SECURITIES AND EXCHANGE COMMISSION
March 31, 2021 Yes ☒ No ☐ ☐ ☐ Yes ☐ No ☒ % of Total Revenue % of Total Revenue $ Change % Change % of Total Revenue % of Total Revenue $ Change % Change Three months ended September 30, Nine months ended September 30, Deferred Revenue Installation Costs Sales Commissions Total Deferred Costs Operating lease right-of-use assets Operating lease liabilities Finance lease right-of-use assets Finace lease liabilities May 11, 2021. For the three months ended . On report. We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting and may from time to time make changes to enhance their effectiveness and ensure that our systems evolve with our business. 1 by reference. cash flows.QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 September 30, 2020☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 numbernumber: 001-11460
NTN Buzztime,DELAWAREDelaware 31-1103425 (State of incorporation) (I.R.S. Employer Identification No.) 6965 EL CAMINO REAL, SUITE 105-BOX 517,CARLSBAD, CALIFORNIA 92008 (Address of principal executive offices) (Zip Code) (760) 438-7400former address and former fiscal year,address, if changed since last report) Symbol(s)symbol Common Stockstock, $0.005 par value per share NTNBTX NYSE American YES [X] NO [ ][X]☒ No [ ]Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in in Rule 12b-2 of the Exchange Act.Large accelerated filer [ ]☐Accelerated filer [ ]☐ Non-accelerated filer [X]☒Smaller reporting company [X]☒ Emerging growth company [ ]☐[ ]YES [ ] NO [X]November 10, 2020,May 13, 2021, the registrant had outstanding 2,962,86641,562,739 shares of common stock, $0.005 par value per share.NTN BUZZTIME, INC. AND SUBSIDIARIESFORM 10-QPART I – FINANCIAL INFORMATIONItem 1.Financial Statements.NTN BUZZTIME, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except par value amount) September 30,
2020 December 31,
2019 ASSETS Current Assets: Cash and cash equivalents $ 1,710 $ 3,209 Restricted cash - 50 Accounts receivable, net of allowances of $845 and $354, respectively 132 1,195 Income tax receivable 13 - Site equipment to be installed 792 1,090 Prepaid expenses and other current assets 146 526 Total current assets 2,793 6,070 Restricted cash, long-term - 150 Operating lease right-of-use assets 5 2,101 Fixed assets, net 689 2,822 Software development costs, net of accumulated amortization of $3,016 and $3,341, respectively 1,420 1,915 Deferred costs 85 274 Goodwill - 696 Other assets 62 97 Total assets $ 5,054 $ 14,125 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 275 $ 835 Accrued compensation 125 588 Accrued expenses 490 490 Sales taxes payable 14 131 Income taxes payable - 3 Current portion of long-term debt, net 1,724 2,739 Current portion of obligations under operating leases 5 409 Current portion of obligations under finance leases 23 21 Current portion of deferred revenue 120 460 Other current liabilities 154 419 Total current liabilities 2,930 6,095 Long-term debt 1,625 - Long-term obligations under operating leases - 2,891 Long-term obligations under finance leases 4 20 Long-term deferred revenue - 2 Other liabilities - 26 Total liabilities 4,559 9,034 Shareholders’ Equity Series A 10% cumulative convertible preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019 1 1 Common stock, $0.005 par value, 15,000 shares authorized at September 30, 2020 and December 31, 2019; 2,952 and 2,901 shares issued at September 30, 2020 and December 31, 2019, respectively 15 14 Treasury stock, at cost, 10 shares at September 30, 2020 and December 31, 2019 (456 ) (456 ) Additional paid-in capital 136,881 136,721 Accumulated deficit (136,187 ) (131,457 ) Accumulated other comprehensive income 241 268 Total shareholders’ equity 495 5,091 Total liabilities and shareholders’ equity $ 5,054 $ 14,125 See accompanying notes to unaudited condensed consolidated financial statements.NTN BUZZTIME, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(In thousands, except per share amounts)(unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue from contracts with customers Subscription revenue $ 1,053 $ 3,723 $ 3,779 $ 11,356 Hardware revenue 379 11 421 811 Other revenue 45 846 425 2,471 Total revenue from contracts with customers 1,477 4,580 4,625 14,638 Operating expenses: Direct operating costs (includes depreciation and amortization of $346 and $649 for the three months ended September 30, 2020 and 2019, respectively, and $1,241 and $1,918 for the nine months ended September 30, 2020 and 2019, respectively) 801 1,344 2,364 4,545 Selling, general and administrative 2,068 3,413 6,743 10,303 Impairment of capitalized software - 51 238 52 Impairment of goodwill - - 662 - Depreciation and amortization (excluding depreciation and amortization included in direct operating costs) 26 88 189 273 Total operating expenses 2,895 4,896 10,196 15,173 Operating loss (1,418 ) (316 ) (5,571 ) (535 ) Other (expense) income, net (82 ) (16 ) 826 (189 ) Loss before income taxes (1,500 ) (332 ) (4,745 ) (724 ) Benefit (provision) for income taxes 19 (19 ) 23 (30 ) Net loss (1,481 ) (351 ) (4,722 ) (754 ) Series A preferred stock dividend - - (8 ) (8 ) Net loss attributable to common shareholders $ (1,481 ) $ (351 ) $ (4,730 ) $ (762 ) Net loss per common share - basic and diluted $ (0.50 ) $ (0.12 ) $ (1.62 ) $ (0.27 ) Weighted average shares outstanding - basic and diluted 2,936 2,874 2,920 2,870 Comprehensive loss Net loss $ (1,481 ) $ (351 ) $ (4,722 ) $ (754 ) Foreign currency translation adjustment 1 (18 ) (27 ) 47 Total comprehensive loss $ (1,480 ) $ (369 ) $ (4,749 ) $ (707 ) See accompanying notes to unaudited condensed consolidated financial statements.NTN BUZZTIME, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYFor the three and nine months ended September 30, 2020 and 2019 (unaudited)(in 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 July 1, 2020 156 $ 1 2,938 $ 15 $ (456 ) $ 136,837 $ (134,706 ) $ 240 $ 1,931 Foreign currency translation adjustment - - - - - - - 1 1 Net loss - - - - - - (1,481 ) - (1,481 ) Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes - - 14 - - (9 ) - - (9 ) Non-cash stock based compensation - - - - - 53 - - 53 Balances at September 30, 2020 156 $ 1 2,952 $ 15 $ (456 ) $ 136,881 $ (136,187 ) $ 241 $ 495 Balances at January 1, 2020 156 $ 1 2,901 $ 14 $ (456 ) $ 136,721 $ (131,457 ) $ 268 $ 5,091 Foreign currency translation adjustment - - - - - - - (27 ) (27 ) Net loss - - - - - - (4,722 ) - (4,722 ) Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes - - 28 - - (18 ) - - (18 ) Issuance of common stock in lieu of cash compensation, net of shares withheld for payroll taxes - - 23 1 - 43 - - 44 Non-cash stock based compensation - - - - - 135 - - 135 Cash paid to Series A preferred stockholders for semi-annual dividend - - - - - - (8 ) - (8 ) Balances at September 30, 2020 156 $ 1 2,952 $ 15 $ (456 ) $ 136,881 $ (136,187 ) $ 241 $ 495 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 Beginning balances at July 1, 2019 156 $ 1 2,882 $ 14 $ (456 ) $ 136,648 $ (129,805 ) $ 265 $ 6,667 Foreign currency translation adjustment - - - - - - - (18 ) (18 ) Net loss - - - - - - (351 ) - (351 ) Issuance of common stock upon vesting of restricted stock units - - 13 - - (16 ) - - (16 ) Non-cash stock based compensation - - - - - 63 - - 63 Balances at September 30, 2019 156 $ 1 2,895 $ 14 $ (456 ) $ 136,695 $ (130,156 ) $ 247 $ 6,345 Beginning balances at January 1, 2019 156 $ 1 2,875 $ 14 $ (456 ) $ 136,552 $ (129,394 ) $ 200 $ 6,917 Foreign currency translation adjustment - - - - - - - 47 47 Net loss - - - - - - (754 ) - (754 ) Issuance of common stock upon vesting of restricted stock units - - 20 - - (29 ) - - (29 ) Cash paid to Series A preferred stockholders for semi-annual dividend - - - - - - (8 ) - (8 ) Non-cash stock based compensation - - - - - 172 - - 172 Balances at September 30, 2019 156 $ 1 2,895 $ 14 $ (456 ) $ 136,695 $ (130,156 ) $ 247 $ 6,345 See accompanying notes to unaudited condensed consolidated financial statements.5NTN BUZZTIME, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(unaudited) For the nine months ended
September 30, 2020 2019 Cash flows (used in) provided by operating activities: Net loss $ (4,722 ) $ (754 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 1,430 2,191 Provision for doubtful accounts 124 144 Amortization of operating lease right-of-use-assets 161 217 Common stock issued for compensation in lieu of cash payment 61 - Transfer of fixed assets to sales-type lease - 7 Stock-based compensation 135 172 Gain from the asset sale of Stump! Trivia and OpinioNation (1,225 ) - Loss from the termination of operating lease 9 - Loss (gain) from the sale or disposition of assets, net 511 (5 ) Impairment of capitalized software 238 52 Impairment of goodwill 662 - Amortization of debt issuance costs 12 7 Changes in assets and liabilities: Accounts receivable 939 222 Site equipment to be installed 51 475 Operating lease liabilities (154 ) (111 ) Prepaid expenses and other assets 353 (66 ) Accounts payable and accrued liabilities (1,405 ) (196 ) Income taxes (16 ) 4 Deferred costs 189 84 Deferred revenue (342 ) (541 ) Other liabilities (291 ) (141 ) Net cash (used in) provided by operating activities (3,280 ) 1,761 Cash flows used in investing activities: Capital expenditures (21 ) (111 ) Capitalized software development expenditures (173 ) (882 ) Proceeds from the sales of equipment - 29 Net cash used in investing activities (194 ) (964 ) Cash flows provided by (used in) financing activities: Net proceeds from the sale of Stump! Trivia 1,226 - Proceeds from long-term debt 2,625 - Payments on long-term debt (2,025 ) (750 ) Debt issuance costs on long-term debt (3 ) - Principal payments on finance leases (14 ) (39 ) Payment of preferred stockholders dividends (8 ) (8 ) Payroll tax remitted on net share settlement of equity awards (36 ) (29 ) Net cash provided by (used in) financing activities 1,765 (826 ) Effect of exchange rate on cash and cash equivalents 10 27 Net decrease in cash, cash equivalents and restricted cash (1,699 ) (2 ) Cash, cash equivalents and restricted cash at beginning of period 3,409 2,786 Cash, cash equivalents and restricted cash at end of period $ 1,710 $ 2,784 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 86 $ 195 Income taxes $ 23 $ 26 Supplemental disclosure of non-cash investing and financing activities: Site equipment transferred to fixed assets $ 69 $ 458 Assets acquired under operating leases $ 28 $ 57 Initial measurement of operating lease right-of-use assets and liabilities $ - $ 3,458 Reconciliation of cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents $ 1,710 $ 2,533 Restricted cash - 51 Restricted cash, long-term - 200 Total cash, cash equivalents and restricted cash at end of period $ 1,710 $ 2,784 See accompanying notes to unaudited condensed consolidated financial statements.6NTN BUZZTIME, INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)(1)BASIS OF PRESENTATIONDescription of BusinessNTN 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 advertising 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 to partners for access to its 24/7 trivia network, 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. Until February 1, 2020, the Company also generated revenue from hosting live trivia events. The Company sold all of its assets used to host live trivia events in January 2020.At September 30, 2020, 1,080 venues in the U.S. and Canada subscribed to the Company’s interactive entertainment network. See Note 3 for more information regarding the impact of the COVID-19 pandemic on these venues and the Company’s subscription revenues.Basis of Accounting PresentationThe 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., NTN Buzztime, Ltd. and BIT Merger Sub, Inc., all of which, other than NTN Canada, Inc. and BIT Merger Sub, 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, 2019. The accompanying condensed consolidated balance sheet as of December 31, 2019 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 nine months ended September 30, 2020 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2020, or any other period.ReclassificationsCertain 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.