. As a result, any patents we may obtain in the future may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our products and product candidates.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs or ABLAs to the FDA in which they claim that our patents are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

In addition to patent protection, we expect to rely heavily on trade secrets, know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available, or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Issued patents covering our products and product candidates could be found invalid or unenforceable if challenged in court or in administrative proceedings. We may not be able to protect our trade secrets in court.

If we initiate legal proceedings against a third-party to enforce a patent covering one of our products or product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non- enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re- examination, post grant review, inter partes review and equivalent proceedings in foreign jurisdictions. An adverse determination in any of the foregoing proceedings could result in the revocation or cancellation of, or amendment to, our patents in such a way that they no longer cover our products or product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we were unaware during prosecution. If a defendant or third party were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our products and product candidates. Such a loss of patent protection could have a material adverse ~~effect~~impact on our ~~financial condition and~~ business.

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In addition, our trade secrets may otherwise become known or be independently discovered by competitors. Competitors and other third parties could purchase our products and product candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe, misappropriate or otherwise violate our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to ~~incur substantial costs~~prevent them, or those to ~~modify~~whom they communicate it, from using that technology or ~~adapt~~information to compete with us. If our trade secrets are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be adversely affected, as could our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non- compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications are required to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedurals, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which non- compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. The terms of one or more licenses that we enter into the future may not provide us with the ability to maintain or prosecute patents in the portfolio and must therefore rely on third parties to do so. If we fail to obtain and maintain the patents and patent applications covering our products or ~~services to respond to developments, customer needs, and changing preferences. We must~~procedures, we may not be able to ~~incorporate new technologies into~~stop a competitor from marketing products that are the ~~products we design and develop to address the increasingly complex and varied needs of~~same as our ~~customer base. Any significant delay or failure in developing new or enhanced technology, including new~~ product ~~and service offerings, would have a material adverse effect on our financial condition and business.~~

~~A disruption in the supply of equipment or in our advertising exchange network could negatively impact our revenue.~~

An unaffiliated third party manufactures an Android-based tablet customized to our specifications and our tablet equipment—tablet charging trays and tablet cases. We have no alternative manufacturing source for our customized tablet or tablet equipment or alternatives for the tablet equipment.

If our sole manufacturer is delayed in delivering tablets to us, becomes unavailable, has product quality issues, or shortages occur, besides not realizing the benefits of having a tablet manufactured to our specifications, we would need to return to third-party tablets or find an alternative device. Similarly, if our sole manufacturer is delayed in delivering the tablet equipment to us, becomes unavailable, has product quality issues, or shortages occur, we may not timely obtain replacement tablet equipment. Delays, unavailability of the tablet or tablet equipment, product quality issues and shortages could damage 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 customized tablet and tablet equipment is not able to meet our manufacturing quality standards~~.”

If our sole manufacturer and/or suppliers were to go out of business or otherwise become unable to meet our needs for reliable equipment, locating and qualifying alternate sources could take months, duringcandidates, 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.

If we do not obtain patent term extension and data exclusivity for our products and product candidates, our business ~~operating results,~~may be materially harmed.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and ~~financial condition.~~

the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

In the future, if we obtain an issued patent covering one of our present or future product candidates, depending upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. A patent may only be extended once and only based on a single approved product. However, we may not be granted an extension because of, for example, failure to obtain a granted patent before approval of a product candidate, failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise our failure to satisfy applicable requirements. A patent licensed to us by a third party may not be available for patent term extension. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

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Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products and product candidates.

Changes in either the patent laws or the interpretation of the patent laws in the United States or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. When implemented, the Leahy-Smith Act included several significant changes to U.S. patent law that impacted how patent rights could be prosecuted, enforced and defended. In particular, the Leahy-Smith Act also included provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allowed third- party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures governing the administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act.

In addition, the ~~revenue we receive~~patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the ~~sale~~U.S. Court of ~~advertisements~~Appeals for the Federal Circuit and the U.S. Supreme Court have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that are shown on the screens throughout our network depends on the advertisements being properly aired in our network. We rely on the technology of an unaffiliated third party to air the advertisements on the screens in our network. If that third party technology has interruptions in service or if the advertisements are otherwise not properly airing on our network, the revenue we receive from the sale of advertisements will decrease.

~~Our business could be adversely impacted if the sole manufacturer of our customized tablet and tablet equipment cannot meet our manufacturing quality standards.~~

As discussed above, one unaffiliated third-party manufactures our customized tablet and tablet equipment. Continued improvement in supply-chain management and in manufacturing of our customized tablet and tablet equipment and manufacturing quality and product testing are important to our business. Flaws in the design and manufacturing of our customized 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. There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our tablet and related equipment will be sufficient to permit us to avoid quality issues. Significant quality issues could have a material adverse effect on our ~~business, results of operations~~existing patent portfolio and our ability to protect and enforce our intellectual property in the future.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, maintaining, defending and enforcing patents on products and product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products. There can be no assurance that we will obtain or ~~financial condition.~~

maintain patent rights in or outside the United States under any future license agreements. In addition, the ~~third-party manufacturer~~laws of ~~our customized tablet~~some foreign countries do not protect intellectual property rights to the same extent as federal and tablet equipment manufactures in China using a significant number of Chinese-sourced parts. While our inventory is currently robust, we are experiencing delays from suppliers who have been affected by the COVID-19 pandemic. A disruptionstate laws in the ~~supply chain for~~United States. Consequently, we may not be able to prevent third parties from utilizing our ~~tablet~~inventions in all countries outside the United States, even in jurisdictions where we pursue patent protection, or from selling or importing products made using our inventions in and ~~tablet equipment for whatever reason, including resulting from~~into the ~~effects of~~United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the ~~COVID-19 pandemic, could adversely impact our ability to deliver~~United States. These products may compete with our products and ~~services. It~~product candidates and our patents or other intellectual property rights may not be ~~possible~~effective or sufficient to ~~find replacement products or supplies~~prevent them from competing.

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Many companies have encountered significant problems in protecting and ~~significant delays could adversely affect our business. We are experiencing delays from suppliers who have been affected more directly by the outbreak.~~

~~If we~~defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not ~~adequately protect~~favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights ~~and intellectual property or we are subjected~~generally. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses 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~~third parties. Proceedings to protect our proprietary rights in our products. We have a few 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 similar or identical to ours. Such third-party patent applications might have priority overenforce our patent ~~applications. To determine the priority of inventions, we may have to participate~~rights, even if obtained, in ~~interference proceedings declared by the United States Patent and Trademark Office, which~~foreign jurisdictions could result in substantial ~~cost to us.~~

~~We believe that the success~~costs and divert our efforts and attention from other aspects of our business, ~~also depends on such factors as~~could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and 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 consultantsdamages or other remedies awarded, if any, 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~~not be commercially meaningful. While we ~~have to initiate or defend against an infringement claim~~intend to protect our ~~proprietary~~intellectual property rights ~~the litigation over any such claim, with or without merit, could be time-consuming and costly to us.~~

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, with or without merit, could be time-consuming and costly to us, adversely affecting our financial condition.

~~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. 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 harm our business.

~~Our products and services are subject to government regulations that may restrict our operations or cause demand~~major markets 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 interactive entertainment and product marketing industries. In addition, we operate games of chance and skill, and we award nominal cash prizes to winners of certain games and may provide items of nominal value (e.g., key chains, etc.) to venues who may award such items to consumers. 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 offerings (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 customer cancellations and a decrease in our revenues.~~

We rely on the continuous operation of our information technology and communications systems and those of third parties to communicate with and to distribute our services to the locations of our network subscribers. We currently transmit our data to our customers via broadband internet connections including telephone and cable TV networks. Our systems and those of third parties on which we rely are vulnerable to damage or interruption from many causes, including earthquakes, terrorist attacks, floods, storms, fires, power loss, telecommunications and other network failures, equipment failures, computer viruses, computer denial of service or other attacks. 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, 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.

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

At December 31, 2019, we had net operating loss (“NOL”) carryforwards of approximately $63,354,000 available for federal income tax purposes, which will continue expiring in 2020, and of approximately $29,195,000 available for state income tax purposes, which will continue expiring in 2020. 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 performed a Section 382 analysis through December 31, 2018 to determine the impact of any changes in ownership. This analysis indicated that no ownership change occurred that would limit the use of the NOLs. We do not believe there has been a material change in our ownership between the Section 382 analysis completed through December 31, 2018 and the year ended December 31, 2019 that would indicate a limit on the use of the NOLs. We 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.

~~Risks Relating to the Market for Our Common Stock~~

~~Our common stock could be delisted or suspended from trading on the NYSE American if we are determined not to be in compliance with any of the NYSE American continued listing standards.~~

After the filing of this report, the NYSE Regulation may notify us that we are not in compliance with Section 1003(a)(iii) of the NYSE American Company Guide because our stockholders’ equity was less than $6 million as of December 31, 2019 (it was $5,091,000) and because we had net losses in five of our most recent fiscal years ended December 31, 2019. If we are determined not to be in compliance with Section 1003(a)(iii) of the NYSE American Company Guide or any other NYSE American continued listing standard, we will become subject to the procedures and requirements of Section 1009 of the Company Guide or the NYSE Regulation may immediately initiate delisting proceedings.

~~If we receive a notice of non-compliance from NYSE Regulation, we can give no assurances~~ensure that we will be able to ~~address it successfully,~~initiate or ~~even~~maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.

Many of our current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees may be subject to proprietary rights, non-disclosure and non- competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we ~~do,~~are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we ~~will~~regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. In addition, our patents may become, involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive and time-consuming, and our adversaries may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both.

In an infringement proceeding, a court may decide that a patent is invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. Accordingly, despite our efforts, we may not be able to ~~maintain the listing~~prevent third parties from infringing upon or misappropriating intellectual property rights we own or control. An adverse result in any litigation proceeding could put one or more of our ~~common stock on~~owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Further, because of the ~~NYSE American.~~substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

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Even if resolved in our favor, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, ~~we may determine~~there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to pursue business opportunities or grow our business at levels or on timelines that further reduces our stockholders’ equity below the level required to maintain compliance with NYSE American continued listing standards. The delisting of our common stock for whatever reasonbe negative, it could ~~among other things: substantially impair our ability to raise additional capital; result in~~have a loss of institutional investor interest and fewer financing opportunities for us; result in claims for breaches of representations or covenants in agreements relating to our compliance with applicable listing requirements; materially impair our stockholders’ ability to buy and sell shares of our common stock; and have ansubstantial adverse effect on the ~~market price of, and the efficiency of the trading market for, our common stock.~~

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 were delisted or suspended from trading on the NYSE American, 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.

~~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 affect the market price of our common stock without regard to our operating performance. In addition, the market price of our common stock may fluctuate significantly in response to several factors, including:

	●	~~the level of our financial resources;~~

	●	~~announcements of entry into or consummation of a financing;~~

	●	~~announcements of new products or technologies, commercial relationships or other events by us or our competitors;~~

	●	~~announcements of difficulties or delays in entering into commercial relationships with our customers;~~

	●	~~changes in securities analysts’ estimates of our financial performance or deviations in our business and the trading price of our common stock from the estimates of securities analysts;~~

	●	~~fluctuations in stock market prices and trading volumes of similar companies;~~

	●	sales of large blocks of our common stock, including sales by significant stockholders, our executive officers or our directors or pursuant to shelf or resale registration statements that register shares of our common stock that may be sold by us or certain of our current or future stockholders;

	●	~~discussion of us or our stock price by the financial press and in online investor communities;~~

	●	~~announcement of non-compliance with any of the NYSE American continued listing standards;~~

	●	~~commencement of delisting proceedings by NYSE Regulation; and~~

	●	~~additions or departures of key personnel.~~

~~The realization of any of the foregoing could have a dramatic and adverse impact on the market~~ price of our common stock.

~~Future~~ Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, ~~of substantial amounts~~marketing, or distribution activities.

We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our ~~common stock in~~competitors may be able to sustain the ~~public market or the anticipation~~costs of such ~~sales~~litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on ~~then-prevailing market prices.~~

As of December 31, 2019, there were approximately (1) 142,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from $2.43 to $30.50 per share, (2) 57,000 shares of common stock reserved for issuance upon the settlement of outstanding restricted stock units, and (3) 156,000 shares of our Series A Preferred Stock outstanding which, based on their current conversion price, would convert into approximately 11,000 shares of common stock. Registration statements registering the shares of common stock underlying the outstanding options and restricted stock units are currently effective. Generally, the shares of common stock issuable upon conversion of the Series A Preferred Stock, which the holders may do at any time, may be sold under Rule 144 of the Securities Act of 1933. 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 any of our outstanding options are exercised exceeds their exercise price or at the time any of our outstanding shares of Series A Preferred stock are converted exceeds their conversion price, such exercise or conversion 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. 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 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~~compete in the marketplace.

If our trademarks and trade names are not adequately protected, then we 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 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, November 2016, March 2017, April 2017 and June 2018 were equity offerings conducted under a “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, SEC rules and regulations. Under 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. Based on the closing price of our common stock on March 16, 2020, the highest closing price of our common stock within the past 60 days, our public float is approximately $7.6 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 must evaluate it, we will onlynot be able to ~~sell up to approximately $2.5 million if we seek to use a shelf registration statement. If~~build name recognition in our ~~ability to use a shelf registration statement for a primary offering~~marks of interest and our ~~securities is limited to one-third of our public float, we~~business may ~~conduct such an offering pursuant to an exemption from registration under the Securities Act~~be adversely affected.

Our trademarks or ~~under a Form S-1 registration statement, and we would expect either alternative to increase the cost of raising additional capital relative to utilizing a Form S-3 registration statement.~~

~~In addition, under SEC rules and regulations, our common stock must~~trade names may 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-3challenged, infringed, circumvented 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 American, there can be no assurance we can maintain such listing. See also “~~Our common stock could be delisted~~declared generic or ~~suspended from trading on the NYSE American if we are~~ determined to be ~~non-compliant with any of the NYSE American continued listing standards,” above.~~

~~Our ability~~infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to ~~timely raise sufficient additional capital also~~protect our rights to these trademarks and trade names or may be ~~limited~~forced to stop using these names, which we need for name recognition by ~~the NYSE American’s stockholder approval requirements for transactions involving the issuance~~potential partners or customers in our markets of ~~our common stock or securities convertible into our common stock. For instance, the NYSE American requires that~~interest. During trademark registration proceedings, 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 American staff.may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, ~~certain prior sales by us~~with the USPTO and with comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be ~~aggregated with any offering~~filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may ~~propose in the future, further limiting the amount we could raise in any future offering~~ not ~~considered a public offering by the NYSE American staff~~be able to compete effectively 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 American also requires that we obtain stockholder approval if the issuance or potential issuance of additional shares will be considered by the NYSE American staff to result in a change of control of our company.

Obtaining stockholder approval is a costly and time-consuming process. If we must 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 American rules typically involves broadly announcing the proposed transaction, which often depresses 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 provisions:~~

adversely affected.

ITEM 1B.	●	~~authorize the issuance of preferred stock which can be created and issued by our board of directors without prior stockholder approval, with rights senior to those of the common stock;~~

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

	●	~~require advance written notice of stockholder proposals and director nominations.~~Unresolved Staff Comments

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 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.

~~ITEM 2.~~~~Properties~~

ITEM 2. Properties

We currently lease ~~two properties, both~~approximately 9,000 square feet of ~~which are material to~~office and laboratory space in New York, Massachusetts and California. The terms of our ~~business.~~leases expire from December 2026 through June 2028. We believe that our leased ~~properties meet~~property meets our current needs and that we will be able to renew these leases when needed on acceptable terms or find alternative facilities. As a result of recent reductions in headcount, we are exploring subleasing a portion of our office space in Carlsbad, California to help reduce our lease expense.

needs.

~~Location~~ ITEM 3.	~~Approx. Square Feet~~	~~Term Expires~~	~~Purpose~~
~~Carlsbad, California~~	~~16,000~~	~~April 2026~~	~~Principal executive office~~
~~Hilliard, Ohio~~	~~10,000~~	~~April 2020~~	~~Warehouse for equipment~~Legal Proceedings

~~ITEM 3.~~~~Legal Proceedings~~

From time to time, we become ~~subject to legal proceedings~~involved in litigation and ~~claims, both asserted and unasserted, that arise~~arbitrations in the ordinary course of business. ~~Litigation in general,~~Legal fees and ~~securities~~other costs associated with such actions are expensed as incurred. In addition, we assess the need to record a liability for litigation ~~in particular,~~and contingencies. We reserve for costs relating to these matters when a loss is probable, and the amount can be ~~expensive~~reasonably estimated.

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Merger-Related Shareholder Litigation

Brooklyn (then known as NTN Buzztime, Inc.) and ~~disruptive~~its former directors were named as defendants in ten substantially similar actions arising out of the Merger that were brought by purported pre-Merger stockholders of Brooklyn: Henson v. NTN Buzztime, Inc., et al., No. 1:20-cv-08663-LGS (S.D.N.Y.); Monsour v. NTN Buzztime, Inc., et al., No. 1:20-cv-08755-LGS (S.D.N.Y.); Amanfo v. NTN Buzztime, Inc., et al., No. 1:20-cv-08747-LGS (S.D.N.Y.); Carlson v. NTN Buzztime, Inc., et al., No. 1:21-cv-00047-LGS (S.D.N.Y.); Finger v. NTN Buzztime, Inc., et al., No. 1:21-cv-00728-LGS (S.D.N.Y.); Falikman v. NTN Buzztime, Inc., et al., No. 1:20-cv-05106-EK-SJB (E.D.N.Y.); Haas v. NTN Buzztime, Inc., et al., No. 3:20-cv-02123-BAS-JLB (S.D. Cal.); Gallo v. NTN Buzztime, Inc., et al., No. 3:21-cv-00157-WQH-AGS (S.D. Cal.); Chinta v. NTN Buzztime, Inc., et al., No. 1:20-cv-01401-CFC (D. Del.); and Nicosia v. NTN Buzztime, Inc., et al., No. 1:21-cv-00125-CFC (D. Del.) (collectively, the “Stockholder Actions”). Only two of the Stockholder Actions (the Chinta and Nicosia cases) also named Brooklyn LLC. These actions asserted claims alleging violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and both the Chinta and Nicosia cases alleged that Brooklyn LLC is a controlling person of Brooklyn. The complaints generally alleged that the defendants failed to ~~normal business operations. Moreover,~~disclose allegedly material information in a Registration Statement on Form S-4 filed on October 2, 2020, including: (1) certain details regarding any projections or forecasts of Brooklyn or Brooklyn LLC may have made, and the analyses performed by Brooklyn’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not Brooklyn entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints generally alleged that these purported failures to disclose rendered such Registration Statement on Form S-4 false and misleading. The complaints requested: preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate a compliant Registration Statement on Form S-4; an accounting by Brooklyn for all alleged damages suffered; a declaration that certain federal securities laws had been violated; and reimbursement of costs, including attorneys’ and expert fees and expenses. On or about February 26, 2021, in order to render moot certain of the disclosure claims asserted in the Stockholder Actions, to avoid nuisance, potential expense, and delay, and to provide additional information to Brooklyn’s stockholders, Brooklyn determined to voluntarily supplement the Form S-4 with certain additional disclosures. In exchange for those disclosures, the plaintiffs in each of the Stockholder Actions agreed to voluntarily dismiss their claims. As of the date of this Annual Report on Form 10-K all ten actions have been dismissed. Following the dismissal the parties amicably resolved plaintiffs’ counsel’s request for an award of attorneys’ fees and expenses based on the purported benefit contented to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.

Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021)

On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and certain individuals that plaintiff alleges were directors of Brooklyn LLC. The complaint is captioned, Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021). Plaintiff alleges that Brooklyn LLC and certain of its officers engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment. Plaintiff also asserts various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleges Brooklyn LLC agreed to hire him as an executive once the Merger was completed. In particular, plaintiff alleges that, in exchange for transferring an opportunity to obtain an agreement to acquire a license from Novellus for its mRNA-based gene editing and cell reprogramming technology to Brooklyn LLC, he was promised a $500,000 salary and 7% of the equity of Brooklyn LLC. Based on these and other allegations, plaintiff seeks damages of not less than $10 million, a permanent injunction enjoining Brooklyn LLC from exercising the option to acquire such license from Novellus or completing the proposed Merger. On or about February 19, 2021, an amended complaint was filed asserting the same causes of action but withdrawing the request for injunctive relief. On June 6, 2021, defendants filed a motion to compel arbitration or, in the alternative, for partial dismissal of the complaint for failure to state viable fraud, quantum meruit and employment discrimination claims. After obtaining extensions of time to respond, plaintiff opposed the defendants’ motion on August 9, 2021. The defendants filed their reply on September 3, 2021. The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021. By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn LLC. Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No. 01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on February 3, 2022. In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against the Company and Cherington based on the breach of these same promises and a claim for quantum meruit against the Brooklyn LLC. In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be determined at the hearing. Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a three-member arbitration panel. At this stage in the litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.

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Carlson v. Allen Wolff, Michael Gottlieb, Richard Simtob, Susan Miller, and NTN Buzztime, Inc., C.A. No. 2021-0193-KSJM (Del. Ch. Ct.)

On or about March 12, 2021, Douglas Carlson, a purported stockholder of Brooklyn (then known as NTN Buzztime, Inc.), filed a verified class action complaint against Brooklyn and its then current members of the board of directors, for allegedly breaching their fiduciary duties and violating Section 211(c) of the Delaware General Corporation Law. In particular, plaintiff seeks to compel the defendants to hold an annual stockholder meeting. Plaintiff also moved for summary judgment at the same time that he filed his complaint. In order to moot the claim addressed in the complaint, Brooklyn agreed to hold its annual meeting on June 29, 2021, which date was subsequently rescheduled to August 20, 2021. On or about May 6, 2021, the parties entered into a stipulation, which was “so ordered” by the court, extending defendants’ time to respond to the complaint and to file their answering brief in opposition to plaintiff’s motion for summary judgment on or before July 16, 2021 and providing that plaintiff’s reply brief in support of his motion for summary judgment is due on or before August 20, 2021. On or about July 12, 2021, the parties entered in a further amended scheduling order, which provided that defendants were to respond to the complaint and file their answering brief in opposition to plaintiff’s motion for summary judgment on or before September 16, 2021 and plaintiff was to file its reply brief in support of his motion for summary judgment on or before October 20, 2021. On August 20, 2021, Brooklyn convened its 2021 annual meeting. Due to the lack of a required quorum, the meeting was adjourned to September 3, 2021. Thereafter, Brooklyn obtained a quorum, and the annual meeting was held on September 3, 2021. On September 10, 2021, Brooklyn filed a report on Form 8-K with the SEC announcing the results of ~~legal proceedings are difficult~~the annual meeting. On September 16, 2021, the parties filed a stipulation seeking voluntary dismissal of the complaint as moot. The Court entered the dismissal on September 16, 2021 with prejudice as to ~~predict. An unfavorable resolution~~the named plaintiff and without prejudice as to other members of ~~one~~the purported class and retained jurisdiction for the purpose of determining any fee application to the extent it cannot be resolved amicably the parties. Thereafter, on or ~~more legal proceedings could materially adversely affect our business, results~~about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of ~~operations, or financial condition. In addition, defending any claim requires resources, including cash to pay legal~~ fees and expenses for the purported benefit that Carlson contended was received by stockholders as a result of his action.

Edmund Truell Matter

On May 14, 2021, Edmund Truell, a stockholder of Brooklyn, alleged that he sustained a loss because he was unable to sell shares of common stock timely due to a delay caused by Brooklyn’s issuance of stock certificates in lieu of electronic book entry.

Emerald Private Equity Fund, LLC Matter

By a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), a stockholder of Brooklyn, made a demand pursuant to 8 Del. C. 220 to inspect certain books and ~~our limited~~records of Brooklyn. The stated purpose of the demand is to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper stock certificates, including investigating whether: (i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement; (ii) certain restrictions on the sale of Brooklyn common stock following the Merger were proper and applied without favor; (iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of Brooklyn’s common stock; and (iv) it should pursue remedial measures and/or report alleged misconduct to the SEC. Brooklyn has responded to the demand letter and has produced certain information to Emerald in connection with the demand, which is subject to the terms of a confidentiality agreement entered into among the parties, including certain additional stockholders who have subsequent joined as parties to such agreement. In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and former directors of the Company, and the Company’s financial ~~resources could severely impact our ability~~advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty. Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor on behalf of individual stockholders whom counsel represents in addition to Emerald; and the Company has agreed to respond to Emerald’s counsel by April 22, 2022. The Company can provide no assurance that such pre-suit early resolution discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed. The Company intends to defend itself vigorously against any ~~such claim.~~

~~Also,~~and all claims. Additionally, on April 7, 2022, the Company received a demand for indemnification from ~~time~~its financial advisor as it relates to ~~time, state~~the aforementioned potential lawsuit.

John Westman v. Novellus, Inc., Christopher Rohde, and ~~provincial tax agencies have made,~~Matthew Angel, Civil Action No. 2181CV01949 (Middlesex County (Massachusetts) Superior Court)

On or about September 7, 2021, John Westman, a former employee of Novellus, Inc. filed a Complaint in Middlesex County (Massachusetts) Superior Court against Novellus, Inc. and ~~we anticipate will make, inquiries~~the company’s founders and former executives, Christopher Rohde and Matthew Angel (collectively, “Defendants”). Brooklyn acquired Novellus, Inc. on July 16, 2021. Mr. Westman’s claims relate to alleged conduct that took place before Brooklyn acquired Novellus, Inc. Pursuant to the July 16, 2021 Agreement and Plan of Acquisition, as ~~to whether our~~well as a separate agreement among Brooklyn, Novellus, Inc., Mr. Rohde, and Mr. Angel, Mr. Rohde and Mr. Angel are essentially assuming the defense of and paying the fees associated with defending against these claims. To that end, on September 10, 2021, Morgan Lewis accepted service ~~offerings are subject to taxation in their jurisdictions. Many states have expanded their interpretation~~on behalf of ~~their sales and use tax statutes, which generally had~~all defendants. On December 24, 2021, Westman dismissed the ~~effect of increasing~~case without prejudice so 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~~parties could mediate 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~~matter. The parties’ February 2022 mediation was unsuccessful, but Mr. Westman has not ~~resolved favorably to us, materially adversely affect our business, results of operations, or financial condition.~~

refiled suit.

~~ITEM 4.~~~~Mine Safety Disclosures~~

ITEM 4. Mine Safety Disclosures

Not Applicable.

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PART II

ITEM 5.

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

~~PART II~~

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

Our common stock is listed on ~~the NYSE American~~The Nasdaq Global Market under the symbol ~~“NTN.~~“BTX.”

~~On March 16, 2020, the closing price for our common stock as reported on the NYSE American was $1.73 and~~

As of April 12, 2022, there were approximately ~~342~~421 stockholders of record based on the actual number of holders ~~of record.~~

registered on our books at such date.

We have ~~156,000~~156,112 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or in shares of our common stock. In ~~2018,~~2021, we paid approximately ~~$16,000~~$8,000 in cash dividends and issued 202 shares of common stock in stock dividends to the holders of our Series A Preferred Stock. We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms, though we may elect to pay the dividend in shares of our common stock in the future.

We have not declared or paid any cash dividends on our common stock. No cash dividends have been previously paid on our common stock and none are anticipated in 2022.

~~ITEM 6.~~~~Selected~~
ITEM 6. [Reserved]
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Exchange Act, about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements reflect our views only as of the date they are made.

Overview

We are a clinical-stage biopharmaceutical company focused on exploring the role that cytokine-based therapy can have on the immune system in treating patients with cancer, both as a single agent and in combination with other anti-cancer therapies. We are seeking to develop IRX-2, a novel cytokine-based therapy, to treat patients with cancer. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing and cell therapy technology through a license with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021, or the Acquisition.

Recent Developments

Acquisition of Novellus

On July 16, 2021, we acquired Novellus, Inc. and Novellus, Inc.’s wholly owned subsidiary, Novellus, Ltd. Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc. Total consideration was $124.0 million, which consisted of (a) $22.8 million in cash and approximately and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.

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Merger with NTN Buzztime, Inc.

On March 25, 2021, we completed the Merger with NTN Buzztime, Inc. In accordance with the Merger Agreement, on March 25, 2021, Brooklyn amended its restated certificate of incorporation in order to effect:

prior to the Merger, a reverse stock split of its common stock, par value $0.005 per share, at a ratio of one-for-two; and
following the Merger, a change in its corporate name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”

On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.

The Merger has been accounted for as a reverse acquisition in accordance with U.S. generally accepted accounting principles, or GAAP. Under this method of accounting, Brooklyn LLC was deemed the “acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the Merger are those of Brooklyn LLC, and the historical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.

Impact of COVID-19 Pandemic

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our development plans, and on the ability to conduct our clinical trials. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted.

The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical trials. While our INSPIRE trial in patients with squamous cell carcinoma of the oral cavity is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result of the pandemic.

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Basis of Presentation

Revenues

We are a development stage company and have had no revenues from product sales to date. We will not have revenues from product sales until such time as we receive regulatory approval of our product candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.

Research and Development Expenses

We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended. In-Process Research and Development (“IPR&D”) that is acquired through an asset acquisition and has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.

The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product development efforts.

In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front expenditures. We anticipate paying significant portions of a study’s or trial’s cost before such begins and incurring additional expenditures as the study or trial progresses and reaches certain milestones.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs.

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Comparison of the Years Ended December 31, 2021 and 2020

Years Ended December 31, Change       % Change
2021 2020
Operating expenses:
Research and development $
12,705,000
$
3,951,000
$
8,754,000
$
222
%
Acquired in-process research and development
80,538,000

-

80,538,000

N/A

General and administrative
14,724,000

3,297,000

11,427,000

347
%
Transaction costs
5,765,000

-

5,765,000

N/A

Change in fair value of contingent consideration
(180,000
)

19,240,000

(19,420,000
)

-101
%
Total operating expenses
113,552,000

26,488,000

87,064,000

329
%

Loss from operations
(113,552,000
)

(26,488,000
)

(87,064,000
)

329
%

Other expenses:
Loss on sale of NTN assets
(9,648,000
)

-

(9,648,000
)

N/A

Other income (expense), net
899,000

(43,000
)

942,000

-2191
%
Total other expense
(8,749,000
)

(43,000
)

(8,706,000
)

20247
%
Loss before income taxes
(122,301,000
)

(26,531,000
)

(95,770,000
)

361
%
Provision for income taxes
(5,000
)
-
(5,000
)

N/A

Net loss
(122,306,000
)

(26,531,000
)

(95,775,000
)

361
%

Series A preferred stock dividend
(16,000
)

-

(16,000
)

N/A

Net loss attributable to common stockholders
$
(122,322,000
)

$
(26,531,000
)

$
(95,791,000
)

361
%

Research and Development Expenses

Years Ended December 31

2021 2020 Change % Change
License fees
$
6,500,000

$
-

$
6,500,000

N/A

Stock-based compensation
1,597,000

-

1,597,000

N/A

Clinical trials
1,292,000

412,000

880,000

214
%
Payroll-related
2,342,000

1,985,000

357,000

18
%
Other expenses, net
974,000

1,554,000

(580,000
)

-37
%
Total research and development expenses
$
12,705,000

$
3,951,000

$
8,754,000

222
%

For the year ended December 31, 2021, our research and development expenses increased by approximately $8.75 million from the year ended December 31, 2020 due to upfront payments associated with licensed technology, which were expensed because there is no future alternative use for the licensed technology other than for the intended purpose, increased clinical trial expenses, increased headcount and increased stock-based compensation when compared to 2020.

Acquired IPR&D

During the year ended December 31, 2021, we expensed the approximately $80.5 million fair value of the IPR&D acquired in the Acquisition because there is no future alternative use for the IPR&D other than for its intended purpose.

General and Administrative Expenses

Years Ended December 31

2021 2020 Change % Change
Professional fees
$
7,351,000

$
2,352,000

$
4,999,000

213
%
Stock-based compensation
3,638,000

91,000

3,547,000

3898
%
Payroll-related
1,299,000

(98,000
)

1,397,000

-1426
%
Insurance
1,134,000

122,000

1,012,000

830
%
Other expenses, net
1,302,000

830,000

472,000

57
%
Total general and administrative expenses
$
14,724,000

$
3,297,000

$
11,427,000

347
%

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The $11.42 million increase in general and administrative expense for the year ended December 31, 2021 from the year ended December 31, 2020 was primarily related to increased professional fees such as legal, accounting and consulting fees associated with merger and acquisition activity, including the Merger and the Acquisition, as well as costs associated with becoming a publicly traded company, increased stock-based compensation resulting from the issuance of equity awards, increased payroll-related expense due to an increase in our headcount and increased insurance expenses when compared to 2020.

