See accompanying notes to unaudited condensed consolidated financial statements.

NTN BUZZTIME, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)	(1) BASIS OF PRESENTATION

Description of Business

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

The Company delivers interactive entertainment and innovative technology, including performance analytics, to help its customers acquire, engage and retain its patrons. The Company’s tablets and technology offer engaging solutions to establishments with guests who experience dwell time, such as in bars, restaurants, casinos and senior living centers. Casual dining venues subscribe to the Company’s customizable solution to differentiate themselves via competitive fun by offering guests trivia, card, sports and arcade games. The Company’s platform creates connections among the players and venues, and amplifies guests’ positive experiences, and its in-venue TV network creates one of the largest digital out of home adadvertising audiences in the United States and Canada. The Company also continues to support its legacy network product line, which it calls its Classic platform.

The Company generates revenue by charging subscription fees for its service to network subscribers, by leasing tablet platform equipment to certain network subscribers, by selling tablet platform equipment, by hosting live trivia events, by selling advertising aired on in-venue screens and as part of customized games, by licensing its content for use with third-party equipment, from providing professional services (such as developing certain functionality within the Company’s platform for customers), and from pay-to-play arcade games.

At June 30, 2019, 2,609March 31, 2020, 1,396 venues in the U.S. and Canada subscribed to the Company’s interactive entertainment network. See Note 2 for more information regarding the impact of COVID-19 on these venues and the Company’s subscription revenues.

Basis of Accounting Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments that are necessary, which are of a normal and recurring nature, for a fair presentation for the periods presented of the financial position, results of operations and cash flows of the Company 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. All significant intercompany transactions have been eliminated in consolidation.

These condensed consolidated financial statements should be read with the audited consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018.2019. The accompanying condensed balance sheet as of December 31, 20182019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and six months ended June 30, 2019March 31, 2020 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2019,2020, or any other period.

Reclassifications

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

The negative impact of the COVID-19 pandemic on the restaurant and bar industry was abrupt and substantial, and the Company’s business, cash flows from operations and liquidity suffered, and continues to suffer, materially as a result. In many jurisdictions, including those in which the Company has many customers and prospective customers, restaurants and bars have been ordered by the government to shut down or close all on-site dining since the latter half of March 2020. At its peak, approximately 70% of the Company’s customers requested that their subscriptions to the Company’s services be temporarily suspended. As governmental orders and restrictions impacting restaurants and bars are eased or lifted, the Company expects the temporary subscription suspensions to end, however, even in jurisdictions in which such orders and restrictions are eased or lifted, the Company’s customers could request to continue their subscription suspensions if, for example, such customers choose not to re-open despite being permitted to do so. The Company has experienced material decreases in subscription revenue, advertising revenue and cash flows from operations, which it expects to continue for at least as long as the restaurant and bar industry continues to be negatively impacted by the COVID-19 pandemic, and which may continue thereafter if restaurants and bars seek to reduce their operating costs or are unable to re-open even if restrictions within their states are eased or lifted. The Company cannot predict with certainty whether, when or the manner in which the impact of the pandemic will improve, including when restaurants will be permitted to offer on-site dining or when bars will be permitted to re-open or to what degree, when the Company’s customers will re-open, or if they will subscribe to the Company’s service if and when they do, or if and when there will be a resurgence in COVID-19 transmission or infection after the easing or lifting of stay-at-home orders, and if three is, the impact of such resurgence on the Company’s business. Similarly, the Company cannot predict with certainty the duration of the negative effects of the pandemic on its business and liquidity, however, unless in the very near term the Company’s subscription revenue, advertising revenue and cash flows from operations return to pre-pandemic levels and/or the Company raises substantial capital, the amount of time and the amount of cash the Company has to maintain operations and sustain the negative effects of the pandemic is very limited. See Item 2 “—Liquidity and Capital Resources,” and “Item 1A. Risk Factors” in Part II of this report for additional information regarding the impact of the pandemic on our business and outlook.

While the Company expects the effects of COVID-19 to negatively impact its future results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time. The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Such estimates and assumptions affect, among other things, the allowance for doubtful accounts, site equipment to be installed, fixed assets, capitalized software development, goodwill and right-of-use assets. Events and changes in circumstances arising after the issuance of the financial statements as of and for the three months ended March 31, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods

In connection with preparing its financial statements as of and for the periodthree months ended June 30, 2019,March 31, 2020, the CompanyCompany’s management evaluated whether there are conditions andor events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about itsthe Company’s ability to continue as a going concern withinthrough twelve months after the date that such financial statements are issued. The Company believes it has sufficient cash to meet its operating cash requirements and to fulfill its debt obligations for at leastDuring the next twelvethree months after the date that such financial statements are issued.