(2)Merger Agreement and asset purchase agreementOn August 12, 2020, the Company entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) with Brooklyn Immunotherapeutics LLC (“Brooklyn”), pursuant to which, subject to the terms and conditions thereof, a wholly-owned subsidiary of the Company will be merged with and into Brooklyn (the “Merger”), with Brooklyn surviving the Merger as a wholly-owned subsidiary of the Company. On the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Brooklyn’s members will exchange their equity interests in Brooklyn for shares of the Company’s common stock representing between approximately 94.08% and 96.74% of the outstanding common stock of the Company immediately after the Effective Time on a fully diluted basis (less a portion of such shares which will be allocated to Maxim Group LLC in respect of the success fee owed to it by Brooklyn), and the Company’s stockholders as of immediately prior to the Effective Time, will own between approximately 5.92% and 3.26% of the outstanding common stock of the Company immediately after the Effective Time on a fully diluted basis. The exact number of shares to be issued in the Merger will be determined pursuant to a formula in the Merger Agreement.Upon completion of the Merger, the combined company will focus its resources on executing Brooklyn’s business plan, and the board of directors of the combined company is expected to consist entirely of individuals designated by Brooklyn and the officers of the combined company are expected to be members of Brooklyn’s current management team.On September 18, 2020, the Company and eGames.com Holdings LLC (“eGames.com”) entered into an asset purchase agreement (the “Asset Purchase Agreement”), pursuant to which, subject to the terms and conditions thereof, the Company will sell and assign (the “Asset Sale”) all of its right, title and interest in and to the assets relating to its current business (the “Purchased Assets”) to eGames.com. At the closing of the Asset Sale, in addition to assuming specified liabilities of the Company, eGames.com will pay the Company $2.0 million in cash. In connection with entering into the Asset Purchase Agreement, the sole owner of eGames.com absolutely, unconditionally and irrevocably guaranteed to the Company the full and prompt payment when due of any and all amounts, from time to time, payable by eGames.com under the Asset Purchase Agreement.In connection with entering into the Asset Purchase Agreement, an affiliate of eGames.com loaned $1,000,000 to the Company, which, if the closing of the Asset Sale occurs, will be applied toward the purchase price at the closing of the Asset Sale. See Note 10 for more information regarding this loan. The Company is in discussions with the affiliate of eGames.com regarding the possibility of borrowing an additional $500,000 on approximately December 1, 2020, which, if received, would also be applied toward the purchase price at the closing of the Asset Sale. No assurances can be given that the Company will obtain such $500,000 loan from such affiliate or from any other party.Consummation of the Merger and the Asset Sale is subject to certain closing conditions including, among others, approval by the Company’s stockholders of issuance of the Company’s common stock to Brooklyn’s members under the terms of the Merger Agreement and the approval of the Asset Sale.No assurances are, or can be given, that the Merger or the Asset Sale will be consummated. See Item 1A, “Risk Factors—RISKS RELATED TO THE PROPOSED MERGER AND ASSET SALE.”(3)COVID-19 UPDATEThe 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 were ordered by the government to shut-down or close all on-site dining operations in the latter half of March 2020. Since then, governmental orders and restrictions impacting restaurants and bars in certain jurisdictions were eased or lifted as the number of COVID-19 cases decreased or plateaued, but as jurisdictions began experiencing a resurgence in COVID-19 cases, many jurisdictions reinstated such orders and restrictions, including mandating the shut-down of bars and the closing of all on-site dining operations of restaurants. The Company has experienced material decreases in subscription revenue, advertising revenue and cash flows from operations, which the Company 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 jurisdictions are eased or lifted. For example, at its peak, approximately 70% of the Company’s customers had their subscriptions to our services temporarily suspended. As of November 10, 2020, approximately 11% of the Company’s customers remain on subscription suspensions. 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 the Company’s business and outlook.While the Company expects the effects of the pandemic 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 the pandemic means the related future 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 and nine months ended September 30, 2020, including those resulting from the impacts of the pandemic, will be reflected future periods.8(4)going concern uncertainty.In connection with preparing its financial statements as of and for the three and nine months ended September 30, 2020, the Company’s management evaluated whether there are conditions or events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about the Company’s ability to continue as a going concern through twelve months after the date that such financial statements are issued. During the three and nine months ended September 30, 2020, the Company incurred a net loss of $1,481,000 and $4,722,000, respectively. As of September 30, 2020, the Company had $1,710,000 of unrestricted cash, total debt outstanding of $3,350,100, which is gross of approximately $1,000 in unamortized debt issuance costs, and negative working capital of $137,000. The total debt outstanding consists of $725,000 of principal outstanding under the Company’s term loan with Avidbank, $1,625,100 of principal outstanding under the loan the Company received in April 2020 under the Paycheck Protection Program, and $1,000,000 of principal outstanding under the loan the Company received in connection with entering into the Asset Purchase Agreement, which, if the closing of the Asset Sale occurs, will be applied toward the $2.0 million purchase price eGames.com will owe the Company at the closing of the Asset Sale. See Note 2 for more information on the Asset Sale. In November 2020, the Company was informed that approximately $1,093,000 of the $1,625,100 loan under the Paycheck Protection Program would be forgiven, leaving a principal balance of approximately $532,000. The Company is in discussions with the affiliate of eGames.com regarding the possibility of borrowing an additional $500,000 on approximately December 1, 2020, which, if received, would also be applied toward the purchase price at the closing of the Asset Sale. No assurances can be given that the Company will obtain such $500,000 loan from such affiliate or from any other party.As a result of the impact of the COVID-19 pandemic on the Company’s business and taking into account its current financial condition and its existing sources of projected revenue and cash flows from operations, if the Company is able to borrow an additional $500,000 from the affiliate of eGames.com discussed above, the Company believes it will have sufficient cash resources to pay forecasted cash outlays only through mid-January 2021, but if the Company does not borrow such amount from the affiliate of eGames.com or any other party, the Company believes it will have sufficient cash resources to pay forecasted cash outlays only through mid-December 2020, in each case, assuming 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 there is substantial doubt regarding the Company’s ability to continue as a going concern through the twelve-month period subsequent to the issuance date of these financial statements. The Company needs to complete the Merger or the Asset Sale or raise capital to meet its debt service obligations to Avidbank and fund its working capital needs. The Company currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital when needed, on acceptable terms, or at all.The accompanying condensed 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.(5)RESTRICTED CASHAt the commencement date of the Company’s lease for its corporate headquarters on December 1, 2018, the Company’s primary lender, Avidbank, issued a $250,000 letter of credit to the lessor as security, which amount was reduced by $50,000 on December 1, 2019 and was to be reduced by the same amount December 1 of each year thereafter, 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 was and would be reduced as the amount required under the letter of credit 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.In June 2020, the Company terminated its lease for its corporate headquarters, and as part of the consideration to the lessor for the early least termination, the lessor received the $200,000 of restricted cash provided for under the letter of credit in July 2020. (See Note 10 for more information on the lease termination.)(6)Revenue RecognitionThe Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers. ASC No. 606 provides a five-step analysis in determining when and how revenue is recognized: Page PART I – FINANCIAL INFORMATION Item 1. IdentifyFinancial Statements (unaudited)1 2 3 4 5 29 Item 3. 38 Item 4. 38 PART II – OTHER INFORMATION 2.Identify the performance obligationsItem 1. 39 Item 1A. 39 Item 6. 40 3.Determine the transaction price4.Allocate the transaction price to the performance obligations5.Recognize revenue when the performance obligations have been satisfied41ASC No. 606 requires revenue recognitiondepict the transferBrooklyn ImmunoTherapeutics, Inc. (formerly known as NTN Buzztime, Inc.) and “Brooklyn LLC” refers to Brooklyn ImmunoTherapeutics LLC, a wholly owned subsidiary of promised goodsBrooklyn Inc. All references to “our company,” “we,” “us” 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, 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. Until February 1, 2020, the Company also generated revenue from hosting live trivia events. The Company sold all of its assets used to host live trivia events in January 2020.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.ASC No. 606 specifies certain criteria that an arrangement with a customer must have in order for a contract to exist for purposes of revenue recognition, one of which is that it must be probable that the Company will collect the consideration to which it will be entitled under the contract. As a result of the impact that the COVID-19 pandemic has had, and continues to have, on the Company’s customers, the Company determined that due to the uncertainty of collectability of the subscription fees for certain customers, the Company’s arrangement with those customers no longer meets all the criteria needed for a contract to exist for revenue recognition purposes. Therefore, the Company did not recognize revenue for these customers and fully reserved for accounts receivable in the allowance for doubtful accounts. The Company only recognized revenue for the arrangements that continued to meet the contract criteria, including the criteria that collectability was probable.Revenue StreamsThe Company disaggregates revenue by material revenue stream as follows: Three months ended September 30, 2020 2019 $ $ Subscription revenue 1,053,000 71.3 % 3,723,000 81 % (2,670,000 ) (71.7 )% Hardware revenue 379,000 25.7 % 11,000 0 % 368,000 3,345.5 % Other revenue 45,000 3.0 % 846,000 19 % (801,000 ) (94.7 )% Total 1,477,000 100.0 % 4,580,000 100 % (3,103,000 ) (67.8 )% Nine months ended September 30, 2020 2019 $ $ Subscription revenue 3,779,000 82 % 11,356,000 78 % (7,577,000 ) (67 )% Hardware revenue 421,000 9 % 811,000 6 % (390,000 ) (48 )% Other revenue 425,000 9 % 2,471,000 17 % (2,046,000 ) (83 )% Total 4,625,000 100 % 14,638,000 100 % (10,013,000 ) (68 )% The following describes how the Company recognizes revenue under ASC No. 606.Subscription Revenue - Prior to the COVID-19 pandemic, the Company recognized the recurring subscription fees it received for its services over time as customers received and consumed 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 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 up to one year of 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 Company’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-line method. The Company has certain contingent performance obligations with respect to repairing or replacing equipment and will recognize any revenue related to the performance of such obligations at the point in time the Company performs them.As discussed above, as a result of the impact that the COVID-19 pandemic has had, and continues to have, on the Company’s customers, the Company determined that due to the uncertainty of collectability of the subscription fees for certain customers, the Company’s arrangement with those customers no longer meets all the criteria needed for a contract to exist for revenue recognition purposes. Therefore, the Company did not recognize revenue for these customers and fully reserved for accounts receivable in the allowance for doubtful accounts.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. 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.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. 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 associated with the Company’s advertising activities.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 – As of February 1, 2020, the Company no longer has revenue related to hosting live- trivia events as a result of the sale of all of the Company’s assets used to host live trivia events in January 2020. The Company recognized revenue from hosting live-trivia events at a point in time, which is when the event took place. Some customers hosted their own trivia events and the Company provided the game materials. In those cases, the Company recognized the revenue at the point in time the Company sent the game materials to the customer. The Company recognized related costs at the same point in time the revenue was recognized. Generally, there was no unbilled revenue or deferred revenue associated with live-hosted trivia events.