Transaction Costs

For the year ended December 31, 2021, we incurred approximately $5.8 million in transaction costs related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger, and there were no comparable transaction costs for the year ended December 31, 2020.

Change in Fair Value of Contingent Consideration

As of December 31, 2020, our contingent consideration liability was approximately $20.1 million and related to royalties we would be obligated to pay under certain IRX-2 license agreements based on future revenues from any future IRX-2 product sales. During the year ended December 31, 2021, the change in fair value of the contingent consideration was a decrease to the liability of $180,000, based on our third-party valuation analysis.

Loss on Sales of NTN Assets

The approximately $9.6 million loss on the sale of NTN assets during the year ended December 31, 2021 was incurred upon completion of the Disposition, and there was no comparable loss on sale for the year ended December 31, 2020.

Other Income (Expense), Net

Years Ended December 31

2021 2020 Change % Change
Employer retention tax credit
$
664,000

$
664,000

N/A

Income from Brooklyn PPP loan forgiveness
310,000

-

310,000

N/A

Other expenses, net
(1,000
)

-

(1,000
)

N/A

Interest expense, net
(74,000
)

(43,000
)

(31,000
)

72
%
Total other income (expense), net
$
899,000

$
(43,000
)

$
942,000

-2191
%

During the year ended December 31, 2021, we recognized an increase in other income, net of expense of $899,000, as compared to other expense of $43,000 for the year ended December 31, 2020, primarily as a result of a withholding tax refund related to the employer retention tax credit under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration, or the CARES Act, and the forgiveness of Brooklyn LLC’s Paycheck Protection Program loan, or the PPP Loan, which was primarily offset by interest accrued on notes payable that we assumed as part of the acquisition of the assets of IRX Therapeutics, LLC in 2018. Such notes bore interest at the rate of 14% and matured on December 31, 2021, on which date the Company repaid such notes in full, including all accrued and unpaid interest thereon.

Provision for Income Taxes

Our income tax provision is for state income tax related to our U.S. operations. At December 31, 2021 and 2020 we had available net operating loss (“NOL”) carryforwards of approximately $20,679,000 and $0 for federal income tax purposes, respectively, of which $20,679,000 can be carried forward indefinitely. We have available $1,397,000 and $747,000 state NOLs for the years ended December 31, 2021 and 2020, respectively. We also have foreign NOL carryforwards of $4,759,000 and $0 for the years ended December 31, 2021 and 2020, respectively, which carry forward indefinitely. Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards. We continue to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. We have also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.
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Liquidity and Capital Resources

At December 31, 2021, we had cash and cash equivalents of approximately $17.0 million. During the second quarter of 2021, we entered into Purchase Agreements with Lincoln Park, pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60.0 million in shares of our common stock. Future sales of common stock by us, if any, are subject to certain limitations, and may occur from time to time, at our sole discretion. As of April 12, 2022, we had issued and sold approximately 3,552,000 shares of common stock for total gross proceeds of $54.1 million and net proceeds of $52.0 million. For further information, see “—Recent Developments—Purchase Agreements.” On March 9, 2022, we consummated the PIPE Transaction, resulting in net proceeds of approximately $11 million. see “—Recent Developments—PIPE Transaction.”   Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity under the Purchase Agreements for a period of one-year following consummation of the PIPE Transaction.

We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our product development programs and operate as a publicly traded company. Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. It will likely be some years before we obtain the necessary regulatory approvals to commercialize one or more of our product candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Annual Report on Form 10-K. There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other product candidate we may acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.

In that regard, our future funding requirements will depend on many factors, including:

the scope, rate of progress and cost of our clinical trials and other product development activities;

future clinical trial results;

the terms and timing of any collaborative, licensing and other agreements that we may establish;

the cost and timing of regulatory approvals;

the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;

the cost and timing of establishing sales, marketing and distribution capabilities;

the effect of competition and market developments; and

the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights.

We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase Agreement (to the extent we are permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means. We may also seek governmental grants to support our clinical trials and preclinical trials. Further, we may seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us.

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Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay the commercialize of our products, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our business.

Sources of Funds

Equity Securities

On March 6, 2022, we entered into a Securities Purchase Agreement with the PIPE Investor providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of approximately 6,857,000 Units, each of which consisted of (i) one share of our common stock (or, in lieu thereof, one Pre-Funded Warrant) and (ii) one Common Warrant, resulting in net proceeds of approximately $11 million. The PIPE Transaction closed on March 9, 2022. see “—Recent Developments—PIPE Transaction.”

On April 26, 2021, we and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed the First Purchase Agreement, pursuant to which we had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of Brooklyn’s common stock, subject to certain limitations. In consideration for Lincoln Park’s entry into the First Purchase Agreement, we issued Lincoln Park approximately 56,000 shares of common stock. As of December 31, 2021, we issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, we and Lincoln Park executed the Second Purchase Agreement, pursuant to which we have the right from time to time, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40.0 million of shares of Brooklyn’s common stock, subject to certain limitations. In consideration of Lincoln Park’s entry into the Second Purchase Agreement, we issued to Lincoln Park 50,000 shares of common stock. As of December 31, 2021, Brooklyn had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of $34.1 million.   Pursuant to the Securities Purchase Agreement in respect of the PIPE Transaction, we may not effect transactions under the Second Purchase Agreement for a period of one year immediately following closing of the PIPE Transaction.

For further information on the Purchase Agreements, see “—Recent Developments—Purchase Agreements.”

As a condition to the closing of the Merger, Brooklyn LLC was required to have at least $10.0 million in cash and cash equivalents at the effective time of the Merger. In furtherance of, and prior to, the Merger, certain of its members entered into agreements pursuant to which those members purchased additional units of Brooklyn LLC for an aggregate purchase price of $10.5 million.

Disposition.

On March 26, 2021, we completed the Disposition, in which we sold to eGames.com our rights, title and interest in and to the assets relating to the business we operated prior to the Merger under the name “NTN Buzztime, Inc.” in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business.

Brooklyn LLC PPP Loan.

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $310,000 to Silicon Valley Bank evidencing the loan, or the Brooklyn LLC PPP Loan, Brooklyn LLC received under the Paycheck Protection Program, or PPP, of the CARES Act administered by the U.S. Small Business Administration. Brooklyn LLC PPP Loan had an interest rate of 1.0% per annum.

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Under the terms of the CARES Act, certain amounts of the Brooklyn LLC PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act. In June 2021, Brooklyn LLC submitted its loan forgiveness application for the Brooklyn LLC PPP Loan, and in September 2021, the lender informed Brooklyn LLC that the U.S Small Business Administration had approved the forgiveness of 100% of the outstanding principal and interest of the Brooklyn LLC PPP Loan. As of December 31, 2021, there was no outstanding principal balance under the Brooklyn LLC PPP Loan.

Uses of Funds

Net Cash Used in Operating Activities.

Our operations used $23.5 million during the year ended December 31, 2021. Our cash use for operating activities is influenced by the level of our net loss and the amount of cash we invest in personnel and technology development to support anticipated growth in our business.

License Obligations.

We are obligated to pay certain amounts to Factor pursuant to the license agreement we entered into in April 2021, including $2.5 million in October 2021, which was paid, and $3.5 million in October 2022. The license agreement also provides for milestone payments and royalties on the net sale of product developed under the license agreement.

Lease Obligations.

We are obligated to pay approximately $750,000 per year for our facilities leases, subject to annual increases and to a sharing of common area expenses with other tenants in the building. The leases expire at varying times between December 2026 and June 2028.

Acquisition.

On July 16, 2021, we used approximately $22,882,000 of cash as partial consideration for the Acquisition, and we issued common stock valued at a total of $102.0 million, based on a price of $14.5253 per share, for the remaining portion of the Acquisition’s purchase price.

Brooklyn PPP Loan.

On April 18, 2020, Brooklyn (then known as NTN Buzztime, Inc.) was granted a loan, which we refer to as the Brooklyn PPP Loan, in the aggregate amount of $1,625,000, pursuant to the PPP under the CARES Act. Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act. In October 2020 the U.S. Small Business Administration approved the forgiveness of $1,093,000 of the $1,625,000 principal amount of the Brooklyn PPP Loan, leaving a principal balance of approximately $532,000, all of which, plus accrued and unpaid interest, was due and, in accordance with the terms of the Merger Agreement, paid by Brooklyn upon the closing of the Merger.

Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue and expenses during the reporting periods. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

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Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities; (b) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; (c) the reported amounts of revenues and expenses during the reporting period and (d) the reported amount of the fair value of assets acquired in connection with business combinations. Actual results could differ from those estimates. Our significant estimates and assumptions include the recoverability and useful lives of long-lived assets and the contingent consideration liability.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018 (the “IRX Acquisition”), which was accounted for as a business combination. Goodwill is not amortized but is tested for impairment annually, or if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Since management evaluates Brooklyn as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the entity is less than its carrying value. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. If the entity does not pass the qualitative assessment, then the entity’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the entity exceeds its fair value.

Impairment of Long-Lived Assets

We review long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. An impairment exists when the carrying value of the long-lived asset is not recoverable and exceeds its fair value.

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Fair Value of Financial ~~Data~~

Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.

The carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivable, prepaid assets and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities. The carrying value of loans payable approximates its fair market value because the effective yield on this debt, which includes contractual interest rates as well as other finance charges, is comparable to rates of returns for instruments of similar credit risk.

Commitment and Contingencies

We follow ASC No.450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for equity awards granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for share-based payment awards is recognized using the straight-line single-option method.

Recent Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for us) and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of this update to have a significant impact on our financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842) – Lessors - Certain Leases with Variable Lease Payments, which amends the lessor classification guidance to introduce additional criteria when classifying leases with variable lease payments that do not depend on a reference index or a rate. This guidance is effective for annual periods beginning after December 15, 2021 (January 1, 2022 for us), with early adoption permitted. We do not expect the adoption of this update to have a significant impact on its financial statements.

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ITEM 7A.

Quantitative and Qualitative Disclosures about Market Risk

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

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

~~Introduction~~

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the accompanying audited consolidated financial statements and notes, included in Item 8 of this report, to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. You should also see the section entitled “Forward-Looking Statements” at the beginning of this report. All dollar amounts in MD&A are rounded to the nearest thousand. Our MD&A is organized as follows:

ITEM 8.	●	~~Overview~~~~. This section provides a general description of our business.~~

	●	~~Results of Operations~~. This section provides an analysis of our results of operations presented in the accompanying consolidated statements of operations by comparing the results for our two most recent completed fiscal years.

	●	~~Liquidity~~Financial Statements and ~~Capital Resources~~~~. This section provides an analysis of our historical cash flows, as well as our future capital requirements.~~

	●	~~Off-Balance Sheet Arrangements~~~~. This section provides information related to any off-balance sheet arrangement we may have that would affect our consolidated finance statements.~~

	●	~~Critical Accounting Policies and Estimates~~. This section provides a listing of our significant accounting policies, including any material changes in our critical accounting policies, estimates and judgments during the year ended December 31, 2019 from those described in the MD&A section of our Annual Report on Form 10-K for the year ended December 31, 2018.

	●	~~Recent Accounting Pronouncements.~~ ~~This section provides information related to new or updated accounting guidance that may impact our consolidated financial statements.~~Supplementary Data

~~Overview~~

Through social fun and friendly competition, our platform creates bonds between our hospitality partners and their patrons, and between patrons themselves. We believe this unique experience increases dwell time, revenue, and repeat business for venues – and has also created a large and engaged audience which we connect with through our in-venue TV network. Over 1 million hours of trivia, card, sports and arcade games are played on our network each month.

~~Results of Operations~~

~~We generated a net loss of $2,047,000 for the year ended December 31, 2019, compared to a net loss of $259,000 for the year ended December 31, 2018.~~

~~Revenue~~

We generate revenue by charging subscription fees to our partners for access to our 24/7 trivia network, by charging equipment fees to select partners for use of tablets and other equipment, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling digital-out-of-home (DOOH) advertising direct to advertisers and on national ad exchanges, by licensing our entertainment and trivia content to other parties, and by providing professional services such as custom game design or development of new platforms on our existing tablet form factor. Up until February 1, 2020, we also generated revenue by hosting live trivia events. (See Note 18 to the consolidated financial statements included in item 8 of this report.) The table below summarizes the type of revenue we generated for the years ended December 31, 2019 and 2018:

Years ended December 31,
2019 2018
$
% of Total
Revenue
$
% of Total
Revenue
Change $
%
Change

Subscription revenue 14,278,000 72.1 % 16,031,000 68.7 % (1,753,000 ) (10.9 )%
Hardware revenue 2,350,000 11.9 % 3,589,000 15.4 % (1,239,000 ) (34.5 )%
Other revenue 3,178,000 16.0 % 3,715,000 15.9 % (537,000 ) (14.5 )%
Total 19,806,000 100.0 % 23,335,000 100.0 % (3,529,000 ) (15.1 )%

~~Subscription Revenue~~

The decrease in subscription revenue year-over-year was primarily due to lower average site count and lower average revenue per site in 2019 compared to 2018. In November 2019, our agreements with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees terminated in accordance with their terms. As a result of the foregoing and if we do not add network subscribers or other revenue sources to sufficiently offset the subscription revenue we received in recent years from Buffalo Wild Wings corporate-owned restaurants and its franchisees, our subscription revenue will materially decrease beginning in the first quarter of 2020. In addition, our subscription revenue could be further adversely affected as a result of the effects of the recent COVID-19 pandemic. See “ITEM 1A., Risk Factors—Risk Factors That May Affect Our Business—Due to the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows to be adversely effected. In addition, the recent COVID-19 pandemic could further decrease our revenues and our operating results and cash flows could be further adversely effected.”

~~The table below provides a geographic breakdown of our site count as of the date indicated:~~

Network Subscribers
as of December 31,

2019 2018
United States 1,318 2,499
Canada 122 140
Total 1,440 2,639

~~Hardware Revenue~~

The decrease in hardware revenue year-over-year was primarily due to decreased sales-type lease arrangements in 2019 compared to 2018, offset by increased sales of our tablets to a third-party using our tablets and operating system to deliver its services in jails. We do not expect to continue recognizing hardware revenue under sales-type lease arrangements during 2020 or thereafter. We expect to continue recognizing hardware revenue throughout 2020 under our existing contract from our jail services partner. We are uncertain if we will enter into another equipment sale contract with our jail services partner or any other party.

~~Other Revenue~~

The decrease in other revenue year-over-year was primarily due to a decrease in revenue for professional services performed in 2019 compared to 2018, partially offset by increased advertising and licensing revenue in 2019 compared to 2018. Our advertising revenue could be adversely affected as a result of the effects as a result of the recent COVID-19 pandemic, including because of a decrease in advertising sales arising from a slowdown in consumer traffic of the restaurant and bars that subscribe to our service. See “ITEM 1A., Risk Factors—Risk Factors That May Affect Our Business—Due to the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows to be adversely effected. In addition, the recent COVID-19 pandemic could further decrease our revenues and our operating results and cash flows could be further adversely effected.”

~~Direct Costs and Gross Margin~~

~~The following table compares the direct costs and gross margin for the years ended December 31, 2019 and 2018:~~

For the years ended
December 31,

2019 2018 Change
Revenues $ 19,806,000 $ 23,335,000 $ (3,529,000 )
Direct Costs 7,483,000 8,070,000 (587,000 )
Gross Margin $ 12,323,000 $ 15,265,000 $ (2,942,000 )

Gross Margin Percentage 62.2 % 65.4 %

The decrease in direct costs year-over-year was primarily due to decreased (i) equipment expense of approximately $823,000 related to lower hardware revenue, (ii) service provider and freight expense of $384,000 and (iii) license fees of $137,000, partially offset by increased (a) equipment expense of approximately $676,000 related to writing off certain older tablets and the related cases during the fourth quarter ended December 31, 2019 for which we did not expect to generate future cash flows, (b) depreciation expense of $69,000 and (c) other miscellaneous expense of $13,000.

~~Operating Expenses~~

For the years ended
December 31,

2019 2018 Change
Selling, general and administrative $ 13,175,000 $ 14,463,000 $ (1,288,000 )

Impairment of capitalized software $ 550,000 $ 23,000 $ 527,000

Impairment of goodwill $ - $ 261,000 $ (261,000 )

Depreciation and amortization (non-direct) $ 360,000 $ 315,000 $ 45,000

~~Selling, General and Administrative Expenses~~

The decrease in selling, general and administrative expenses year-over-year was primarily due to decreased (i) payroll and related expense of $980,000, (ii) professional fees of $303,000 due to fewer consulting and legal expenses and (iii) occupancy expense of $150,000 related to the lease for our new headquarters that we moved to in December 2018. These decreases were partially offset by increased (a) bad debt expense of $118,000, (b) marketing expense of $87,000 and (c) miscellaneous expenses of $61,000. In light of the recent measures we implemented to reduce operating expenses and to preserve capital, we expect our selling, general and administrative expenses to decrease in 2020. However, such actions, and any similar actions we may implement in the future, could adversely affect our business and we may not realize the operation or financial benefits of such actions. See “ITEM 1A., Risk Factors—Risk Factors That May Affect Our Business—The measures we recently implemented and may implement in the future to reduce operating expenses and preserve capital could adversely affect our business and we may not realize the operational or financial benefits from such actions,” above.

~~Impairment of Capitalized Software~~

Impairment of capitalized software increased for the year ended December 31, 2019 as a result of abandoning certain capitalized software development projects that we concluded were no longer a current strategic fit or for which we determined that the marketability of the content had decreased due to obtaining additional information regarding the specific purpose for which the content was intended.

~~Impairment of Goodwill~~

We have goodwill resulting from the excess of costs over the fair value of assets we acquired in 2003 related to our Canadian business (the “Reporting Unit”). Goodwill and intangible assets acquired in a purchase combination that are determined to have an indefinite useful life are not amortized, but instead are assessed annually, or at interim periods, for impairment based on qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the Reporting Unit is less than its carrying amount. If there are indications of impairment, then we perform a quantitative impairment test. We performed the quantitative impairment test of our goodwill in each of the years ended December 31, 2019 and 2018, as we determined that because of declines in revenue of the Reporting Unit, the decline in our stock price and other general market conditions, it was more likely than not that there were indications of impairment. We used three methods of determining the fair value of the Reporting Unit: the public company market method, the transaction market method and the income method. Each method was equally weighted to calculate the total estimated fair value of the Reporting Unit, and then we compared this fair value to the carrying value of the Reporting Unit. The impairment test performed during 2018 resulted in the carrying value exceeding the fair value. Accordingly, we recognized a goodwill impairment loss of $261,000 during the year ended December 31, 2018. The impairment test performed during 2019 resulted in the fair value exceeding the carrying value. Therefore, we did not record any goodwill impairment for the year ended December 31, 2019.

The effects of the COVID-19 pandemic on the operating results of our Canadian business could be an event that requires us to assess at interim periods in 2020 whether the recorded goodwill related to our Canadian business is impaired, and if impaired, we would be required to record a non-cash impairment charge.

~~Depreciation and Amortization~~

The increase in depreciation and amortization expense year-over-year was primarily due to our leasehold improvement asset we recognized as a result of our move to our new headquarters in December 2018. The leasehold improvement asset is being depreciated over the term of the lease, which is 89 months

~~Other (Expense) Income, Net~~

For the years ended
December 31,
Decrease in
2019 2018 other expense, net
Interest expense, net $ (249,000 ) $ (389,000 )
Other expense, net (9,000 ) (137,000 )
Total other expense, net $ (258,000 ) $ (526,000 ) $ 268,000

The decrease in other expense, net was primarily related to decreased interest expense resulting from lower debt balances and gains from the sale of equipment, partially offset by increased foreign currency losses related to the operations of our Canadian subsidiary for the year ended December 31, 2019 when compared to 2018.

~~Income Taxes~~

For the years ended
December 31,

2019 2018
(Provision) benefit for income taxes $ (27,000 ) $ 64,000

We expect to incur state income tax liability in 2019 related to our U.S. operations. We also expect to incur an income tax liability in 2019 in Canada due to the profitability of our Canadian subsidiary. During the year ended December 31, 2018, an impairment to goodwill resulted in a deferred tax benefit under generally accepted accounting principles (“GAAP”), which resulted in a net tax benefit in Canada.

~~EBITDA—Consolidated Operations~~

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is not intended to represent a measure of performance in accordance with GAAP. Nor should EBITDA be considered as an alternative to statements of cash flows as a measure of liquidity. We include EBITDA 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 compared to their net income or loss calculation in accordance with GAAP.

The reconciliation of our consolidated net loss calculated in accordance with GAAP to EBITDA for the years ended December 31, 2019 and 2018 is shown in the table below. EBITDA should not be considered as substitutes for, or superior to, net loss calculated in accordance with GAAP.

For the years ended
December 31,

2019 2018
Net loss per GAAP $ (2,047,000 ) $ (259,000 )
Interest expense, net 249,000 389,000
Income tax provision (benefit) 27,000 (64,000 )
Depreciation and amortization 2,877,000 2,764,000
EBITDA $ 1,106,000 $ 2,830,000

~~Liquidity and Capital Resources~~

As of December 31, 2019, we had cash, cash equivalents and restricted cash of $3,409,000 compared to cash, cash equivalents and restricted cash of $2,786,000 as of December 31, 2018. In January 2020, we sold all our assets used to conduct the live hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation for approximately $1.4 million in cash.

In connection with preparing our financial statements as of and for the year ended December 31, 2019, our management evaluated whether there are conditions or events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about our ability to continue as a going concern through twelve months after the date that such financial statements are issued. During the year ended December 31, 2019, we incurred a net loss of $2,047,000, and as a result of the debt reclassification described below, the Company’s current liabilities exceeded its current assets at December 31, 2019 by $25,000. As of December 31, 2019, we had $3,209,000 of unrestricted cash and total debt outstanding of $2,750,000, which was the outstanding principal balance of our term loan with Avidbank. Since January 1, 2020, Avidbank required us to pay $750,000 of the principal balance of our term loan, thereby reducing it to $2,000,000 as of March 19, 2020. Under the terms of the amendment to our loan and security agreement that we entered into with Avidbank on March 12, 2020, during 2020 we will be required to make monthly payments that, if made in accordance with their terms, will result in us paying off our term loan by December 31, 2020. Based on this amendment, $1,750,000 of debt outstanding has been reclassified as a current liability in the accompanying balance sheet at December 31, 2019. As a result of the accelerated payments required on our term loan, and taking into account our current financial condition and our existing sources of revenue, our management concluded there is substantial doubt about our ability to continue as a going concern through March 19, 2021.

Since January 1, 2020, we reduced headcount by approximately $2.2 million in annualized salaries and implemented measures to preserve capital. We may implement additional measures designed to reduce operating expenses and/or preserve capital. We need to raise capital to meet our debt service obligations to Avidbank and to fund our working capital needs. We continue to explore and evaluate opportunities to raise capital, including through equity financings, alternative sources of debt, and strategic transactions, which may include selling a portion or all of our assets. However, none of these potential sources of capital are currently assured, and the actions to reduce operating expenses we implemented may not sufficiently mitigate the conditions and events that raise substantial doubt about our ability to continue as a going concern through March 19, 2021. See “ITEM 1A, Risk Factors—Risk Factors That May Affect Our Business—“~~We need to raise capital to meet our debt service obligations to Avidbank and to fund our working capital needs~~.~~Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business,” above.~~

In addition, any actions we implemented or may implement in the future designed to reduce operating expenses and to preserve capital may not cover our capital needs and may negatively impact our ability to effectively manage, operate and grow our business, to introduce new offerings to our customers, to increase market awareness and encourage the adoption of the Buzztime brand and the Buzztime network, to retain customers, and to generate revenue. See “ITEM 1A, Risk Factors—Risk Factors That May Affect Our Business—“The measures we recently implemented and may implement in the future to reduce operating expenses and to preserve capital could adversely affect our business and we may not realize the operational or financial benefits from such actions,” above.

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to our ability to continue as a going concern.

~~Avidbank Term Loan~~

Under a loan and security agreement we entered into with Avidbank in September 2018, or the Original LSA, we borrowed $4,000,000 in the form of a 48-month term loan, all of which we used to pay-off the $4,050,000 of principal borrowed from our then-existing lender. As of December 31, 2019, $2,750,000 was outstanding under the term loan. We recorded debt issuance costs of $23,000, which includes a $20,000 facility fee. The debt issuance costs are being amortized to interest expense using the effective interest rate method over the life of the loan. The unamortized balance of the debt issuance costs as of December 31, 2019 was $11,000 and is recorded as a reduction of long-term debt.

On March 12, 2020, we entered into an amendment to the Original LSA. We refer to the Original LSA, as amended, as the Avidbank LSA. In connection with entering into the amendment, we made a $433,000 payment on our term loan, which includes the $83,333 monthly principal payment plus accrued interest for March 2020 and a $350,000 principal prepayment, thereby reducing the outstanding principal balance of our term loan to $2.0 million. Under the terms of the amendment, our financial covenants were changed, the maturity date of our term loan was changed from September 28, 2022 to December 31, 2020 (and as a result, we classified the total outstanding principal balance as a current liability on our balance sheet as of December 31, 2019), and commencing on April 30, 2020, we must make principal plus accrued interest payments on the last day of each month, such that our term loan will be repaid by December 31, 2020. The principal payment we must make each month will be $125,000 for each of April, May and June, $300,000 for each of July, August, September, October and November, and $125,000 for December.

Under the terms of the Original LSA, our EBITDA was required to be at least $1,000,000 for the trailing six-month period as of the last day of each fiscal quarter and the aggregate amount of unrestricted cash we had in deposit accounts or securities accounts maintained with Avidbank must be not less than $2,000,000 at all times. As of December 31, 2019, we were in compliance with both of those covenants.

Under the terms of the amendment, the minimum EBITDA covenant was replaced with a monthly minimum asset coverage ratio covenant, which we refer to as the ACR covenant, and the minimum liquidity covenant was amended to provide that the aggregate amount of unrestricted cash we have in deposit accounts or securities accounts maintained with Avidbank must be at all times not less than the principal balance outstanding under our term loan. Under the ACR covenant, the ratio of (i) our unrestricted cash at Avidbank as of the last day of a calendar month plus 75% of our outstanding accounts receivable accounts that are within 90 days of invoice date to (ii) the outstanding principal balance of our term loan on such day must be no less than 1.25 to 1.00.

Under the Avidbank LSA, subject to customary exceptions, we are prohibited from borrowing additional indebtedness. We granted and pledged to Avidbank a first-priority security interest in all our existing and future personal property.

The Avidbank LSA includes customary representations, warranties and covenants (affirmative and negative), including restrictive covenants that, subject to specified exceptions, limit our ability to: dispose of our business or property; merge or consolidate with or into any other business organization; incur or prepay additional indebtedness; create or incur any liens on its property; declare or pay any dividend or make a distribution on any class of our stock; or enter specified material transactions with our affiliates. The Avidbank LSA also includes customary events of default, including: payment defaults; breaches of covenants following any applicable cure period; material breaches of representations or warranties; the occurrence of a material adverse effect; events relating to bankruptcy or insolvency; and the occurrence of an unsatisfied material judgment against us. Upon the occurrence of an event of default, Avidbank may declare all outstanding obligations immediately due and payable, do such acts as it considers necessary or reasonable to protect its security interest in the collateral, and take such other actions as are set forth in the Avidbank LSA.

~~Strategic Process~~

Our board of directors continues to explore and evaluate strategic alternatives focused on maximizing shareholder value, while also exploring and evaluating financing alternatives to raise the capital we need to successfully execute our current operating and strategic plan in the event the strategic process does not result in a transaction. Our board of directors has not set a timetable for the strategic process nor has it made any decisions relating to any strategic alternatives at this time, and no assurance can be given as to the outcome of the process. We do not intend to disclose additional details regarding the strategic process unless and until further disclosure is appropriate or necessary. See also “PART I—ITEM 1A. Risk Factors—Risk Factors That May Affect Our Business—We cannot assure you that our exploration of strategic alternatives will result in us pursuing a transaction or that any such transaction would be successfully completed, and there may be negative impacts on our business and stock price as a result of the process of exploring strategic alternatives,” above.

~~Working Capital~~

As of December 31, 2019, we had negative working capital (current liabilities in excess of current assets) of $25,000 compared to working capital (current assets in excess of current liabilities) of $2,761,000 as of December 31, 2018. The following table shows our change in working capital from December 31, 2018 to December 31, 2019.

Increase
(Decrease)

Working capital as of December 31, 2018 $ 2,761,000
Changes in current assets:
Cash and cash equivalents 673,000
Accounts receivable, net of allowance 52,000
Site equipment to be installed (1,449,000 )
Prepaid expenses and other current assets 9,000
Net decrease in current assets (715,000 )
Changes in current liabilities:
Accounts payable 564,000
Accrued compensation 16,000
Accrued expenses 46,000
Sales taxes payable 44,000
Income taxes payable 2,000
Current portion of obligations under capital leases 409,000
Deferred revenue (24,000 )
Deferred rent (807,000 )
Other current liabilities 82,000
Net increase in current liabilities 2,071,000
Net decrease in working capital (2,786,000 )
Working capital as of December 31, 2019 $ (25,000 )

~~Cash Flows~~

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

For the years ended
December 31,

2018 2018 Change
Cash provided by (used in):
Operating activities $ 2,744,000 $ 1,365,000 $ 1,379,000
Investing activities (1,065,000 ) (1,579,000 ) 514,000
Financing activities (1,098,000 ) (303,000 ) (795,000 )
Effect of exchange rates 42,000 (75,000 ) 117,000
Net increase (decrease) in cash, cash equivalents and restricted cash $ 623,000 $ (592,000 ) $ 1,215,000

~~Net cash provided by operations.~~ The increase in cash provided by operating activities was due to a decrease in cash used for operating assets and liabilities of $2,447,000, partially offset by an increase in net loss of $853,000, after giving effect to adjustments made for non-cash transactions during 2019 compared to 2018.

Our largest use of cash is payroll and related costs. Cash used for payroll and related costs decreased $764,000 to $9,296,000 for 2019 from $10,060,000 for 2018, primarily due to reduced headcount. In light of the recent measures we implemented to reduce operating expenses and to preserve capital, we expect our selling, general and administrative expenses to decrease in 2020. See “—Results of Operations—Operating Expenses,” above.

Our primary source of cash is cash we generate from customers. Cash received from customers decreased $2,030,000 to $19,790,000 for 2019 from $21,820,000 for 2018. This decrease was primarily related to decreased subscription and hardware revenue. If we do not add network subscribers or other revenue sources to sufficiently offset the subscription revenue we received in recent years from Buffalo Wild Wings corporate-owned restaurants and its franchisees, our subscription revenue will materially decrease beginning in the first quarter of 2020. See “—Results of Operations—Revenues,” above.

~~Net cash used in investing activities.~~ ~~The $514,000 decrease in cash used in investing activities was primarily due to decreased capital expenditures.~~

~~Net cash used in financing activities.~~ During 2018, we received $4,000,000 under our term loan with Avidbank and we received $1,375,000 in net proceeds from a registered offering of our common stock. There were no similar financing activities during 2019. During 2019, we made $4,373,000 less in principal payments on long-term debt and $204,000 less in principal payments on our finance leases when compared to 2018.

~~Off-Balance Sheet Arrangements~~

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, expenses, results of operations, liquidity, capital expenditures or capital resources.

~~Critical Accounting Policies and Estimates~~

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

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

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

~~Site Equipment to be Installed—~~Site equipment to be installed consists of fixed assets related to our tablet platform that have not yet been placed in service and are stated at cost. These assets remain in site equipment to be installed until installed at our customer sites. For tablet platform customers that are under sales-type lease arrangements, the cost of the equipment is recognized in direct costs upon installation. For all other tablet platform customers, the cost of the equipment is reclassified to fixed assets upon installation and depreciated over its estimated useful life. We evaluate the recoverability of site equipment to be installed for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future net cash flows expected to be generated. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

Following the termination of our relationship with Buffalo Wild Wing corporate-owned restaurants and most of its franchisees in November 2019, we took back title to all of the tablets, cases and charging trays located at sites that terminated service with us at zero cost to us other than for shipping and related charges of approximately $175,000. We received approximately 45,000 tablets and cases and approximately 4,500 charging trays during the fourth quarter of 2019. Many of these items are our newer technology tablets and cases that can be redeployed to our customer sites or used in other possible partnerships. Although we have not yet completed our assessment of the items we received to determine how many we will ultimately retain, we determined that we would no longer have a future use for certain older tablets and cases we received. Accordingly, during the quarter ended December 31, 2019, we recognized a loss of approximately $580,000 for the disposition of those older tablets and related cases recorded in site equipment to be installed for which we did not expect to generate future cash flows. Total loss for the disposition of site equipment for the year ended December 31, 2019 was approximately $591,000. There were no indications of impairment for the year ended December 31, 2018.