Althoughended March 31, 2020, the Company continues to have discussions with Buffalo Wild Wingsincurred a net loss of $1,218,000, and directly with its franchisees regarding the possibility of continuing the Company’s relationshipcurrent liabilities exceeded its current assets at March 31, 2020 by $87,000. As of March 31, 2020, the Company had $2,221,000 of unrestricted cash and total debt outstanding of $2,000,000, which was the outstanding principal balance of the Company’s term loan with them beyond November 2019, which is whenAvidbank. Under the relationship under existing agreements terminatesterms 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, and although one Buffalo Wild Wing franchisee agreedwill result in the Company paying off the term loan by December 31, 2020. See Note 9 for additional information on this term loan.

As discussed further in Note 16, subsequent to extend the Company’s entertainment services to that franchisee’s 64 locations through DecemberMarch 31, 2020, the Company has begun to reduce certain operating expenses in anticipationreceived $1,625,100 loan (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) of the terminationCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration. The Company may use funds from the PPP Loan for payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent payments, utility payments, and interest payments on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP Loan for qualifying expenses. Under the terms of existing agreements. Ifthe PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. No assurance is provided that the Company extendswill obtain forgiveness of the PPP Loan in whole or in part.

As a result of the impact of the COVID-19 pandemic on the Company’s business and taking into account its relationship with Buffalo Wild Wings,current financial condition and its existing sources of revenue, unless in the very near term the Company’s subscription revenue, advertising revenue and cash flows from operations returns to pre-pandemic levels and/or the Company expects the relationship will be significantly different than in the past, asraises substantial capital, the Company believes it will have sufficient cash resources to pay forecasted cash outlays through October 2020, assuming the Company delivers a significant hardware order as scheduled during the second quarter of 2020, Avidbank does not take actions to foreclose on the Company’s assets in the event the Company becomes out of compliance with its financial covenants, and the Company is able to continue to successfully manage its working capital deficit by managing the timing of payments to its vendors and other third parties.

Based on the factors described above, management concluded that Buffalo Wild Wings prefersthere is substantial doubt regarding the Company’s ability to continue as a mobile-only, trivia-driven solutiongoing concern through the twelve month period subsequent to the Company’s tablet-based platform

In addition,issuance date of these financial statements. Management’s plans for addressing the Company continuesliquidity shortfall include continuing efforts to explore and evaluateraise additional financing alternatives, including additionalcapital through equity financings and alternative sources of debt. These efforts are being undertaken to increase the likelihoodHowever, there can be no assurances that the Company will be able to successfully execute its current long-term operating and strategic plan and to position the Company to take advantage of market opportunities for growth and to respond to competitive pressures. If the Company’s cash and cash equivalents are notraise sufficient to meet future capital requirements, it will not be able to successfully execute its current long-term operating and strategic plan or take advantage of market opportunities for growth and may have to reduce planned capital expenses and further reduce operational cash uses, or may have to raise capitalwhen needed, on terms that are not as favorable to the Company as they otherwise might be. Any actions the Company is undertaking or may undertake to reduce planned capital expenses or reduce operational cash uses may not cover shortfalls in available funds. If the Company requires additional capital, it may not secure additional capital on terms acceptable to the Company,terms, or at all.

ReclassificationsThe 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 the Company’s ability to continue as a going concern.

Certain reclassifications have been made to the prior year’s consolidated balance sheet and statement of cash flows to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

(2) RESTRICTED CASH

In connection withAt the Company entering into an agreement tocommencement date of the Company’s lease office space for its corporate headquarters on December 1. 2018, the Company’s bank, Avidbank, issueissued a $250,000 letter forof credit to the lessor in the amount of $250,000 as security, which amount will reducebe 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 reduce in alignment withbe reduced as the amount required under the letter of credit each year.is reduced. The Company recorded the $250,000 deposit as restricted cash on its balance sheet, 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 suchthe restricted cash account willdoes not count toward the covenant underin the Avidbank loan and security agreement (see Note 6)9) 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.

(3) Revenue Recognition

On January 13, 2020, the Company entered into an asset purchase agreement with Sporcle, Inc., a Delaware corporation (“Sporcle”), pursuant to which the Company agreed to sell to Sporcle all of its assets necessary for Sporcle to conduct the live-hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation for $1,360,000 in gross proceeds. On the closing date of the transaction (January 31, 2020), the Company received $1,260,000. The remaining $100,000 is being held back until the one-year anniversary of the closing date, or January 31, 2021, to satisfy indemnification claims, if any, for which the Company is liable. The hold-back amount is recorded in accounts receivable in the consolidated balance sheet. The Company recorded a net gain of approximately $1,265,000 in January 2020.