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.11Revenue ConcentrationsThe 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 September 30, 2019, 2,565 venues in the U.S. and Canada subscribed to the Company’s interactive entertainment network, of which approximately 47% were Buffalo Wild Wings corporate-owned restaurants“our” mean Brooklyn Inc. and its franchisees. As of September 30, 2020, the number declined to 1,080 venues, primarily due to the termination of its agreements with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019 in accordance with their terms and also in part to customers terminating their subscriptions or going out of business relating to the effects of the COVID-19 pandemic on their business.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 nine months ended September 30, 2020 and 2019, and the percentage of total revenue that such amount represents for such periods: Three months ended Nine months ended September 30, September 30, 2020 2019 2020 2019 Buffalo Wild Wings revenue $ 25,000 $ 1,676,000 $ 176,000 $ 5,891,000 Percent of total revenue 2 % 37 % 4 % 40 % As of September 30, 2020 and December 31, 2019, approximately $112,000 and $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 nine months ended September 30, 2020 and 2019 were as follows: 2020 2019 2020 2019 United States $ 1,420,000 $ 4,420,000 $ 4,390,000 $ 14,144,000 Canada 57,000 160,000 235,000 494,000 Total revenue $ 1,477,000 $ 4,580,000 $ 4,625,000 $ 14,638,000 Contract Assets and LiabilitiesThe 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,subsidiary Brooklyn LLC, unless stated otherwise 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 January 1, 2020 and September 30, 2020, including the change during the period. Balance at January 1, 2020 $ 462,000 New performance obligations 198,000 Revenue recognized (540,000 ) Balance at September 30, 2020 120,000 Less non-current portion - Current portion at September 30, 2020 $ 120,000 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 table below shows the balance of the unamortized installation cost and sales commissions as of January 1, 2020 and September 30, 2020, including the change during the period. Balance at January 1, 2020 $ 187,000 $ 87,000 $ 274,000 Incremental costs deferred 83,000 60,000 143,000 Deferred costs recognized (212,000 ) (120,000 ) (332,000 ) Balance at September 30, 2020 58,000 27,000 85,000 (7)Basic and Diluted Earnings Per Common ShareBasic 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, 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 stock units and convertible preferred stock representing approximately 239,000 and 249,000 shares of common stock were excluded from the computations of diluted net loss per common share for the three and nine months ended September 30, 2020 and 2019, respectively, as their effect was anti-dilutive.(8)SHAREHOLDERS’ EQUITYEquity Incentive PlansThe 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.The 2019 Plan provides for the issuance of up to 240,000 shares of Company common stock. Awards 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 September 30, 2020, there were stock options to purchase approximately 2,000 shares of common stock and 98,000 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 September 30, 2020, there were stock options to purchase approximately 24,000 shares of common stock and 12,000 restricted stock units outstanding under the 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 September 30, 2020, there were no equity grants outstanding under the 2014 Plan.Stock-Based CompensationThe 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.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 Company did not grant any stock options and no options were exercised during the three or nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, the Company granted stock options to purchase approximately 1,000 and 2,000 shares of common stock, respectively, and no options were exercised.The following weighted-average assumptions were used for stock option awards granted during the three and nine months ended September 30, 2019: Three months ended Nine months ended September 30, 2019 September 30, 2019 Weighted average risk-free rate 1.39 % 1.70 % Weighted average volatility 95.11 % 108.83 % Dividend yield 0.00 % 0.00 % Expected term 5.61 years 5.73 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 the three months ended September 30, 2020 and 2019 was $53,000 and $63,000, respectively, and $135,000 and $172,000 for the nine months ended September 30, 2020 and 2019, respectively, and is expensed in selling, general and administrative expenses and credited to additional paid-in-capital.Outstanding restricted stock units (“RSUs”) are settled in an equal number of shares of common stock on the vesting date of the award. 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 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. During the three months ended September 30, 2019, the Company granted 30,000 RSUs. No RSUs were granted during the three months ended September 30, 2020. During the nine months ended September 30, 2020 and 2019, the Company granted 172,000 and 77,000 RSUs, respectively. The weighted average grant date fair value of the RSUs awarded during the three months ended September 30, 2019 was $2.76 per RSU. The weighted average grant date fair value of the RSUs awarded during the nine months ended September 30, 2020 and 2019 was $2.51 and $2.95 per RSU, respectively.During the three months ended September 30, 2019, 30,000 RSUs were awarded as a performance-based award granted to the Company’s former chief executive officer in connection with his resignation. The award would have vested in full upon the effective date of a change in control transaction in which an individual, entity or group acquired all of the Company’s then-outstanding equity interests on or before March 17, 2020, or in which an individual, entity or group acquired 51% of our then-outstanding equity interests on or before March 17, 2020, and then that same individual, entity or group acquired the remaining equity so that it held all of the Company’s then-outstanding equity interests on or before June 17, 2020. Continuing service was not required for vesting to occur. Because a change in control is not considered probable until a change in control occurs, and because the change in control did not occur as discussed above, the Company did not recognize stock compensation expense on this award and this award expired unvested.In connection with the resignation of the Company’s former chief executive officer, the vesting of 10,000 of his RSUs were 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 RSUs in the period in which the accelerated vesting occurred.With the exception of the performance-based award and the acceleration of vesting of RSUs discussed above, RSUs typically vest over a period of two to three years, generally in monthly or quarterly increments. Some awards may have an initial cliff period of six months before the monthly vesting begins. All outstanding RSUs as of September 30, 2020 are subject to accelerated vesting in the event of a change in control.The following table shows the number of RSUs that vested and were settled during the three and nine months ended September 30, 2020 and 2019, as well as the number of shares of common stock issued upon settlement. In lieu of paying cash to satisfy withholding taxes due upon the settlement of vested RSUs, an employee may elect to have shares of common stock withheld that wouldcontext otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. Three months ended
September 30, Nine months ended
September 30, 2020 2019 2020 2019 Restricted stock units vested and settled 19,000 18,000 39,000 29,000 Common stock issued, net of shares withheld 14,000 13,000 28,000 20,000
requires.14(9)DEBTTerm LoanIn 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. In February 2020, the Company made a pre-payment on the term loan of approximately $150,000 following the sale of all of the Company’s assets used to conduct the live-hosted knowledge-based trivia events in January 2020. In March 2020, the Company and Avidbank entered into an amendment to the loan and security agreement (“Amendment #1”). In connection with entering into Amendment #1, the Company made a $433,000 payment on the 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 of the term loan to $2,000,000 as of March 31, 2020.The Company incurred approximately $26,000 of debt issuance costs related to the loan and security agreement and its amendment, of which approximately $3,000 was related to Amendment #1. 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 September 30, 2020 and December 31, 2019 was $1,000 and $11,000, respectively, and is recorded as a reduction of long-term debt.Under the terms of Amendment #1, the Company’s financial covenants were changed as described below, the maturity date was changed from September 28, 2022 to December 31, 2020, and the amount of the Company’s monthly payment obligations increased as described below.Before entering into Amendment #1, 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 Amendment #1, 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 September 30, 2020, the Company was in compliance with both of those covenants.Before entering into Amendment #1, the Company was required to make monthly principal payments of approximately $83,000 plus accrued and unpaid interest. Under the terms of the amendment, the monthly principal payment increased to $125,000 for each of April, May and June 2020, to $300,000 for each of July, August, September, October and November 2020, and to $125,000 for December 2020. As of September 30, 2020, the outstanding principal balance of the term loan was $725,000.On June 1, 2020, the Company and Avidbank entered into an amendment to the loan and security agreement to formally memorialize Avidbank’s consent to the Company receiving the PPP Loan (as defined below). Avidbank initially consented to the Company receiving the PPP loan in April 2020.Paycheck Protection Program LoanOn April 18, 2020, the Company issued a note in the principal amount of approximately $1,625,000 to Level One Bank evidencing the loan (the “PPP Loan”) the Company 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”). As of September 30, 2020, the outstanding principal balance of the PPP Loan was approximately $1,625,000.The PPP Loan matures on April 18, 2022 and bears interest at a rate of 1.0% per annum. The Company must make monthly interest only payments beginning on November 18, 2020. One final payment of all unforgiven principal plus any accrued unpaid interest is due at maturity. Under the terms of the PPP, the Company may prepay the PPP Loan at any time with no prepayment penalties. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In October 2020, the Company submitted its loan forgiveness application for the PPP Loan, and in November 2020, the U.S Small Business Administration approved the forgiveness of approximately $1,093,000 of the $1,625,000 loan, leaving a principal balance of approximately $532,000.15Bridge LoanIn connection with the Asset Purchase Agreement entered into with eGames.com on September 18, 2020, the Company issued to Fertilemind Management, LLC, an affiliate of eGames.com, an unsecured promissory note (the “Note”) in the principal amount of $1,000,000, evidencing a $1,000,000 loan received from Fertilemind Management, LLC on behalf of eGames.com (the “Bridge Loan”). The Company may use the loan proceeds for, among other things, the payment of obligations related to the transactions contemplated by the Asset Purchase Agreement and the Merger Agreement and other general working capital purposes. The principal amount accrues interest at rate of 8% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. The principal amount of the Bridge Loan and accrued interest thereon is due and payable upon the earlier of (i) the termination of the Asset Purchase Agreement, (ii) the closing of a Business Combination (as defined in the Note), and (iii) December 31, 2020. Upon the closing of the Asset Sale, the Bridge Loan will be applied against the purchase price under the Asset Purchase Agreement, and the Note will be extinguished.All of the Company’s obligations under the Note are subordinate to the indebtedness and all other obligations owed by the Company to Avidbank including under the loan and security agreement, dated as of September 28, 2018 and as amended from time to time, between the Company and Avidbank.The Note includes customary events of default, including if any portion of the Note is not paid when due; if the Company defaults in the performance of any other material term, agreement, covenant or condition of the Note, subject to a cure period; if any final judgment for the payment of money is rendered against the Company and the Company does not discharge the same or cause it to be discharged or vacated within 90 days; if the Company makes an assignment for the benefit of creditors, if the Company generally does not pay its debts as they become due; if a receiver, liquidator or trustee of the Company is appointed, or if the Company is adjudicated bankrupt or insolvent. In the event of an event of default, the Note will accelerate and become immediately due and payable at the option of the holder.The Company is in discussions with Fertilemind Management, LLC regarding the possibility of borrowing an additional $500,000 on approximately December 1, 2020, which, if received, would also be applied toward the purchase price at the closing of the Asset Sale. No assurances can be given that the Company will obtain such $500,000 loan from Fertilemind Management, LLC or from any other party.