~~Fixed Assets~~—Fixed assets are recorded at cost. Equipment under finance leases is recorded at the present value of future minimum lease payments. We evaluate the recoverability of our fixed assets for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. As discussed above, we determined that we would no longer have a future use for certain older tablets and cases we received from Buffalo Wild Wing corporate-owned restaurants and its franchisees. Accordingly, during the quarter ended December 31, 2019, we recognized a loss of approximately $96,000 primarily for the disposition of those older tablets and the related cases recorded in fixed assets for which we did not expect to generate future cash flows. Total loss for the disposition of fixed assets for the year ended December 31, 2019 was approximately $127,000. There were no indications of impairment for the year ended December 31, 2018.

Depreciation of fixed assets is computed using the straight-line method over the estimated useful lives of the assets. Depreciation of leasehold improvements and fixed assets under finance leases is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease period.

We incur a relatively significant level of depreciation expense in relation to our operating income. The amount of depreciation expense in any fiscal year is largely related to the equipment located at our customers’ sites that are not under sales-type lease arrangements. Such equipment includes the Classic Playmaker, tablet, other associated electronics and the computers located at customer’s sites (collectively, “Site Equipment”). The components within Site Equipment are depreciated over one to three years based on the shorter of the contractual finance lease period or the estimated useful life, which considers anticipated technology changes. Machinery and equipment is depreciated over three to five years, furniture and fixtures is depreciated over five to seven years and the vehicle is depreciated over five years. If our fixed assets turn out to have longer lives, on average, than estimated, then our depreciation expense would be significantly reduced in those future periods. Conversely, if the fixed assets turn out to have shorter lives, on average, than estimated, then our depreciation expense would be significantly increased in those future periods. As of December 31, 2019, we determined there were no changes to the estimated useful lives for any of our assets.

~~Goodwill~~—Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill acquired in a purchase combination determined to have an indefinite useful life are not amortized, but instead are assessed annually, or at interim periods, for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. If after assessing the totality of events or circumstances we determine it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we must perform the step one quantitative impairment test outlined in Accounting Standards Codification (“ASC”) No. 350,~~Intangibles – Goodwill and Other.~~

We have goodwill resulting from the excess of costs over the fair value of assets we acquired in 2003 related to our Canadian business (the “Reporting Unit”). We performed the quantitative impairment test of our goodwill in each of the years ended December 31, 2019 and 2018, as we determined that because of declines in revenue of the Reporting Unit, the decline in our stock price and other general market conditions, it was more likely than not that there were indications of impairment. We used three methods of determining the fair value of the Reporting Unit: the public company market method, the transaction market method and the income method. Each method was equally weighted to calculate the total estimated fair value, and then we compared this fair value to the carrying value of the Reporting Unit. The impairment test performed during 2018 resulted in the carrying value exceeding the fair value. Accordingly, we recognized a goodwill impairment loss of approximately $261,000 during the year ended December 31, 2018. The impairment test performed during 2019 resulted in the fair value exceeding the carrying value. Therefore, we did not record any goodwill impairment for the year ended December 31, 2019.

~~Revenue Recognition~~~~—In accordance with ASC No. 606,~~~~Revenue from Contracts with Customers,~~~~we recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services.~~

We generate revenue by charging subscription fees to customers for access to our 24/7 trivia network, charging equipment fees to certain customers for use of tablets and other equipment, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling DOOH advertising direct to advertisers and on national ad exchanges, by licensing our entertainment and trivia content to other parties, and by providing professional services such as custom game design or development of new platforms on our existing tablet form factor. Up until February 1, 2020, the Company also generated revenue from hosting live trivia events.

In general, when multiple performance obligations are present in a customer contract, we allocated the transaction price to the individual performance obligation based on the relative stand-alone selling prices, and recognize the revenue when or as each performance obligation has been satisfied. We treat discounts as a reduction to the overall transaction price and allocate the discount to the performance obligations based on the relative stand-alone selling prices. We recognize revenue net of sales tax we collect from the customer.

~~Software Development Costs~~—We capitalize costs related to the development of certain software products in accordance with ASC No. 350. We recognize amortization of costs related to interactive programs on a straight-line basis over the programs’ estimated useful lives, generally two to three years. Amortization expense relating to capitalized software development costs totaled $519,000 and $382,000 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, approximately $177,000 and $1,296,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete.

We performed our annual review of software development projects for the years ended December 31, 2019 and 2018, and determined to abandon various software development projects that we concluded were no longer a current strategic fit or for which we determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, for the quarter ended December 31, 2019, we recognized an impairment charge of $498,000. There was no impairment charge for the quarter ended December 31, 2018. For the year ended December 31, 2019 and 2018, we recognized an impairment charge of $550,000 and $23,000, respectively. Impairment of capitalized software is shown separately on our consolidated statement of operations.

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

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

~~Recent Accounting Pronouncements~~

~~In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2019-12,~~~~Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.~~This ASU enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year and interim-period accounting for enacted changes in tax law. The amendment will be effective for public companies with fiscal years beginning after December 15, 2020 (which will be January 1, 2021 for us); early adoption is permitted. We are currently assessing the impact of this pronouncement to our consolidated financial statements.

~~In November 2019, the FASB issued ASU No. 2019-08,~~~~Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606)~~ (“ASU No. 2019-08”). This ASU requires that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the share-based payment award in accordance with Topic 718. The grant date is the date at which a grantor (supplier) and a grantee (customer) reach a mutual understanding of the key terms and conditions of a share-based payment award. The classification and subsequent measurement of the award are subject to the guidance in Topic 718 unless the share-based payment award is subsequently modified and the grantee is no longer a customer. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 2020 for us). The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

~~In November 2018, the FASB issued ASU No. 2018-18,~~~~Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.~~ This ASU requires certain transactions between participants in a collaborative arrangement to be accounted for as revenue under the new revenue standard when the participant is a customer. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 2020 for us). The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 2020 for us) and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The adoption of this ASU is not expected to have a significant impact on our consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement~~. This ASU modifies certain disclosure requirements on fair value measurements. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 2020 for us). The adoption of this ASU is not expected to have a significant impact on our consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~~~Measurement of Credit Losses on Financial Instruments~~, which supersedes current guidance requiring recognition of credit losses when it is probable that a loss has been incurred. The ASU requires an entity to establish an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. This ASU will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. For smaller reporting companies, the effective date for this standard has been delayed and will be effective for fiscal years beginning after December 15, 2022 (which will be January 1, 2023 for us). We are evaluating the impact that the adoption of this standard will have on our consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases (Topic 842);~~ ~~in July 2018, the FASB issued ASU No. 2018-11,~~~~Leases (Topic 842): Targeted Improvements~~~~; and in December 2018, the FASB issued ASU No. 2018-20,~~~~Leases (Topic 842) – Narrow-Scope Improvements for Lessors~~, (collectively “Topic 842”). Topic 842 primarily requires lessees to recognize at the lease commencement date a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Topic 842 was effective for fiscal periods beginning after December 15, 2018 (which was January 1, 2019 for us), including interim periods within those fiscal years. Lessees and lessors must either (i) apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements or (ii) recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Applying a full retrospective transition approach is not allowed. We have elected to use the cumulative-effect transition method upon adoption.

~~Topic 842 also allows lessees and lessors to elect certain practical expedients. We elected the following practical expedients:~~

●

~~Transitional practical expedients, which must be elected as a package and applied consistently to all of our leases:~~

	o	~~We need not reassess whether any expired or existing contracts are or contain leases.~~
	o	We need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be classified as finance leases).
	o	~~We need not reassess initial direct costs for any existing leases~~.

●

Hindsight practical expedient. We elected the hindsight practical expedient in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of our right-of-use assets. We may elect this practical expedient separately or with the “practical expedient package,” and we must apply it consistently to all of our leases.

Upon adoption of Topic 842, we recognized on our consolidated balance sheet as of January 1, 2019 approximately $3.5 million of operating lease liabilities, and approximately $2.3 million of corresponding operating right-of use assets, net of tenant improvement allowances. We also show the initial recognition of the leases as a supplemental noncash financing activity on the statement of cash flows and the amortization of the noncash lease expense in operating activities. The adoption of Topic 842 did not have a material impact on our consolidated statement of operations. (See Note 14 to the consolidated financial statements included in Item 8 of this report for more information.)

~~ITEM 7A.~~~~Quantitative and Qualitative Disclosures about Market Risk~~

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

~~ITEM 8.~~~~Financial Statements and Supplementary Data~~

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

Annual Report on Form 10-K.

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

~~None~~

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

None.

~~ITEM 9A.~~~~Controls and Procedures~~

ITEM 9A. Controls and Procedures

Disclosure Controls and Procedures

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

In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this ~~report~~Annual Report on Form 10-K under the supervision, and with the participation, of our management, including our Chief Executive Officer and ~~Senior~~President (who serves as our principal executive officer) and our Vice President of Finance (who serves as our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on ~~our~~that evaluation, ~~and subject to the foregoing,~~ our Chief Executive Officer and ~~Senior~~ Vice President of Finance concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this ~~report~~Annual Report on Form 10-K in providing reasonable assurance of achieving the desired control ~~objectives.~~

objectives due primarily to a material weakness discussed below.

Management’s Report on Internal Control over Financial Reporting

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

Under the supervision and with the participation of our management, including our Chief Executive Officer and our ~~Senior~~ Vice President of Finance, we ~~conducted~~conduct an annual evaluation of the effectiveness of our internal control over financial reporting ~~as of December 31, 2019. According to~~based on the guidelines established by the 2013Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission, one~~Commission. If management identifies any material weakness in the course of that evaluation, management cannot conclude that our internal controls over financial reporting are effective. A material weakness is a deficiency, or ~~more material weaknesses renders~~ a ~~company’s~~combination of deficiencies, in internal control over financial reporting, ~~ineffective.~~such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Upon completion of the Merger in March 2021 and the resulting change in our business model and strategy, we experienced a complete turnover of our employees, including all of the members of our executive management team, which resulted in, among other things, our having insufficient accounting staff available to enable and ensure adequate segregation of duties and our lacking appropriate and complete documentation of policies and procedures critical to the accomplishment of financial reporting objectives. The accounting personnel and documentation deficiencies each increase the risk that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Based on this evaluation, ~~we have~~our Chief Executive Officer and President and our Vice President of Finance concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective and did not provide reasonable assurance of achieving the desired control objectives.

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Management’s Plan for Material Weakness in Internal Control over Financial Reporting

Management plans to implement measures designed to ensure that the deficiencies contributing to the ineffectiveness of our disclosure controls and procedures are promptly remediated, such that the controls and procedures are designed, implemented and operating effectively. The remediation actions planned include:

hiring additional accounting personnel in a number, and with experience, to allow for proper segregation of duties; and

developing and implementing, and then monitoring the effectiveness of, written policies and procedures required to achieve our financial reporting objectives in a timely manner, including policies and procedures relating to internal control over financial reporting.

We are committed to developing a strong internal control environment, and we believe the remediation efforts that we will implement will result in significant improvements in our control environment. We hired our Vice President of Finance in the second quarter of 2021 to oversee all accounting and financial reporting ~~was effective~~matters, including implementing a framework for internal controls over financial reporting, and we hired a full-time controller at the beginning of 2022. Also, during the fourth quarter of 2021, we engaged a third-party consulting firm with expertise in implementing the framework for internal controls over financial reporting, and we currently developing this framework. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as ~~of December 31, 2019.~~

necessary.

Changes in Internal Control over Financial Reporting

~~There~~

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

~~ITEM 9B.~~~~Other Information~~

ITEM 9B. Other Information

Not Applicable.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.

71
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PART III

~~ITEM 10.~~~~Directors,~~

The information required in Item 10 (Directors, Executive Officers and Corporate ~~Governance~~

Information required by this item will be set forth under the headings “PROPOSAL 1: ELECTION OF DIRECTORS,” “BOARD OF DIRECTORS AND CORPORATE GOVERNANCE,” “EXECUTIVE OFFICERS,” and “DELINQUENT SECTION 16(a) REPORTS” in our definitive proxy statement relating to our 2020 annual meeting of stockholders (the “Proxy Statement”)Governance), ~~which we expect to filed no later than 120 days after the end of our fiscal year ended December 31, 2019, and is incorporated in this report by reference.~~

~~ITEM 11.~~~~Executive Compensation~~

~~The information required by this item will be set forth under the heading “EXECUTIVE OFFICER COMPENSATION” in the Definitive Proxy Statement and is incorporated in this report by reference.~~

~~ITEM 12.~~~~Security~~Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder ~~Matters~~

The information required by this item will be set forth under the headings “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and “EQUITY COMPENSATION PLAN INFORMATION” in the Definitive Proxy Statement and is incorporated in this report by reference.

~~ITEM 13.~~~~Certain~~Matters), Item 13 (Certain Relationships and Related Transactions,,and Director ~~Independence~~

~~The information required by this item will be set forth under the headings “PROPOSAL 1: ELECTION OF DIRECTORS,” “BOARD OF DIRECTORS AND CORPORATE GOVERNANCE”~~Independence), and ~~“CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS” in the Definitive Proxy Statement and is incorporated in this report by reference.~~

~~ITEM 14.~~~~Principal~~Item 14 (Principal Accounting Fees and ~~Services~~

~~The information required by this item will be set forth under the headings “PRINCIPAL ACCOUNTING FIRM FEES” in the Definitive Proxy Statement and~~Services) is incorporated ~~in this report~~ by ~~reference.~~

reference to the Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021.

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PART IV

~~ITEM 15.~~~~Exhibits, Financial Statement Schedules~~

ITEM 15. Exhibits, Financial Statement Schedules

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

Annual Report on Form 10-K:

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

(2)Financial Statement Schedules.None

(3)Exhibits.

The following exhibits are submitted with this Annual Report on Form 10-K or, where indicated, incorporated by reference to other filings.

Exhibit	Description	Incorporated By Reference
2.1(b)	~~Filed or Furnished~~ ~~Herewith~~ Agreement and Plan of Merger and Reorganization, dated August 12, 2020, among NTN Buzztime, Inc., BIT Merger Sub, Inc. and Brooklyn Immunotherapeutics LLC	~~Incorporated By Reference From~~Annex A to the ~~Document Indicated Previously Filed by~~proxy statement/prospectus/consent solicitation statement forming a part of the ~~Registrant~~S-4 Registration Statement filed on January 20, 2021
~~3.1(a)~~ 2.2(b)	Agreement and Plan of Acquisition, dated as of July 16, 2021, by and among Brooklyn ImmunoTherapeutics, Inc., Brooklyn Acquisition Sub, Inc., Novellus LLC, Novellus, Inc., and the Sellers’ Representative.	Exhibit to Form 8-K filed on July 19, 2021
3.1	Restated Certificate of ~~Incorporation.~~Incorporation		Exhibit to Form 10-Q filed on August 14, 2013
~~3.1(b)~~ 3.2	Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split).		Exhibit to Form 8-K filed on June 17, 2016
~~3.1(c)~~ 3.3	Certificate of Decrease of the Series A Convertible Preferred ~~Stock.~~Stock		Exhibit to Form 8-K filed on April 12, 2017
~~3.1(d)~~ 3.4	Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock).		Exhibit to Form 8-K filed on June 9, 2017
~~3.2~~ 3.5	~~Bylaws (as amended and restated and further amended through December 6, 2018).~~ Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Reverse Stock Split)		Exhibit to Form 8-K filed on ~~December 7, 2018~~March 31, 2021
~~4.1~~ 3.6	~~Form of~~ Certificate of ~~Common Stock~~Amendment to Restated Certificate of ~~NTN Buzztime, Inc.~~Amendment, dated March 25, 2021 (Authorized Share Increase)	Exhibit to Form 8-K filed on March 31, 2021
3.7	Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Name Change)	Exhibit to Form 8-K filed on March 31, 2021
3.8	Certificate of Validation of Brooklyn ImmunoTherapeutics, Inc., as filed with the Secretary of State of the State of Delaware on September 3, 2021	Exhibit to Form 8-K filed on September 13, 2021
3.9	Amended and Restated Bylaws of Brooklyn ImmunoTherapeutics, Inc.	Exhibit to Form 8-K filed on September 23, 2021
4.1	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	Filed herewith
10.1	Registration Rights Agreement, dated as of April 26, 2021, betweenBrooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC	Exhibit to Form 8-K filed on April 30, 2021
10.2	Registration Rights Agreement, dated as of May 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC	Exhibit to Form 8-K filed on May 26, 2021
10.3	Registration Rights Agreement, dated as of July 16, 2021, by and among Brooklyn ImmunoTherapeutics, Inc. and the individuals and entities named therein.	Exhibit to Form 8-K filed on July 19, 2021
10.4	Amended and Restated Royalty Agreement and Distribution Agreement, dated March 22, 2021.	Exhibit to Form 8-K filed on March 31, 2021
10.5(a)	Assignment andAssumption of Employment Agreement dated March 30, 2021 among Brooklyn ImmunoTherapeutics, LLC, Brooklyn ImmunoTherapeutics, Inc. and Ronald Guido.	Exhibit to Form 8-K filedon March 31, 2021

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10.6(a)	Assignment and Assumption of Employment Agreement dated March 30, 2021 among Brooklyn ImmunoTherapeutics, LLC, Brooklyn ImmunoTherapeutics, Inc. and Lynn Sadowski Mason.	Exhibit to Form 8-K filedon March 31, 2021
10.7(a)	Executive Employment Agreement, dated as of April 1, 2021 and effective as of April 16, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Howard J. Federoff.	Exhibit to Form 8-K filedon April 7, 2021
10.8(a)	Executive Employment Agreement, dated as of June 5, 2021 and effective as of June 28, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Kevin D’Amour.	Exhibit to Form 8-K filed on June ~~17, 2016~~10, 2021
~~4.2~~ 10.9(a)	~~Description~~ Executive Employment Agreement, dated as of ~~securities~~June 16, 2021 and effective as of ~~the registrant~~June 21, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Sandra Gurrola.	X
10.1(a)*	~~Amended 2010 Performance Incentive Plan.~~		~~Exhibit to Definitive Proxy Statement on Schedule 14A filed on April 24, 2015~~
10.2(a)*	~~NTN Buzztime, Inc. 2014 Inducement Plan.~~		Exhibit to Form ~~10-Q~~8-K filedon June 21, 2021
10.10(a)	Executive Employment Agreement, dated as of July 6, 2021 and effective as of July 15, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Jay Sial.	Exhibit to Form 8-K filed on ~~November 7, 2014~~July 19, 2021
10.3* 10.11(a)	~~Limited Term~~ Executive Employment ~~and Separation~~ Agreement, ~~and General Release~~effective as of ~~All Claims dated~~ September ~~17, 2019 by and~~20, 2021, between ~~NTN Buzztime,~~Brooklyn ImmunoTherapeutics, Inc. and ~~Ram Krishnan.~~Roger Sidhu.		Exhibit to Form 8-K filed on September ~~17, 2019~~23, 2021
10.4(a)* 10.12	~~Employment~~ Form of Indemnification Agreement ~~by and between the registrant and Allen Wolff dated March 19, 2018.~~		Exhibit to Form ~~10-Q~~8-K filed on April 16, 2021
10.13	Purchase Agreement, dated as of April 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC	Exhibit to Form 8-K filed on April 30, 2021
10.14	Purchase Agreement, dated as of May 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC	Exhibit to Form 8-K filed on May ~~11, 2018~~26, 2021
10.4(b)* 10.15	~~Stock Unit~~ Exclusive License Agreement, ~~under the Amended 2010 Performance Incentive Plan~~dated as of April 26, 2021, between ~~the registrant~~Factor Bioscience Limited, Novellus Therapeutics Limited and ~~Allen Wolff dated March 19, 2018.~~Brooklyn ImmunoTherapeutics LLC		Exhibit to Form ~~10-Q~~8-K filed on ~~May 11, 2018~~April 30, 2021
10.4(c)* 10.16(a)	~~First Amendment~~ Brooklyn ImmunoTherapeutics, Inc. 2021 Inducement StockIncentive Plan	Exhibit to ~~Employment Agreement dated September 17, 2019 by and between NTN Buzztime,~~Form 8-K filedon May 26, 2021
10.17(a)	Brooklyn ImmunoTherapeutics, Inc. ~~and Allen Wolff.~~Restated 2020 Stock Incentive Plan		Exhibit to Form 8-K filed on September ~~17, 2019~~13, 2021
10.4(d)* 10.18(c)	~~2019 Interim CEO Performance Incentive Plan.~~ Lease Agreement, made as of September 28, 2015, between Biobat, Inc. and IRX Therapeutics, LLC		Exhibit to Form ~~8-K~~S-4/A filed on ~~September 17, 2019~~November 25, 2020
10.5* 10.19	~~Employment~~ First Amendment to Lease Agreement, dated September ~~17, 2019~~28, 2015	Exhibit to Form S-4/A filed on November 25, 2020
10.20(c)	Assignment and Assumption of Lease, made by and between ~~NTN Buzztime,~~IRX Therapeutics, LLC and Brooklyn, and consented to by Biobat, Inc. ~~and Sandra Gurrola.~~, as landlord		Exhibit to Form ~~8-K~~S-4/A filed on ~~September 17, 2019~~November 25, 2020
10.6(a)* 10.21	Second Amendment to Lease Agreement, dated July 24, 2019 ~~Performance Incentive Plan.~~		~~Exhibit to Definitive Proxy Statement on Schedule 14A filed on April 24, 2015~~
10.6(b)*	~~Form of Incentive Stock Option Agreement under the 2019 Performance Incentive Plan.~~		Exhibit to Form ~~S-8~~S-4/A filed on ~~June 14, 2019~~November 25, 2020
10.6(c)* 10.22(c)	~~Form of Nonstatutory Stock Option~~ Sublease Agreement, ~~under the~~dated April 18, 2019, ~~Performance Incentive Plan.~~between Brooklyn and Nezu Asia Capital Management, LLC		Exhibit to Form ~~S-8~~S-4/A filed on ~~June 14, 2019~~November 25, 2020
10.6(c)* 10.23	~~Form~~ Consent to Sublease and Agreement, dated as of ~~Nonstatutory Stock Option Agreement for Directors under the~~May 18, 2019, ~~Performance Incentive Plan.~~among 654 Madison Avenue Associates LP, Brooklyn, and Nezu Asia Capital Management, LLC		Exhibit to Form ~~S-8~~S-4/A filed on ~~June 14, 2019~~November 25, 2020
10.6(d)* 10.24	~~Form~~ Commencement Date Confirmation Agreement, made as of ~~Stock Unit Agreement under the~~June 27, 2019, ~~Performance Incentive Plan.~~among Brooklyn and Nezu Asia Capital Management, LLC.		Exhibit to Form ~~S-8 filed on June 14, 2019~~

10.6(e)*	~~Form of Restricted Stock Grant Agreement under the 2019 Performance Incentive Plan.~~		~~Exhibit to Form S-8 filed on June 14, 2019~~
10.7*	~~The NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. Fiscal Year 2019 dated March 19, 2019.~~		~~Exhibit to Form 8-K filed on March 20, 2019~~
10.8*	~~NTN Buzztime, Inc. Non-Employee Director Compensation Policy.~~		~~Exhibit to Form 10-Q filed on August 6, 2018~~
~~10.9(a)~~	~~Loan and Security Agreement by and between Avidbank and the registrant dated September 28, 2019.~~		~~Exhibit to Form 8-K filed on October 1, 2018~~
~~10.9(b)~~	~~First Amendment to the Loan and Security Agreement by and between Avidbank and the registrant dated March 12, 2020.~~		~~Exhibit to Form 8-K filed on March 17, 2020~~
~~10.10~~	~~Office lease, dated for reference purposes only July 26, 2018, by and between Burke Aston Partners, LLC and the registrant~~		~~Exhibit to Form 10-Q~~S-4/A filed on November ~~9, 2018~~25, 2020
10.14* 10.25	~~Form of Director~~Lease Agreement dated June 15, 2021 between Brooklyn ImmunoTherapeutics, Inc. and ~~Officer Indemnification Agreement~~Fairlane Columbia, LLC	Filed herewith
21.1	~~Exhibit to Form 10-K filed on March 22, 2019.~~
~~21.1~~ Subsidiaries of the Company.	Filed herewith.
~~Subsidiaries of Registrant~~23.1	X Consent of the Independent Registered Accounting Firm.	Filed herewith

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~~23.1~~ 31.1	~~Consent of Squar Milner LLP~~	X
~~24.1~~	~~Power of attorney (included on the signatures page of this report)~~	X
~~31.1~~	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X	Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X	Filed herewith
~~32.1#~~ 32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X	Furnished herewith
~~32.2#~~ 32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X	Furnished herewith
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).	X	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X

Filed herewith

*	~~Management Contract or Compensatory Plan~~
# 101.PRE	~~Furnished herewith. This certification is being furnished solely~~ Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

(a)	Indicates management contract or compensatory plan.

(b)

Pursuant to ~~accompany~~Item 601(b)(2) of Regulation S-K, portions of this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing ofexhibit have been omitted because the Company ~~whether made before~~customarily and actually treats the omitted portions as private or ~~after~~confidential, and such portions are not material and would likely cause competitive harm to the ~~date hereof, regardless~~Company if publicly disclosed. The Company will supplementally provide a copy of ~~any general incorporation language in such filing.~~an unredacted copy of this exhibit to the U.S. Securities and Exchange Commission or its staff upon request.

(c) Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

~~ITEM 16.~~~~Form 10-K Summary~~

ITEM 16. Form 10-K Summary

None.

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SIGNATURES

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

~~Dated: March 19, 2020~~

authorized.

	~~NTN BUZZTIME,~~BROOKLYN IMMUNOTHERAPEUTICS, INC.

Date: April 15, 2022	By:	/s/~~Sandra Gurrola~~ Howard J. Federoff
		~~Sandra Gurrola~~ ~~Senior Vice President of Finance~~ ~~(As Principal Financial~~Howard J. Federoff
		Chief Executive Officer and President (Principal ~~Accounting~~Executive Officer)

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

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

~~Signature~~ Name	Title	Date

/s/~~Allen Wolff~~ Howard J. Federoff	Chief Executive Officer, President and ~~Director~~	~~March 19, 2020~~
~~Allen Wolff~~	Member of the Board (Principal Executive Officer)	April 15, 2022

~~/s/Sandra Gurrola~~	~~Vice President of Finance~~	~~March 19, 2020~~
~~Sandra Gurrola~~	~~(Principal Financial Officer and Principal Accounting Officer)~~

~~/s/Gregory Thomas~~	~~Chairman of the Board of Directors~~	~~March 19, 2020~~
~~Gregory Thomas~~

~~/s/Richard Simtob~~	~~Director~~	~~March 19, 2020~~
~~Richard Simtob~~Howard J. Federoff

/s/~~Susan Miller~~ Sandra Gurrola	~~Director~~ Vice President of Finance (Principal Financial and Accounting Officer)	~~March 19, 2020~~ April 15, 2022
~~Susan Miller~~Sandra Gurrola

/s/~~Michael Gottlieb~~	~~Director~~	~~March 19, 2020~~
~~Michael Gottlieb~~ Charles Cherington	Chairman of the Board	April 15, 2022
Charles Cherington

~~NTN BUZZTIME, INC. AND SUBSIDIARIES~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~

	~~Page~~
~~Report of Independent Registered Public Accounting Firm~~	~~F-2~~

~~Consolidated Financial Statements:~~

/s/ Dennis H. Langer	Member of the Board	April 15, 2022
Dennis H. Langer

/s/ Erich Mohr	Member of the Board	April 15, 2022
Erich Mohr

/s/ Heather B. Redman	Member of the Board	April 15, 2022
Heather B. Redman

/s/ Erin S. Enright	Member of the Board	April 15, 2022
Erin S. Enright

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BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)	F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, ~~2019~~2021 and ~~2018~~2020		F-3

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, ~~2019~~2021 and ~~2018~~2020		F-4

Consolidated Statements of Shareholders’ Equity for the years ended December 31, ~~2019~~2021 and ~~2018~~2020		F-5

Consolidated Statements of Cash Flows for the years ended December 31, ~~2019~~2021 and ~~2018~~2020		F-6

Notes to the Consolidated Financial Statements		F-7

F-1

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~Shareholders~~Stockholders, Members and ~~the~~ Board of Directors of ~~NTN Buzztime,~~

Brooklyn ImmunoTherapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~NTN Buzztime,~~Brooklyn ImmunoTherapeutics, Inc. ~~and its subsidiaries~~ (the “Company”) as of December 31, ~~2019~~2021 and ~~2018,~~2020, the related consolidatedstatements of operations, stockholders’ and ~~comprehensive loss, shareholders’~~members’ equity (deficit) and cash flows for each of the two years ~~then~~in the period ended December 31, 2021, and the related notes (collectively referred to ~~the consolidated financial statements (collectively,~~as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company atas of December 31, ~~2019~~2021 and ~~2018,~~2020, and the results of its operations and its cash flows for each of the two years ~~then~~in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

~~Change in Accounting Principle~~

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Explanatory Paragraph – Going Concern ~~Uncertainty~~

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As ~~discussed~~more fully described in Note 2, ~~to the financial statements,~~ the Company has incurred a significant ~~net loss for the year ended December 31, 2019~~losses and ~~as of December 31, 2019 had a negative working capital balance. In addition, in March 2020, the Company’s agreement with~~needs to raise additional funds to meet its ~~secured creditor was amended requiring an acceleration of scheduled debt payments during the remainder of 2020.~~obligations and sustain its operations. These ~~factors~~conditions raise substantial doubt about the ~~Company’s~~Company's ability to continue as a going concern. ~~Management’s~~Management's plans in regard to these matters are also ~~are~~ described in Note 2.2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Change in Accounting Principle

As discussed in Notes 3 and 7 to the financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of the guidance in ASC Topic 842, Leases (“Topic 842”).

Basis for Opinion

These financial statements are the responsibility of the ~~Company’s~~Company's management. Our responsibility is to express an opinion on the ~~Company’s~~Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”~~("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the ~~Company’s~~Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~SQUAR MILNER~~

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Fair Value of Contingent Consideration

Description of the Matter

As discussed in Note 5 to the financial statements, contingent consideration is recorded at fair value at the transaction date and subsequently revalued each reporting period, with changes in the fair value recognized within the statement of operations. As of and for the year ended December 31, 2021, management recorded a contingent consideration liability of $19.9 million and change in fair value of $0.2 million. Management utilized a third-party valuation specialist to assist in estimating the contingent consideration fair value using the income approach, and the discounted cash flows were used to estimate the expected royalty payments to third parties.

Auditing management’s estimated fair value of contingent consideration is highly subjective and judgmental as the assumptions used in the fair value measurement, including the discount rate, the amount and timing of cash flows, and the forecast of future product sales, are all based on significant inputs not observable in the market. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures related to the fair value of contingent consideration and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

How we Addressed the Matter in Our Audit

With the assistance of our valuation specialists, our audit procedures included, amongst others:

We obtained an understanding of management’s process in regards to the methodology used and the factors considered around the inputs, sources of data used and assumptions and estimates made in determining the fair value of contingent consideration, including those over management’s review of its third-party specialist valuation report.

We tested the completeness and accuracy of the data used in the discounted cash flow model.

We evaluated the appropriateness of the discounted cash flow model.

We performed a sensitivity analysis on the discount rate used in the discounted cash flow model to determine the impact rate changes could have on the fair value.

/s/ Marcum llp

Marcum LLP

We are uncertain as to the year we began serving consecutively as the auditor of the Company’s financial statements; however, we are aware that we have ~~served as~~been the Company’s auditor consecutively since at least 2013.