The Company recognizes revenue in accordance with Accounting Standards Codification Topic(“ASC”) No. 606,Revenue from Contracts with Customers (“Topic 606”). ASC No. 606 provides a five-step analysis in determining when and how revenue is recognized:

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 service to24/7 trivia network, subscribers, by leasing equipment to certain network subscribers, 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 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 by selling advertising aired on in-venue screens and as part of customized games, by licensing its content for use with third-party equipment, from providing professional services (such as developing certain functionality within the Company’s platform for customers), and from pay-to-play arcade player games.(see Note 5).

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 depicted on its statement of operations. follows:

The following describes how the Company recognizes revenue under TopicASC No. 606.

Subscription Revenue - The Company recognizes itsthe 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, which includes the Company’s content, 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 month in which they receive the services. Due to the timing of providing the services and receiving payment for the services, the Company does not record any unbilled contract asset. Occasionally, a customer will prepay for up to one year of subscription services, in which case, the Company will record deferred revenue on the balance sheet related to such prepayment and will recognize the revenue over the time the customer receives the subscriptionCompany’s services. Revenue from installation services is also recorded as deferred revenue and recognized over the longer of the contract term and the expected term of the customer relationship using the straight linestraight-line method. The Company has certain contingent performance obligations with respect to repairing or replacing equipment and wouldwill recognize any revenue related to the performance of such revenueobligations at the point in time the Company performs such services.them.

Costs associated with installing the equipment are considered direct costs. Costs associated with sales commissions are considered incremental costs for fulfillingobtaining 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 yearto 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 Accounting Standards Codification (“ASC”)ASC No. 840,842,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. 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 cost 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.

Live Hosted Trivia Revenue – The Company recognizes 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.

Advertising Revenue – The Company recognizes advertising revenue either over the time the advertising campaign airs in its customers locations. Thecustomers’ 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. When the Company contracts with an advertising agent, the Company shares in the advertising revenue generated with that agent. In these cases, the Company generally recognizes revenue on a net basis, as the agent typically has the responsibility for the relationship with the advertiser and the credit risk. When the Company contracts directly with the advertiser, it will recognize the revenue on a gross basis and will recognize any revenue share arrangement it has with a third party as a direct expense, as the Company has the responsibility for the relationship with the advertiser and the credit risk. Generally, there is no unbilled revenue or deferred revenue associated with the Company’s advertising activities.

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.

Content Licensing – The Company licenses content (trivia packages) to a 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 recognizes 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 live-hosted trivia revenue after January 31, 2020. See Note 5 for more information on the live-hosted trivia product line.

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 June 30,March 31, 2019, 2,6092,632 venues in the U.S. and Canada subscribed to the Company’s interactive entertainment network, of which approximately 47%46% were Buffalo Wild Wings corporate-owned restaurants and its franchisees. In October 2018,As of March 31, 2020, the Company’s site count declined to 1,396 venues primarily due to the termination of its agreements with Buffalo Wild Wings informed the Company that Buffalo Wild Wings determined not to rollout the Company’s order, paymentcorporate-owned restaurants and guest insights functionality and thatmost of its relationship with the Company would continuefranchisees in accordance with existing agreements entered into in the ordinary course of business, and which terminateNovember 2019 in accordance with their terms in November 2019. See “PART II — OTHER INFORMATION, ITEM 1A., Risk Factors.”terms.

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 three and six months ended June 30,March 31, 2020 and 2019, and 2018, and the percentage of total revenue that such amount represents for such periods:

As of June 30, 2019March 31, 2020 and December 31, 2018,2019, approximately $252,000$178,000 and $552,000,$158,000, 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 three and six months ended June 30,March 31, 2020 and 2019 and 2018 were as follows:

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 June 30, 2019January 1, 2020 and DecemberMarch 31, 2018,2020, including the change during the period.

The Company does not generally recognizecapitalizes 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 in advancefor the related contract, the amortization period approximates the longer of when the contract givesterm 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 right to invoice ainitial 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 table below shows the balance of the unamortized installation cost and therefore the Company did not recognize any related contract assetssales commissions as of June 30, 2019.January 1, 2020 and March 31, 2020, including the change during the period.