(10)LEASESAs LesseeThe Company has operating leases for its warehouse facility and for equipment under agreements that expire at various dates through 2023. Certain of these leases contain renewal provisions and the warehouse lease requires the Company to pay utilities, insurance, taxes and other operating expenses. The Company terminated its lease for its corporate headquarters as of June 30, 2020, which is discussed further below. 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, Leases (“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 amounts of which were primarily related to the Company’s corporate headquarters. 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.Corporate Headquarters Lease TerminationAs part of the Company’s on-going efforts to implement measures designed to reduce operating expenses and preserve capital as it continues to seek to mitigate the substantial negative impact of the COVID-19 pandemic on the Company’s business, on June 25, 2020, the Company entered into a Lease Termination, Surrender and Buy-Out Agreement (the “Lease Termination Agreement”) with Burke Aston Partners, LLC (the “Lessor”) to terminate, effective June 30, 2020, the lease dated July 26, 2018 for the Company’s corporate headquarters. Absent the Lease Termination Agreement, the lease would have expired in accordance with its terms in April 2026. Since January 1, 2020, the Company reduced its headcount from 74 to 19 employees, all of whom are currently working remotely, and the Company did not currently need a corporate headquarters of the size subject to that lease. After paying all the amounts the Company potentially could be required to pay under the Lease Termination Agreement, including both contingent payments described below, the Company will have reduced its future cash obligations under the lease by approximately $3.5 million as compared to the amount of rent the Company would have otherwise paid if the lease remained in effect for the duration of its original term.Pursuant to the Lease Termination Agreement, in exchange for allowing the Company to terminate the lease early, the Company agreed to (i) allow the Lessor to keep its security deposits of approximately $260,000, which includes $200,000 of restricted cash under a letter of credit, (ii) pay the Lessor approximately $121,000 for past due rent, and (iii) pay the Lessor $80,000 if the Company sells all or any material part of its assets or all or any material part of its equity interests and $5,000 if the Lessor needs to dispose of furniture that remained in the office space. In July 2020, the Lessor informed the Company that it needed to dispose of the remaining furniture, and the Company paid the Lessor $5,000 to do so.As a result of the lease termination, the Company recorded a gain on the termination of the lease of approximately $8,000 during the three months ended June 30, 2020, which includes writing off the remaining balances of the right-of-use asset of approximately $1,913,000 and the corresponding lease liability of approximately $3,135,000, applying the principal portion of past due rents to be paid in July 2020 of approximately $64,000, writing off of the unamortized tenant improvement allowance of approximately $890,000, and applying the security deposit of approximately $260,000.Additionally, as part of the lease termination and vacating the facility, the Company recorded a loss on the disposal of fixed assets of approximately $282,000 during the three months ended June 30, 2020, which includes approximately $197,000 in furniture and fixtures and the Company’s vehicle, and $85,000 in other leasehold improvement assets.The tables below show the beginning balances of the operating lease right-of-use assets and liabilities as of January 1, 2019 and the ending balances as of September 30, 2020, including the changes during the periods. Operating lease right-of use assets at January 1, 2020 $ 2,101,000 Amortization of operating lease right-of-use assets (161,000 ) Addition of operating lease right-of -use asset 28,000 Write-off of right-of-use asset due to headquarters lease termination (1,913,000 ) Write-off of right-of-use asset related to other lease terminations (50,000 ) Operating lease right-of-use assets at September 30, 2020 $ 5,000 Operating lease liabilities at January 1, 2020 $ 3,300,000 Principal payments on operating lease liabilities (154,000 ) Addition of operating lease liability 28,000 Write-off of lease liability related to headquarters lease termination (3,135,000 ) Write-off of lease liability related to other lease terminations (34,000 ) Operating lease liabilities at September 30, 2020 5,000 Less non-current portion - Current portion at September 30, 2020 $ 5,000 As of September 30, 2020, the Company’s operating leases have a weighted-average remaining lease term of 1 month for $5,000 in future payments and a weighted-average discount rate of 5%.For the three months ended September 30, 2020 and 2019, total lease expense under operating leases was approximately $17,000 and $137,000, respectively. For the nine months ended September 30, 2020 and 2019, total lease expense under operating leases was approximately $281,000 and $407,000, respectively. Lease expense is recorded in selling, general and administrative expenses.The tables below show the beginning balances of the finance lease right-of-use assets and liabilities as of January 1, 2020 and the ending balances as of September 30, 2020, including the changes during the periods. 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 at January 1, 2020 $ 41,000 Depreciation of finance lease right-of-use assets (15,000 ) Finance lease right-of-use assets at September 30, 2020 $ 26,000 Finance lease liabilities at January 1, 2020 $ 41,000 Principal payments on finance lease liabilities as of September 30, 2020 (14,000 ) Finance lease liabilities at September 30, 2020 27,000 Less non-current portion (4,000 ) Current portion at September 30, 2020 $ 23,000 As of September 30, 2020, the Company’s finance leases have a weighted-average remaining lease term of 1.2 years and a weighted-average discount rate of 5.52%. The maturities of the finance lease liabilities are as follows: As of September 30, 2020 2020 7,000 2021 21,000 Total Finance lease payments 28,000 Less imputed interest (1,000 ) Present value of Finance lease liabilities $ 27,000 For the three months ended September 30, 2020 and 2019, total lease costs under finance leases were approximately $5,000 and $10,000, respectively. For the nine months ended September 30, 2020 and 2019, total lease costs under finance leases were approximately $15,000 and $41,000, respectively.As LessorASC 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. The Company does not anticipate entering into any sales-type lease arrangements after December 31, 2019. The Company has not recognized any sales-type lease revenue for the three or nine months ended September 30, 2020.18(11)DISPOSITION OF SITE EQUIPMENT TO BE INSTALLED AND FIXED ASSETSSite 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 they are deployed 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 and fixed assets 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.The COVID-19 pandemic has had, and continues to have, a significant adverse impact on the Company’s business, cash flows from operations and liquidity. However, based on the cash flows the Company is receiving from its customers during the pandemic and the future undiscounted cash flows the Company expects to receive from these customers, the Company has determined that recoverability of the carrying amounts of its site equipment to be installed and the site equipment in fixed assets is probable and, therefore, during the three months ended September 30, 2020, the Company did not record any impairment charges on these assets, other than disposals of approximately $3,000 in the ordinary course of business. For the nine months ended September 30, 2020, the Company disposed of approximately $229,000 of site equipment, primarily related to older equipment the Company determined would no longer be deployed.For other fixed assets, as previously discussed, the Company terminated its lease for its corporate headquarters and vacated the facility as of June 30, 2020. (See Note 10) As a result, during the nine months ended September 30, 2020, the Company wrote-off approximately $890,000 of unamortized tenant improvement allowance that is recorded as part of the gain on termination of lease, as well as approximately $85,000 in leasehold improvement assets and $197,000 in furniture and fixtures and the Company’s vehicle.The Company disposed of approximately $4,000 and $24,000 of site equipment during the three and nine months ended September 30, 2019 in the ordinary course of business.The Company will continue to monitor the recoverability of its site equipment and other fixed assets as it relates to the continued impact of the COVID-19 pandemic and will recognize any additional write-offs during the period in which it determines that impairment exists.(12)SOFTWARE DEVELOPMENT COSTSThe Company capitalizes costs related to developing certain software programs in accordance with ASC No. 350, Intangibles – Goodwill and Other. When the Company deploys the programs, it begins to recognize costs related to the 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 $137,000 and $100,000 for the three months ended September 30, 2020 and 2019, respectively, and $430,000 and $293,000 for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020 and December 31, 2019, approximately $62,000 and $177,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete.The Company performed its quarterly review of software development projects for the three months ended September 30, 2019, and determined to abandon certain software development projects that were no long a strategic fit for the Company, which resulted in recognizing approximately $51,000 in capitalized software impairment charges. The Company’s quarterly review for the three months ended September 30, 2020 did not result in recognizing any impairment charges for the period. During the nine months ended September 3, 2020 and 2019, the Company abandoned 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, the Company recognized impairment charges of $238,000 and $52,000, respectively. Impairment of capitalized software is shown separately on the Company’s consolidated statement of operations.Taking into consideration the impact the COVID-19 pandemic has had, and continues to have, on the Company’s business, the Company determined that based on the future undiscounted cash flows the Company expects to receive from its customers, recoverability of the carrying amounts of capitalized software development costs is probable and, therefore, no additional impairment charges were required to be recognized other than as discussed above. The Company will continue to monitor the recoverability of these assets as it relates to the continued impact of the COVID-19 pandemic on the Company’s business and recognize any additional write-offs during the period in which it determines that impairment exists.(13) GOODWILLThe Company’s goodwill balance of $696,000 as of December 31, 2019 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”). In the Company’s evaluation of impairment indicators as of March 31, 2020, it determined that the uncertainty relating to the impact of the COVID-19 pandemic on the Reporting Unit’s future operating results represented an indicator of impairment. Accordingly, the Company compared the estimated fair value of the Reporting Unit to its carrying value at March 31, 2020, determined that a full impairment loss was warranted and recognized an impairment charge of $662,000 for the three months ended March 31, 2020. No further evaluations are necessary after March 31, 2020. There was no goodwill impairment recorded for the three or nine months ended September 30, 2019.In addition to the impairment loss recognized, fluctuations in the amount of goodwill shown on the accompanying balance sheets can occur due to changes in the foreign currency exchange rates used when translating NTN Canada’s financial statement from Canadian dollars to US dollars during consolidation. The following table shows the changes in the carrying amount of goodwill for the nine months ended September 30, 2020.Goodwill balance at January 1, 2020 $ 696,000 Activity for the three months ended March 31, 2020 Effects of foreign currency (34,000 ) Goodwill impairment (662,000 ) Goodwill balance at March 31, 2020 and September 30, 2020 $ - (14) ACCUMULATED OTHER COMPREHENSIVE INCOMEThe 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 Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. In accordance with ASC No. 830, Foreign Currency Matters, revenues and expenses of the Company’s foreign subsidiaries have been translated into U.S. dollars using the average exchange rates during the reporting period, and the assets and liabilities of such subsidiaries have been translated using the period end exchange rate. Accumulated other comprehensive income includes the accumulated gains or losses from these foreign currency translation adjustments. As of September 30, 2020 and December 31, 2019, $241,000 and $268,000 of foreign currency translation adjustments were recorded in accumulated other comprehensive income, respectively.