~~San Diego, California~~

~~March 19, 2020~~

New York, NY

April 15, 2022

F-2

Table of Contents~~NTN BUZZTIME,~~

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND ~~SUBSIDIARIES~~

~~CONDENSED~~ SUBSDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amount)

December 31, 2019 December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents $ 3,209 $ 2,536
Restricted cash 50 50
Accounts receivable, net of allowances of $354 and $374, respectively 1,195 1,143
Site equipment to be installed 1,090 2,539
Prepaid expenses and other current assets 526 517
Total current assets 6,070 6,785
Restricted cash, long-term 150 200
Operating lease right-of-use assets 2,101 -
Fixed assets, net 2,822 4,667
Software development costs, net of accumulated amortization of $3,341 and $2,973, respectively 1,915 2,018
Deferred costs 274 424
Goodwill 696 667
Other assets 97 103
Total assets $ 14,125 $ 14,864

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 835 $ 271
Accrued compensation 588 572
Accrued expenses 490 444
Sales taxes payable 131 87
Income taxes payable 3 1
Current portion of long-term debt 2,739 1,000
Current portion of obligations under operating leases 409 -
Current portion of obligations under financing leases 21 45
Current portion of deferred revenue 460 1,267
Other current liabilities 419 337
Total current liabilities 6,095 4,024
Long-term debt - 2,729
Long-term obligations under operating leases 2,891 -
Long-term obligations under financing leases 20 41
Long-term deferred revenue 2 30
Deferred rent - 1,123
Other liabilities 26 -
Total liabilities 9,034 7,947

Shareholders’ Equity
Series A 10% cumulative convertible preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at December 31, 2019 and 2018 1 1
Common stock, $0.005 par value, 15,000 shares authorized at December 31, 2019 and 2018; 2,901 and 2,875 shares issued at December 31, 2019 and 2018, respectively 14 14
Treasury stock, at cost, 10 shares at December 31, 2019 and 2018 (456 ) (456 )
Additional paid-in capital 136,721 136,552
Accumulated deficit (131,457 ) (129,394 )
Accumulated other comprehensive income 268 200
Total shareholders’ equity 5,091 6,917
Total liabilities and shareholders’ equity $ 14,125 $ 14,864

~~See~~

	December 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash	$	16,985		$	1,630
Accounts receivable		684			0
Prepaid expenses and other current assets		1,097			102
Total current assets		18,766			1,732
Property and equipment, net		670			594
Right-of-use assets - operating leases		2,567			2,093
Goodwill		2,044			2,044
In-process research and development		6,860			6,860
Investment in minority interest		1,000			0
Security deposits and other assets		522			453
Total assets	$	32,429		$	13,776

LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,755		$	1,275
Accrued expenses		1,249			1,051
Loans payable		0			410
PPP loan, current		0			116
Operating lease liabilities, current		426			273
Other current liabilities		247			0
Total current liabilities		3,677			3,125
Contingent consideration		19,930			20,110
Operating lease liabilities, non-current		2,297			1,905
PPP loan, non-current		0			194
Other liabilities		23			23
Total liabilities		25,927			25,357

Stockholders’ and members’ equity (deficit):
Class A membership units		0			23,202
Class B membership units		0			1,400
Class C membership units		0			1,000
Common units		0			198
Series A preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at December 31, 2021; 0 shares issued and outstanding at December 31, 2020.		1			0
Common stock, $0.005 par value, 100,000 shares authorized, 52,021 issued and outstanding at December 31, 2021; 0 shares issued and outstanding at December 31, 2020.		260			0
Additional paid-in capital		165,944			0
Accumulated deficit		(159,703	)		(37,381	)
Total stockholders’ and members’ equity (deficit)		6,502			(11,581	)
Total liabilities and stockholders’ and members’ equity (deficit)	$	32,429		$	13,776

The accompanying notes toare an integral part of these consolidated financial ~~statements~~

statements.

F-3

Table of Contents~~NTN BUZZTIME,~~

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND COMPREHENSIVE LOSS~~

(In thousands, except per share amounts)

Years Ended December 31,
2019 2018

Revenue from contracts with customers
Subscription revenue $ 14,278 $ 16,031
Sales-type lease revenue Hardware revenue 2,350 3,589
Other revenue 3,178 3,715
Total revenue from contracts with customers 19,806 23,335
Operating expenses:
Direct operating costs (includes depreciation and amortization of $2,517 and $2,449, respectively) 7,483 8,070
Selling, general and administrative 13,175 14,463
Impairment of capitalized software 550 23
Impairment of goodwill - 261
Depreciation and amortization (excluding depreciation and amortization included in direct operating costs) 360 315
Total operating expenses 21,568 23,132
Operating (loss) income (1,762 ) 203
Other expense, net:
Interest expense, net (249 ) (389 )
Other expense (9 ) (137 )
Total other expense, net (258 ) (526 )
Loss before income taxes (2,020 ) (323 )
(Provision) benefit for income taxes (27 ) 64
Net loss (2,047 ) (259 )

Series A preferred stock dividend (16 ) (16 )

Net loss attributable to common shareholders $ (2,063 ) $ (275 )

Net loss per common share - basic and diluted $ (0.72 ) $ (0.10 )

Weighted average shares outstanding - basic and diluted 2,875 2,688

Comprehensive loss
Net loss $ (2,047 ) $ (259 )
Foreign currency translation adjustment 68 (145 )
Total comprehensive loss $ (1,979 ) $ (404 )

~~See~~

	Years ended December 31,
	2021			2020
Operating expenses:
Research and development	$	12,705		$	3,951
Acquired in-process research and development		80,538			0
General and administrative		14,724			3,297
Transaction costs		5,765			0
Change in fair value of contingent consideration		(180	)		19,240
Total operating expenses		113,552			26,488
Loss from operations		(113,552	)		(26,488	)
Other expenses:
Loss on sale of NTN assets		(9,648	)		0
Other income (expense), net		899			(43	)
Total other expenses, net		(8,749	)		(43	)
Loss before income taxes		(122,301	)		(26,531	)
Provision for income taxes		(5	)		0
Net loss		(122,306	)		(26,531	)
Series A preferred stock dividend		(16	)		0
Net loss attributable to common stockholders	$	(122,322	)	$	(26,531	)

Net loss per common share - basic and diluted	$	(2.82	)	$	(1.51	)
Weighted average shares outstanding - basic and diluted		43,306			17,588

The accompanying notes toare an integral part of these consolidated financial ~~statements~~

statements.

F-4

Table of Contents~~NTN BUZZTIME,~~

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS’~~ STOCKHOLDERS’ AND MEMBERS’ EQUITY

(DEFICIT)

For the years ended December 31, ~~2019~~2021 and ~~2018~~

2020

(inIn thousands)

Series A Cumulative Convertible Preferred Stock Common Stock Treasury Additional Paid-in Accumulated Accumulated Other Comprehensive
Shares Amount Shares Amount Stock Capital Deficit Income Total

Balances at January 1, 2018 156 $ 1 2,521 $ 13 $ (456 ) $ 134,752 $ (129,119 ) $ 345 $ 5,536

Foreign currency translation
adjustment - - - - - - - (145 ) (145 )
Net loss - - - - - - (259 ) - (259 )
Net proceeds from issuance of common stock related to registered direct offering - - 345 1 - 1,374 - - 1,375
Issuance of common stock upon vesting of restricted stock units - - 9 - - (17 ) - - (17 )
Dividend paid to Series A preferred stockholders - - - - - - (16 ) - (16 )
Non-cash stock based compensation - - - - - 443 - - 443

Balances at December 31, 2018 156 $ 1 2,875 $ 14 $ (456 ) $ 136,552 $ (129,394 ) $ 200 $ 6,917

Foreign currency translation adjustment - - - - - - - 68 68
Net loss - - - - - - (2,047 ) - (2,047 )
Issuance of common stock upon vesting of restricted stock units - - 26 - - (37 ) - - (37 )
Dividend paid to Series A preferred stockholders - - - - - - (16 ) - (16 )
Non-cash stock based compensation - - - - - 206 - - 206

Balances at December 31, 2019 156 $ 1 2,901 $ 14 $ (456 ) $ 136,721 $ (131,457 ) $ 268 $ 5,091

~~See~~

	Membership Equity												Common Stock					Series A Preferred Stock				Additional Paid-in			Accumulated
	Class A			Class B			Class C			Common			Shares			Amount		Shares		Amount		Capital			Deficit			Total

Balances at January 1, 2021	$	23,202		$	1,400		$	1,000		$	198			0		$	0		0	$	0	$	0		$	(37,381	)	$	(11,581	)
Brooklyn rights offerings membership units		10,500			0			0			0			-			0		-		0		0			0			10,500
Elimination of Brooklyn’s historical members’ equity		(33,702	)		(1,400	)		(1,000	)		(198	)		-			0		-		0		36,300			0			0
Common stock to be retained by NTN stockholders		0			0			0			0			1,514			8		0		0		8,170			0			8,178
Issuance of Series A preferred stock retained by NTN stockholders		0			0			0			0			0			0		156		1		(1	)		0			0
Issuance of common stock to Brooklyn members		0			0			0			0			38,924			195		0		0		(195	)		0			0
Issuance of common stock to Financial Advisor upon consummation of merger		0			0			0			0			1,068			5		0		0		5,760			0			5,765
Issuance of common stock from the exercise of stock options		0			0			0			0			1			0		0		0		10			0			10
Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net		0			0			0			0			3,552			17		0		0		52,008			0			52,025
Issuance of common stock in connection with the acquisition of Novellus, Inc.		0			0			0			0			7,022			35		0		0		58,649			0			58,684
Cash dividends to Series A preferred stockholders		0			0			0			0			0			0		0		0		0			(8	)		(8	)
Issuance of common stock in lieu of cash dividend to Series A preferred stockholders		0			0			0			0			0			0		0		0		8			(8	)		0
Forfeiture of unvested restricted stock		0			0			0			0			(60	)		0		0		0		0			0			0
Stock based compensation		0			0			0			0			-			0		-		0		5,235			0			5,235
Net loss		0			0			0			0			-			0		-		0		0			(122,306	)		(122,306	)
Balances at December 31, 2021	$	0		$	0		$	0		$	0			52,021		$	260		156	$	1	$	165,944		$	(159,703	)	$	6,502

	Membership Equity								Accumulated
	Class A		Class B		Class C		Common		Deficit			Total

Balances at January 1, 2020	$	18,178	$	1,400	$	1,000	$	107	$	(10,942	)	$	9,743
Implementation of new accounting principle		0		0		0		0		92			92
Stock based compensation		0		0		0		91		0			91
Sale of members’ equity		5,024		0		0		0		0			5,024
Net loss		0		0		0		0		(26,531	)		(26,531	)
Balances at December 31, 2020	$	23,202	$	1,400	$	1,000	$	198	$	(37,381	)	$	(11,581	)

The accompanying notes toare an integral part of these consolidated financial ~~statements~~

statements.

F-5

Table of Contents~~NTN BUZZTIME,~~

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the years ended December 31,
2019 2018
Cash flows provided by operating activities:
Net loss $ (2,047 ) $ (259 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 2,877 2,764
Provision for doubtful accounts 196 78
Transfer of fixed assets to sales-type lease 10 23
Amortization of operating lease right-of-use-assets 291 -
Stock-based compensation 206 443
Amortization of debt issuance costs 9 59
Loss from the sale or disposition of assets 689 242
Impairmentof capitalized software 550 23
Impairment of goodwill - 261
Changes in assets and liabilities:
Accounts receivable (248 ) (507 )
Site equipment to be installed 337 431
Operating lease liabilities (215 )
Prepaid expenses and other assets (5 ) 29
Accounts payable and accrued liabilities 669 (186 )
Income taxes payable 1 (10 )
Deferred costs 151 350
Deferred revenue (835 ) (2,227 )
Deferred rent - (190 )
Other liabilities 108 41
Net cash provided by operating activities 2,744 1,365
Cash flows used in investing activities:
Capital expenditures (128 ) (648 )
Capitalized software development expenditures (966 ) (964 )
Proceeds from sale of assets 29 33
Net cash used in investing activities (1,065 ) (1,579 )
Cash flows used in financing activities:
Net proceeds from issuance of common stock related to registered direct offering - 1,375
Proceeds from long-term debt - 4,000
Payments on long-term debt (1,000 ) (5,373 )
Debt issuance costs on long-term debt - (23 )
Principal payments on finance leases (45 ) (249 )
Tax withholding related to net share settlement of vested restricted stock units (37 ) (17 )
Dividends paid to Series A preferred shareholders (16 ) (16 )
Net cash used in financing activities (1,098 ) (303 )
Effect of exchange rate on cash and cash equivalents 42 (75 )
Net increase (decrease) in cash, cash equivalents and restricted cash 623 (592 )
Cash, cash equivalents and restricted cash at beginning of year 2,786 3,378
Cash, cash equivalents and restricted cash at end of year $ 3,409 $ 2,786

Supplemental disclosures of cash flow information:
Cash paid during the period for:

Interest $ 246 $ 336

Income taxes $ 26 $ 17
Supplemental disclosure of non-cash investing and financing activities:

Site equipment transferred to fixed assets $ 521 $ 1,865

Capitalized tenant improvements paid by landlord $ - $ 1,131

Initial measurement of operating lease right-of-use assets and liabilities $ 3,458 $ -

Assets acquired under operating lease $ 57 $ -

Assets acquired under financing lease $ - $ 5

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents $ 3,209 $ 2,536
Restricted cash 50 50
Restricted cash, long-term 150 200
Total cash, cash equivalents and restricted cash at end of period $ 3,409 $ 2,786

~~See~~

	For years ended December 31,
	2021			2020
Cash flows used in operating activities:
Net loss	$	(122,306	)	$	(26,531	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		117			98
Stock-based compensation		5,235			91
Amortization of right-to-use asset		342			0
Transaction costs - shares to Financial Advisor		5,765			0
Loss on sale of NTN assets		9,648			0
Loss on disposal of fixed assets		13			0
Gain on forgiveness of PPP loan		(310	)		0
Acquired in-process research and development		80,538			0
Change in fair value of contingent consideration		(180	)		19,240
Changes in operating assets and liabilities:
Account receivable		(659	)		0
Prepaid expenses and other current assets		(850	)		(16	)
Security deposits and other non-current assets		(34	)		(90	)
Accounts payable and accrued expenses		(485	)		(930	)
Operating lease liability		(322	)		12
Other liabilities		0			25
Net cash used in operating activities		(23,488	)		(8,101	)
Cash flows used in investing activities:
Purchase of property and equipment		(154	)		(39	)
Purchase of NTN, net of cash acquired		147			0
Purchase of Novellus, net of common stock issued and cash acquired		(22,854	)		0
Proceeds from the sale of NTN assets, net of cash disposed		119			0
Net cash used in investing activities		(22,742	)		(39	)
Cash flows provided by financing activities:
Net proceeds of common stock issued to Lincoln Park		52,025			0
Proceeds from sale of members’ equity		10,500			4,359
Proceeds from the exercise of stock options		10			0
Proceeds from loans payable		0			310
Repayment of NTN’s PPP loan		(532	)		0
Principal payments on notes payable		(410	)		0
Dividends paid to Series A preferred shareholders		(8	)		0
Net cash provided by financing activities		61,585			4,669
Net increase (decrease) in cash and cash equivalents		15,355			(3,471	)
Cash and cash equivalents at beginning of period		1,630			5,101
Cash and cash equivalents at end of period	$	16,985		$	1,630

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	225		$	0
Income taxes	$	1		$	0

Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock for Series A preferred stock dividend	$	8		$	0
Issuance of common stock for business combination	$	8,178		$	0
Issuance of common Stock for Novellus acquisition	$	58,684		$	0
Forfeiture of unvested restricted stock	$	0		$	0
Preferred shares issued in connection with reverse merger	$	1		$	0
Initial measurement of ROU assets, net of tenant improvement allowance	$	816		$	0
Initial measurement of operating lease liabilities	$	866		$	0
Investor deposits for sale of members’ equity	$	0		$	666
Right of use assets obtained in exchange for new operating lease liabilities	$	0		$	2,093

The accompanying notes toare an integral part of these consolidated financial ~~statements~~

~~F-6~~

statements.

F-6

Table of Contents~~NTN BUZZTIME,~~

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO ~~THE~~ CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, ~~2019~~2021 and ~~2018~~

1. 2020

1)	Organization and Description of Business Operations

Brooklyn ImmunoTherapeutics Inc., a Delaware corporation (“Brooklyn” or the “Company”), together with its subsidiaries including Brooklyn ImmunoTherapeutics LLC (“Brooklyn LLC”), Novellus, Inc. (“Novellus”) and Novellus Therapeutics, Ltd. (“Novellus, Ltd.”), is a clinical stage biopharmaceutical company focused on exploring the role that cytokine, gene editing and cell therapy can have in treating patients with cancer, blood disorders and monogenic diseases. As used herein, the “Company” refers collectively to Brooklyn and its subsidiaries.

On August 12, 2020, Brooklyn (then known as “NTN Buzztime, Inc.”), Brooklyn LLC and BIT Merger Sub, Inc., a wholly owned subsidiary of ~~Company~~

~~Description~~Brooklyn (the “Merger Sub”), entered into an agreement and plan of ~~Business~~

~~NTN Buzztime, Inc.~~merger and reorganization (the ~~“Company”~~“Merger Agreement”) ~~was incorporated in Delaware in 1984~~pursuant to which, among other matters, Merger Sub merged with and into Brooklyn LLC, with Brooklyn LLC continuing as ~~Alroy Industries~~a wholly owned subsidiary of Brooklyn and ~~changed its corporate name to NTN Communications, Inc. in 1985.~~as the surviving company of the merger (the “Merger”). The ~~Company~~Merger closed on March 25, 2021. After the Merger, Brooklyn changed its name ~~to NTN~~from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.” The Merger was accounted for as a reverse acquisition, in ~~2005~~which Brooklyn LLC was deemed the acquiring company for accounting purposes.

On March 26, 2021, Brooklyn sold (the “Disposition”) its rights, title and interest in and to ~~better reflect~~ the ~~growing role~~assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC (“eGames.com”) in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between Brooklyn and eGames.com (the “Asset Purchase Agreement”). (See Note 4.)

On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc. entered into an agreement and plan of acquisition (the “Acquisition Agreement”) with (a) Novellus LLC, (b) Novellus (the sole equity holder of Novellus, Ltd. and, prior to the closing under the Acquisition Agreement, a wholly owned subsidiary of Novellus, LLC), and (c) a seller representative (the “Acquisition”), pursuant to which Brooklyn acquired Novellus and its subsidiary, Novellus, Ltd. As part of the ~~Buzztime consumer brand.~~

Acquisition, Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc. (“NoveCite”), a corporation focused on developing an allogeneic mesenchymal stem cell product for patients with acute respiratory distress syndrome, including from COVID-19. (See Note 4.)

2)	Liquidity and Capital Resources

The Company delivers interactive entertainment and innovative technology to its partners in a wide range of verticals – from bars and restaurants to casinos and senior living centers. By enhancing the overall guest experience, the Company believes it helps its hospitality partners acquire, engage, and retain patrons.

Through social fun and friendly competition, the Company’s platform creates bonds between our hospitality partners and their patrons, and between patrons themselves. The Company believes this unique experience increases dwell time, revenue, and repeat business for venues –has incurred significant operating losses and has ~~also created~~an accumulated deficit as a ~~large~~result of ongoing efforts to develop product candidates, including conducting clinical trials and ~~engaged audience which it connects with through its in-venue TV network. Over 1 million hours of trivia, card, sports~~providing general and ~~arcade games are played on our network each month.~~

~~The Company generates revenue by charging subscription fees to partners~~administrative support for access to its 24/7 trivia network, by charging equipment fees to select partner venues for use of tablets and other equipment, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling digital-out-of-home (DOOH) advertising direct to advertisers and on national ad exchanges, by licensing its entertainment and trivia content to other parties, and by providing professional services such as custom game design or development of new platforms on its existing tablet form factor. Up until February 1, 2020, the Company also generated revenue by hosting live trivia events (see Note 18).

these operations. As of December 31, ~~2018, 2,639 venues subscribed~~2021, the Company had a cash balance of approximately $16,985,000 and an accumulated deficit of approximately $159,703,000. For the year ended December 31, 2021, the Company incurred a net loss of $122,306,000 and the Company used cash in operating activities of $23,488,000 (inclusive of $80,538,000 IPR&D expense related to the ~~Company’s interactive entertainment network~~Acquisition, $9,648,000 related to the loss on sale of assets in the Disposition and ~~approximately 56%~~$180,000 related to the change in fair value of ~~its network subscriber venues were affiliated~~contingent consideration).

On April 26, 2021, Brooklyn entered into a common stock purchase agreement (the “First Purchase Agreement”) with ~~national and regional restaurant brands.~~Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provided that Brooklyn could offer to Lincoln Park up to an aggregate of $20,000,000 of common stock over a 36-month period commencing after May 10, 2021, the date that a registration statement covering the resale of shares of common stock issued under the First Purchase Agreement was declared effective by the SEC. As of December 31, ~~2019, those numbers declined~~2021, Brooklyn had issued and sold an aggregate of approximately 1,128,000 shares of common stock to ~~1,440 venues and to approximately 26%, in each case, primarily due~~Lincoln Park pursuant to the ~~termination~~First Purchase Agreement, resulting in gross proceeds of $20,000,000.

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On May 26, 2021, Brooklyn entered into a second common stock purchase agreement (the “Second Purchase Agreement”) with Lincoln Park, which provides that Brooklyn may offer to Lincoln Park up to an aggregate of $40,000,000 of common stock over a 36-month period commencing after June 4, 2021, the date that a registration statement covering the resale of shares of common stock issued under the Second Purchase Agreement was declared effective by the SEC. As of December 31, 2021, Brooklyn had issued and sold an aggregate of approximately 2,424,000 shares of common stock to Lincoln Park pursuant to the Second Purchase Agreement, resulting in gross proceeds of approximately $34,106,000.

On July 16, 2021, Brooklyn used approximately $22,854,000 of cash, net of cash acquired, as part of the ~~Company’s relationship with Buffalo Wild Wings corporate-owned restaurants and most~~purchase price of ~~its franchisees~~the Acquisition. Brooklyn issued common stock as the remaining portion of the purchase price of the Acquisition.

On March 9, 2022, we consummated a private placement of equity resulting in ~~November 2019.~~

~~Basis~~net proceeds of ~~Accounting Presentation~~

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

~~Reclassifications~~

Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

2.~~Going Concern Uncertainty~~

approximately $11 million. See Note 17 for details.

In connection with preparing its financial statements as of and for the year ended December 31, ~~2019,~~2021, the Company’s management ~~evaluated whether~~concluded that there ~~are conditions or events, considered in the aggregate, that are known and reasonably knowable that would raise~~is substantial doubt ~~about~~regarding the Company’s ability to continue as a going concern because it does not expect to have sufficient cash or working capital resources to fund operations for the twelve-month period subsequent to the issuance date of these financial statements. The Company will need to raise additional capital, which could be through ~~twelve months after~~ the ~~date that such financial statements are issued. During~~remaining availability under the ~~year ended December 31, 2019,~~Second Purchase Agreement (to the extent the Company ~~incurred a net loss of $2,047,000, and as a result of the~~is permitted to use such agreement), public or private equity offerings, debt reclassification described below, the Company’s current liabilities exceeded its current assets at December 31, 2019 by $25,000. As of December 31, 2019, the Company had $3,209,000 of unrestricted cash and total debt outstanding of $2,750,000, which was the outstanding principal balance of the Company’s term loan with Avidbank. Under the terms of the amendment to the Company’s loan and security agreement that the Company entered into with Avidbank on March 12, 2020, during 2020 the Company will be required to make monthly payments that, if made in accordance with their terms, will result in the Company paying off the term loan by December 31, 2020. Based on this amendment, $1,750,000 of debt outstanding has been reclassified as a current liability in the accompanying balance sheet at December 31, 2019. As a result of the foregoing, and taking into account the Company’s current financial condition, the Company’s management concluded there is substantial doubt about the Company’s ability to continue as a going concern through March 19, 2021.

~~Since January 1, 2020, the Company has reduced headcount by approximately $2.2 million in annualized salaries and implemented measures to preserve capital.~~financings, corporate collaborations or other means. The Company may ~~implement additional measures designed~~also seek governmental grants to ~~reduce operating expenses and/or preserve capital.~~support our clinical trials and preclinical trials.. The Company ~~needs~~currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital to meet its debt service obligations to Avidbank and to fund its working capital needs. The Company continues to explore and evaluate opportunities to raise capital, including through equity financings, alternative sources of debt,when needed, on acceptable terms, or strategic transactions, which may include selling a portion or all of the Company’s assets. However, none of these potential sources of capital are currently assured, and the actions to reduce operating expenses the Company has implemented may not sufficiently mitigate the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern through March 19, 2021.See PART I — ITEM 1A, Risk Factors.

In addition, any actions the Company took or may take to reduce planned capital expenses or operational cash uses may not cover shortfalls in available funds and may negatively impact the Company’s ability to effectively manage, operate and grow its business, to introduce new offerings to its customers, to increase market awareness and encourage the adoption of the Buzztime brand and the Buzztime network, to retain customers, and to generate revenue. See PART I — ITEM 1A, Risk Factors.

at all.

3)	Basis of Accounting Presentation and Summary of Significant Accounting Policies

Basis of ~~Significant~~ Accounting ~~Policies and Estimates~~

~~Consolidation~~—Presentation

The ~~Company’s~~ consolidated financial statements have been prepared in ~~accordance~~conformity with U.S. generally accepted accounting principles ~~generally accepted~~(“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the ~~United States (GAAP)~~Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). All significant intercompany balances and transactions have been eliminated in consolidation.

As described above, the Merger closed on March 25, 2021. The Merger was accounted for as a reverse acquisition, in which Brooklyn LLC was deemed the acquiring company for accounting purposes. Brooklyn LLC’s historical financial statements have replaced Brooklyn’s historical financial statements with respect to periods prior to the completion of the Merger (when Brooklyn operated under the name “NTN Buzztime, Inc.”). The Company retrospectively adjusted the weighted average shares used in determining loss per common share to reflect the conversion of the outstanding Class A units, Class B units, Class C units, and common units of Brooklyn LLC that converted into shares of Brooklyn’s common stock upon the Merger and to reflect the effect of a 2-to-1 reverse stock split of Brooklyn’s common stock that occurred immediately prior to the Merger.

Also as described above, the Acquisition closed on July 16, 2021. The Acquisition was accounted for as an asset acquisition, and substantially all of the value was attributed to in-process research and development (“IPR&D”), with the exception of the cash paid for the investment in NoveCite, which is being accounted for as an investment in equity securities. The IPR&D had no alternative future uses and no separate economic value from its originally intended purpose and was therefore expensed in the period the cost was incurred.

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Summary of Significant Accounting Policies

Use of Estimates~~—Preparing the Company’s~~

The preparation of consolidated financial statements in conformity with GAAP requires itmanagement to make estimates and ~~judgments~~assumptions that affect (a) the reported amounts of assets ~~liabilities, revenues~~ and ~~expenses, and related~~liabilities; (b) disclosure of contingent assets and ~~liabilities. On an ongoing basis,~~liabilities at the ~~Company evaluates its~~date of the consolidated financial statements; (c) the reported amounts of revenues and expenses during the reporting period and (d) the reported amount of the fair value of assets acquired in connection with business combinations. Actual results could differ from those estimates. The Company’s significant estimates ~~including those related to deferred costs~~ and ~~revenues; depreciation~~assumptions include the recoverability and useful lives of ~~fixed assets; allowance for doubtful accounts; site equipment to be installed; stock-based compensation assumptions; impairment of fixed assets, software development costs, intangible~~long-lived assets and ~~goodwill; contingencies, including~~ the reserve for sales tax inquiries; and the provision for income taxes, including the valuation allowance. The Company bases its estimates on a combination of historical experience and various other assumptions that it believes are reasonable under the circumstances. Actual results may differ materially from these estimates.

contingent consideration liability.

Cash and Cash Equivalents—

The Company ~~considers all~~classifies highly liquid ~~investment instruments~~investments with ~~original maturities~~a remaining contractual maturity at date of purchase of three months or less ~~or any investment redeemable without penalty or loss of interest, to be~~as cash equivalents.

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~~Capital Resources~~— In September 2018, the Company entered into a loan and security agreement with Avidbank (the “Original LSA”) that provides for a $4,000,000 48-month term loan, all of which the Company used to pay-off the $4,050,000 of principal borrowed from its then-existing lender.. As of December 31, 2019, $2,750,000 was outstanding under the term loan. The Company recorded debt issuance costs of $23,000, which includes a $20,000 facility fee. The debt issuance costs are being amortized to interest expense using the effective interest rate method over the life of the loan. The unamortized balance of the debt issuance costshad 0 cash equivalents as of December 31, ~~2019 was $11,000~~2021 or 2020.

Property and isEquipment

Property and equipment are recorded ~~as a reduction of long-term debt. The Company has no more borrowing availability under this credit facility.~~

~~On March 12, 2020, the Company entered into an amendment to its loan~~at cost and security agreement with Avidbank. In connection with entering into the amendment, the Company made a $433,000 payment on its term loan, which includes the $83,333 monthly principal payment plus accrued interest for March 2020 and a $350,000 principal prepayment, thereby reducing the outstanding principal balance of its term loan to $2.0 million. Under the terms of the amendment, the Company’s financial covenants were changed, the maturity date of its term loan was changed from September 28, 2022 to December 31, 2020 (and as a result, the Company classified the total outstanding principal balance as a current liability on its balance sheet as of December 31, 2019), and commencing on April 30, 2020, the Company must make principal plus accrued interest payments on the last day of each month, such that its term loan will be repaid by December 31, 2020. The principal payment the Company must make each month will be $125,000 for each of April, May and June, $300,000 for each of July, August, September, October and November, and $125,000 for December.

~~Assessments of Functional Currencies~~—The United States dollar is the Company’s functional currency, except for its operations in Canada where the functional currency is the Canadian dollar. The financial position and results of operations of the Canadian subsidiary is measuredare depreciated over their estimated useful lives using the ~~foreign subsidiary’s local currency as~~straight-line method. Laboratory and manufacturing equipment are depreciated over an estimated useful life of seven years. Leasehold improvements are depreciated over the ~~functional currency. In accordance with Accounting Standards Codification (“ASC”) No. 830,~~~~Foreign Currency Matters~~~~, revenues~~shorter of their estimated useful life, or the lease term. Computer equipment are depreciated over an estimated useful life of three years. Upon retirement or other disposition of these assets, the cost and ~~expenses~~related accumulated depreciation of ~~its foreign subsidiary have been translated into U.S. dollars at weighted average exchange rates prevailing during~~these assets are removed from the ~~period. Assets~~accounts and ~~liabilities have been translated at~~ the ~~rates of exchange on the balance sheet date. The~~ resulting ~~translation~~ gain ~~and loss adjustments~~or losses are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are includedreflected in the results of ~~operations as incurred. For the years ended December 31, 2019~~operations. Expenditures for maintenance and ~~2018, the Company recorded $48,000 of foreign currency transaction losses~~repairs are charged to operations. Renewals and $41,000 in foreign currency transaction gains, respectively, due to settlements of intercompany transactions, re-measurement of intercompany balances with its Canadian subsidiary and other non-functional currency denominated transactions, whichbetterments are included in other income in the accompanying statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect the Company’s results of operations and period-to-period comparisons of its operating results. The Company does not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2019, the net impact to the Company’s results of operations from the effect of exchange rate fluctuations was immaterial.

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

~~Site Equipment to be Installed~~— Site equipment to be installed consists of fixed assets related to the Company’s tablet platform that have not yet been placed in service and are stated at cost. These assets remain in site equipment to be installed until it is installed at the Company’s customer sites. For tablet platform customers that are under sales-type lease arrangements, the cost of the equipment is recognized in direct costs upon installation. For all other tablet platform customers, the cost of the equipment is reclassified to fixed assets upon installation and depreciated over its estimated useful life. The Company evaluates the recoverability of site equipment to be installed for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future net cash flows expected to be generated. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

Due to the termination of our relationship with Buffalo Wild Wing corporate-owned restaurants and most of its franchisees in November 2019, Buffalo Wild Wings offered the Company the opportunity to take back title to all of the tablets, cases and charging trays located at sites that terminated service with the Company at zero cost to the Company other than for shipping and related charges of approximately $175,000. As a result, the Company received approximately 45,000 tablets and cases and approximately 4,500 charging trays during the fourth quarter of 2019. Many of these items are the Company’s newer technology tablets and cases that can be redeployed to its customer sites or used in other possible partnerships. Although the Company has not yet completed its assessment of the items it received to determine how many the Company will ultimately retain, the Company determined that it would no longer have a future use for certain older tablets and cases it had on hand. Accordingly, during the quarter ended December 31, 2019, the Company recognized a loss of approximately $580,000 for the disposition of those older tablets and related cases recorded in site equipment to be installed for which it did not expect to generate future cash flows. Total loss for the disposition of site equipment for the year ended December 31, 2019 was approximately $591,000. There were no indications of impairment for the year ended December 31, 2018.