(4) Basic and Diluted Earnings Per Common Share

Basic earningsnet loss per share excludesis calculated by dividing net loss by the dilutive effectsweighted-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, warrantsrestricted stock units, and other convertible securities. Diluted earningssecurities are considered potential common shares and are included in the calculation of diluted net loss per share reflectsusing the potential dilutions of securities that could share in the Company’s earnings.treasury method when their effect is dilutive. Options, warrantsrestricted stock units and convertible preferred stock representing approximately 247,000172,000 and 288,000262,000 shares of common stock were excluded from the computations of diluted net loss per common share as of June 30,for the three months ended March 31, 2020 and 2019, and 2018, respectively, as their effect was anti-dilutive.

(5) SHAREHOLDERS’ EQUITY

Stock-based CompensationEquity Incentive Plans

The Company’s stock-based compensation plans include the NTN Buzztime, Inc. 2019 Performance Incentive Plan (the “2019 Plan”), the NTN Buzztime, Inc. Amended 2010 Performance Incentive Plan (the “2010 Plan”) and the NTN Buzztime, Inc. 2014 Inducement Plan (the “2014 Plan”). The Company’s board of directors 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’sThe 2019 Annual Meeting of Stockholders, the Company’s stockholders approved the 2019 Plan which provides for the issuance of up to 240,000 shares of Company common stock. Awards the under the 2019 Plan may be granted to officers, directors, employees and consultants of the Company. Stock options granted under the 2019 Plan may either be incentive stock options or nonqualified stock options, 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 June 30, 2019,March 31, 2020, there were stock options to purchase approximately 2,000 shares of the Company’s common stock have been grantedand 108,000 restricted stock units outstanding under the 2019 Plan.

As a result of stockholder approval of the 2019 Plan in June 2019, no future grants will be made under the 2010 Plan. All awards that are outstanding under the 2010 Plan will continue to be governed by the 2010 Plan until they are exercised or expire in accordance with the terms of the applicable award or the 2010 Plan. As of June 30, 2019,March 31, 2020, there were approximately stock options to purchase 62,000approximately 32,000 shares of common stock and 87,00018,000 restricted stock units outstanding under the Amended 2010 Plan.

The 2014 Plan provides for the grant of up to 85,000 share-based awards to a new employee as an inducement material to the new employee entering into employment with the Company and expires in September 2024. As of June 30, 2019,March 31, 2020, there were no share-based awards available for grantequity grants outstanding under the 2014 Plan.

Stock-Based Compensation

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 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 and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

The following weighted-average assumptionsCompany did not grant any stock options and no options were used for awards grantedexercised during the three and six months ended June 30, 2019 and 2018:March 31, 2020 or 2019.

The Company granted stock options to purchase approximately 2,000 sharesestimates forfeitures, based on historical activity, at the time of common stockgrant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Stock-based compensation expense for employees during each of the three and six months ended June 30,March 31, 2020 and 2019 was $39,000 and 2018. No options were exercised during either of$59,000, respectively, and is expensed in selling, general and administrative expenses and credited to the three or six months ended June 30, 2019 or 2018.additional paid-in-capital account.

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 unitAn 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 unitsRSUs 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. DuringFor the sixthree months ended June 30,March 31, 2020 and 2019, the Company granted approximately 47,000 restricted stock units with a weighted average grant date fair valuethe following awards:

The following table shows the number of $3.72 per restricted stock unit. During the six months ended June 30, 2018, the Company granted approximately 53,000 restricted stock units with a weighted average grant date fair value of $6.04 per restricted stock unit. No restricted stock unitsRSUs that vested and were grantedsettled during either of the three months ended June 30,March 31, 2020 and 2019, or 2018. All restrictedas well as the number of shares of common 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.

issued upon settlement. In lieu of paying cash to satisfy withholding taxes due upon the settlement of vested restricted stock units,RSUs, 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 three and six months ended June 30, 2019, approximately 7,000 and 11,000 restricted stock units vested and were settled, respectively, and as a result of employees electing to satisfy applicable withholding taxes by having the Company withhold shares, approximately 4,000 and 7,000 shares of common stock were issued, respectively. There were no restricted stock units that vested and settled during the three and six months ended June 30, 2018.

The Company estimates forfeitures, based on historical activity, at the time of grant and revises such estimates if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Stock-based compensation expense for the three months ended June 30, 2019 and 2018 was $50,000 and $134,000, respectively, and $109,000 and $251,000 for the six months ended June 30, 2019 and 2018, respectively, and is expensed in selling, general and administrative expenses and credited to additional paid-in-capital.