(15) RECENT ACCOUNTING PRONOUNCEMENTSIn 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 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 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 the Company). The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements.(16) SUBSEQUENT EVENTSPPP Loan ForgivenessIn November 2020, the U.S. Small Business Administration approved the forgiveness of approximately $1,093,000 of the Company’s $1,625,000 PPP Loan, leaving a principal balance of approximately $532,000.Legal ProceedingsFrom time to time, the Company is subject to legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm its financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition or operating results. The Company is not currently subject to any pending material legal proceedings except as described below.The Company and its directors have been named as defendants in six substantially similar actions brought by purported stockholders of the Company’s arising out of the Merger: Henson v. NTN Buzztime, Inc., Case No. 1:20-cv-08663 (S.D.N.Y. filed Oct. 16, 2020); Chinta v. NTN Buzztime, Inc., Case No. 1:20-cv-01401 (D. Del. filed Oct. 16, 2020); Amanfo v. NTN Buzztime, Inc., Case No. 1:20-cv-08747 (S.D.N.Y. filed Oct. 20, 2020); Falikman v. NTN Buzztime, Inc., Case No. 1:20-cv-05106 (E.D.N.Y. filed Oct. 23, 2020); Haas v. NTN Buzztime, Inc., Case No. 3:20-cv-02123-BAS-JLB (S.D. Cal. filed Oct. 29, 2020); and Monsour v. NTN Buzztime, Inc. Case No. 1:20-cv-08755 (S.D.N.Y filed October 20, 2020). These actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 14a-9 promulgated thereunder. Chinta asserts additional claims for breach of fiduciary duty under Delaware law. The complaints allege that 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 the Company or Brooklyn may have made, and the analyses performed by the Company’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not the Company entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints allege that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints request a 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; an accounting by the Company for all alleged damages suffered; a declaration that certain federal securities laws have been violated; and costs, including attorneys’ and expert fees and expenses. Process has been served in Henson, but not in any of the other actions. The deadline for defendants to respond to the complaint in Henson is December 21, 2020. Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief.The Company and its directors deny the allegations asserted against the Company in these actions and intend to oppose them vigorously.Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.CAUTION CONCERNINGCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSand the documents incorporated by reference herein, if any, containcontains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, or the Forward-Looking Statements Safe Harbor, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts could be deemed forward-looking statements. We have tried, whenever possible, to identify these statements by using words such as “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “seeks,” or words of similar meaning, or future or conditional verbs, such as “may,” “will,” “should,” “could,” “aims,” “intends” or “projects,” and similar expressions, whether in the negative or the affirmative. Forward-looking statements reflect management’s beliefs and assumptions, are all based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. 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 statement. For us, particularmightwe believe could cause actual results or contributeevents to such differences include: (1)differ materially from our forward-looking statements. You should also carefully review the risk that the conditions to the closing of the Asset Sale or the Merger are not satisfied, including the failure to timely or at all obtain stockholder approval for the Asset Sale or the Merger; (2) uncertainties as to the timing of the consummation of the Asset Sale or the Mergerfactors and the ability of the parties to consummate the Asset Sale or the Merger; (3) risks related to our ability to correctly estimate our operating expenses and our expenses associated with the Asset Sale or the Merger; (4) unexpected costs, charges or expenses resulting from the Asset Sale or the Merger; (5) if the Merger or the Asset Sale is not consummated, our ability to raise substantial capitalcautionary statements described in the very near-term to allow us to maintain operations and sustain the negative impact of the COVID-19 pandemic on our business and financial condition, and if we are able to sustain such impact, our ability to recover from the impact; (6) our ability to successfully manage our liquidity and our working capital deficit by managing the timing of payments to our third parties; (7) 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 and which could lead to a foreclosure on our assets; (8) when, and the extent to which, the negative impact of the pandemic will improve, including when a substantial majority of restaurants across the U.S. and Canada will be permitted to offer on-site dining and operate at or close to pre-pandemic levels or when a substantial majority of bars across the U.S. and Canada will be permitted to re-open and operate at or close to pre-pandemic levels, when our customers will re-open, or if they will subscribe to our service if and when they do; (9) the negative impact that measures we 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; (10) our ability to maintain or grow our revenue; and (11) the other risks and uncertainties described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (our “2019 10-K”), and described in other documents we file from time to time with the Securities and Exchange Commission, or SEC, includingspecifically under “Risk Factors” in Item 8.01 of our Current ReportsReport on Form 8-K and our Quarterly Reports on Form 10-Q8‑K filed with the SEC thereafter. To the extent the impact of the COVID-19 pandemic adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in Part I, Item 1A “Risk Factors” included in our 2019 10-K.Readers are urged not to place undue reliance on the forward-looking statements in this report or incorporated by reference herein, which speak only as of the date of this report. We are including this cautionary note to make applicable, and take advantage of, the safe harbor provisions of the Forward-Looking Statements Safe Harbor.We believe that the expectations reflected in forward-looking statements in this report or incorporated herein by reference are based upon reasonable assumptions at the time made. However, given the risks and uncertainties, you should not rely on any forward- looking statements as a prediction of 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. You are cautioned not to place undue reliance on these forward-looking statements. December 31, 2021 2020 Assets (Unaudited) Current Assets: Cash $ 8,409,938 $ 1,630,455 Subscription receivable 24,918 - Tax receivable 28,490 - Prepaid expenses and other current assets 250,243 102,322 Total Current Assets 8,713,589 1,732,777 Long-Term Assets: Property and equipment, net 568,943 594,106 Right of use assets - operating leases 2,023,263 2,092,878 Goodwill 2,043,747 2,043,747 In process research and development 6,860,000 6,860,000 Security deposits and other assets 488,534 453,252 Total Assets $ 20,698,076 $ 13,776,760 Liabilities and Stockholders’ Deficit Current Liabilities: Accounts payable $ 1,812,017 $ 1,275,223 Accrued expenses 1,160,344 1,051,020 Loans payable 410,000 410,000 PPP loan, current 232,235 115,972 Current portion of lease liability 287,359 273,217 Total Current Liabilities 3,901,955 3,125,432 Long-Term Liabilities: Contingent consideration 19,290,000 20,110,000 Lease liability, non-current 1,826,863 1,905,395 PPP loan, non-current 77,670 193,933 Other liabilities 22,863 22,863 Total Liabilities 25,119,351 25,357,623 Commitments and contingencies Stockholders’ Deficit: Class A membership units - 23,202,005 Class B membership units - 1,400,000 Class C membership units - 1,000,000 Common units - 197,873 Common stock, $0.005 par value; 100,000,000 shares authorized; 41,505,998 shares issued and outstanding as of March 31, 2021, and no shares issued and outstanding as of December 31, 2020 207,530 - Additional paid-in capital 50,453,489 - Series A preferred stock 781 - Accumulated deficit (55,083,075 ) (37,380,741 ) Total Stockholders’ Deficit (4,421,275 ) (11,580,863 ) Total Liabilities and Stockholders’ Deficit $ 20,698,076 $ 13,776,760 Three Months Ended March 31, 2021 2020 Operating Expenses: Research and development $ (38,971 ) General and administrative Transaction costs - Change in fair value of contingent consideration - Total operating expenses Loss from operations (1,014,534 ) Other Expenses: Other expense, net (4,678 ) Loss on sales of NTN assets - Total other expenses Net loss attributable to common stockholders $ (17,702,334 ) $ (1,019,212 ) Basic and diluted net loss per share attributable to common stockholders $ (0.64 ) $ (0.06 ) Basic and diluted weighted average number of shares outstanding 27,799,415 17,501,813 Membership Equity Common Stock Class A Class B Class C Common Shares Amount Total
Stockholders’
Equity (Deficit) $ - $ 23,202,005 $ 1,400,000 $ 1,000,000 $ 197,873 - $ - $ - $ (37,380,741 ) $ (11,580,863 ) Brooklyn rights offerings membership units - 10,500,000 - - - - - - - 10,500,000 Elimination of Brooklyn’s historical members’ equity - (33,702,005 ) (1,400,000 ) (1,000,000 ) (197,873 ) - - 36,299,878 - - Common stock to be retained by NTN stockholders - - - - - 7,572 8,170,042 - 8,177,614 Issuance of Series A preferred stock retained by NTN stockholders 781 - - - - - - (781 ) - - Issuance of common stock to Brooklyn members - - - - - 194,620 (194,620 ) - - Issuance of common stock to Financial Advisor upon consummation of merger - - - - - 5,338 5,760,069 - 5,765,407 Stock based compensation: Modification of vested restricted common shares - - - - - - - 249,905 - 249,905 - - - - - - - 168,996 - 168,996 Net loss - - - - - - - - (17,702,334 ) (17,702,334 ) $ 781 $ - $ - $ - $ - 41,505,998 $ 207,530 $ 50,453,489 $ (55,083,075 ) $ (4,421,275 ) Membership Equity Accumulated Total Members’ Class A Class B Class C Common Deficit Equity Balance - January 1, 2020 $ 18,177,692 $ 1,400,000 $ 1,000,000 $ 106,937 $ (10,941,526 ) $ 9,743,103 Stock based compensation: Amortization of restricted common units - - - 22,734 - 22,734 Sale of members’ equity 312,500 - - - - 312,500 Net loss - - - - (1,019,212 ) (1,019,212 ) Balance - March 31, 2020 $ 18,490,192 $ 1,400,000 $ 1,000,000 $ 129,671 $ (11,960,738 ) $ 9,059,125 Three Months Ended March 31, 2021 2020 Cash Flows from Operating Activities: Net loss $ (17,702,334 ) $ (1,019,212 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 25,287 22,999 Modification of vested restricted common shares 249,905 - Equity compensation 168,996 22,734 Amortization of right-to-use asset 69,615 - Transaction costs - shares to Financial Advisor 5,765,407 - Loss on sales of NTN assets 9,598,173 - Change in fair value of contingent consideration (820,000 ) - Change in operating assets and liabilities: Account receivable 4,680 - Prepaid expenses and other current assets 41,594 (53,459 ) Security deposits and other non-current assets (1,018 ) (84,915 ) Accounts payable and accrued expenses (765,842 ) (761,925 ) Operating lease liability (64,390 ) - Other liabilities - 685 Total adjustments 14,272,407 (853,881 ) Net Cash Used in Operating Activities (3,429,927 ) (1,873,093 ) Cash Flows from Investing Activities: Purchase of property and equipment - (4,457 ) Purchase of NTN, net of cash acquired 147,728 - Proceeds from the sales of NTN assets, net of cash disposed 118,594 - Net cash provided by / (used in) investing activities 266,322 (4,457 ) Cash Flows from Financing Activities Repayment of NTN's PPP Loan (531,994 ) - Proceeds from sale of members' equity 10,475,082 312,500 Net Cash Provided by Financing Activities 9,943,088 312,500 Net Increase / (Decrease) in Cash 6,779,483 (1,565,050 ) Cash - Beginning of Period 1,630,455 5,100,819 Cash - End of Period $ 8,409,938 $ 3,535,769 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ - $ - Income taxes $ - $ - Non-cash Investing and Financing Activities: Issuance of common stock for business combination $ 8,177,614 $ - Repayment of aquired NTN debts upon disposition of assets to eGames $ 1,700,000 $ - Preferred shares issued in connection with reverse merger $ 781 $ - NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS NOTE 2 LIQUIDITY AND CAPITAL RESOURCES NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NOTE 3 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NOTE 4 NTN BUZZTIME, INC TRANSACTION NOTE 4 NTN BUZZTIME, INC TRANSACTION (Continued) Number of shares of the Common Stock owned by NTN stockholders (i) Multiplied by the fair value per share of Common Stock (ii) Total purchase price (i) (ii) NOTE 4 NTN BUZZTIME, INC TRANSACTION (Continued) Preliminary Purchase