~~Fixed Assets~~— Fixed assets are recorded at cost. Equipment under finance leases is recorded at the present value of future minimum lease payments. The Company evaluates the recoverability of our fixed assets for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Due to the tablets, cases and charging trays the Company received as a result of the termination of the relationship with Buffalo Wild Wing corporate-owned restaurants and most of its franchisees in November 2019 discussed above, the Company determined that it would no longer have a future use for certain older tablets and cases it had on hand. Accordingly, during the quarter ended December 31, 2019, the Company recognized a loss of approximately $96,000 primarily for the disposition of those older tablets and the related cases recorded in fixed assets for which the Company did not expect to generate future cash flows. Total loss for the disposition of fixed assets for the year ended December 31, 2019 was approximately $127,000. There were no indications of impairment for the year ended December 31, 2018.

The Company incurs a relatively significant level of depreciation expense in relation to its operating income. The amount of depreciation expense in any fiscal year is largely related to the equipment located at the Company’s customers’ sites that are not under sales-type lease arrangements. Such equipment includes the Classic Playmaker, tablet, other associated electronics and the computers located at customer’s sites (collectively, “Site Equipment”). The components within Site Equipment are depreciated over one to three years based on the shorter of the contractual finance lease period or the estimated useful life, which considers anticipated technology changes. Machinery and equipment are depreciated over three to five years, furniture and fixtures is depreciated over five to seven years and the vehicle is depreciated over five years. If the Company’s fixed assets turn out to have longer lives, on average, than estimated, then its depreciation expense would be significantly reduced in those future periods. Conversely, if the fixed assets turn out to have shorter lives, on average, than estimated, then its depreciation expense would be significantly increased in those future periods. As of December 31, 2019, the Company determined there were no changes to the estimated useful lives for any of its assets.

capitalized.

Goodwill—

Goodwill represents the excess of ~~costs~~the purchase price over the fair value of ~~assets of businesses acquired (reporting unit). Goodwill and intangible~~identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018 (the “IRX Acquisition”), which was accounted for as a ~~purchase combination determined to have an indefinite useful life are~~business combination. Goodwill is not amortized but ~~instead are assessed~~is tested for impairment annually, or ~~at interim periods,~~if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Because management evaluates the Company as a single reporting unit, goodwill is tested for impairment ~~based on~~at the entity level by first performing a qualitative ~~factors~~assessment to determine whether ~~the existence of events or circumstances leads to a determination that~~ it is more likely than not that the fair value of the ~~reporting unit~~entity is less than its carrying ~~amount.~~value. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. If ~~after assessing~~ the ~~totality~~entity does not pass the qualitative assessment, then the entity’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of ~~events~~the entity exceeds its fair value.

IPR&D

IPR&D assets represent the fair value assigned to technologies that were acquired in connection with the IRX Acquisition, which have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite lived until the completion or ~~circumstances~~abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company ~~determines~~becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives beginning at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.

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Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. An impairment exists when the carrying value of the long-lived asset is not recoverable and exceeds its fair value. For the years ended December 31, 2021 and 2020, there were no qualitative factors that indicated it iswas more likely than not that the fair value of the ~~reporting unit is less than its carrying amount, then the Company must perform the one-step impairment test outlined in ASC No. 350,~~~~Intangibles – Goodwill and Other.~~

~~The Company has goodwill resulting from the excess of costs over the fair value of~~long-lived assets it acquired in 2003 related to its Canadian business (the “Reporting Unit”). The Company performed the quantitative impairment test of its goodwill in each of the years ended December 31, 2019 and 2018, as the Company determined that because of declines in revenue of the Reporting Unit, the decline in the Company’s stock price and other general market conditions, it was more likely than not that there were indications of impairment. The Company used three methods of determining the fair value of the reporting unit: the public company market method, the transaction market method and the income method. Each method was equally weighted to calculate the total estimated fair value, and then the Company compared this fair value to the carrying value of the reporting unit. The impairment test performed during 2018resulted in the carrying value exceeding the fair value. Accordingly, the Company recognized a goodwill impairment loss of approximately $261,000 during the year ended December 31, 2018. The impairment test performed during 2019 resulted in the fair value exceedingexceeded the carrying value. ~~Therefore, the~~

Research and Development

The Company ~~did not record any goodwill impairment~~expenses its research and development costs as incurred. Research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments made for the ~~year ended December 31, 2019.~~

~~Revenue Recognition~~—~~Revenue Recognition~~~~— The Company recognizes revenue~~licensing of technology are expensed as research and development in ~~accordance with ASC No. 606,~~~~Revenue from Contracts with Customers~~~~. ASC No. 606 provides a five-step analysis in determining when and how revenue is recognized:~~

	1.	~~Identify the contract(s) with customers~~
	2.	~~Identify the performance obligations~~
	3.	~~Determine the transaction price~~
	4.	~~Allocate the transaction price to the performance obligations~~
	5.	~~Recognize revenue when the performance obligations have been satisfied~~

~~ASC No. 606 requires revenue recognition to depict~~ the ~~transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services.~~

The Company generates revenue by charging subscription fees to partners for access to its 24/7 trivia network, charging equipment fees to certain customers for use of tablets and other equipment, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling DOOH advertising direct to advertisers and on national ad exchanges, by licensing its entertainment and trivia content to other entities, and by providing professional services such as custom game design or development of new platforms on its existing tablet form factor. Up until February 1, 2020, the Company also generated revenue from hosting live trivia events (see Note 18).

In general, when multiple performance obligations are present in a customer contract, the transaction price is allocated to the individual performance obligation based on the relative stand-alone selling prices, and the revenue is recognized when or as each performance obligation has been satisfied. Discounts are treated as a reduction to the overall transaction price and allocated to the performance obligations based on the relative stand-alone selling prices. All revenues are recognized net of sales tax collected from the customer.

~~Revenue Streams~~

~~The Company disaggregates revenue by material revenue stream as follows:~~

Years ended December 31,
2019 2018
$ % of Total
Revenue $ % of Total
Revenue Change $ %
Change
Subscription revenue 14,278,000 72.1 % 16,031,000 68.7 % (1,753,000 ) (10.9 )%
Hardware revenue 2,350,000 11.9 % 3,589,000 15.4 % (1,239,000 ) (34.5 )%
Other revenue 3,178,000 16.0 % 3,715,000 15.9 % (537,000 ) (14.5 )%
Total 19,806,000 100.0 % 23,335,000 100.0 % (3,529,000 ) (15.1 )%

~~The following describes how the Company recognizes revenue under ASC No. 606.~~

~~Subscription Revenue~~ - The Company recognizes the recurring subscription fees it receives for its services, which includes the Company’s content, over time as customers receive and consume the benefits of such services, the Company’s equipment to access the Company’s content and the installation of the equipment. In general, customers pay for the subscription services during the monthperiod in which they ~~receive~~are incurred if the ~~services. Due~~technology is not expected to have any alternative future uses other than the ~~timing of providing the services~~specific research and ~~receiving payment~~development project for ~~the services, the Company does not record any unbilled contract asset. Occasionally,~~which it was intended. IPR&D that is acquired through an asset acquisition (as opposed to a ~~customer will prepay up~~business combination) and has no alternative future uses and, therefore, no separate economic values, is expensed to ~~one year of services, in which case, the Company will record deferred revenue on the balance sheet related to such prepayment~~research and ~~will recognize the revenue over~~development costs at the time the ~~customer receives the Company’s services. Revenue from installation services is also recorded as deferred revenue~~costs are incurred.

The major components of research and ~~recognized over the longer~~development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, expensed IPR&D, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of the contract term and the expected term of the customer relationship using the straight-line method. The Company has certain contingent performance obligations with respect to repairing or replacing equipment and will recognize any revenuevarious overhead costs related to ~~the performance of such obligations at the point in time the Company performs them.~~

Costs associated with installing the equipment are considered direct costs. Costs associated with sales commissions are considered incremental costs for obtaining the contract because such costs would not have been incurred without obtaining the contract. The Company expects to recover both costs through future fees it collects and both costs are recorded in deferred costs on the balance sheet and amortized on a straight-line basis. For installation costs that are of an amount that is less than or equal to the deferred installation revenue for the related contract, the amortization period approximates the longer of the contract term and the expected term of the customer relationship. For any excess costs that exceed the deferred revenue, the amortization period of the excess cost is the initial term of the contract, which is generally one to two years because the Company can still recover that excess cost in the initial term of the contract. The Company amortizes commissions over the longer of the contract term and the expected term of the customer relationship.

~~Sales-type Lease Revenue~~ ~~– For certain customers that lease equipment under sale-type lease arrangements, the Company recognizes revenue in accordance with ASC No. 842,~~~~Leases.~~ Such revenue is recognized at the time of installation based on the net present value of the leased equipment. Interest income is recognized over the life of the lease for customers who have remaining lease payments to make. our product development efforts.

In the event a customer under a sales-type lease arrangement prepays for the lease in full prior to receiving the equipment under the lease, such amounts are recorded in deferred revenue and recognized as revenue once the equipment has been installed and activated at the customer’s location. The costnormal course of ~~the leased equipment is recognized at the same time as the revenue. The Company does not expect to recognize revenue under sales-type lease arrangements after the year ended December 31, 2019.~~

~~Equipment Sales~~ – The Company recognizes revenue from equipment sales at a point in time, which is when control has been transferred to the customer, the customer holds legal title and the customer has significant risks and rewards of ownership. Generally, the Company has determined that any customer acceptance provisions of the equipment is a formality, as the Company has historically demonstrated the ability to produce and deliver similar equipment. If the Company sells equipment with unique specifications, then customer control of the equipment will occur upon customer acceptance as defined in the contract, and revenue will be recognized at that time. Costs associated with the equipment sold is recognized at the same point in time as the revenue.

~~Advertising Revenue~~ – The Company recognizes advertising revenue either over the time the advertising campaign airs in its customers’ locations or at a point in time by impression. For advertising campaigns that are airing over a specific period of time (regardless of number of impressions), the Company uses the time elapsed output method to measure its progress toward satisfying the performance obligation. Whenour business, the Company contracts with ~~an advertising agent, the Company shares~~third parties to perform various clinical study and trial activities in the ~~advertising revenue generated with that agent. In~~on-going development and testing of potential products. The financial terms of these ~~cases,~~agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the ~~Company generally recognizes revenue~~contracts depend on ~~a net basis,~~factors such as the ~~agent typically has~~achievement of certain events or milestones, the ~~responsibility for~~successful enrollment of patients, the ~~relationship with~~allocation of responsibilities among the ~~advertiser~~parties to the agreement, and the ~~credit risk. When~~completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front expenditures. The Company ~~contracts directly with the advertiser, it will recognize the revenue on~~anticipates paying significant portions of a ~~gross basis~~study’s or trial’s cost before they begin and ~~will recognize any revenue share arrangement it has with a third party as a direct expense,~~incurring additional expenditures as the ~~Company has the responsibility for the relationship with the advertiser~~study or trial progresses and ~~the credit risk. Generally, there is no unbilled revenue associated with the Company’s advertising activities.~~

~~Content Licensing~~ ~~– The Company licenses content (trivia packages) to a~~reaches certain customer, who in turn installs the content on its equipment that it sells to its customers. The content license is characterized as a “right to use intellectual property as it exists at the point in time at which the license is granted,” meaning the Company is not expected to undertake activities that affect the intellectual property or any such activities would not affect the intellectual property the customer is using. The content license is considered to be on consignment, and the Company retains title of the licensed content throughout the license period. The Company’s customer has no obligation to pay for the licensed content until the customer sells and installs the content to its customer. Accordingly, the Company recognizes revenue at the point in time when such installation occurs. The Company recognizes costs related to developing the content during the period incurred.

~~Live Hosted Trivia Revenue~~ – The Company recognize its live-hosted trivia revenue at a point in time, which is when the event takes place. Some customers host their own trivia events and the Company provides the game materials. In these cases, the Company recognizes the revenue at the point in time the Company sends the game materials to the customer. The Company recognizes related costs at the same point in time the revenue is recognized. Generally, there is no unbilled revenue or deferred revenue associated with live hosted trivia events. The Company does not expect to recognize revenue for live hosted trivia events after January 31, 2020. See Note 18 for more information on the live hosted trivia product line.

~~Pay-to-Play Revenue~~ – The Company recognizes revenue generated from its customers’ patrons who access the Company’s premium games on the tablets. This revenue is recognized at a point in time based on usage-based royalty revenue guidance. The Company generally shares the revenue with the customer whose patrons generated the revenue. In cases where the Company determines that it is the principal and the customer is the agent, the Company recognizes this revenue on a gross basis, with the amount of revenue shared with the customer as a direct expense. In cases where the Company determines it is the agent and the principal is the customer, the Company recognizes the revenue on a net basis. Costs associated with procuring the game license or developing the games are recognized over the life of the license or expected life of the developed game. Generally, there is no unbilled revenue or deferred revenue associated with the Company’s pay-to-play games.

~~Professional Development Revenue~~ – Depending on the type of development work the Company is performing, the Company will recognize revenue, and associated costs, at the point in time when the Company satisfies each performance obligation, which is generally when the customer can direct the use of, and obtain substantially all of the remaining benefits of the goods or service provided. For services provided over time, the corresponding revenue is generally recognized over the time the Company provides such services. Any payments received before satisfying the performance obligations are recorded as deferred revenue and recognized as revenue when or as such obligations are satisfied. The Company does not have unbilled revenue assets associated with professional development services.

~~Revenue Concentrations~~

The Company’s customers predominantly range from small independently operated bars and restaurants to bars and restaurants operated by national chains. This results in diverse venue sizes and locations. As of December 31, 2018, 2,639 venues in the U.S. and Canada subscribed to our interactive entertainment network, of which approximately 46% were Buffalo Wild Wings corporate-owned restaurants and its franchisees. As of December 31, 2019, the Company’s site count declined to 1,440 venues primarily due to the termination of its agreement with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019 in accordance with the terms of the agreement. See Note (1) BASIS OF PRESENTATION—Basis of Accounting Presentation, below and PART I — ITEM 1A, Risk Factors

The table below sets forth the approximate amount of revenue the Company generated from Buffalo Wild Wings corporate-owned restaurants and its franchisees during the years ended December 31, 2019 and 2018, and the percentage of total revenue that such amount represents for such periods:

Year Ended
December 31,
2019 2018
Buffalo Wild Wings revenue $ 6,820,000 $ 10,180,000
Percent of total revenue 34 % 44 %

~~As of December 31, 2019 and 2018, approximately $158,000 and $552,000, respectively, was included in accounts receivable from Buffalo Wild Wings corporate-owned restaurants and its franchisees.~~

~~The geographic breakdown of the Company’s revenue for the years ended December 31, 2019 and 2018 were as follows:~~

For the years ended
December 31,
2019 2018
United States $ 19,153,000 $ 22,653,000
Canada 653,000 682,000
Total revenue $ 19,806,000 $ 23,335,000

~~Contract Assets and Liabilities~~

The Company enters into contracts and may recognize contract assets and liabilities that arise from these contracts. The Company recognizes revenue and corresponding cash for customers who auto pay via their bank account or credit card, or the Company recognizes a corresponding accounts receivable for customers the Company invoices. The Company may receive consideration from customers, per the terms of the contract, prior to transferring goods or services to the customer. In such instances, the Company records a contract liability and recognizes the contract liability as revenue when all revenue recognition criteria are met. The table below shows the balance of contract liabilities as of December 31, 2019 and December 31, 2018, including the change during the period.

Deferred
Revenue
Balance at January 1, 2019 $ 1,297,000
New performance obligations 1,093,000
Revenue recognized (1,928,000 )
Balance at December 31, 2019 462,000
Less non-current portion (2,000 )
Current portion at December 31, 2019 $ 460,000

The Company capitalizes installation costs associated with installing equipment in a customer location and sales commissions as a deferred cost asset on the balance sheet. For installation costs that are of an amount that is less than or equal to the deferred installation revenue for the related contract, the amortization period approximates the longer of the contract term and the expected term of the customer relationship. For any excess installation costs that exceed the deferred revenue, the amortization period of the excess cost is the initial term of the contract, which is generally one to two years because the Company can still recover that excess cost in the initial term of the contract. The Company amortizes commission costs over the longer of the contract term and the expected term of the customer relationship. The tables below show the balance of the unamortized installation cost and sales commissions as of December 31, 2019 and December 31, 2018, including the change during the period.

Installation
Costs Sales
Commissions Total
Deferred Costs
Balance at January 1, 2019 $ 321,000 $ 103,000 $ 424,000
Incremental costs deferred 352,000 161,000 513,000
Deferred costs recognized (486,000 ) (177,000 ) (663,000 )
Balance at December 31, 2019 187,000 87,000 274,000

~~Research and Development~~— Research and development costs, which include the cost of equipment the Company is evaluating for future integration or use, are expensed as incurred. For the years ended December 31, 2019 and 2018, research and developments costs totaled $26,000 and $72,000, respectively, and are included in selling, general and administrative expense.

~~Software Development Costs~~—The Company capitalizes costs related to developing certain software products in accordance with ASC No. 350. The Company recognizes costs related to interactive programs on a straight-line basis over the programs’ estimated useful lives, generally two to three years. Amortization expense relating to capitalized software development costs totaled $519,000 and $382,000 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, approximately $177,000 and $1,296,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete.

The Company performed its annual review of software development projects for the years ended December 31, 2019 and 2018, and determined to abandon various software development projects that the Company concluded were no longer a current strategic fit or for which it determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, for the quarter ended December 31, 2019, the Company recognized an impairment of $498,000. There was no impairment charge for the quarter ended December 31, 2018. For the year ended December 31, 2019 and 2018, the Company recognized an impairment charge of $550,000 and $23,000, respectively. Impairment of capitalized software is shown separately on the Company’s consolidated statement of operations.

~~Advertising Costs –~~~~There were no marketing-related advertising costs for the either of the years ended December 31, 2019 or 2018.~~

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

~~Stock-Based Compensation~~—milestones.

Income Taxes

The Company records ~~stock-based compensation in accordance with ASC No. 718~~~~, Compensation – Stock Compensation.~~ The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for share-based payment awards is recognized using the straight-line single-option method. On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2018-07,~~Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting.~~~~The adoption of this ASU did not have a material impact~~deferred tax liabilities and assets based on the ~~Company’s consolidated financial statements.~~

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

~~ASC No. 740,~~Income ~~Taxes,~~ ~~defines~~tax expense consists of the ~~threshold~~tax payable for ~~recognizing~~ the period and the change during the period in deferred tax assets and liabilities.

Tax benefits offrom uncertain tax ~~return~~ positions inare recognized only if it is more likely than not that the ~~financial statements as “more-likely-than-not” to~~tax position will be sustained on examination by the taxing ~~authority. A~~authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position ~~that meets the “more-likely-than-not” criterion is~~are measured atbased on the largest ~~amount of~~ benefit that ~~is more~~has a greater than 50% ~~likely~~likelihood of being realized upon ultimate ~~settlement.~~resolution. The Company ~~reviewed its~~has no material uncertain tax positions ~~and determined that an adjustment to~~for any of the ~~tax provision is not considered necessary nor is a reserve for income taxes required.~~

reporting periods presented.

Earnings Per Share—

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

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Segment Reporting—

In accordance with ASC No. 280,Segment Reporting, the Company has determined that it operates as ~~one~~1 operating segment. Decisions regarding the Company’s overall operating performance and allocation of its resources are assessed on a consolidated basis.

Concentration of Credit Risk

The Company maintains its cash balances in financial institutions located in the United States. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At times, the Company’s cash balances may be uninsured for deposit accounts that exceed the FDIC insurance limit.

In the Company’s business, vendor concentrations could be indicative of vulnerabilities in the Company’s supply chain, which could ultimately impact the Company’s ability to continue its research and development activities. For the years ended December 31, 2021 and 2020, there was no vendor concentration related to the Company’s research and development activities.

Fair Value of Financial Instruments

• Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.

Leases

The Company adopted ASC Topic 842, Leases, on December 31, 2020 using the modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize right-of-use assets (“ROU assets”) and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. If the interest rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates secured borrowing rates corresponding to the maturities of the leases.

The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead account for each as a single lease component for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

Commitment and Contingencies

The Company follows ASC No.450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

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Stock-Based Compensation

Recent Accounting ~~Pronouncements~~

Standards

In ~~December 2019,~~May 2021, the Financial Accounting Standards Board (the “FASB”) issued ~~ASU No. 2019-12,~~~~Income Taxes~~Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic ~~740) – Simplifying the Accounting for Income Taxes.~~~~This ASU enhances~~260), Debt—Modifications and simplifies various aspect of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year and interim-period accounting for enacted changes in tax law. The amendment will be effective for public companies with fiscal years beginning after December 15, 2020, (which will be January 1, 2021 for the Company); early adoption is permitted. The Company is currently assessing the impact of this pronouncement to its consolidated financial statements.

~~In November 2019, the FASB issued ASU No. 2019-08,~~~~Compensation –~~ Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and ~~Revenue from~~ Derivatives and Hedging—Contracts ~~with Customers (Topic 606)~~ (“in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU ~~No. 2019-08”). This~~2021-04 addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU requires that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the share-based payment award in accordance with Topic 718. The grant date is the date at which a grantor (supplier) and a grantee (customer) reach a mutual understanding of the key terms and conditions of a share-based payment award. The classification and subsequent measurement of the award are subject to the guidance in Topic 718 unless the share-based payment award is subsequently modified and the grantee is no longer a customer. The standard2021-04 is effective for fiscal years beginning after December 15, ~~2019 (which was January~~2021 (January 1, ~~2020 for the Company). The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.~~

~~In November 2018, the FASB issued ASU No. 2018-18,~~~~Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.~~ This ASU requires certain transactions between participants in a collaborative arrangement to be accounted for as revenue under the new revenue standard when the participant is a customer. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 2020 for the Company). The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019 (which was January 1, 20202022 for the Company) and ~~can be applied either retrospectively or prospectively to all implementation costs incurred after~~interim periods within those fiscal years, with early adoption permitted. The Company does not expect the ~~date of adoption. The~~ adoption of this ~~ASU is not expected~~update to have a significant impact on ~~the Company’s consolidated~~its financial statements.

In ~~August 2018,~~July 2021, the FASB issued ASU ~~No. 2018-13,~~~~Fair Value Measurement~~2021-05, Leases (Topic ~~820): Disclosure Framework~~842) – Lessors - ~~Changes~~Certain Leases with Variable Lease Payments, which amends the lessor classification guidance to ~~the Disclosure Requirements for Fair Value Measurement~~.introduce additional criteria when classifying leases with variable lease payments that do not depend on a reference index or a rate. This ~~ASU modifies certain disclosure requirements on fair value measurements. The standard~~guidance is effective for ~~fiscal years~~annual periods beginning after December 15, ~~2019 (which was January~~2021 (January 1, ~~2020~~2022 for the Company)., with early adoption permitted. The Company does not expect the adoption of this ~~ASU is not expected~~update to have a significant impact on ~~the Company’s consolidated~~its financial statements.

~~In June 2016,~~

4)	Merger, Disposition and Acquisition Transactions

Merger

On August 12, 2020, Brooklyn, Brooklyn LLC and the ~~FASB~~Merger Sub entered into the Merger Agreement. The Merger closed on March 25, 2021. After the Merger, Brooklyn changed its name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.” The Merger was accounted for as a reverse acquisition, in which Brooklyn LLC was deemed the acquiring company for accounting purposes. Brooklyn LLC, as the accounting acquirer, recorded the assets acquired and liabilities assumed of Brooklyn in the Merger at their fair values as of the acquisition date. Brooklyn’s common stock trades on the NYSE American stock exchange under the ticker symbol “BTX”.

Brooklyn LLC was determined to be the accounting acquirer based upon the terms of the Merger and other factors including that (i) Brooklyn LLC members, received common stock in the Merger that represented 96.35% of Brooklyn’s outstanding common stock on a fully diluted basis as of immediately after the Merger, (ii) all of the directors of Brooklyn immediately after the Merger were designated by Brooklyn LLC under the terms of the Merger Agreement and (iii) existing members of Brooklyn LLC’s management became the management of Brooklyn immediately after the Merger.

At the closing of the Merger, all the outstanding membership interests of Brooklyn LLC converted into the right to receive an aggregate of approximately 39,992,000 shares of common stock, of which 1,068,000 shares were issued ~~ASU 2016-13,~~~~Measurement~~as compensation to Maxim Group LLC, Brooklyn LLC’s financial advisor (the “Financial Advisor”) for its services to Brooklyn LLC in connection with the Merger.

The purchase price of ~~Credit Losses~~$8,178,000, which represents the consideration transferred in the Merger to stockholders of Brooklyn immediately before the Merger, was calculated based on ~~Financial Instruments, which supersedes current guidance requiring recognition~~the closing price of ~~credit losses when it is probable~~$5.40 per share for approximately 1,514,000 shares common stock that those stockholders owned on March 25, 2021 immediately prior to the Merger because that represented a ~~loss~~more reliable measure of the fair value of consideration transferred in the Merger.

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Under the acquisition method of accounting, the total purchase price has been ~~incurred.~~ allocated to the acquired tangible and intangible assets and assumed liabilities of Brooklyn based on their estimated fair values as of March 25, 2021, the Merger closing date. Because the consideration paid by Brooklyn LLC in the Merger is more than the estimated fair values of Brooklyn’s net assets deemed to be acquired, goodwill is equal to the difference of approximately $8,589,000, which has been calculated using the fair values of the net assets of Brooklyn as of March 25, 2021.

The ~~ASU requires an entity~~allocation of the estimated purchase price to ~~establish an allowance for~~the tangible and intangible assets acquired and liabilities deemed to be assumed from Brooklyn, based on their estimated ~~credit losses~~fair values as of March 25, 2021, is as follows:

	Historical Balance Sheet of Brooklyn at March 25, 2020			Fair Value Adjustment to Brooklyn Pre-Merger Assets			Purchase Price Allocation Pro Forma Adjustment
Cash and cash equivalents	$	148,000		$	0		$	148,000
Accounts receivable		103,000			0			103,000
Prepaid expense and other current assets		329,000			0			329,000
Property and equipment, net		1,015,000			0			1,015,000
Software development costs		1,296,000			(368,000	)		928,000
Customers		0			548,000			548,000
Trade name		0			299,000			299,000
Accounts payable, accrued liabilities and other current liabilities		(3,781,000	)		0			(3,781,000	)
Net assets acquired, excluding goodwill	$	(890,000	)	$	479,000		$	(411,000	)

Total consideration	$	8,178,000
Net assets acquired, excluding goodwill		(411,000	)
Goodwill	$	8,589,000

Brooklyn LLC was obligated under the Merger Agreement to have $10,000,000 in cash and cash equivalents on ~~financial assets, including trade and other receivables,~~its balance sheet at ~~each reporting date. This ASU will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. For smaller reporting companies,~~ the effective ~~date~~time of the Merger. To ensure Brooklyn LLC had the required funds, certain beneficial holders of Brooklyn LLC’s Class A membership interests entered into contractual commitments to invest $10,000,000 into Brooklyn LLC immediately prior to the closing of the Merger. During March 2021, Brooklyn offered its Class A unit holders an additional 5% rights offering for ~~this standard has been delayed~~an additional $500,000 to be raised by a rights offering. Brooklyn received funds from the rights offering between February 17, 2021 and ~~will be effective~~April 5, 2021.

Disposition

On March 26, 2021, Brooklyn sold its rights, title and interest in and to the assets relating to the business it operated (under the name NTN Buzztime, Inc.) prior to the Merger to eGames.com in exchange for ~~fiscal years beginning after December 15, 2022 (which will be January 1, 2023~~a purchase price of $2,000,000 and assumption of specified liabilities relating to that business. The sale was completed in accordance with the terms of the Asset Purchase Agreement. Details of the Disposition are as follows:

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Proceeds from sale:
Cash	$	132,000
Escrow		50,000
Assume advance/loans		1,700,000
Interest on advance/loans		68,000

Carrying value of assets sold:
Cash and cash equivalents		(14,000	)
Accounts receivable		(75,000	)
Prepaids and other current assets		(124,000	)
Property and equipment, net		(1,014,000	)
Software development costs		(927,000	)
Customers		(548,000	)
Trade name		(299,000	)
Goodwill		(8,589,000	)
Other assets		(103,000	)

Liabilities transferred upon sale:
Accounts payable and accrued expenses		113,000
Obligations under finance leases		17,000
Lease liability		26,000
Deferred revenue		55,000
Other current liabilities		149,000

Transaction costs		(265,000	)

Total loss on sale of assets	$	(9,648,000	)

Unaudited Pro Forma Disclosure

The following unaudited pro forma financial information summarizes the results of operations for the ~~Company). The Company is evaluating~~years months ended December 31, 2021 and 2020 as if the ~~impact that~~Merger and the ~~adoption of this standard will have on its consolidated financial statements.~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases (Topic 842);~~ ~~in July 2018, the FASB issued ASU No. 2018-11,~~~~Leases (Topic 842): Targeted Improvements~~~~; and in December 2018, the FASB issued ASU No. 2018-20,~~~~Leases (Topic 842) – Narrow-Scope Improvements for Lessors~~, (collectively “Topic 842”). Topic 842 primarily requires lessees to recognize at the lease commencement date a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Topic 842 was effective for fiscal periods beginning after December 15, 2018 (which was January 1, 2019 for the Company), including interim periods within those fiscal years. Lessees and lessors must either (i) apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements or (ii) recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Applying a full retrospective transition approach is not allowed. The Company has elected to use the cumulative-effect transition method upon adoption.

~~Topic 842 also allows lessees and lessors to elect certain practical expedients. The Company elected the following practical expedients:~~

●

~~Transitional practical expedients, which must be elected as a package and applied consistently to all of the Company’s leases:~~

	o	~~The Company need not reassess whether any expired or existing contracts are or contain leases.~~
	o	The Company need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be classified as finance leases).
	o	~~The Company need not reassess initial direct costs for any existing leases.~~

●

Hindsight practical expedient. The Company elected the hindsight practical expedient in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Company’s right-of-use assets. The Company may elect this practical expedient separately or with the “practical expedient package,” and the Company must apply it consistently to all of its leases.

~~Upon adoption of Topic 842, the Company recognized on its consolidated balance sheet~~Disposition had been completed as of January 1, ~~2019~~2020. Pro forma information primarily reflects adjustments relating to the reversal of transaction costs. Assuming that the Merger and the Disposition had been completed as of January 1, 2020, the transaction costs would have been expensed in the prior period.

	Years ended December 31,
	2021			2020
Net loss attributable to common stockholders	$	(122,306,000	)	$	(26,547,000	)

Basic and diluted net loss per share attributable to common stockholders	$	(2.82	)	$	(1.51	)

Acquisition

On July 16, 2021, Brooklyn and Brooklyn Acquisition Sub, Inc. entered into the Acquisition Agreement. The Acquisition closed contemporaneously with the execution and delivery of the Acquisition Agreement. At the closing:

•Brooklyn acquired all of the outstanding equity interests of Novellus, Inc. as the result of the merger of Brooklyn Acquisition Sub, Inc. with and into Novellus, Inc., following which, Novellus, Inc., as the surviving corporation, became Brooklyn’s wholly owned subsidiary and Novellus Ltd. became Brooklyn’s indirectly owned subsidiary; and

• Brooklyn acquired 25.0% of the total outstanding equity interests of NoveCite.

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Brooklyn delivered consideration for the Acquisition totaling approximately ~~$3.5 million~~$124,000,000, which consisted of ~~operating lease liabilities, and~~(a) approximately ~~$2.3 million of corresponding operating right-of use assets,~~$22,854,000 in cash, net of ~~tenant improvement allowances.~~ cash acquired, and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102,000,000, based on a price of $14.5253 per share.

The Acquisition Agreement contained customary representations, warranties and certain indemnification provisions. Approximately 741,000 of the shares issued as consideration were placed in escrow for a period of up to 12 months in order to secure indemnification obligations to Brooklyn under the Acquisition Agreement. The Acquisition Agreement also contains certain non-competition and non-solicitation provisions pursuant to which Novellus LLC agreed not to engage in certain competitive activities for a period of five years following the closing, including customary restrictions relating to employees. No employees of Novellus Ltd. or Novellus, Inc. prior to the Acquisition continued their employment, or were otherwise engaged by Brooklyn, following the Acquisition.