(6) DEBT

Term Loan

In September 2018, the Company entered into a loan and security agreement with Avidbank for a one-time 48-month term loan in the amount of $4,000,000. The$4,000,000, under which the Company makeswas obligated to make monthly electronic principal payments initiated by Avidbank of approximately $83,000 plus accrued and unpaid interest. The June 2019 payment was not deducted fromIn February 2020, the Company’s bank account until July 1, 2019. Accordingly, as of June 30, 2019, $3,333,000 ofCompany made a pre-payment on the term loan was outstanding, with $1,083,000 recorded in current portion of long-term debt andapproximately $150,000 following the remaining $2,250,000 recorded as long-term debt onsale of all of the Company’s assets used to conduct the live-hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation in January 2020 (see Note 5). On March 12, 2020, the Company entered into an amendment to the loan and security agreement. In connection with entering into the amendment, the Company made a $433,000 payment on its term loan, which included the $83,333 monthly principal payment plus accrued interest for March 2020 and a $350,000 principal prepayment, thereby reducing the outstanding principal balance sheet. of its term loan to $2,000,000 as of March 31, 2020.

The Company recordedincurred approximately $26,000 of debt issuance costs related to loan and security agreement and its amendment, of $23,000, which includesapproximately $3,000 was related to the $20,000 facility fee.amendment. 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 June 30,March 31, 2020 and December 31, 2019 was approximately $15,000$10,000 and $11,000, respectively, and is recorded as a reduction of long-term debt. The

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 commencing on April 30, 2020, the Company must comply withmake principal plus accrued interest payments on the following financial covenants: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 adjusted earnings before interest, taxes, depreciation and amortization (“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.

Under the terms of the amendment, the minimum EBITDA covenant was replaced with a monthly minimum asset coverage ratio covenant, which the Company refers to as the ACR covenant, and the minimum liquidity covenant was amended to provide that the aggregate amount of unrestricted cash the Company has in deposit accounts or securities accounts maintained with Avidbank must be at all times not less than the principal balance outstanding under the term loan. Under the ACR covenant, the ratio of (i) the Company’s unrestricted cash at Avidbank as of the last day of a calendar month plus 75% of its outstanding accounts receivable accounts that are within 90 days of invoice date to (ii) the outstanding principal balance of the term loan on such day must be no less than 1.25 to 1.00. As of June 30, 2019,March 31, 2020, the Company was in compliance with both of these financialthose covenants.

(7) LEASES

On January 1, 2019, the Company adopted ASC No. 842,Leases (“TopicASC No. 842”). TopicASC 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.

TopicASC No. 842 also allows lessees and lessors to elect certain practical expedients. The Company elected the following practical expedients:

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 financingfinance 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 TopicASC 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 financingfinance leases under TopicASC No. 842 did not have a material change from the balances of the financingfinance lease liabilities and assets recorded prior to the adoption of TopicASC No. 842. There was also no cumulative effect adjustment to retained earnings as a result of the transition to TopicASC 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 TopicASC No. 842 did not have a material impact on the Company’s consolidated statement of operations.

The tables below show the initial measurementbeginning balances of the operating lease right-of-use assets and liabilities as of January 1, 2019 and the ending balances as of June 30, 2019,March 31, 2020, including the changes during the periods.

As of June 30, 2019,March 31, 2020, the Company’s operating leases have a weighted-average remaining lease term of 6.76.0 years and a weighted-average discount rate of 7.25%. The maturities of the operating lease liabilities are as follows:

Total lease expense was approximately $135,000 and $131,000 forFor the three months ended June 30, 2019March 31, 2020 and 2018,20198, total lease expense under operating leases was approximately $134,000 and $135,000, respectively, and approximately $270,000 and $264,000 for the six months ended June 30, 2019 and 2018, respectively. Lease expense was recorded in selling, general and administrative expenses.

The tables below show the initial measurementbeginning balances of the financingfinance lease right-of-use assets and liabilities as of January 1, 20192020 and the ending balances as of June 30, 2019,March 31, 2020, including the changes during the periods. The Company’s financingfinance lease right-of-use assets are included in “Fixed assets, net” on the accompanying consolidated balance sheet.

As of June 30, 2019,March 31, 2020, the Company’s financingfinance leases have a weighted-average remaining lease term of 2.21.7 years and a weighted-average discount rate of 5.51%5.52%. The maturities of the financingfinance lease liabilities are as follows:

For the three months ended June 30,March 31, 2020 and 2019, and 2018, total lease costs under financingfinance leases were approximately $10,000$6,000 and $48,000, respectively. For the six months ended June 30, 2019 and 2018, total lease costs under financing leases were approximately $32,000 and $95,000,$22,000, respectively.