Price
Allocation Pro Forma
Adjustment Cash and cash equivalents Accounts receivable Prepaid expense and other current assets Property and equipment, net Software development costs (368,460 ) Customers Trade name Accounts payable, accrued liabilities and other current liabilities (3,781,173 ) (3,781,173 ) Net assets acquired, excluding goodwill Total consideration Net assets acquired, excluding goodwill (410,962 ) Goodwill NOTE 4 NTN BUZZTIME, INC TRANSACTION (Continued) Proceeds from sale: Cash $ 132,055 Escrow 100,000 Assume advance/loans 1,700,000 Interest on advance/loans 67,945 Carrying value of assets sold: Cash and cash equivalents (13,461 ) Accounts receivable (75,153 ) Prepaids and other current assets (123,769 ) Property and equipment, net (1,013,950 ) Software development costs (927,368 ) Customers (548,000 ) Trade name (299,000 ) Goodwill (8,588,576 ) Other assets (103,173 ) Liabilities transferred upon sale: Accounts payable and accrued expenses 113,156 Obligations under finance leases 16,676 Lease liability 25,655 Deferred revenue 54,803 Other current liabilities 148,987 Transaction costs (265,000 ) Total loss on sale of assets $ (9,598,173 ) NOTE 4 NTN BUZZTIME, INC TRANSACTION (Continued) Three Months Ended March 31, 2021 2020 Net loss attributable to common stockholders $ (17,702,334 ) $ (1,019,212 ) Basic and diluted net loss per share attributable to common stockholders $ (0.64 ) $ (0.06 ) NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) March 31, 2021 Description Level 1 Level 2 Level 3 Liabilities: Contigent consideration - - 19,290,000 Total $ - $ - $ 19,290,000 December 31, 2020 Description Level 1 Level 2 Level 3 Liabilities: Contigent consideration - - 20,110,000 Total $ - $ - $ 20,110,000 Balance at December 31, 2020 $ 20,110,000 Fair value adjustments included in operating expenses (820,000 ) Balance at March 31, 2021 $ 19,290,000 NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) PROPERTY AND EQUIPMENT March 31, December 31, 2021 2020 Laboratory and manufacturing equipment $ 299,839 $ 299,839 Leasehold improvements 414,504 414,504 714,343 714,343 Less: accumulated depreciation and amortization (145,400 ) (120,237 ) Property and equipment, net $ 568,943 $ 594,106 NOTE 7 LEASES NOTE 7 LEASES (Continued) NOTE 7 LEASES (Continued) Operating lease expense Sublease income Variable lease expense 9,002 Total $ 138,822 Three Months Ended
March 31, 2021 Cash paid within operating cash flow $ 154,641 Weighted average remaining lease term (years) 5.25 Weighted average discount rate 14.5 % Amount Remaining of 2021 $ 428,878 2022 588,918 2023 606,864 2024 624,172 2025 641,981 Thereafter 105,674 Future lease payments 2,996,487 Less: Imputed interest $ 882,265 Total operating lease liabilities 2,114,222 NOTE 7 LEASES (Continued) Amount Remaining of 2021 $ 60,655 2022 82,419 2023 84,194 2024 86,010 2025 87,867 Thereafter 74,590 Total $ 475,735 NOTE 8 GOODWILL AND IN PROCESS RESEARCH AND DEVELOPMENT NOTE 9 SECURITY DEPOSITS AND OTHER ASSETS SECURITY DEPOSITS AND OTHER ASSETS (Continued) ACCRUED EXPENSES March 31, December 31, 2021 2020 Compensation payable $ 588,266 $ 293,534 Accrued general and administrative expenses 57,702 207,468 Accrued research and development expenses 349,592 399,893 Accrued interest 164,784 150,125 Total accrued expenses $ 1,160,344 $ 1,051,020 NOTE 11 LOANS PAYABLE NOTE 12 COMMITMENTS AND CONTINGENCIES NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued) NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued) NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued) NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued) NOTE 13 STOCK-BASED COMPENSATION NOTE 14 STOCKHOLDERS’ DEFICIT STOCKHOLDERS’ DEFICIT (Continued) NOTE 15 SUBSEQUENT EVENTS NOTE 15 SUBSEQUENT EVENTS (Continued) Item 2. Quarterly Report on Form 10-Q,report, to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. All dollar amounts in this discussion are rounded to the nearest thousand. Our discussion is organizedfollows:●Overview and Highlights. This section describes our business and significant events and transactions we believe are important in understanding our financial condition and results of operations.●Critical Accounting Policies. This section lists our significant accounting policies, including any material changes in our critical accounting policies, estimates and judgments during the three and nine months ended September 30, 2020 from those described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2019 10-K.●Results of Operations. This section provides an analysis of our results of operations presented in the accompanying unaudited condensed consolidated statements of operations by comparing the results for the three and nine months ended September 30, 2020 to the results for the three and nine months ended September 30, 2019.●Liquidity and Capital Resources. This section provides an analysis of our historical cash flows, and our future capital requirements.●Recent Accounting Pronouncements. This section provides information related to new or updated accounting guidance that may impact our consolidated financial statements.●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.OVERVIEW AND HIGHLIGHTSAbout Our BusinessNTN Buzztime, Inc.) merged with and How We Talk About ItWe deliver interactive entertainment and innovative technology to our partners ininto Brooklyn LLC, with Brooklyn LLC surviving as a wide rangewholly owned subsidiary 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. We believe this unique experience increases dwell time, revenue, and repeat business for venues – and has also created a large and engaged audienceBrooklyn Inc.. This transaction, which we connect with through our in-venue TV network. Until the significant disruptions to the restaurant and bar industry resulting from the COVID-19 pandemic that began in March 2020, over 1 million hours of trivia, card, sports and arcade games were played on our network each month. Since the pandemic, approximately 100,000 hours per month of such games have been 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 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. Until February 1, 2020, we also generated revenue from hosting live trivia events. We sold all our assets used to host live trivia events in January 2020.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 are our property. Other trademarks are the property of their respective owners.Unless otherwise indicated, references in this report: (a) to “Buzztime,” “NTN,” “we,” “us” and “our” refer to NTN Buzztime, Inc. and its consolidated subsidiaries; (b) to “network subscribers,” “customers,” or “partners” refer to venues that subscribe to our network service; (c) to “consumers,” “patrons” or “players” refer toas the individuals that engageMerger, was completed 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)accordance with the terms of our customers at which our games and entertainment experiences are available to consumers.Recent DevelopmentsProposed Reverse Merger and Asset Sale TransactionsSince 2018, we have been exploring and evaluating strategic alternatives focused on maximizing shareholder value, while also exploring and evaluating financing alternatives to increase the likelihood that we would be able to avoid a restructuring (such as a reorganization, bankruptcy or assignment for the benefit of creditors) or a dissolution, liquidation and/or winding up of our company, in the event the strategic process does not result in a transaction.On August 12, 2020, we entered into an agreement and plan of merger and reorganization (the “Merger Agreement”dated August 12, 2020 among Brooklyn Inc. (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 Immunotherapeutics LLC (“Brooklyn”), pursuantInc. amended its restated certificate of incorporation in order to which, subjecteffect:termsMerger, a reverse stock split of its common stock, par value $0.005 per share, at a ratio of one-for-two, which we refer to as the Reverse Split; and conditions thereof,wholly-owned subsidiary ours will be merged with and intochange in its corporate name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”(the “Merger”).On September 18, 2020, we entered an asset purchase agreement (the “Asset Purchase Agreement”) with eGames.com Holdings LLC (“eGames.com”), pursuant to which, subject to the terms and conditions thereof, we will sell and assign (the “Asset Sale”) all of our right,Inc. sold its rights, title and interest in and to the assets relating to our currentthe business (the “Purchased Assets”)it operated prior to the Merger, which it had operated under the name “NTN Buzztime, Inc.,” 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 Asset Sale, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between Brooklyn Inc. and eGames.com.Ifare completed, we will sell to eGames.com allour business consists exclusively of our right, titlethe business conducted by Brooklyn LLC.interest in andBrooklyn Inc. (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the assets relating to our businessMerger are those of licensing our interactive entertainment network and servicesBrooklyn LLC, and the tabletshistorical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn Inc. with respect to periods prior to the completion of the Merger. The weighted average shares used in determining loss per common share were retrospectively adjusted to reflect the conversion of the outstanding Class A, Class B, Class C and related equipment used therein,common units of Brooklyn LLC that converted into shares of Brooklyn Inc.’s common stock upon the Merger, and our business will becomeall share and per share amounts of common stock have been retrospectively restated to reflect the business of Brooklyn. Brooklyn isReverse Split.cancer.Pursuantcancer, 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. IRX‑2 active constituents, namely Interleukin-2, or IL‑2, and other key cytokines, are postulated to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike existing cancer therapies, which rely on targeting the cancer directly. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing cell‑therapy technology through a license with Factor Biosciences Limited and Novellus Therapeutics Limited, which we refer to collectively as the Licensor.MergerPurchase Agreement, atwe have the closingright, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of the Merger, Brooklyn will become our wholly owned subsidiary. At the effective time of the Merger, Brooklyn’s members will exchange their equity interests in Brooklyn for shares of ourcommon stock. Any such sale of common stock representing between approximately 94.08%will be subject to specified limitations and 96.74%may occur from time to time, at our discretion, over a 36-month period commencing after the date that a registration statement covering the resale of our outstandingshares of common stock immediately followingissued under the effective time ofPurchase Agreement, which we agreed to file with the Merger on a fully diluted basis (less a portion of such shares which will be allocated to Maxim Group LLC in respect of the success fee owed to it by Brooklyn), and our stockholders as of immediately priorSEC pursuant to the Registration Rights Agreement, is declared effective time, will own between approximately 5.92%by the SEC and 3.26% of our outstanding common stock immediately aftera final prospectus in connection therewith is filed and the effective time of the Merger on a fully diluted basis. The exact number of shares to be issuedother conditions set forth in the Merger will be determined pursuant to a formula in the Merger Agreement.Upon completion of the Merger, the board of directors of the combined company is expected to consist entirely of individuals designated by Brooklyn and the officers of the combined company are expected to be members of Brooklyn’s current management team. The employment of Allen Wolff, our chief executive officer, with us will terminate upon the closing of the Asset Sale, and he will become employed by eGames.com. Sandra Gurrola, our senior vice president of finance, has had discussions regarding her possible employment with eGames.com following the closing of the Merger, and as of the date of this report, the parties continue to be in discussions and Ms. Gurrola has not accepted an offer.Consummation of the Merger is subject to certain closing conditions, including, among other things, approval by our stockholders and by the beneficial holders of the Class A membership units of Brooklyn. The Merger Agreement contains certain termination rights for each of us and Brooklyn, including that either party may terminate the Merger Agreement if the Merger has not been consummated by December 31, 2020, subject to extension under specified circumstances. The Merger Agreement also provides that, upon the termination of the Merger Agreement under specified circumstances, we or Brooklyn will be required to pay the other party a $750,000 termination fee or reimburse the other party for up to $250,000 of its third party expenses.We devoted significant resources and effort to identify, evaluate and negotiate the Merger Agreement with Brooklyn and the Asset Purchase Agreement with eGames.com, and continue to devote significant resources and effort to consummate the transactions contemplated by the Merger Agreement and the Asset Purchase Agreement. However, no assurances are, or can be given, that the Merger or the Asset Sale will be consummated.If the Merger is not completed, we cannot predict whether and to what extent we would be successful in consummating an alternative transaction, the timing of such a transaction or our future cash needs required to complete such a transaction, and we may choose or be forced to effectuate a restructuring or to dissolve and liquidate our assets. Even if the Merger is completed, it ultimately may not deliver the anticipated benefits or enhance stockholder value.If neither the Merger nor the Asset Sale are completed, we will reconsider our strategic alternatives and could attempt to complete another strategic transaction like the Merger or the Asset Sale, continue to operate our business, or dissolve and liquidate our assets. However, because of our limited cash and resources, we would likely be required to dissolve and liquidate our assets.If the Merger does not close and the Asset Sale closes, we may attempt to find another reverse merger partner or dissolve and liquidate our assets. Because the NYSE Regulation, Inc. may begin delisting proceedings if we had no assets or operations and due to our limited cash availability, we may be unable to identify and complete another reverse merger and we would likely be required to dissolve and liquidate our assets. In such case, we would be required to pay all our debts and contractual obligations and to set aside certain reserves for potential future claims.If the Merger closes and our stockholders do not approve the Asset Sale Proposal, the combined company will focus its resources on executing Brooklyn’s business plan, and the board of directors of the combined company may elect to, among other things, attempt to sell or otherwise dispose of the assets related to our historical business, including to eGames.com under the Asset Purchase Agreement. Because as of immediately following the closing of the Merger, the assets related to our historical business are not expected to constitute all or substantially all of the combined company’s assets, the combined company may be able sell or otherwise dispose of the assets related to our historical business without stockholder approval, including to eGames.com under the Asset Purchase Agreement.The descriptions above of Merger Agreement and the Asset Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement and the Asset Purchase Agreement that have been filed with the Securities and Exchange Commission (the “SEC”), and are incorporated by reference in this report. The assertions embodied in the representations and warranties contained in the Merger Agreement and the Asset Purchase Agreement are qualified by information in confidential disclosure schedules delivered by the parties in connection with the signing of those agreements. Moreover, certain representations and warranties contained in those agreements were madesatisfied. Lincoln Park has no right to require us to sell any common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as of a specified date; may have been made for the purposes of allocating contractual risk between the parties to such agreements; and may bewe direct, subject to contractual standardsconditions set forth in the Purchase Agreement.materiality differentcommon stock, or the Commitment Shares, to Lincoln Park as consideration for Lincoln Park’s commitment to purchase up to $20.0 million shares of common stock under the Purchase Agreement.what mighttime to time, subject to specified conditions, to require the selling stockholder to purchase on any single business day on which the closing price of common stock is equal to or greater than $1.00, which we refer to as a Regular Purchase, (a) up to 60,000 shares of common stock, (b) if the closing sale price of common stock on the NYSE American is at least $5.50 per share, up to 80,000 shares of common stock or (c) if the closing sale price of common stock on the NYSE American is at least $7.00 per share, up to 120,000 shares of common stock. In no case, however, will the selling stockholder’s commitment with respect to any single Regular Purchase exceed $1,000,000. The foregoing share amounts and per share prices will be viewed as material to our stockholders. Accordingly, the representations and warranties in those agreements should not be relied on byadjusted for any persons as characterizations of the actual state of facts and circumstances of our companyreorganization, recapitalization, non-cash dividend, stock split, reverse stock split or any other parties thereto at the time they were made and should consider the information in these agreements in conjunction with the entirety of the factual disclosure about our company in this report. Information concerning the subject matter of the representations and warranties may have changedsimilar transaction occurring after the date of those agreements, which subsequent informationthe Purchase Agreement with respect to common stock. The purchase price per share for each such Regular Purchase will be based on prevailing market prices of the common stock immediately preceding the time of sale, as determined under the Purchase Agreement.may not be fully reflected in our public disclosures. Those agreements should not be read alone, but should instead be read in conjunction with each otheras additional accelerated purchases on the terms and other information included in this report andsubject to the conditions set forth in the registration statement on Form S-4Purchase Agreement.filed with the SEC on October 2, 2020, to register the offerhad issued and salesold an aggregate of the302,358 shares of our common stock to be issuedLincoln Park pursuant to the MergerPurchase Agreement, (the “Registration Statement”). The Registration Statement also servesresulting in gross proceeds of $6.3 million.our proxy statement for the special meeting of stockholders that we intend to convene as promptly as practicable following the effectiveness of the Registration Statement at which our stockholders will be asked to vote to approve (i) the issuance of sharesreceive regulatory approval of our common stockdrug 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.membersdevelopment of Brooklyn pursuant to the terms of the Merger AgreementIRX-2, and the change of control resulting therefrom, (ii) a reverse stock split of the outstanding shares of our common stock within a range of one new share for every 3 to 10 (or any number in between) shares outstanding (if the reverse stock split is implemented in connection with the Merger, the ratio will be mutually agreed upon by our board of directors and Brooklyn’s managers, and if not implemented in connection with the Merger, will be determined by our board of directors), (iii) amendments to our certificate of incorporation to increase the authorized number of shares of our common stock, change our corporate name to “Brooklyn Immunotherapeutics, Inc.”, and provide the holders of our Series A Convertible Preferred Stock with voting rights (in order to help ensure the tax-deferred nature of the transactions contemplated by the Merger Agreement), (iv) a new stock incentive plan, which will become effective upon the Merger and will authorize the issuance of no more than 7.5% of the fully-diluted outstanding shares of our common stock immediately following the effective date of the merger, (v) the Asset Sale and (vi) on a non-binding, advisory basis, the compensation that will be paid or may become payable to our named executive officers in connection with the Merger and the Asset Sale.Bridge LoanIn connection with entering into the Asset Purchase Agreement with eGames.com on September 18, 2020, we issued to Fertilemind Management, LLC, an affiliate of eGames.com, an unsecured promissory note in the principal amount of $1,000,000, evidencing a $1,000,000 loan received from Fertilemind Management, LLC on behalf of eGames.com. We may use the loan proceeds for, among other things, the payment of obligations related to the transactions contemplated by the Asset Purchase Agreement and the Merger Agreement and other general working capital purposes. Upon the closing of the Asset Sale, the loan be applied against the purchase price under the Asset Purchase Agreement, and the promissory note evidencing the loan will be extinguished. See “—Liquidity and Capital Resources,” below.We are in discussions with Fertilemind Management, LLC regarding the possibility of borrowing an additional $500,000 on approximately December 1, 2020, which, if received, would also be applied toward the purchase price at the closing of the Asset Sale. No assurances can be given that we will obtain such $500,000 loan from Fertilemind Management, LLC or from any other party.COVID-19 ImpactThe negative impact of the COVID-19 pandemic on the restaurant and bar industry was abrupt and substantial, and our business, cash flows from operations and liquidity suffered, and continues to suffer, materially as a result. In many jurisdictions, including those in which we have many customers and prospective customers, restaurants and bars were ordered by the government to shut-down or close all on-site dining operations in the latter half of March 2020. Since then, governmental orders and restrictions impacting restaurants and bars in certain jurisdictions were eased or lifted as the number of COVID-19 cases decreased or plateaued, but as jurisdictions began experiencing a resurgence in COVID-19 cases, many jurisdictions reinstated such orders and restrictions, including mandating the shut-down of bars and the closing of all on-site dining operations of restaurants. We have experienced material decreases in subscription revenue, advertising revenue and cash flows from operations, which we expect this to continue for at least as long as the restaurant and bar industry continues to be negatively impacted byforeseeable future.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 jurisdictions are eased or lifted. For example, at its peak, approximately 70%normal course of our customers had their subscriptions to our services temporarily suspended. As of November 10, 2020, approximately 11% of our customers remain on subscription suspensions.In response to the impact of the pandemic on our business, we implemented measurescontract with third parties to reduce our operating expensesperform various clinical study and preserve capital, and we may implement additional measurestrial activities in the future.●We reduced our headcount (as of November 10, 2020, we had 22 employees, all of whom are currently working remotely, compared to 74 at December 31, 2019).●Our chief executive officer agreed to defer payment of 45% of his base salary between May 1, 2020 and October 31, 2020 until the earlier of October 31, 2020 or such time as our board of directors determines in good faith that we are in the financial position to pay his accumulated deferred salary. As of September 30 2020, we have accrued approximately $21,000 related to our chief executive officer’s deferred compensation.●We terminated the lease for our corporate headquarters, resulting in a reduction in our future cash obligations under the lease by approximately $3.4 million (see Note 10 to the unaudited condensed consolidated financial statements included herein).