In connection with the Acquisition, the co-founders of Novellus, Ltd. entered into lock-up agreements with respect to approximately 3,378,000 of the shares of common stock received in the Acquisition, and Brooklyn’s Chairman of the Board of Directors and its Chief Executive Officer and President entered into identical lock-up agreements with respect to their current holdings of Brooklyn stock. Each lock-up agreement extends for a period of three years, provided that up to 75% of the shares of common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of common stock on the Nasdaq exceeds specified thresholds. The lock-up agreements include customary exceptions for transfers during the applicable lock-up period.

The Company ~~also shows~~expects the ~~initial recognition~~Acquisition will advance its evolution into a platform company with a pipeline of next generation engineered cellular, gene editing and cytokine programs. In addition, the acquisition of Novellus, Ltd. builds on the License Agreement. (See Note 11). The completion of the ~~leases~~acquisition of Novellus, Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor Bioscience Limited (“Factor”) under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene editing and cell therapy products, remained unchanged.

Although Brooklyn acquired all of the outstanding equity interests of Novellus, Inc., the Company accounted for the Acquisition as an asset acquisition (as the assets acquired did not constitute a ~~supplemental noncash financing activity on~~business as defined in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations), and was measured by the ~~statement~~amount of cash ~~flows~~paid and the amortization of the noncash lease expense in operating activities. The adoption of Topic 842 did not have a material impact on the Company’s consolidated statement of operations. (See Note 14 for more information.)

4.~~Restricted Cash~~

~~When the Company entered the lease for its corporate headquarters, the Company’s bank, Avidbank, issued a $250,000 letter of credit to the lessor as security, which amount will be reduced~~ by $50,000 on December 1 of each year beginning on December 1, 2019, provided there has been no default under the lease. Avidbank required the Company to deposit $250,000 in a restricted cash account maintained with the bank, which amount will be reduced as the amount required under the letter of credit is reduced. As of December 31, 2019, the letter of credit and the corresponding restricted cash recorded on the accompanying consolidated balance sheet was $200,000, with $50,000 plus any earned interest being recorded in short-term restricted cash and the balance being recorded in long-term restricted cash. The amount deposited in the restricted cash account does not count toward the covenant in the Avidbank loan and security agreement (see Note 13) that requires the Company to have an aggregate amount of unrestricted cash in deposit accounts or securities accounts maintained with Avidbank of not less than $2,000,000 at all times.

5.~~Fixed Assets, Net~~

~~Fixed assets are recorded at cost and consist of the following at December 31, 2019 and 2018:~~

As of December 31,
2019 2018
Site equipment $ 8,856,000 $ 11,566,000
Machinery and equipment 1,570,000 1,887,000
Furniture and fixtures 314,000 461,000
Leasehold improvements 1,240,000 1,240,000
Vehicle 15,000 15,000
11,995,000 15,169,000

Accumulated depreciation (9,173,000 ) (10,502,000 )
Total $ 2,822,000 $ 4,667,000

~~Depreciation expense totaled $2,358,000 and $2,382,000 for the years ended December 31, 2019 and 2018, respectively.~~

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

As of December 31,
2019 2018
United States $ 2,760,000 $ 4,526,000
Canada 62,000 141,000
Total fixed assets $ 2,822,000 $ 4,667,000

6.~~Goodwill~~

The Company’s goodwill balance of $696,000 and $667,000 as of December 31, 2019 and 2018, respectively, relates to the excess of costs over the fair value of assets the Company acquired in 2003 related to its Canadian business (the “Reporting Unit”). The Company performed the quantitative impairment test of its goodwill in each of the years ended December 31, 2019 and 2018, as it determined that because of declines in revenue of the Reporting Unit, the decline in the Company’s stock price and other general market conditions, it was more likely than not that there were indications of impairment. The Company used three methods to determine the fair value of the ~~reporting unit:~~shares of common stock issued. As a result, substantially all of the ~~public company market method,~~value acquired was attributed to IPR&D, with the ~~transaction market method~~exception of the cash paid for the investment in NoveCite, which is being accounted for as an investment in equity securities, as discussed further below.

Brooklyn paid $22,854,000 in cash, net of cash acquired, as part of the consideration for the Acquisition, of which $1,000,000 was paid in cash for the investment in NoveCite. Brooklyn also issued approximately 7,022,000 shares of the Company’s common stock, of which approximately 3,644,000 shares are unrestricted and ~~the income method. Each method was equally weighted to calculate the total estimated fair value, and then the Company compared this fair value~~3,378,000 shares are subject to the ~~carrying~~three-year lockup. The unrestricted shares were valued at $10.05 per share, which was the closing price of Brooklyn’s common stock on July 16, 2021. The fair value of the ~~reporting unit.~~ restricted shares was discounted by approximately 35% to $6.53 per restricted share, which was derived from the average discount rate between the Black Scholes and Finnerty valuation models. The ~~impairment test performed during 2018resulted~~resulting fair value of the asset acquired is as follows:

	Fair Value of Consideration
Cash paid	$	22,882,000
Cash acquired		(28,000	)
Unrestricted shares		36,628,000
Restricted shares		22,056,000
Total fair value of consideration paid		81,538,000
Less amount of cash paid for NoveCite investment		(1,000,000	)
Fair value of IPR&D acquired	$	80,538,000

IPR&D that is acquired through an asset purchase that has no alternative future uses and no separate economic values from its original intended purpose is expensed in the ~~carrying value exceeding~~period the ~~fair value.~~cost is incurred. Accordingly, the Company ~~recognized a goodwill impairment loss of $261,000. The impairment test performed during 2019 resulted in~~expensed the fair value ~~exceeding~~of the ~~carrying value. Therefore,~~IPR&D during the ~~Company did not record any goodwill impairment for the year ended December 31, 2019. In addition to the impairment loss recognized, fluctuations~~third quarter of 2021 in the amount of ~~goodwill shown~~$80,538,000.

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Investment in NoveCite

As a result of the Acquisition, Brooklyn acquired and currently owns 25% of NoveCite and Citius Pharmaceuticals, Inc. (“Citius”) owns the remaining 75%. A member of the Company’s management holds one of 3 board seats on NoveCite’s board of directors. Citius’ s officers and directors hold the ~~accompanying balance sheets can occur due~~other two board seats. Citius also retains the ability, in its sole discretion, to ~~changes~~increase the size of the board of directors of NoveCite. Pursuant to a subscription agreement, as amended, between NoveCite and Novellus, LLC (the former parent of Novellus, Inc.), which was further amended and assigned to Brooklyn by Novellus, LLC upon the completion of the Acquisition, Citius has complete operational control and financial responsibility for NoveCite. Citrus’s officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. Therefore, despite Brooklyn’s ownership of greater than 20% of NoveCite, which leads to a presumption that in the ~~foreign currency exchange rates used when translating NTN Canada’s financial statement from Canadian dollars~~absence of predominant evidence to ~~US dollars during consolidation. The following table shows~~ the ~~changes~~contrary, an investor has the ability to exercise significant influence over an investee, Brooklyn does not exercise any significant influence over NoveCite or its board of directors. Brooklyn also has no contractual rights in the ~~carrying~~profits or obligations to share in the losses of NoveCite. Accordingly, the Company is accounting for its interest in NoveCite under ASC Topic 321, Investments – Equity Securities. Because NoveCite’s stock is not publicly traded and, therefore, does not have a readily determinable fair value, the Company has elected to account for its investment at cost, which was $1,000,000. The Company will make adjustments to this amount ~~of goodwill~~when there are observable transactions for the ~~years ended~~identical or similar equity securities of the same issuer that would provide an indicator of fair value. In addition, if qualitative factors indicate a potential impairment, fair value must be estimated and the investment written down to that fair value if it is lower than the carrying value. As of December 31, ~~2019 and 2018:~~

For the year ended For the year ended
December 31, 2019 December 31, 2018
Gross
Carrying Value Effects of
Foreign Currency Net
Carrying Value Gross
Carrying Value Impairment Losses
for the period Effects of
Foreign Currency Net
Carrying Value
Goodwill $ 667,000 $ 29,000 $ 696,000 $ 1,004,000 $ (261,000 ) $ (76,000 ) $ 667,000

7.~~Fair Value~~2021, there were no observable transactions for identical or similar equity securities of ~~Financial Instruments~~

~~The carrying values~~NoveCite to provide an indication of ~~cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate~~ fair value, ~~due to~~nor were there any indications of impairment of the ~~short maturity of these instruments. The fair~~investment.

5)	Fair Value of Financial Instruments

Fair value ~~of long-term debt~~ is ~~based on~~defined as the ~~Company’s current borrowing rate for similar types of borrowing arrangements.~~

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

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

liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

• Level ~~2: Observable market~~1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or ~~unobservable~~liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market ~~data.~~

data by correlation or other means.

• Level ~~3: Unobservable~~3 Inputs – Valued based on inputs ~~that are not corroborated by~~for which there is little or no market ~~data.~~

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

value, which require the reporting entity to develop its own assumptions.

The ~~Company does not have assets or~~following tables summarize the liabilities that are measured at fair value as of December 31, 2021 and 2020:

	As of December 31, 2021
Description	Level 1		Level 2		Level 3
Liabilities:
Contingent consideration		0		0	$	19,930,000
Total	$	0	$	0	$	19,930,000

	As of December 31, 2020
Description	Level 1		Level 2		Level 3
Liabilities:
Contingent consideration		0		0	$	20,110,000
Total	$	0	$	0	$	20,110,000

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The contingent consideration is related to an asset purchase agreement entered into between Brooklyn LLC and IRX Therapeutics (“IRX”) in connection with the IRX Acquisition, according to which, Brooklyn LLC is obligated to pay royalties to certain noteholders and shareholders of IRX based on ~~a recurring basis.~~

~~Assets~~future revenues from any future IRX-2 product sales.

Contingent consideration for the IRX Acquisition was initially valued at the transaction price and ~~Liabilities that are Measured~~is subsequently valued at ~~Fair Value on a Nonrecurring Basis:~~

~~Certain assets are~~the end of each reporting period using third-party valuation services or other market observable data. The third-party valuation services use industry standard valuation models, including discounted cash flow analysis, to determine the value. After completing its validation procedures as of December 31, 2021, the Company adjusted the carrying amount of its contingent consideration liabilities as follows:

	Year ended December 31, 2021
Balance as of beginning of period	$	20,110,000
Fair value adjustments included in operating expenses		(180,000	)
Balance as of end of period	$	19,930,000

Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within the statements of operations.

Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which the milestones are expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

For purposes of this calculation, a royalty equal to 13% of revenue (consisting of the royalty due to University of South Florida and the royalty due to the collaborator) is assumed until 2029 and a royalty of 7% of revenues is assumed from 2030 to 2038. The post patent decline is 50% in the first year and 10% thereafter. Income taxes were projected to be 26% of net royalty savings. The cash flows were discounted by the liability specific weighted average cost of capital of 26% using the mid-point convention.

6)	Property and Equipment

Property and equipment consist of the following:

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	December 31,
	2021			2020
Laboratory and manufacturing equipment	$	258,000		$	300,000
Leasehold improvements		464,000			414,000
Computer equipment		154,000			0
		877,000			714,000
Less: accumulated depreciation and amortization		(207,000	)		(120,000	)
Property and equipment, net	$	670,000		$	594,000

Depreciation expense totaled $117,000 and $98,000 for the years ended December 31, 2021 and 2020, respectively. No depreciation expense is recorded on fixed assets in process until such time as the assets are completed and are placed into service.

Leases

The Company has operating leases for office and laboratory space in the boroughs of Brooklyn and Manhattan in New York, New York, which expire in 2025 and 2026, respectively. In June 2021, the Company entered into an additional lease agreement to lease approximately 2,700 square feet of office and laboratory space in Cambridge, Massachusetts for approximately $56.00 per square foot annually. The lease provides for annual escalation of the base rent based on the year-over-year increase of the consumer price index, as well as the payment of other customary expenses, such as common area maintenance fees, property taxes, and insurance. Upon entering into this lease agreement, the Company paid a lease deposit of approximately $25,000. The Cambridge, Massachusetts lease expires in June 2028. See Note 17 for subsequent event information regarding the Company’s leases.

Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. As the rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates secured borrowing rates corresponding to the maturities of the leases.

Operating leases are included in right of use assets - operating leases and operating lease liabilities, current and long-term, on the balance sheet. Lease expense for operating leases is recognized on a ~~non-recurring~~straight-line basis over the lease term and is included in general and administrative costs in the statements of operations.

The Company recognizes operating lease expense and lease payments from the sublease on a straight-line basis in its statements of operations over the lease terms. During the years ended December 31, 2021 and 2020, the net operating lease expenses were as follows:

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	Years ended December 31,
	2021			2020
Operating lease expense	$	688,000		$	591,000
Sublease income		(84,000	)		(77,000	)
Variable lease expense		19,000			21,000
Total lease expense	$	623,000		$	535,000

The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2021 and the ending balances as of December 31, 2021, including the changes during the period.

	Operating Lease ROU Assets

Operating lease ROU assets at January 1, 2021	$	2,093,000
Amortization of operating lease ROU assets		(342,000	)
Addition of operating lease ROU assets		816,000
Operating lease ROU assets at December 31, 2021	$	2,567,000

	Operating Lease Liabilities
Operating lease liabilities at January 1, 2021	$	2,178,000
Principal payments on operating lease liabilities		(321,000	)
Addition of operating lease liabilities		866,000
Operating lease liabilities at December 31, 2021		2,723,000
Less non-current portion		2,297,000
Current portion at December 31, 2021	$	426,000

As of December 31, 2021, the Company’s operating leases had a weighted-average remaining life of 4.9 years with a weighted-average discount rate of 12.76%. The maturities of the operating lease liabilities are ~~subject~~as follows:

	As of December 31
2022	$	750,000
2023		767,000
2024		785,000
2025		802,000
2026		267,000
Thereafter		246,000
Total payments		3,617,000
Less imputed interest		(894,000	)
Total operating lease liabilities	$	2,723,000

Sublease Agreement

On April 18, 2019, the Company entered into a sublease agreement with Nezu Asia Capital Management, LLC (the “Tenant”), whereby the Tenant agreed to ~~fair value adjustments only~~sublease approximately 999 square feet of space currently rented by the Company in ~~certain circumstances. Goodwill~~the borough of Manhattan in New York, New York commencing on May 15, 2019. The term of this sublease expires on October 31, 2026 with no option to extend the sublease term. Rent payments provided by the Tenant under the sublease agreement began on September 1, 2019. The sublease agreement stipulates an annual rent increase of 2.25%. The Tenant is ~~written down~~also responsible for paying to ~~fair value when determined~~the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to ~~be impaired,~~the subleased space during the term of the sublease.

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	As of December 31, 2021
2022	$	82,000
2023		84,000
2024		86,000
2025		88,000
2026		75,000
	$	415,000

The Company received sublease payments of approximately $83,000 and ~~long-lived assets, including capitalized software, are written down~~$79,000 during the years ended December 31, 2021 and 2020, respectively. In accordance with ASC Topic 842, the Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to ~~fair value when they are held~~account for ~~sale~~the Manhattan lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sale-type or ~~determined to be impaired.~~ direct financing lease.

8)	Goodwill and In-Process Research & Development

The ~~valuation methods for~~Company recorded goodwill and ~~long-lived assets involve assumptions concerning interest~~IPR&D in the amount of $2,044,000 and ~~discount rates, growth projections, and/or other assumptions of future business conditions. As all of~~$6,860,000, respectively, in connection with the assumptions employed to measure these assets and liabilities on a nonrecurring basis are based on management’s judgment using internal and external data, these fair value determinations are classifiedIRX Acquisition in ~~Level 3 of the valuation hierarchy.~~

~~There were no transfers between fair value measurement levels during~~ the year ended December 31, ~~2019.~~

8.2018. IPR&D assets are considered to be indefinite lived until the completion or abandonment of the associated research and development projects.

In connection with the Acquisition, the Company expensed the fair value of the IPR&D it acquired in the amount of $80,538,000, as the Company determined there were no future alternative uses or separate economic values from its original intended purpose. (See Note 4.)

9)	Accrued Expenses

Accrued ~~Compensation~~

~~Accrued compensation~~expenses consisted of the ~~following at December 31, 2019 and 2018:~~

As of December 31,
2019 2018
Accrued vacation $ 260,000 $ 267,000
Accrued salaries 236,000 251,000
Accrued bonuses 77,000 32,000
Accrued commissions 15,000 22,000
Total accrued compensation $ 588,000 $ 572,000

9.~~Concentrations of Risk~~

~~Credit Risk~~

~~At times,~~following:

	As of December 31,
	2021		2020
Accrued compensation	$	656,000	$	294,000
Accrued research and development expenses		222,000		207,000
Accrued general and administrative expenses		371,000		400,000
Accrued interest		0		150,000
Total accrued expenses	$	1,249,000	$	1,051,000

10)

Debt

Loans Payable

In connection with the ~~Company’s cash balances held~~IRX Acquisition in ~~financial institutions are~~2018, Brooklyn LLC assumed certain notes payable (the “IRX Notes”) in ~~excess of federally insured limits. The Company performs periodic evaluations of the relative credit standing of financial institutions and seeks to limit~~ the amount of ~~risk by selecting financial institutions with a strong credit standing. The Company believes it is not exposed~~$410,000. On January 27, 2020, the IRX Notes were amended to ~~any significant credit risk with respect to its cash and cash equivalents.~~

The Buzztime network provides services to group viewing locations, generally restaurants, sports bars and lounges throughout North America. Concentration of credit risk with respect to trade receivables is limited dueextend the maturity date to the ~~large number~~earlier of ~~customers comprising~~(i) a change of control, as defined in the ~~Company’s customer base,~~IRX Notes, and their dispersion across many different geographic locations. The Company performs credit evaluations of new customers and generally requires no collateral. The Company maintains an allowance for doubtful accounts to provide for credit losses.

~~Significant Customer~~

~~For the years ended~~(ii) December 31, ~~2019 and 2018,~~2021. On December 31, 2021, the Company ~~generated~~paid the outstanding $410,000 in principal plus accrued and unpaid interest of approximately ~~$6,820,000~~$210,000 under the IRX Notes, and ~~$10,180,000, respectively,~~the Company has 0 further obligations thereunder.

Payment Protection Program Loan

Brooklyn LLC PPP Loan.

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Table of ~~total revenue from Buffalo Wild Wings corporate-owned restaurants~~Contents

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $310,000 to Silicon Valley Bank evidencing a loan (the “Brooklyn LLC PPP Loan”) Brooklyn LLC received under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “CARES Act”). Brooklyn LLC PPP Loan incurred interest at a rate of 1.0% per annum.

Under the terms of the Cares Act, certain amounts of the Brooklyn LLC PPP Loan could be forgiven if they were used for qualifying expenses, as described in the CARES Act. In June 2021, Brooklyn LLC submitted its ~~franchisees, which represented approximately 34%~~loan forgiveness application for the Brooklyn LLC PPP Loan, and ~~44%~~in September 2021, the lender informed Brooklyn LLC that the U.S Small Business Administration approved the forgiveness of ~~total revenue in each~~100% of ~~those years, respectively.~~the outstanding principal and interest of the Brooklyn LLC PPP Loan. As of December 31, ~~2019~~2021, there was 0 outstanding principal balance of the Brooklyn LLC PPP Loan.

11)	Commitments and Contingencies

Legal Matters

The Company is involved in litigation and ~~2018, approximately $158,000~~arbitrations from time to time in the ordinary course of business. Legal fees and ~~$552,000, respectively, was included in accounts receivable from Buffalo Wild Wings corporate-owned restaurants~~other costs associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

Merger-Related Shareholder Litigation

Brooklyn (then known as NTN Buzztime, Inc.) and its ~~franchisees.~~

~~In November 2018, the Company’s relationship with Buffalo Wild Wings corporate-owned and most~~former directors were named as defendants in 10 substantially similar actions arising out of the ~~franchisee-owned restaurants terminated~~Merger that were brought by purported pre-Merger stockholders of Brooklyn: Henson v. NTN Buzztime, Inc., et al., No. 1:20-cv-08663-LGS (S.D.N.Y.); Monsour v. NTN Buzztime, Inc., et al., No. 1:20-cv-08755-LGS (S.D.N.Y.); Amanfo v. NTN Buzztime, Inc., et al., No. 1:20-cv-08747-LGS (S.D.N.Y.); Carlson v. NTN Buzztime, Inc., et al., No. 1:21-cv-00047-LGS (S.D.N.Y.); Finger v. NTN Buzztime, Inc., et al., No. 1:21-cv-00728-LGS (S.D.N.Y.); Falikman v. NTN Buzztime, Inc., et al., No. 1:20-cv-05106-EK-SJB (E.D.N.Y.); Haas v. NTN Buzztime, Inc., et al., No. 3:20-cv-02123-BAS-JLB (S.D. Cal.); Gallo v. NTN Buzztime, Inc., et al., No. 3:21-cv-00157-WQH-AGS (S.D. Cal.); Chinta v. NTN Buzztime, Inc., et al., No. 1:20-cv-01401-CFC (D. Del.); and Nicosia v. NTN Buzztime, Inc., et al., No. 1:21-cv-00125-CFC (D. Del.) (collectively, the “Stockholder Actions”). Only 2 of the Stockholder Actions (the Chinta and Nicosia cases) also named Brooklyn. These actions asserted claims alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder and both the Chinta and Nicosia cases alleged that Brooklyn LLC is a controlling person of Brooklyn. The complaints generally alleged that the defendants failed to disclose allegedly material information in a Form S-4 Registration Statement filed on October 2, 2020, including: (1) certain details regarding any projections or forecasts of Brooklyn or Brooklyn LLC may have made, and the analyses performed by Brooklyn’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not Brooklyn entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints generally alleged that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints requested: preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate a compliant Form S-4; an accounting by Brooklyn for all alleged damages suffered; a declaration that certain federal securities laws had been violated; and reimbursement of costs, including attorneys’ and expert fees and expenses. On or about February 26, 2021, in order to moot certain of the disclosure claims asserted in the Stockholder Actions, to avoid nuisance, potential expense, and delay, and to provide additional information to Brooklyn’s stockholders, Brooklyn determined to voluntarily supplement the Form S-4 with certain additional disclosures. In exchange for those disclosures, the plaintiffs in each of the Stockholder Actions agreed to voluntarily dismiss their claims. All ten actions have now been dismissed. Following the dismissal the parties amicably resolved plaintiffs’ counsel’s request for an award of attorneys’ fees and expenses based on the purported benefit contented to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.

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Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021)

On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and certain individuals that plaintiff alleges were directors of Brooklyn LLC. The complaint is captioned, Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021). Plaintiff alleges that Brooklyn LLC and certain of its officers and directors (“defendants”) engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment. Plaintiff also asserts various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleges Brooklyn LLC agreed to hire him as an executive once the Merger was completed. In particular, plaintiff alleges that, in exchange for transferring an opportunity to obtain an agreement to acquire a license from Novellus for its mRNA-based gene editing and cell reprogramming technology to Brooklyn LLC, he was promised a $500,000 salary and 7% of the equity of Brooklyn LLC. Based on these and other allegations, plaintiff seeks damages of not less than $10 million, a permanent injunction enjoining Brooklyn LLC from exercising the option to acquire such license from Novellus or completing the proposed Merger. On or about February 19, 2021, an amended complaint was filed asserting the same causes of action but withdrawing the request for injunctive relief. On June 6, 2021, defendants filed a motion to compel arbitration or, in the alternative, for partial dismissal of the complaint for failure to state viable fraud, quantum meruit and employment discrimination claims. After obtaining extensions of time to respond, plaintiff opposed the defendants’ motion on August 9, 2021. The defendants filed their reply on September 3, 2021. The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021. By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn LLC. Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No. 01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on February 3, 2022. In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against Brooklyn LLC and Cherington based on the breach of these same promises and a claim for quantum meruit against the Brooklyn LLC. In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be determined at the hearing. Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a 3-member arbitration panel. Defendants intend to vigorously defend themselves against these claims. At this stage in the litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.

Carlson v. Allen Wolff, Michael Gottlieb, Richard Simtob, Susan Miller, and NTN Buzztime, Inc., C.A. No. 2021-0193-KSJM (Del. Ch. Ct.)

On or about March 12, 2021, Douglas Carlson, a purported stockholder of Brooklyn (then known as NTN Buzztime, Inc.), filed a verified class action complaint against Brooklyn and its then current members of the board of directors, for allegedly breaching their fiduciary duties and violating Section 211(c) of the Delaware General Corporation Law. In particular, plaintiff seeks to compel the defendants to hold an annual stockholder meeting. Plaintiff also moved for summary judgment at the same time that he filed his complaint. In order to moot the claim addressed in the complaint, Brooklyn agreed to hold its annual meeting on June 29, 2021, which date was subsequently rescheduled to August 20, 2021. On or about May 6, 2021, the parties entered into a stipulation, which was “so ordered” by the court, extending defendants’ time to respond to the complaint and to file their answering brief in opposition to plaintiff’s motion for summary judgment on or before July 16, 2021 and providing that plaintiff’s reply brief in support of his motion for summary judgment is due on or before August 20, 2021. On or about July 12, 2021, the parties entered in a further amended scheduling order, which provided that defendants were to respond to the complaint and file their answering brief in opposition to plaintiff’s motion for summary judgment on or before September 16, 2021 and plaintiff was to file its reply brief in support of his motion for summary judgment on or before October 20, 2021. On August 20, 2021, Brooklyn convened its 2021 annual meeting. Due to the lack of a required quorum, the meeting was adjourned to September 3, 2021. Thereafter, Brooklyn obtained a quorum, and the annual meeting was held on September 3, 2021. On September 10, 2021, Brooklyn filed a report on Form 8-K with the SEC announcing the results of the annual meeting. On September 16, 2021, the parties filed a stipulation seeking voluntary dismissal of the complaint as moot. The Court entered the dismissal on September 16, 2021 with prejudice as to the named plaintiff and without prejudice as to other members of the purported class and retained jurisdiction for the purpose of determining any fee application to the extent it cannot be resolved amicably the parties. Thereafter, on or about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of fees and expenses for the purported benefit that Carlson contended was received by stockholders as a result of his action.

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Robert Garfield Matter

On April 29, 2021, Robert Garfield, a purported stockholder of Brooklyn, sent to Brooklyn a demand letter that had purportedly been sent to Brooklyn (then known as NTN Buzztime, Inc.) on or about March 16, 2021. The demand letter asserts that, Brooklyn (then known as NTN Buzztime, Inc.) made material misstatements in a prospectus issued in seeking a stockholder vote on March 15, 2021 with respect to an amendment to Brooklyn’s certificate of incorporation to increase the number of authorized shares from 15 million to 100 million. The demand letter seeks to have Brooklyn deem the amendment to the certificate of incorporation ineffective or seek valid stockholder approval of such amendment and for Brooklyn to implement internal controls.

Brooklyn decided to seek stockholder ratification of the March 15, 2021 stockholder vote concerning an amendment to Brooklyn’s certificate of incorporation to increase the number of authorized shares from 15 million to 100 million pursuant to Sections 204 of the Delaware General Corporation Law. Stockholder ratification was obtained at the annual meeting of stockholders that took place on September 3, 2021. As a result of the ratification, Garfield advised that the claims set forth in his demand letter were moot. The parties thereafter resolved Garfield’s counsel’s request for an award of attorney’s fees and expenses for the purported benefit that Garfield contented was received by stockholders as a result of the stockholder ratification.

Edmund Truell Matter

Emerald Private Equity Fund, LLC Matter

By a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), a stockholder of Brooklyn, made a demand pursuant to 8 Del. C. 220 to inspect certain books and records of Brooklyn. The stated purpose of the demand is to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper stock certificates, including investigating whether: (i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement; (ii) certain restrictions on the sale of Brooklyn common stock following the Merger were proper and applied without favor; (iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of Brooklyn’s common stock; and (iv) it should pursue remedial measures and/or report alleged misconduct to the SEC. Brooklyn has responded to the demand letter and has produced certain information to Emerald in connection with the demand, which is subject to the terms of a confidentiality agreement entered into among the parties, including certain additional stockholders who have subsequently joined as parties to such agreement (including Truell noted above). In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and former directors of the Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty. Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor on behalf of individual stockholders whom counsel represents in addition to Emerald; and the Company has agreed to respond to Emerald’s counsel by April 22, 2022. The Company can provide no assurance that such pre-suit early resolution discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed. The Company intends to defend itself vigorously against any and all claims. Additionally, on April 7, 2022, the Company received a demand for indemnification from its financial advisor as it relates to the aforementioned potential lawsuit.

John Westman v. Novellus, Inc., Christopher Rohde, and Matthew Angel, Civil Action No. 2181CV01949 (Middlesex County (Massachusetts) Superior Court)

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Licensing Agreements

USF

Brooklyn LLC has license agreements with University of South Florida Research Association, Inc. (“USF”), granting Brooklyn LLC the right to sell, market, and distribute IRX-2, subject to a 7% royalty payable to USF based on a percentage of gross product sales. Under the license agreement with USF, Brooklyn LLC is obligated to repay patent prosecution expenses incurred by USF. To date, Brooklyn LLC has not recorded any product sales, or obligations related to USF patent prosecution expenses. The license agreement terminates upon the expiration of the IRX-2 patents.

Novellus, Ltd. and Factor

In December 2020, Brooklyn LLC entered into option agreements (the “Option Agreements”) with Novellus, Ltd. and Factor (together, the “Licensors”) to obtain the right to exclusively license the Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle cell disease, and beta thalassemia (the “Licensed Technology”). The option was exercisable before February 28, 2021 (or April 30, 2021 if the Merger had not closed by that date) and required Brooklyn LLC to pay a non-refundable option fee of $500,000 and then an initial license fee of $4,000,000 (including the non-refundable fee of $500,000) in order to exercise the option.

In April 2021, Brooklyn LLC and the Licensors amended the Option Agreements to extend the exercise period to May 21, 2021 and to require Brooklyn, LLC to pay a total $1,000,000 of the $4,000,000 initial license fees to the Licensors by April 15, 2021.

In April 2021, Brooklyn LLC and the Licensors entered into an exclusive license agreement (the “License Agreement”) pursuant to which Brooklyn LLC acquired an exclusive worldwide license to the Licensed Technology. Under the terms of the ~~agreements~~License Agreement, Brooklyn LLC is obligated to pay the ~~Company had with Buffalo Wild Wings and such franchisees. Certain Buffalo Wild Wings franchisee-owned locations extended their relationship~~Licensors a total of $4,000,000 in connection with the ~~Company~~execution of the License Agreement, all of which had been paid as of June 30, 2021.

The completion of the acquisition of Novellus, Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene editing and cell therapy products, remained unchanged. Accordingly, Brooklyn LLC is obligated to pay to Factor a fee of $3,500,000 in October 2022, which will be in addition to a fee of $2,500,000 paid to Factor in October 2021.

Brooklyn LLC is also required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Brooklyn LLC will be obligated to pay, in the case of development and regulatory milestones, milestone payments to the Licensors in specified amounts and, in the case of commercialization milestones, specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Brooklyn LLC fails to timely achieve certain delineated milestones, the Licensors will have the right to terminate Brooklyn LLC’s rights under provisions of the License Agreement relating to those milestones.

Novellus, Ltd. also has a license agreement with Factor, which was entered into in February 2015, amended in June 2018 and March 2020, and then amended and restated in November 2020. This license agreement provides for Novellus, Ltd. to use over 70 granted patents owned by Factor throughout the world covering synthetic mRNA, RNA-based gene editing, and RNA-based cell reprogramming, in addition to specific patents covering methods for treating specific diseases. There are also more than 60 pending patent applications throughout the world focused on these and other aspects of the technology. The patent coverage includes granted patents and pending patent applications in the United States, Europe, and Japan, along with other major life sciences markets.

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NoveCite

In October 2020, Novellus, Ltd. (as sublicensor) and NoveCite (as sublicensee) entered into an exclusive license agreement (the “Sublicense”) to license novel cellular therapy for acute respiratory distress syndrome, which NoveCite is licensing from Factor. Under the sublicense agreement, NoveCite is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization milestones. In general, upon its achievement of these milestones, NoveCite will be obligated, in the case of development and regulatory milestones, to make milestone payments to the Novellus, Ltd. in specified amounts and, in the case of commercialization milestones, specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers.

Under the terms of the Sublicense, in the event that Novellus, Ltd. receives any revenue involving the original cell line included in the licensed technology, then Novellus, Ltd. shall remit to NoveCite 50% of such revenue.

Royalty Agreements

Collaborator Royalty Agreement

Effective June 22, 2018, IRX terminated its Research, Development and Option Facilitation Agreement and its Options Agreement (the “RDO and Options Agreements”) with a collaborative partner (the “Collaborator”), pursuant to a termination agreement (the “Termination Agreement”). The Termination Agreement was assigned to Brooklyn, LLC in November 2018 when Brooklyn LLC acquired the assets of IRX. In connection with the Termination Agreement, all of the rights granted to the Collaborator under the RDO and Options Agreements were terminated, and Brooklyn LLC has no obligation to refund any payments received from the Collaborator. As consideration for entering into the Termination Agreement, the Collaborator will receive a royalty equal to 6% of revenues from the sale of IRX-2, for the period of time beginning with the first sale of IRX-2 through the ~~end~~later of ~~2020.~~

~~Sole Equipment Supplier~~

(i) the twelfth anniversary of the first sale of IRX-2 or (ii) the expiration of the last IRX patent, or other exclusivity of IRX-2.

Investor Royalty Agreement

On March 22, 2021, Brooklyn LLC restated its royalty agreement with certain beneficial holders of Brooklyn ImmunoTherapeutics Investors GP LLC and Brooklyn ImmunoTherapeutics Investors LP, whereby such beneficial holders will continue to receive, on an annual basis, royalties in an aggregate amount equal to 4% of the net revenues of IRX-2, a cytokine-based therapy being developed by Brooklyn LLC to treat patients with cancer.

Royalty Agreement with certain former IRX Therapeutics Investors

On May 1, 2012, IRX Therapeutics entered into a royalty agreement (the “IRX Investor Royalty Agreement”) with certain investors who participated in a financing transaction. The ~~Company currently purchases~~IRX Investor Royalty Agreement was assigned to Brooklyn LLC in November 2018 when Brooklyn LLC acquired the ~~tablets, cases~~assets of IRX. Pursuant to the IRX Investor Royalty Agreement, when Brooklyn LLC becomes obligated to pay royalties to USF under the agreement described above under “Licensing Agreements-USF,” it will pay an additional royalty of 1% of gross sales to an entity organized by the investors who participated in such financing transaction. There are no termination provisions in the IRX Investor Royalty Agreement. Brooklyn LLC has not recognized any revenues to date, and charging trays used in its tablet platform from one unaffiliated third-party manufacturer. The Company currently does not have an alternative manufacturer for its tablets or an alternative manufacturer or device forno royalties are due pursuant to any of the ~~tablet cases or tablet charging trays. The Company no longer purchases playmakers for its Classic platform.~~

Asabove-mentioned royalty agreements.

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Table of ~~December 31, 2019 and 2018, approximately $629,000 and $15,000, respectively, was included in accounts payable or accrued expenses for the tablet equipment purchased from its sole supplier.~~

~~10.Basic and Diluted Earnings Per Common Share~~

Contents

12)	Basic and Diluted Earnings per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of potential common shares. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding plus potential common shares. Stock options, restricted stock units (“RSUs”), and other convertible securities are considered potential common shares and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. ~~Options, restricted~~The following table shows the amount of stock ~~units~~options, RSUs and convertible preferred stock ~~representing approximately 210,000 and 219,000 shares of common stock~~that were excluded from the ~~computations~~computation of diluted net loss per common share for the ~~years~~year ended December 31, ~~2019 and 2018, respectively,~~2021, as their effect was ~~anti-dilutive.~~

~~11.Shareholders’ Equity~~

~~Registered Direct Offerings~~

In June 2018, the Company sold approximately 345,000 shares of its common stock at a purchase price of $4.50 per share and received net proceeds of approximately $1,375,000, after deducting estimated offering expenses. The Company used the net proceeds from the offering for general corporate purposes, which included working capital, general and administrative expenses, capital expenditures and implementation of its strategic priorities.

anti-dilutive:

	Year ended December 31, 2021
Stock options		3,988,000
RSUs		240,000
Preferred stock converted into common stock		42,000
Total potential common shares excluded from computation		4,270,000

There were ~~no equity offerings during~~0 stock options, RSUs or convertible preferred stock outstanding prior to the Merger to exclude from diluted net loss per common share for the year ended December 31, ~~2019.~~

2020.

13)	Stock-Based Compensation

Equity Incentive Plans

~~The Company’s~~

Brooklyn’s stock-based compensation plans ~~include~~consist of the ~~NTN Buzztime, Inc. 2019 Performance~~Restated 2020 Equity Incentive Plan (the ~~“2019~~“Restated 2020 Plan”), and the ~~NTN Buzztime, Inc. Amended 2010 Performance~~2021 Inducement Equity Incentive Plan (the ~~“2010 Plan”) and the NTN Buzztime, Inc. 2014~~“2021 Inducement ~~Plan (the “2014~~ Plan”). ~~The Company’s~~Brooklyn’s board of directors has designated its ~~nominating and corporate governance/~~compensation committee as the administrator of the foregoing plans (the “Plan Administrator”). Among other things, the Plan Administrator selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures, if any, and other provisions of the award.

At ~~the Company’s 2019 Annual Meeting~~Brooklyn’s special meeting of ~~Stockholders,~~stockholders held on March 15, 2021, the ~~Company’s~~ stockholders approved the ~~2019~~2020 Equity Incentive Plan (the “2020 Plan”), which ~~provides~~provided for the issuance of up to ~~240,000~~approximately 3,369,000 shares of ~~Company~~ common stock. ~~Awards~~At Brooklyn’s annual meeting of stockholders held on September 3, 2021, the stockholders approved the Restated 2020 Plan, which provides for (1) an increase in the number of shares of common stock that can be issued under the ~~2019~~Restated 2020 Plan by 5,116,000 to 8,485,000 shares of common stock in total and (2) an annual increase in the number of shares reserved for issuance on January 1 of each year from 2022 through 2031 equal to the lesser of (i) 5% of the number of shares of common stock outstanding on the immediately preceding December 31 and (ii) such smaller number of shares of common stock as may be determine by the board of directors (the “Annual Evergreen Shares”). No other provision of the 2020 Plan were amended. Based on the number of shares of common stock outstanding on December 31, 2021, the maximum increase to the number of Annual Evergreen Shares of common stock that can be issued under the Restated 2020 Plan in 2022 is approximately 2,601,000 shares.

Awards under the Restated 2020 Plan may be granted to officers, directors, employees and consultants of the Company. Stock options granted under the ~~2019~~Restated 2020 Plan may either be incentive stock options or nonqualified stock options, may have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. As of December 31, ~~2019,~~2021, there were approximately 320,000 stock options ~~to purchase approximately 2,000 shares of common stock~~ and ~~30,000 restricted stock units~~18,000 RSUs outstanding under the Restated 2020 Plan.

In June 2019 ~~Plan.~~

~~As a result of stockholder~~Brooklyn adopted the 2019 Performance Incentive Plan (the “2019 Plan”), Upon the approval of the ~~2019~~2020 Plan, no future grants ~~will~~could be made under the ~~2010~~2019 Plan. ~~All awards that are~~As of December 31, 2021, all outstanding options under the ~~2010~~2019 Plan ~~will continue to be governed by the 2010 Plan until they are~~either had been exercised or ~~expire~~had expired in accordance with the terms of the applicable award or the ~~2010~~2019 Plan. As

In May 2021, Brooklyn’s board of ~~December 31, 2019, there were stock options to purchase approximately 55,000 shares of common stock and 27,000 restricted stock units outstanding under~~directors adopted the ~~2010 Plan.~~

~~The 2014~~2021 Inducement Plan, which provides for the grant of up to ~~85,000~~1,500,000 share-based awards as material inducement awards to a new ~~employee as an inducement material to the new employee entering into employment~~employees in accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company ~~and~~Guide. The 2021 Inducement Plan expires in ~~September 2024.~~May 2031. As of December 31, ~~2019,~~2021, there were approximately 443,000 nonqualified stock options ~~to purchase approximately 85,000 shares of common stock~~ and ~~no restricted stock units~~222,000 RSUs outstanding under the ~~2014~~2021 Inducement Plan.

~~Stock-Based Compensation Valuation Assumptions~~

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Equity Awards

Stock Options

The Company records stock-based compensation in accordance with ASC ~~No.~~Topic 718,, Compensation – Stock Compensation. The Company estimates the fair value of each stock ~~options~~option award granted with service-based vesting requirements, using the Black-Scholes option pricing model. The Company recognizes the fair value of stock options granted ~~is recognized~~ as expense on a straight-line basis over the requisite service period. ~~Stock-based compensation expense for share-based payment awards is recognized using the straight-line single-option method. On January 1, 2019, the Company adopted ASU No. 2018-07,~~~~Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting.~~

The ~~adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.~~

The Company uses the historical stock price volatility as an input to value its stock options under ASC No. 718. The expected term of stock options represents the period of time options are expected to be outstanding andrisk-free rate is based on ~~observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses~~ the observed interest rates appropriate for the ~~term~~expected life. The expected life (estimated period of time outstanding) of the stock options ~~are expected to be outstanding. The dividend yield assumption~~granted is estimated using the “simplified” method as permitted by the SEC’s Staff Accounting Bulletin No. 110, Share-Based Payment. Expected volatility is based on the Company’s ~~history~~historical volatility over the expected life of the stock option granted, and ~~expectation of dividend payouts.~~

the Company assumes no dividends. Forfeitures are recognized as incurred.

There were 0 stock options outstanding or granted during the year ended December 31, 2020. The following weighted-average assumptions were used for ~~grants issued during 2019 and 2018 under the ASC No. 718 requirements:~~

2019 2018
Weighted average risk-free rate 1.68 % 2.87 %
Weighted average volatility 105.53 % 113.20 %
Dividend yield 0.00 % 0.00 %
Expected term 5.37 years 7.06 years

The Company estimates forfeitures, based on historical activity, at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Stock-based compensation expense for employeesstock options granted during the ~~years~~year ended December 31, ~~2019 and 2018 was $206,000 and $443,000, respectively, and is expensed in selling, general and administrative expenses and credited to the additional paid-in-capital account.~~

2021:

	~~F-19~~	Year ended December 31, 2021
Weighted average risk-free rate			1.09	%
Weighted average volatility			134.64	%
Dividend yield			0	%
Expected term		6.10 years

~~Stock Option Activity~~

The following table summarizes stock option ~~activities~~activity for the ~~years~~year ended December 31, ~~2019 and 2018:~~

Outstanding
Options Weighted
Average Exercise
Price per Share
Weighted
Average
Remaining
Contractual
Life
(in years)
Aggregate Intrinsic
Value
Outstanding January 1, 2018 156,000 $ 17.74 7.12 $ -
Granted 2,000 4.44 - -
Exercised - - - -
Cancelled (6,000 ) 10.42 - -
Forfeited (4,000 ) 6.38 - -
Expired (1,000 ) 16.00 - -
Outstanding December 31, 2018 147,000 18.20 6.08 -
Granted 3,000 3.15 - -
Exercised - - - -
Cancelled (6,000 ) 13.32 - -
Forfeited (2,000 ) 6.24 - -
Expired - - - -
Outstanding December 31, 2019 142,000 $ 18.26 5.14 $ -

Options vested and exercisable at December 31, 2019 140,000 $ 18.43 5.10 $ -

2021:

	Outstanding Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding January 1, 2021		0	$	0		-	$	0
Granted		3,988,000		8.40		9.38		0
Outstanding December 31, 2021		3,988,000	$	8.40		9.38	$	0

Options vested and exercisable at December 31, 2021		0	$	0		-	$	0

The ~~per share~~per-share weighted average grant-date fair value of stock options granted during the ~~years~~year ended December 31, ~~2019 and 2018~~2021 was ~~$2.49 and $3.90, respectively.~~

$7.57.

As of December 31, ~~2019,~~2021, the unamortized ~~stock based~~stock-based compensation expense related to outstanding unvested options was approximately ~~$8,000~~$21,915,000 with a weighted average remaining requisite service period of ~~0.9~~3.30 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. ~~A deferred tax asset generally would be recorded related~~

Included in the 3,988,000 stock options granted during the year ended December 31, 2021, the Company issued 2 stock option grants to Howard J. Federoff, M.D., Ph.D. upon his appointment as the Company’s Chief Executive Officer and President.

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Dr. Federoff was granted a nonqualified stock option covering approximately 2,628,000 shares of common stock (the “Time-Based Option”). The Time-Based Option was granted at a per share exercise price equal to the ~~expected future tax benefit from the exercise~~closing price of the ~~non-qualified~~common stock ~~options. However, due to a history~~on the NYSE American stock exchange on the date of ~~net operating losses (“NOLs”), a full valuation allowance has been recorded related~~grant. Of the shares covered by the Time-Based Option, 25% will vest on the one-year anniversary of the grant date, and the remaining shares will vest in substantially 36 equal monthly installments thereafter, so long as Dr. Federoff provides continuous service to the ~~tax benefit~~Company throughout the relevant vesting date.

Dr. Federoff was also granted a performance-based nonqualified stock option covering approximately 597,000 shares of common stock (the “Milestone Option”). The Milestone Option was granted at a per share exercise price equal to the closing price of common stock on the NYSE American stock exchange on the date of grant, and its fair value is $4,288,738. The Milestone Option will fully vest upon the first concurrence by the U.S. Food and Drug Administration that a proposed investigation may proceed following review of a Company filed investigational new drug application in connection with that the License Agreement. This milestone is subject to Dr. Federoff’s continuous service with the Company through such vesting date.

Both the Time-Based Option and the Milestone Option were granted outside the Company’s equity incentive plans discussed above. The unvested portion of the Time-Based Option and the Milestone Option will be cancelled upon the termination of Dr. Federoff’s employment with the Company for ~~non-qualified stock options.~~

~~Restricted Stock Unit Activity~~

any reason, subject to certain vesting acceleration provisions upon a qualifying termination, as described in his employment agreement with the Company. Unless earlier terminated in accordance with their terms, each of the Time-Based Option and the Milestone Option will otherwise expire on the tenth anniversary of their respective grant date and be subject to the terms and conditions of the respective option agreement approved by the Company. Each of the Time-Based Option and the Milestone Option was intended to constitute an “employment inducement grant” in accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company Guide and was offered as an inducement material to Dr. Federoff in connection with his hiring.

During the year ended December 31, 2021, there were 1,300 options exercised for total cash proceeds of $10,202. The options exercised had a total intrinsic value of $47,010. There were 0 options exercised during the year ended December 31, 2020.

RSUs

Outstanding ~~restricted stock units~~RSUs are settled in an equal number of shares of common stock on the vesting date of the award. ~~A stock unit~~An RSU award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the respective vesting date. Because ~~restricted stock units~~RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date. ~~The weighted average grant date fair value of the restricted stock units awarded~~

There were 0 RSUs outstanding or granted during ~~the years ended December 31, 2019 and 2018 was $3.35 and $5.13 per restricted stock unit, respectively.~~

~~During~~ the year ended December 31, 2019, 30,000 restricted stock units were awarded as a performance-based award granted to the Company’s former chief executive officer in connection with his resignation. The award will vest in full upon the effective date of a change in control transaction in which an individual, entity or group acquires all of the Company’s then-outstanding equity interests on or before March 17, 2020, or in which an individual, entity or group acquires 51% of our then-outstanding equity interests on or before March 17, 2020, and then that same individual, entity or group acquires the remaining equity so that it holds all of the Company’s then-outstanding equity interests on or before June 17, 2020. Continuing service is not required for vesting to occur. Because a change in control is not considered probable until a change in control occurs, the Company will not recognize stock compensation expense on this award until such change in control occurs.

In connection with the resignation of the Company’s former chief executive officer, the vesting of 10,000 of his restricted stock units was accelerated, 5,000 in September 2019 and 5,000 in October 2019. The modification of this award resulted in the Company recognizing stock compensation expense for the accelerated vesting of restricted stock units in the period in which the vesting was accelerated.

With the exception of the performance-based award and the acceleration of vesting of restricted stock units discussed above, all restricted stock units granted vest as to 16.67% of the total underlying shares on the six month anniversary of the grant date and as to the balance of the total underlying shares in 30 substantially equal monthly installments, beginning on the seven month anniversary of the grant date, subject to accelerated vesting in the event of a change in control.

The following table summarizes ~~restricted stock unit~~RSU activity for the years ended December 31, ~~2019 and 2018:~~

Outstanding Restricted Stock Units Weighted Average Fair Value per Share
January 1, 2018 - $ -
Granted 74,000 5.13
Released (13,000 ) 6.04
Canceled - -
December 31, 2018 61,000 $ 4.94
Granted 77,000 3.35
Released (38,000 ) 4.09
Cancelled (43,000 ) 4.17
December 31, 2019 57,000 $ 3.57

Balance expected to vest at December 31, 2019 19,000

~~Under~~2021:

	Outstanding Restricted Stock Units		Weighted Average Fair Value per Share
January 1, 2021		0	$	0
Granted		240,000		13.80
December 31, 2021		240,000	$	13.80

Balance expected to vest at December 31, 2021		0

NaN RSUs vested during the 2010 Plan, in lieu of paying cash to satisfy withholding taxes due upon the settlement of vested restricted stock units, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. During the yearsyear ended December 31, ~~2019 and 2018,~~2021.

The Company recognizes the intrinsic value of RSUs granted as expense on a straight-line basis over the requisite service period. As of December 31, 2021, the unamortized stock-based compensation expense related to outstanding RSUs was approximately ~~38,000 and 13,000~~$2,935,000 with a weighted average remaining requisite service period of 3.51 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options.

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Restricted Stock

Pursuant to the Merger, Brooklyn LLC’s approximately 3,000 outstanding restricted ~~stock~~common units ~~vested and~~ were ~~settled, respectively, and as a result of employees electing to satisfy applicable withholding taxes by having the Company withhold shares,~~exchanged for approximately ~~26,000 and 9,000~~630,000 shares of Brooklyn’s restricted common stock. There were no changes to any conditions and requirements of the restricted common stock. The shares vest quarterly beginning on March 31, 2021 and continuing through December 31, 2022. Due to the modification of the restricted common units, the fair value of the restricted common stock ~~were issued, respectively.~~

~~Warrant Activity~~

immediately after the Merger was compared to the fair value of the restricted common units immediately prior to the Merger, and the change in fair value of $250,000 was recognized in the statement of operations for year ended December 31, 2021. The ~~following summarizes warrant activities~~Company recognizes the fair value of restricted common stock as an expense on a straight-line basis over the requisite service period.

Stock-Based Compensation Expense

Total stock-based compensation expense for the years ended December 31, ~~2019~~2021 and ~~2018:~~

Outstanding Warrants Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (in years)
Outstanding January 1, 2018 72,000 $ 20.00 0.87
Granted - - -
Exercised - - -
Forfeited (72,000 ) - -
Outstanding December 31, 2018 - $ - -

~~During 2013,~~2020 was approximately $5,235,000 and $91,000, respectively. Stock-based compensation is recorded in general and administrative expense and research and development expense in the ~~Company issued warrants~~statement of operations.

14)	Stockholders’ and Members’ Equity (Deficit)

Equity Line Offerings

On April 26, 2021, Brooklyn and Lincoln Park executed the First Purchase Agreement and a related registration rights agreement. Pursuant to the First Purchase Agreement, Brooklyn had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, ~~an aggregate~~up to $20,000,000 of ~~72,000~~shares of Brooklyn’s common stock. Sales of common stock by Brooklyn were subject to certain limitations, and could occur from time to time, at Brooklyn’s sole discretion. For entering into the First Purchase Agreement, Brooklyn issued to Lincoln Park approximately 56,000 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $20,000,000 in shares of common stock. As of December 31, 2021, Brooklyn issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20,000,000, and 0 further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, Brooklyn executed the Second Purchase Agreement and a related registration rights agreement. Pursuant to the Second Purchase Agreement, Brooklyn has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40,000,000 of shares of Brooklyn’s common stock. Sales of common stock by Brooklyn are subject to certain limitations, and may occur from time to time, at Brooklyn’s sole discretion. In consideration of Lincoln Park’s entryinto the Second Purchase Agreement, Brooklyn issued to Lincoln Park 50,000 shares of common stock.

Under the Second Purchase Agreement, the Company may direct Lincoln Park to purchase up to 60,000 shares of common stock on any business day (the “Regular Purchase”), which amount may be increased up to 120,000 shares based on the closing price of the common stock, provided that Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $2.0 million. The purchase price per share for each such Regular Purchase is based off of the common stock’s market immediately preceding the time of sale.

The Second Purchase Agreement also prohibits Brooklyn from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares of common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of common stock. Brooklyn has the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of common stock to Lincoln Park under the Second Purchase Agreements depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.

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As of December 31, 2021, Brooklyn had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of approximately $34,106,000. As of December 31, 2021, there were approximately 446,000 shares remaining to be sold under the Second Purchase Agreement. Pursuant to the securities purchase agreement in respect of the PIPE Transaction, the Company is prohibited from issuing additional shares under the Section Purchase Agreement for a period of one-year immediately following the closing of the PIPE Transaction.

Reverse Stock-Split

On March 25, 2021, immediately prior to the Merger, Brooklyn filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split. As a result of the reverse stock split, the number of issued and outstanding shares of common stock immediately prior to the reverse stock split was reduced into a smaller number of shares, such that every two shares of common stock held by a stockholder of Brooklyn immediately prior to the reverse stock split were combined and reclassified into one share of common stock after the reverse stock split.

Immediately following the reverse stock split there were approximately 1,514,000 shares of common stock outstanding prior to the Merger. No fractional shares were issued in connection with ~~a private placement. The fair value~~the reverse stock split.

Merger

Under the terms of the ~~warrants was~~Merger Agreement (see Notes 1 and 4), on March 25, 2021, Brooklyn issued shares of common stock to the equity holders of Brooklyn LLC. The 87,000 Class A units of Brooklyn LLC were converted into approximately ~~$1,379,000 in aggregate~~22,275,000 shares of common stock; the 15,000,000 Class B units were converted into approximately 2,515,000 shares of common stock; the 10,000,000 Class C units were converted into approximately 1,676,000 shares of common stock; approximately 630,000 shares of common units were converted into approximately 630,000 shares of common stock, and ~~was determined using~~10,500,000 rights options were converted into approximately 11,828,000 shares of common stock. Brooklyn also issued approximately 1,068,000 shares of common stock to the ~~Black-Scholes model using~~Financial Advisor pursuant to the ~~following weighted-average assumptions: risk-free interest rates~~Merger Agreement.

Acquisition

Under the terms of ~~1.06%; dividend yield~~the Acquisition (see Notes 1 and 4), on July 16, 2021, Brooklyn issued approximately 7,022,000 shares of ~~0%; expected volatility~~common stock, of ~~80.25%;~~which approximately 3,644,000 shares are unrestricted and approximately 3,378,000 shares are subject to a ~~term~~three-year lockup agreement, provided that up to 75% of ~~5 years. The Company concluded that these warrants qualify as equity instruments and not liabilities. None~~the shares of ~~these warrants were exercised, and as~~common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of ~~December 31, 2018, all outstanding warrants expired. There were no new warrants granted during~~common stock on the ~~year ended December 31, 2019.~~

principal market for the common stock exceeds specified thresholds.

Cumulative Convertible Preferred Stock

~~The~~

As a result of the Merger, the Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, ~~2019 and 2018.~~

2021.

The Series A Preferred Stock provides for a cumulative annual dividend of $0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. The Company paid approximately ~~$16,000~~$8,000 in cash and issued approximately 202 shares of common stock for payment of dividends ~~in each of~~during the ~~years~~year ended December 31, ~~2019 and 2018.~~

2021.

The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate. At December 31, ~~2019,~~2021, the conversion rate was ~~13.434~~3.7016 and, based on that conversion rate, ~~all outstanding shares~~one share of Series A Convertible Preferred Stock would have converted into approximately ~~12,000~~0.27 shares of common ~~stock. The conversion rate is subject to adjustment~~stock, and all the outstanding shares of the Series A Convertible Preferred Stock would have converted into approximately 42,000 shares of common stock in ~~certain events and is established at~~ the ~~time of conversion.~~aggregate. There were no0 conversions during ~~either of~~ the ~~years~~year ended December 31, ~~2019 and 2018.~~2021. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock.

~~12.Income Taxes~~

The conversion rate will adjust under the following circumstances:

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If the Company (a) pays a dividend or makes a distribution in shares of its common stock, (b) subdivides its outstanding shares of common stock into a greater number of shares, (c) combines its outstanding shares of common stock into a smaller number of shares, or (d) issues by reclassification of its shares of common stock any shares of its common stock (other than a change in par value, or from par value to no par value, or from no par value to par value), then the conversion rate in effect immediately prior to the applicable event will be adjusted so that the holders of the Series A Convertible Preferred Stock will be entitled to receive the number of shares of common stock which they would have owned or have been entitled to receive immediately following the happening of the event, had the Series A Convertible Preferred Stock been converted immediately prior to the record or effective date of the applicable event.

If the outstanding shares of the Company’s common stock are reclassified (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or if the Company consolidates with or merge into another corporation and the Company is not the surviving entity, or if the Company sells all or substantially all of its property, assets, business and goodwill, then the holders of the Series A Convertible Preferred Stock will thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such holders upon such reclassification, consolidation, merger or sale, if the Series A Convertible Preferred Stock had been converted immediately prior thereto.

If the Company issues common stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount (as defined below), then the Equivalent Preference Amount will immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of common stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance, by (B) the total number of shares of common stock outstanding immediately after such issuance. The “Equivalent Preference Amount” is the value that results when the liquidation preference of one share of Series A Convertible Preferred Stock (which is $1.00) is multiplied by the conversion rate in effect at that time; thus the conversion rate applicable after the adjustment in the Equivalent Preference Amount as described herein will be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Convertible Preferred Stock.

15)	Income Taxes

Loss before income taxes consist of the following:

	Years ended December 31,
	2021			2020
Domestic	$	(122,296,000	)	$	(26,531,000	)
Foreign		(5,000	)		0
Total tax provision for income taxes	$	(122,301,000	)	$	(26,531,000	)

For each of the years ended December 31, ~~2019~~2021 and ~~2018,~~2020, current tax provisions and current deferred tax provisions were recorded as follows:

As of December 31,
2019 2018
Current Tax Provision
Federal $ - $ 21,000
State (25,000 ) (21,000 )
Foreign 2,000 (5,000 )
(23,000 ) (5,000 )
Deferred Tax Provision
Federal - -
State 2,000 6,000
Foreign (6,000 ) 63,000
(4,000 ) 69,000
Total Tax Provision
Federal - 21,000
State (23,000 ) (15,000 )
Foreign (4,000 ) 58,000
$ (27,000 ) $ 64,000

~~The net deferred~~

	Years ended December 31,
	2021			2020
Current Tax Provision
Federal	$	0		$	0
State		5,000			0
Foreign		0			0
		5,000			0
Deferred Tax Provision
Federal		(5,836,000	)		0
State		(1,433,000	)		(322,000	)
Foreign		(1,000	)		0
		(7,270,000	)		(322,000	)
Change in valuation allowance		7,270,000			322,000
Total tax provision for income taxes	$	5,000		$	0

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Deferred tax assets and liabilities consist of the effects of temporary differences as shown in the table below. Deferred tax assets have been ~~reported in other liabilities in the consolidated balance sheets at December 31, 2019 and 2018 as follows:~~

As of December 31,
2019 2018
Deferred Tax Assets:
NOL carryforwards $ 14,730,000 $ 15,756,000
UK NOL carryforwards 552,000 534,000
Allowance for doubtful accounts 92,000 97,000
Compensation and vacation accrual 57,000 58,000
Operating accruals 6,000 285,000
Research and experimentation, AMT and foreign tax credits 126,000 126,000
Texas margin tax credit 106,000 120,000
Lease liabilities 854,000 -
Other 846,000 850,000
Total gross deferred tax assets 17,369,000 17,826,000
Valuation allowance (16,218,000 ) (17,149,000 )
Net deferred tax assets 1,151,000 677,000

Deferred Tax Liabilities:
Capitalized software 497,000 523,000
Right of use assets 544,000 -
Fixed assets and intangibles 45,000 86,000
Foreign 47,000 45,000
Total gross deferred liabilities 1,133,000 654,000
Net deferred taxes $ 18,000 $ 23,000

fully reserved by a valuation allowance since it is more likely than not that such tax benefits will not be realized.

	As of December 31,
	2021			2020
Deferred Tax Assets:
Net operating losses		5,454,000			747,000
Foreign net operating losses		595,000			0
R&D credit carryforwards		288,000			0
Stock compensation		1,312,000			0
Vacation accrual		30,000			0
Contingent consideration		5,171,000			0
Deferred rent		40,000			0
Total gross deferred tax assets		12,890,000			747,000
Valuation allowance		(12,610,000	)		(747,000	)
Net deferred tax assets		280,000			0

Deferred Tax Liabilities:
Fixed assets		(168,000	)		0
Intangibles - goodwill		(112,000	)		0
Total deferred tax liabilities		(280,000	)		0
Net deferred taxes	$	0		$	0

The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 21% is as follows:

As of December 31,
2019 2018
Tax at federal income tax rate $ 424,000 $ 68,000
State provision (23,000 ) (15,000 )
Foreign tax differential (2,000 ) 13,000
Change in valuation allowance (429,000 ) (20,000 )
Permanent items 3,000 (3,000 )
Other - 21,000
Total Provision $ (27,000 ) $ 64,000

	As of December 31,
	2021			2020
Tax at federal income tax rate		21.00	%		21.00	%
State income tax, net of federal tax		1.17			0
Non-deductible expenses/excludable items		(16.33	)		0
Pass-through loss		0			(19.79	)
Change in valuation allowance		(5.94	)		(1.21	)
Credits		0.24			0
Other		(0.14	)		0
Provision for income taxes		0.00	%		0.00	%

The net ~~change~~increase in the total valuation allowance for the year ended December 31, ~~2019~~2021 was an increase of ~~$429,000. The net change in~~$11,863,000 of which $7,270,000 relates to the ~~total valuation allowance for~~current year deferred expense and $4,593,000 relates to the ~~year ended December 31, 2018 was an increase of $20,000.~~purchase accounting related to the 2021 business combinations. In assessing the realizability of deferred tax assets, ~~the Company~~management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary ~~differences~~difference become deductible. ~~The Company considers~~Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, ~~the Company~~management has determined that it is more likely than not that the ~~portion of~~ deferred taxes ~~not utilized through the reversal of deferred tax liabilities~~assets will not be ~~realized.~~utilized. Accordingly, the Company has recorded a full valuation ~~allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.~~

allowance.

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At December 31, ~~2019,~~2021 and 2020 the Company ~~had NOL~~has available net operating loss (“NOL”) carryforwards of approximately ~~$63,354,000~~$20,679,000 and $0 for federal income tax purposes, respectively, of which ~~will continue expiring in 2020, and approximately $29,195,000 for state income tax purposes, which will continue expiring in 2020. There~~$20,679,000 can be ~~no assurance that~~carried forward indefinitely. The Company has available $1,397,000 and $747,000 state NOLs for the years ended December 31, 2021 and 2020, respectively. The Company ~~will ever be able to realize the benefit of some or all of the federal and state~~also has foreign NOL carryforwards ~~due to continued operating losses. Under~~of $4,759,000 and $0 for the years ended December 31, 2021 and 2020, respectively, which carry forward indefinitely. Section 382 of the Internal Revenue Code (“IRC”) ~~Section 382 and similar state provisions, ownership changes may limit~~imposes limits on the ~~annual utilization of~~ability to use NOL carryforwards ~~existing~~that existed prior to a change in control ~~that are available~~ to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards. The Company performed a Section 382 analysis as of December 31, 2018 to determine the impact of any changes in ownership. Based on this analysis, no ownership change occurred that would limit the use of the NOLs. The Company does not believe there has been a material change in its ownership between the Section 382 analysis completed through December 31, 2018 and the year ended December 31, 2019 that would indicate a limit on the use of the NOLs. The Company continues to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for ~~substantially~~ all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets. ~~In addition,~~

At December 31, 2021 and 2020 the Company has ~~approximately $133,000 of~~federal and state income tax credit ~~tax~~ carryforwards ~~that~~of approximately $288,000 and $0, respectively. The credits begin to expire in 2041.

In accordance with authoritative guidance, the ~~years 2020 through 2026.~~

impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The ~~deferred~~Company has 0 uncertain tax ~~assets~~positions as of December 31, 2019 include a deferred tax asset of $442,000 representing NOLs arising from the exercise of stock options by Company employees for 2005 and prior years. To the extent the Company realizes any tax benefit for the NOLs attributable to the stock option exercises, such amount would be credited directly to stockholders’ equity.

United States income taxes were not provided on unremitted earnings from non-United States subsidiaries. Such unremitted earnings are considered to be indefinitely reinvested and determination of the amount of taxes that might be paid on these undistributed earnings is not practicable.

2021 or December 31, 2020.

The Company recognizes interest and ~~its subsidiaries~~penalties related to unrecognized tax positions within the income tax expense line in the accompanying consolidated statements of operations. There were 0 accrued interest and penalties associated with uncertain tax positions as of December 31, 2021 or December 31, 2020.

The Company is subject to U.S. federal, state, and foreign income tax. Tthe Company’s income tax returns are subject to ~~federal income~~examination by the relevant taxing authorities. As of December 31, 2021, the 2018 – 2021 tax ~~as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer~~years remain subject to ~~income~~examination in the U.S. federal tax, ~~examination by~~various state, and foreign tax authorities in major jurisdictions for years prior to 2015. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards.jurisdictions. The Company is not currently under examination by ~~the IRS~~federal state, or ~~state taxing authorities.~~

~~13.Long-term Debt~~

~~Term Loan~~

In September 2018, the Company entered into a loan and security agreement with Avidbank for a 48-month term loan in the amount of $4,000,000. The Company makes monthly electronic principal payments initiated by Avidbank of approximately $83,000 plus accrued and unpaid interest. As of December 31, 2019, $2,750,000 of the term loan was outstanding. The Company recorded debt issuance costs of $23,000, which includes a $20,000 facility fee. The debt issuance costs are amortized to interest expense using the effective interest rate method over the life of the loan. The unamortized balance of the debt issuance costs as of December 31, 2019 was approximately $11,000 and is recorded as a reduction of long-term debt. Through the year ended December 31, 2019, the Company was required to comply with the following financial covenants:

	●	EBITDA (as defined below) must be at least $1,000,000 for the trailing six-month period as of the last day of each fiscal quarter. The Company refers to this covenant as the EBITDA covenant. “EBITDA” means (a) net profit (or loss), after provision for taxes, plus (b) interest expense, plus (c) to the extent deducted in the calculation of net profit (or loss), depreciation expense and amortization expense, plus (d) income tax expense, plus (e) to the extent approved by Avidbank, other noncash expenses and charges, other onetime charges, and any losses arising from the sale, exchange, transfer or other disposition of assets not in the ordinary course of business.

	●	The aggregate amount of unrestricted cash the Company has in deposit accounts or securities accounts maintained with Avidbank must be not less than $2,000,000 at all times. The Company refers to this covenant as the minimum liquidity covenant.

~~As of December 31, 2019, the Company was in compliance with these covenants.~~

In February 2020, the Company made a pre-payment on its long-term debt with Avidbank of approximately $150,000 as a result of selling certain assets related to the Company’s Stump! Trivia product line. (See Note 18).

Pursuant to the amended agreement the Company entered into with Avidbank on March 12, 2020, the total outstanding principal of $2,750,000 was classified as a current liability as of December 31, 2019 and will be paid in full by December 31, 2020. (See Note 18.)

~~Interest expense related to long-term debt for the years ended December 31, 2019 and 2018 was $236,000 and $296,000, respectively.~~

~~14.Leases~~

~~On January 1, 2019, the Company adopted ASC No. 842,~~~~Leases~~ (“ASC No. 842”). ASC No. 842 primarily requires lessees to recognize at the lease commencement date a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must either (i) apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements or (ii) recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Applying a full retrospective transition approach is not allowed. The Company elected to use the cumulative-effect transition method upon adoption.

~~ASC No. 842 also allows lessees and lessors to elect certain practical expedients. The Company elected the following practical expedients:~~

●

~~Transitional practical expedients:~~

	o	~~The Company need not reassess whether any expired or existing contracts are or contain leases.~~
	o	The Company need not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be classified as finance leases).
	o	~~The Company need not reassess initial direct costs for any existing leases.~~

	●	Hindsight practical expedient. The Company elected the hindsight practical expedient in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Company’s right-of-use assets.
	●	~~As a lessor, the Company elected to not separate nonlease components from lease components when both of the following are met:~~

	o	~~The timing and patterns of transfer for the lease component and nonlease component associated with that lease component are the same; and~~
	o	~~The lease component, if accounted for separately, would be classified as an operating lease.~~

foreign jurisdictions.

16)

~~F-24~~

Retirement Savings Plan

~~As Lessee~~

The Company has entered into operating leases for office and production facilities and equipment under agreements that expire at various dates through 2026. Certain of these leases contain renewal provisions and escalating rental clauses and generally require the Company to pay utilities, insurance, taxes and other operating expenses. The Company also has property held under finance leases that expire at various dates through 2021. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

Upon adoption of ASC No. 842, the Company recognized on its consolidated balance sheet as of January 1, 2019 an initial measurement of approximately $3,458,000 of operating lease liabilities, and approximately $2,336,000 of corresponding operating right-of use assets, net of tenant improvement allowances. The initial measurement of the finance leases under ASC No. 842 did not have a material change from the balances of the finance lease liabilities and assets recorded prior to the adoption of ASC No. 842. There was also no cumulative effect adjustment to retained earnings as a result of the transition to ASC No. 842. The Company recorded the initial recognition of the operating leases as a supplemental noncash financing activity on the accompanying consolidated statement of cash flows. The adoption of ASC No. 842 did not have a material impact on the Company’s consolidated statement of operations.

The tables below show the initial measurement of the operating lease right-of-use assets and liabilities as of January 1, 2019 and the balances as of December 31, 2019, including the changes during the year.

Operating lease right-of-use assets
Initial measurement at January 1, 2019 $ 3,458,000
Less tenant improvement allowance (1,122,000 )
Net right-of-use assets at January 1, 2019 2,336,000
Initial measurement of new operating lease right-of-use-assets 57,000
Less amortization of operating lease right-of-use assets (292,000 )
Operating lease right-of-use assets at December 31, 2019 $ 2,101,000

Operating lease liabilities
Initial measurement at January 1, 2019 $ 3,458,000
Initial measurement of new operating lease liabilities 57,000
Less principal payments on operating lease liabilities (215,000 )
Operating lease liabilities at December 31, 2019 3,300,000
Less non-current portion (2,891,000 )
Current portion at December 31, 2019 $ 409,000

As of December 31, 2019, the Company’s operating leases have a weighted-average remaining lease term of 6.3 years and a weighted-average discount rate of 7.25%. The maturities of the operating lease liabilities are as follows:

As of
December 31, 2019

2020 $ 635,000
2021 620,000
2022 634,000
2023 655,000
2024 670,000
Thereafter 932,000
Total operating lease payments 4,146,000
Less imputed interest (846,000 )
Present value of operating lease liabilities $ 3,300,000

Total lease expense was approximately $542,000 and $407,000 for the twelve months ended December 31, 2019 and 2018, respectively. Lease expense was recorded in selling, general and administrative expenses.

The tables below show the initial measurement of the finance lease right-of-use assets and liabilities as of January 1, 2019 and the balances as of December 31, 2019, including the changes during the year. The Company’s finance lease right-of-use assets are included in “Fixed assets, net” on the accompanying consolidated balance sheet.

Finance lease
right-of-use assets

Initial measurement at January 1, 2019 $ 80,000
Less depreciation of Finace lease right-of-use assets (39,000 )
Finace lease right-of-use assets at December 31, 2019 $ 41,000

Finace lease
liabilities

Initial measurement at January 1, 2019 $ 86,000
Less principal payments on Finace lease liabilities (45,000 )
Finace lease liabilities as of December 31, 2019 41,000
Less non-current portion (20,000 )
Current portion at December 31, 2019 $ 21,000

As of December 31, 2019, the Company’s finance leases have a weighted-average remaining lease term of 1.9 years and a weighted-average discount rate of 5.51%. The maturities of the finance lease liabilities are as follows:

As of
December 31, 2019

2020 23,000
2021 21,000
Total Finace lease payments 44,000
Less imputed interest (3,000 )
Present value of Finace lease liabilities $ 41,000

~~For the twelve months ended December 31, 2019 and 2018, total lease costs under finance leases were approximately $48,000 and $191,000, respectively.~~

~~As Lessor~~

ASC No. 842 did not make fundamental changes to lease accounting guidance for lessors. Therefore there was no financial statement impact due to the adoption of ASC No. 842. As a lessor, the Company has two types of customer contracts that involve leases: right-to-use operating leases and sales-type leases.

~~Right-to-use operating leases.~~ Certain customers enter into contracts to obtain subscription services from the Company, which includes the Company’s content (nonlease component) and equipment installed in the customer locations so the customer can access the content (lease component). The timing and pattern of the transfer of both the subscription services and the equipment are the same, that is, the Company’s subscription services are made available to its customer at the same time as the equipment is installed. Additionally, the Company has determined that the lease component of these customer contracts is an operating lease. Accordingly, the Company has concluded that these contracts qualify for the practical expedient permitted under ASC No. 842 to not separate the nonlease component from the related lease component. Instead, the Company treats the combined component as a single performance obligation under Topic 606,~~Revenue from Contracts with Customers,~~ ~~as the Company has concluded that the nonlease component (subscription services) is the predominant component of the combined component.~~

~~Sales-type leases.~~ As with the contracts under right-of-use operating leases, certain customers enter into contracts to obtain subscription services from the Company, which includes the Company’s content (nonlease component) and equipment installed in the customer locations so the customer can access the content (lease component). Generally, the equipment lease term is for three years and the customer prepays its lease in full. After the lease term, the lessee may purchase the equipment for a nominal fee or lease new equipment. Although the timing and pattern of the transfer of both the subscription services and the equipment may be the same, the provisions of the contract related to the equipment results in a sales-type lease, and therefore, the Company cannot treat both the nonlease component and the lease component as a combined component. Accordingly, the nonlease component is accounted for under Topic 606 and the sales-type lease is accounted for under Topic 842 and separately disaggregated on the Company’s statement of operations.

~~15.Commitments and Contingencies~~

~~Litigation~~

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

~~Sales and Use Tax~~

From time to time, state tax authorities will make inquiries as to whether or not a portion of the Company’s services require the collection of sales and use taxes from customers in those states. Many states have expanded their interpretation of their sales and use tax statutes to subject more activities to tax. The Company evaluates such inquiries on a case-by-case basis and has favorably resolved the majority of these tax issues in the past without any material adverse consequences. There were no liabilities recorded in either of the years ended December 31, 2019 or 2018.

~~16.Accumulated Other Comprehensive Income~~

Accumulated other comprehensive income includes the accumulated gains or losses from foreign currency translation adjustments. The Company translated the assets and liabilities on the balance sheet of its subsidiary, NTN Canada Inc., into U.S. dollars using the period end exchange rate. Revenue and expenses were translated using the weighted-average exchange rates for the reporting period. As of December 31, 2019 and 2018, $268,000 and $200,000, respectively, of accumulated foreign currency translation adjustments were recorded in accumulated other comprehensive income.

~~17.Retirement Savings Plan~~

~~In 1994, the~~ Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees ~~who have completed at least three months of service, have worked a minimum of 250 hours in a quarter, and have reached age 18~~ to defer up to ~~50%~~90% of their pay on a pre-tax basis. The Company does not contribute a match to the employees’ contribution.

~~18.Subsequent Events~~

~~Asset Sale~~

17)	Subsequent Events

Private Placement of Equity

On ~~January 13, 2020,~~March 6, 2022, the Company entered into a certain Securities Purchase Agreement (the “Purchase Agreement”) with an ~~asset~~investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to a private investor (the “PIPE Investor”) of approximately 6,857,000 units (collectively, the “Units”), each Unit consisting of (i) 1 share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) 1 warrant (the “Common Warrants”) to purchase one share of common stock, for an aggregate gross purchase price of approximately $12.0 million. The PIPE Transaction closed on March 9, 2022.

Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, and expires five-and-one-half years from the date of issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.

F-33

Table of Contents

In connection with the PIPE Transaction, the Company and the PIPE Investor also entered into a registration rights agreement, ~~with Sporcle, Inc., a Delaware corporation (“Sporcle”),~~dated March 6, 2022, pursuant to which the Company agreed to ~~sell~~prepare and file a registration statement with the SEC no later than 15 days following the filing date of this Annual Report on Form 10-K to ~~Sporcle all~~register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. The Company agreed to use its best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved.

Reduction in Force

On January 3, 2022, the Company completed a reduction in force (the “Reduction”), comprising 8 employees (53% of our workforce at that time), effective January 3, 2022, which was the date on which the Company notified such employees of their termination. The Company believes the Reduction, which was approved by its Board of Directors, will enable the Company to better align its workforce with the needs of its ~~assets necessary for Sporcle~~business and focus more of its capital resources on the Company’s cell therapy and gene editing platform, as it continues to ~~conduct~~sustain its investment in the ~~live hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation for $1,360,000. The transaction closed on January 31, 2020, and~~prosecution of IRX-2 through the end of the INSPIRE Phase 2B study. In connection with the Reduction, the Company ~~recorded~~estimates that it will incur approximately $500,000 for severance and termination-related costs, which the Company will record during the first quarter of 2022. The Company may also incur additional costs and non-cash charges that are not currently contemplated or determinable, which may occur as a ~~net gain~~result of ~~approximately $1,265,000 in January 2020.~~

~~Amendment to Loan and Security Agreement~~

the Reduction.

Lease Assignment

On March ~~12, 2020,~~5, 2022, the Company entered into an ~~amendment~~Agreement to ~~the loan and security agreement it entered into~~Assign Space Lease with Avidbank in September 2018. In connection with entering into the amendment, the Company made a $433,000 payment on its term loan, which includes the $83,333 monthly principal payment plus accrued interest for March 2020 and a $350,000 principal prepayment, thereby reducing the outstanding principal balance of its term loanRegenLab USA LLC (“Regen”) pursuant to $2,000,000. Under the terms of the amendment, the Company’s financial covenants were changed, the maturity date of its term loan was changed from September 28, 2022 to December 31, 2020 (and as a result, the Company classified the total outstanding principal balance as a current liability on its balance sheet as of December 31, 2019), and commencing on April 30, 2020, the Company must make principal plus accrued interest payments on the last day of each month, such that its term loan will be repaid by December 31, 2020. The principal payment the Company must make each month will be $125,000 for each of April, May and June, $300,000 for each of July, August, September, October and November, and $125,000 for December.

Under the terms of the original loan and security agreement, the Company’s EBITDA was required to be at least $1,000,000 for the trailing six-month period as of the last day of each fiscal quarter and the aggregate amount of unrestricted cash it had in deposit accounts or securities accounts maintained with Avidbank must be not less than $2,000,000 at all times. As of December 31, 2019, the Company was in compliance with both of those covenants.

~~Under the terms of the amendment, the minimum EBITDA covenant was replaced with a monthly minimum asset coverage ratio covenant,~~ which the Company ~~refers~~agreed to assign its Brooklyn, NY lease (the “Brooklyn Lease”) to Regen. The effective date of the assignment would be contingent upon, among other things, a consent from BioBat, Inc. (the “Landlord”) to assign the Brooklyn Lease. Additionally, Regen agreed to purchase certain equipment from the Company for $50,000, partly reimburse the Company $50,000 toward certain existing unamortized leasehold improvements, and to reimburse the Company for the existing security deposit the Company had under the Brooklyn Lease of approximately $63,000.

On March 25, 2022, the Company entered into an Assignment and Assumption of Lease Agreement (the “Assignment Agreement”) with Regen, the consent of which was provided by the Landlord in the Assignment Agreement. The effective date of the assignment was March 28, 2022. Under the Assignment Agreement, Regen (i) accepts the assignment of the Brooklyn Lease; (ii) assumes all of the obligations, liabilities, covenants and conditions of the Company’s as tenant under the Brooklyn Lease; (iii) assumes and agrees to perform and observe all of the obligations, terms, requirements, covenants and conditions to be performed or observed by the Company under the Brooklyn Lease; and (iv) makes all of the representations and warranties binding under the Brooklyn Lease with the same force and effect as if Regens had executed the Brooklyn Lease originally as the ~~ACR covenant,~~tenant.

Notwithstanding the above assumptions above by Regen, the Company shall be and remain liable and responsible for the due keeping, and full performance and observance, of all the provisions of the Brooklyn Lease on the part of the tenant to be kept, performed and observed. As a result of the Assignment Agreement, the Company will write off the remaining ROU asset balance and the ~~minimum liquidity covenant was amended~~corresponding lease liability as of March 25, 2022, and it will record any resulting gain or loss on the termination of the Brooklyn lease in its statement of operations. The Company does not expect to ~~provide that~~recognize a contingent liability for its ongoing obligation to remain liable and responsible for all the ~~aggregate amount~~provisions of ~~unrestricted cash~~the Brooklyn Lease, as the Company has ~~in deposit accounts or securities accounts maintained with Avidbank must be at all times~~determined that it is not ~~less than the principal balance outstanding~~probable it will recognize a loss under the Assignment Agreement.

New Lease Agreement

On March 31, 2022, the Company entered into the Torrey Pines Science Center Lease in San Diego, California (the “San Diego Lease”) with Torrey Pines Science Center Limited Partnership for approximately 5,200 square feet of lab and office space. The term ~~loan. Under~~of the ~~ACR covenant,~~San Diego Lease is 62 months and the ~~ratio~~lease commencement date begins on the earlier to occur of (i) the ~~Company’s unrestricted cash at Avidbank as~~date the Company first commences to conduct business in the premises or (ii) the possession date, which is anticipated to be August 1, 2022 (or earlier if the current tenant terminates its lease early). The lease commencement date was April 15, 2022.

Base rent is $6.35 per square foot in the first year of the ~~last day of~~San Diego Lease, with a ~~calendar month plus 75% of its outstanding accounts receivable accounts that are within 90 days of invoice date to (ii)~~rent abatement for the ~~outstanding principal balance~~second and third full months of the first year. The base rent will increase by approximately 3% on each anniversary of the lease commencement date. The Company is also required to pay its share of operating expenses and property taxes. The San Diego Lease provides for a one-time option to extend the lease term ~~loan on such day must be no less than 1.25 to 1.00.~~

for an additional five years at the then fair rental value.

~~F-27~~

F-34

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

Title of Each Class		~~Trading Symbol(s)~~		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, ~~$.005~~$0.005 par value		~~NTN~~BTX		~~NYSE American~~The Nasdaq Stock Market LLC

Item		Page

	Part I

1.	Business	1
1A.	Risk Factors	5
1B.	Unresolved Staff Comments	13
2.	Properties	13
3.	Legal Proceedings	13
4.	Mine Safety Disclosures	13

	Part II

5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
6.	Selected Financial Data	14
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
7A.	Quantitative and Qualitative Disclosures About Market Risk	24
8.	Financial Statements and Supplementary Data	24
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
9A.	Controls and Procedures	24
9B.	Other Information	24

	Part III

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

	Part IV

15.	Exhibits, Financial Statement Schedules	26
16.	Form 10-K Summary	27
	Signatures	28
	Index to Financial Statements and Schedule	F-1

	Year Ended December 31,
	2019			2018
Buffalo Wild Wings revenue	$	6,820,000		$	10,180,000
Percent of total revenue		34	%		44	%

	As of December 31,
	2019			2018
Buffalo Wild Wings accounts receivable	$	158,000		$	552,000
Percent of total accounts receivable, net		13	%		48	%

	Years Ended December 31,						Change			% Change
	2021			2020			Change			% Change
Operating expenses:
Research and development	$	12,705,000		$	3,951,000		$	8,754,000		$	222	%
Acquired in-process research and development		80,538,000			-			80,538,000			N/A
General and administrative		14,724,000			3,297,000			11,427,000			347	%
Transaction costs		5,765,000			-			5,765,000			N/A
Change in fair value of contingent consideration		(180,000	)		19,240,000			(19,420,000	)		-101	%
Total operating expenses		113,552,000			26,488,000			87,064,000			329	%

Loss from operations		(113,552,000	)		(26,488,000	)		(87,064,000	)		329	%

Other expenses:
Loss on sale of NTN assets		(9,648,000	)		-			(9,648,000	)		N/A
Other income (expense), net		899,000			(43,000	)		942,000			-2191	%
Total other expense		(8,749,000	)		(43,000	)		(8,706,000	)		20247	%
Loss before income taxes		(122,301,000	)		(26,531,000	)		(95,770,000	)		361	%
Provision for income taxes		(5,000	)		-			(5,000	)		N/A

Net loss		(122,306,000	)		(26,531,000	)		(95,775,000	)		361	%

Series A preferred stock dividend		(16,000	)		-			(16,000	)		N/A

Net loss attributable to common stockholders	$	(122,322,000	)	$	(26,531,000	)	$	(95,791,000	)		361	%

	Years Ended December 31
	2021		2020		Change			% Change
License fees	$	6,500,000	$	-	$	6,500,000			N/A
Stock-based compensation		1,597,000		-		1,597,000			N/A
Clinical trials		1,292,000		412,000		880,000			214	%
Payroll-related		2,342,000		1,985,000		357,000			18	%
Other expenses, net		974,000		1,554,000		(580,000	)		-37	%
Total research and development expenses	$	12,705,000	$	3,951,000	$	8,754,000			222	%

	Network Subscribers as of December 31,
	2019		2018
United States		1,318		2,499
Canada		122		140
Total		1,440		2,639

	For the years ended December 31,
	2019			2018			Change
Revenues	$	19,806,000		$	23,335,000		$	(3,529,000	)
Direct Costs		7,483,000			8,070,000			(587,000	)
Gross Margin	$	12,323,000		$	15,265,000		$	(2,942,000	)

Gross Margin Percentage		62.2	%		65.4	%

	For the years ended December 31,						Decrease in
	2019			2018			other expense, net
Interest expense, net	$	(249,000	)	$	(389,000	)
Other expense, net		(9,000	)		(137,000	)
Total other expense, net	$	(258,000	)	$	(526,000	)	$	268,000

	Increase (Decrease)
Working capital as of December 31, 2018	$	2,761,000
Changes in current assets:
Cash and cash equivalents		673,000
Accounts receivable, net of allowance		52,000
Site equipment to be installed		(1,449,000	)
Prepaid expenses and other current assets		9,000
Net decrease in current assets		(715,000	)
Changes in current liabilities:
Accounts payable		564,000
Accrued compensation		16,000
Accrued expenses		46,000
Sales taxes payable		44,000
Income taxes payable		2,000
Current portion of obligations under capital leases		409,000
Deferred revenue		(24,000	)
Deferred rent		(807,000	)
Other current liabilities		82,000
Net increase in current liabilities		2,071,000
Net decrease in working capital		(2,786,000	)
Working capital as of December 31, 2019	$	(25,000	)

	December 31, 2019			December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	3,209		$	2,536
Restricted cash		50			50
Accounts receivable, net of allowances of $354 and $374, respectively		1,195			1,143
Site equipment to be installed		1,090			2,539
Prepaid expenses and other current assets		526			517
Total current assets		6,070			6,785
Restricted cash, long-term		150			200
Operating lease right-of-use assets		2,101			-
Fixed assets, net		2,822			4,667
Software development costs, net of accumulated amortization of $3,341 and $2,973, respectively		1,915			2,018
Deferred costs		274			424
Goodwill		696			667
Other assets		97			103
Total assets	$	14,125		$	14,864

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	835		$	271
Accrued compensation		588			572
Accrued expenses		490			444
Sales taxes payable		131			87
Income taxes payable		3			1
Current portion of long-term debt		2,739			1,000
Current portion of obligations under operating leases		409			-
Current portion of obligations under financing leases		21			45
Current portion of deferred revenue		460			1,267
Other current liabilities		419			337
Total current liabilities		6,095			4,024
Long-term debt		-			2,729
Long-term obligations under operating leases		2,891			-
Long-term obligations under financing leases		20			41
Long-term deferred revenue		2			30
Deferred rent		-			1,123
Other liabilities		26			-
Total liabilities		9,034			7,947

Shareholders’ Equity
Series A 10% cumulative convertible preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at December 31, 2019 and 2018		1			1
Common stock, $0.005 par value, 15,000 shares authorized at December 31, 2019 and 2018; 2,901 and 2,875 shares issued at December 31, 2019 and 2018, respectively		14			14
Treasury stock, at cost, 10 shares at December 31, 2019 and 2018		(456	)		(456	)
Additional paid-in capital		136,721			136,552
Accumulated deficit		(131,457	)		(129,394	)
Accumulated other comprehensive income		268			200
Total shareholders’ equity		5,091			6,917
Total liabilities and shareholders’ equity	$	14,125		$	14,864

	Series A Cumulative Convertible Preferred Stock				Common Stock				Treasury			Additional Paid-in			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Stock			Capital			Deficit			Income			Total

Balances at January 1, 2018		156	$	1		2,521	$	13	$	(456	)	$	134,752		$	(129,119	)	$	345		$	5,536

Foreign currency translation
adjustment		-		-		-		-		-			-			-			(145	)		(145	)
Net loss		-		-		-		-		-			-			(259	)		-			(259	)
Net proceeds from issuance of common stock related to registered direct offering		-		-		345		1		-			1,374			-			-			1,375
Issuance of common stock upon vesting of restricted stock units		-		-		9		-		-			(17	)		-			-			(17	)
Dividend paid to Series A preferred stockholders		-		-		-		-		-			-			(16	)		-			(16	)
Non-cash stock based compensation		-		-		-		-		-			443			-			-			443

Balances at December 31, 2018		156	$	1		2,875	$	14	$	(456	)	$	136,552		$	(129,394	)	$	200		$	6,917

Foreign currency translation adjustment		-		-		-		-		-			-			-			68			68
Net loss		-		-		-		-		-			-			(2,047	)		-			(2,047	)
Issuance of common stock upon vesting of restricted stock units		-		-		26		-		-			(37	)		-			-			(37	)
Dividend paid to Series A preferred stockholders		-		-		-		-		-			-			(16	)		-			(16	)
Non-cash stock based compensation		-		-		-		-		-			206			-			-			206

Balances at December 31, 2019		156	$	1		2,901	$	14	$	(456	)	$	136,721		$	(131,457	)	$	268		$	5,091

	For the years ended December 31,
	2019			2018
Cash flows provided by operating activities:
Net loss	$	(2,047	)	$	(259	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,877			2,764
Provision for doubtful accounts		196			78
Transfer of fixed assets to sales-type lease		10			23
Amortization of operating lease right-of-use-assets		291			-
Stock-based compensation		206			443
Amortization of debt issuance costs		9			59
Loss from the sale or disposition of assets		689			242
Impairmentof capitalized software		550			23
Impairment of goodwill		-			261
Changes in assets and liabilities:
Accounts receivable		(248	)		(507	)
Site equipment to be installed		337			431
Operating lease liabilities		(215	)
Prepaid expenses and other assets		(5	)		29
Accounts payable and accrued liabilities		669			(186	)
Income taxes payable		1			(10	)
Deferred costs		151			350
Deferred revenue		(835	)		(2,227	)
Deferred rent		-			(190	)
Other liabilities		108			41
Net cash provided by operating activities		2,744			1,365
Cash flows used in investing activities:
Capital expenditures		(128	)		(648	)
Capitalized software development expenditures		(966	)		(964	)
Proceeds from sale of assets		29			33
Net cash used in investing activities		(1,065	)		(1,579	)
Cash flows used in financing activities:
Net proceeds from issuance of common stock related to registered direct offering		-			1,375
Proceeds from long-term debt		-			4,000
Payments on long-term debt		(1,000	)		(5,373	)
Debt issuance costs on long-term debt		-			(23	)
Principal payments on finance leases		(45	)		(249	)
Tax withholding related to net share settlement of vested restricted stock units		(37	)		(17	)
Dividends paid to Series A preferred shareholders		(16	)		(16	)
Net cash used in financing activities		(1,098	)		(303	)
Effect of exchange rate on cash and cash equivalents		42			(75	)
Net increase (decrease) in cash, cash equivalents and restricted cash		623			(592	)
Cash, cash equivalents and restricted cash at beginning of year		2,786			3,378
Cash, cash equivalents and restricted cash at end of year	$	3,409		$	2,786

Supplemental disclosures of cash flow information:
Cash paid during the period for:

Interest	$	246		$	336

Income taxes	$	26		$	17
Supplemental disclosure of non-cash investing and financing activities:

Site equipment transferred to fixed assets	$	521		$	1,865

Capitalized tenant improvements paid by landlord	$	-		$	1,131

Initial measurement of operating lease right-of-use assets and liabilities	$	3,458		$	-

Assets acquired under operating lease	$	57		$	-

Assets acquired under financing lease	$	-		$	5

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	3,209		$	2,536
Restricted cash		50			50
Restricted cash, long-term		150			200
Total cash, cash equivalents and restricted cash at end of period	$	3,409		$	2,786

	Deferred Revenue
Balance at January 1, 2019	$	1,297,000
New performance obligations		1,093,000
Revenue recognized		(1,928,000	)
Balance at December 31, 2019		462,000
Less non-current portion		(2,000	)
Current portion at December 31, 2019	$	460,000

	Installation Costs			Sales Commissions			Total Deferred Costs
Balance at January 1, 2019	$	321,000		$	103,000		$	424,000
Incremental costs deferred		352,000			161,000			513,000
Deferred costs recognized		(486,000	)		(177,000	)		(663,000	)
Balance at December 31, 2019		187,000			87,000			274,000

	For the year ended						For the year ended
	December 31, 2019						December 31, 2018
	Gross Carrying Value		Effects of Foreign Currency		Net Carrying Value		Gross Carrying Value		Impairment Losses for the period			Effects of Foreign Currency			Net Carrying Value
Goodwill	$	667,000	$	29,000	$	696,000	$	1,004,000	$	(261,000	)	$	(76,000	)	$	667,000

	Outstanding Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding January 1, 2018		156,000		$	17.74		7.12	$	-
Granted		2,000			4.44		-		-
Exercised		-			-		-		-
Cancelled		(6,000	)		10.42		-		-
Forfeited		(4,000	)		6.38		-		-
Expired		(1,000	)		16.00		-		-
Outstanding December 31, 2018		147,000			18.20		6.08		-
Granted		3,000			3.15		-		-
Exercised		-			-		-		-
Cancelled		(6,000	)		13.32		-		-
Forfeited		(2,000	)		6.24		-		-
Expired		-			-		-		-
Outstanding December 31, 2019		142,000		$	18.26		5.14	$	-

Options vested and exercisable at December 31, 2019		140,000		$	18.43		5.10	$	-

	Outstanding Restricted Stock Units			Weighted Average Fair Value per Share
January 1, 2018		-		$	-
Granted		74,000			5.13
Released		(13,000	)		6.04
Canceled		-			-
December 31, 2018		61,000		$	4.94
Granted		77,000			3.35
Released		(38,000	)		4.09
Cancelled		(43,000	)		4.17
December 31, 2019		57,000		$	3.57

Balance expected to vest at December 31, 2019		19,000

	Outstanding Warrants			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)
Outstanding January 1, 2018		72,000		$	20.00		0.87
Granted		-			-		-
Exercised		-			-		-
Forfeited		(72,000	)		-		-
Outstanding December 31, 2018		-		$	-		-

	Operating lease right-of-use assets
Initial measurement at January 1, 2019	$	3,458,000
Less tenant improvement allowance		(1,122,000	)
Net right-of-use assets at January 1, 2019		2,336,000
Initial measurement of new operating lease right-of-use-assets		57,000
Less amortization of operating lease right-of-use assets		(292,000	)
Operating lease right-of-use assets at December 31, 2019	$	2,101,000

	As of December 31, 2019
2020	$	635,000
2021		620,000
2022		634,000
2023		655,000
2024		670,000
Thereafter		932,000
Total operating lease payments		4,146,000
Less imputed interest		(846,000	)
Present value of operating lease liabilities	$	3,300,000

	Finance lease right-of-use assets
Initial measurement at January 1, 2019	$	80,000
Less depreciation of Finace lease right-of-use assets		(39,000	)
Finace lease right-of-use assets at December 31, 2019	$	41,000

		Finace lease liabilities
Initial measurement at January 1, 2019	$	86,000
Less principal payments on Finace lease liabilities		(45,000	)
Finace lease liabilities as of December 31, 2019		41,000
Less non-current portion		(20,000	)
Current portion at December 31, 2019	$	21,000

	As of December 31, 2019
2020		23,000
2021		21,000
Total Finace lease payments		44,000
Less imputed interest		(3,000	)
Present value of Finace lease liabilities	$	41,000