●We substantially eliminated all capital projects and are aggressively managing our payables to limit further cash outlays and manage our working capital.Paycheck Protection Program LoanIn April 2020, we received a loanon-going development and testing of approximately $1,625,000potential 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 Paycheck Protection Programcontracts 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 Coronavirus Aid, Relief,clinical study or trial or similar conditions. Preclinical and Economic Security Act administered byclinical 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 or trial’s cost before such begins and incurring additional expenditures as the U.S. Small Business Administration. The loan matures on April 18, 2022study or trial progresses and bears interest at a ratereaches certain milestones.in November 2020, the U.S Small Business Administration approved the forgiveness of approximately $1,093,000 of the $1,625,000 loan, leaving a note balance of approximately $532,000. See “—Liquidity and Capital Resources,” below.CRITICAL ACCOUNTING POLICIESTheEstimatesaccounting principles generally accepted in the United States (“GAAP”).GAAP. The preparation of these consolidated financial statements requires us to make judgments, estimates, and judgmentsassumptions that affect the reported amounts of assets and liabilities revenues and expenses, and relatedthe disclosure of contingent assets and liabilities. On an ongoing basis, weliabilities 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 including those related to deferred costs and revenues, depreciation and amortization of fixed assets, the provision for income taxes including the valuation allowance, stock-based compensation, bad debts, impairment of software development costs, goodwill, intangible assets and contingencies.assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and on various other assumptionsfactors we believe to beare reasonable underbased on the circumstances, the results of which form theour management’s basis for making judgments about the carrying valuesvalue of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates underestimates.assumptions or conditions. Criticalresult. Our consolidated financial statements and the notes thereto included elsewhere in this report contain accounting policies and estimatesother disclosures as required by GAAP.defined as those that are both most importantrequired under GAAP to the portrayal of our financial condition and results and require management’s most subjective judgments.There have been no material changes in our critical accounting policies,make estimates and judgmentsassumptions that affect (a) the reported amounts of assets and liabilities, (b) disclosure of contingent assets and liabilities at the date of the financial statements, (c) the reported amounts of revenues and expenses during the three months ended September 30, 2020 from those described inreporting period, and (d) the “Management’s Discussion and Analysisreported amount of Financial Condition and Results of Operations” section of our 2019 10-K.RESULTS OF OPERATIONSWe incurred a net loss of $1,481,000 and $4,722,000 for the three and nine months ended September 30, 2020, compared to a net loss of $351,000 and $754,000 for the three and nine months ended September 30, 2019.RevenueWe generate revenue by charging subscription fees to our partners for access to our 24/7 trivia network, 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. Until February 1, 2020, we also generated revenue from hosting live trivia events. We sold all our assets used to host live trivia events in January 2020. The table below summarizes the type of revenue we generated for the three and nine months ended September 30, 2020 and 2019 and the change in such revenue between the two periods: Three months ended September 30, 2020 2019 $ % of Total
Revenue $ % of Total
Revenue $
Change %
Change Subscription revenue 1,053,000 71.3 % 3,723,000 81 % (2,670,000 ) (71.7 )% Hardware revenue 379,000 25.7 % 11,000 0 % 368,000 3,345.5 )% Other revenue 45,000 3.0 % 846,000 19 % (801,000 ) (94.7 )% Total 1,477,000 100.0 % 4,580,000 100 % (3,103,000 ) (67.8 )% Nine months ended September 30, 2020 2019 $ % of Total
Revenue $ % of Total
Revenue $
Change %
Change Subscription revenue 3,779,000 82 % 11,356,000 78 % (7,577,000 ) (67 )% Hardware revenue 421,000 9 % 811,000 6 % (390,000 ) (48 )% Other revenue 425,000 9 % 2,471,000 17 % (2,046,000 ) (83 )% Total 4,625,000 100 % 14,638,000 100 % (10,013,000 ) (68 )% Subscription RevenueThe decrease in subscription revenue for the three and nine months ended September 30, 2020 was due to lower average site count, lower average revenue per site and the impact of the COVD-19 pandemic on our business when compared to the same periods in 2019. We previously reported that our subscription revenue would materially decrease beginning in the first quarter of 2020 if we did not add network subscribers or other revenue sources sufficient to replace the revenue historically received from Buffalo Wild Wings corporate-owned restaurants and its franchisees, after our existing relationships with BWW terminated in November 2019. To date, we have not offset the lost subscription revenue from Buffalo Wild Wings corporate-owned restaurants and its franchisees, and, in light of the substantial negative impact the pandemic has had, continues to have and is expected to continue to have, on the restaurant and bar industry and on our business, and taking into account the measures we implemented in response to the impact of the pandemic on our business to reduce operating expenses and preserve capital, including reducing our headcount and sales and marketing team, we do not expect that will be able to do so in the foreseeable future.Because shelter-in-place orders and governmental orders and restrictions on the operations of restaurants and bars to shut-down or close all on-site dining were generally issued toward the end of the first quarter of 2020, the negative impacts of the COVID-19 pandemic on our subscription revenue were significantly greater in the second quarter of 2020 compared to the first quarter of 2020. Although restrictions have been lifted or reduced for many of our customers, our subscription revenue suffered during the third quarter of 2020 and we expect that it will continue to suffer as a result of the pandemic, including because we expect governmental orders and restrictions impacting restaurants and bars will remain in effect or be reinstated in response to resurgences in COVID-19 cases. See “Item 1A. Risk Factors” in Part II of this report for additional information regarding the impact of the pandemic on our business and outlook.ASC No. 606 specifies certain criteria that an arrangement with a customer must have in order for a contract to exist for purposes of revenue recognition, one of which is that it must be probable that we will collect the consideration to which we will be entitled under the contract. As a result of the impact that the COVID-19 pandemic has had, and continues to have, on our customers, we determined that due to the uncertainty of collectability of the subscription fees for certain customers, our arrangement with those customers no longer meets all the criteria needed for a contract to exist for revenue recognition purposes. Therefore, we did not recognize revenue for these customers and fully reserved for accounts receivable in the allowance for doubtful accounts. We only recognize revenue for the arrangements that continued to meet the contract criteria, including the criteria that collectability was probable.The table below provides a geographic breakdown of our site count as of the date indicated: Network Subscribers
as of September 30, 2020 2019 United States 981 2,431 Canada 99 134 Total 1,080 2,565 Hardware RevenueThe increase in hardware revenue for the three months ended September 30, 2020 was due to the final delivery of tablets to our jail services partner. In September 2020, we entered into an agreement with our jail service partner to terminate our existing contract and cancel the remaining tablets to be delivered under our contract. We expect our hardware revenue to materially decrease in the future.The decrease in hardware revenue for the nine months ended September 30, 2020 was primarily due to decreased sales-type lease arrangements when compared to the same periods in 2019. As previously reported, we did not, and do not, expect to continue recognizing hardware revenue under sales-type lease arrangements during 2020 or thereafter.Other RevenueThe decrease in other revenue for the three and nine months ended September 30, 2020 was primarily due to a decrease in revenue from our live-hosted trivia events when compared to the same periods in 2019 as a result of the sale in January 2020 of all our assets used to conduct such events. We do not expect to recognize revenue from live-hosted trivia events in the future.We also recognized less license revenue and advertising revenue during the three and nine months ended September 30, 2020 when compared to the same periods in 2019. We expect our advertising revenue will continue to be materially adversely impacted because of a decrease in advertising sales arising from a slowdown in consumer traffic in the restaurant and bars that subscribe to our service as a result of the COVID-19 pandemic.Direct Operating Costs and Gross MarginA comparison of direct operating costs and gross margin for the periods indicated is shown in the table below: Three months ended
September 30, 2020 2019 Change % Change Revenues $ 1,477,000 $ 4,580,000 $ (3,103,000 ) (68 )% Direct Operating Costs 801,000 1,344,000 (543,000 ) (40 )% Gross Margin $ 676,000 $ 3,236,000 $ (2,560,000 ) (79 )% Gross Margin Percentage 46 % 71 % Nine months ended
September 30, 2020 2019 Change % Change Revenues $ 4,625,000 $ 14,638,000 $ (10,013,000 ) (68 )% Direct Operating Costs 2,364,000 4,545,000 (2,181,000 ) (48 )% Gross Margin $ 2,261,000 $ 10,093,000 $ (7,832,000 ) (78 )% Gross Margin Percentage 49 % 69 % For the three months ended September 30, 2020, the decrease in direct operating costs was primarily due to decreased (1) direct wages of approximately $313,000 as a result of no longer providing live-hosted trivia events after January 2020 following the sale of all our assets used to conduct those events; (2) depreciation expense of $302,000; (3) service provider and freight expense of approximately $152,000; and (4) other miscellaneous expenses of $78,000, in each case, when compared to the same period in 2019. These decreased expenses were offset by increased equipment expense of approximately $303,000 as a result of the delivery of tablets to our jail services provider during the three months ended September 30, 2020 compared to the same period in 2019.For the nine months ended September 30, 2020, the decrease in direct costs was primarily due to decreased (1) direct wages of approximately $828,000 as a result of no longer providing live-hosted trivia events after January 2020; (2) equipment expense of approximately $71,000 due primarily to reduction in hardware revenue; (3) depreciation expense of $677,000; (4) service provider and freight expense of approximately $398,000; and (5) other miscellaneous expenses of $206,000, in each case, when compared to the same period in 2019.The decrease in gross margin for the three and nine months ended September 30, 2020 was primarily due to the reduction in revenue when compared to the same periods in 2019. Additionally, certain fixed costs, such as direct depreciation and amortization expense, negatively impacted gross margins for the three and nine months ended September 30, 2020 when compared to the same periods in 2019.Operating Expenses Three months ended
September 30, 2020 2019 Change Selling, general and administrative $ 2,068,000 $ 3,413,000 $ (1,345,000 ) Impairment of capitalized software $ - $ 51,000 $ (51,000 ) Depreciation and amortization (non-direct) $ 26,000 $ 88,000 $ (62,000 ) Nine months ended
September 30, 2020 2019 Change Selling, general and administrative $ 6,743,000 $ 10,303,000 $ (3,560,000 ) Impairment of capitalized software $ 238,000 $ 52,000 $ 186,000 Impairment of goodwill $ 662,000 $ - $ 662,000 Depreciation and amortization (non-direct) $ 189,000 $ 273,000 $ (84,000 ) Selling, General and Administrative ExpensesThe decrease in selling, general and administrative expenses for the three and nine months ended September 30, 2020 when compared to the same period in 2019 was primarily due to decreased (1) payroll and related expense of $1,498,000 and $3,320,000, respectively, as a result of reduced headcount; (2) marketing fees of $168,000 and $609,000, respectively, due to managing discretionary spending; (3) lease expense of approximately $118,000 and $127,000, respectively, due to terminating our lease and vacating our corporate headquarters in June 2020, and (4) miscellaneous expense of $192,000 and $208,000, respectively, in each case, when compared to the same periods in 2019. These decreases were partially offset by increased professional fees of $630,000 and $613,000 for the three and nine months ended September 30, 2020, respectively, primarily due to costs associated with the Merger and Asset Sale transactions.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 continue to decrease in the fourth quarter of 2020 when compared to the prior year period. 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.Impairment of Capitalized SoftwareFor the nine months ended September 30, 2020, we abandoned 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. We did not incur any impairment charges during the three months ended September 30, 2020. For the three and nine months ended September 30, 2019, we also abandoned certain capitalized software projects, which resulted in impairments charges during each of those periods.Impairment of GoodwillThrough March 31, 2020, we had goodwill resulting from the excess of costs over the fair value of assets required in connection with our business combination with IRX Therapeutics, LLC in 2018. Our actual results could differ, possibly significantly, from those estimates.2003connection with the business combination with IRX Therapeutics, LLC have not reached technological feasibility and likely have no alternative future use. IPR&D assets are considered to be indefinite lived until the associated research is completed or abandoned. If IPR&D assets are deemed to be indefinite, they are tested for impairment on an annual basis, or more frequently if we become aware of any events or changes that result in the fair value of these assets being decreased. In such a case, where we are able to commercialize IPR&D assets, the lives of the assets are reduced and the amounts are amortized based on the estimated useful lives beginning at that point in time. Where development is terminated or abandoned, there may be a small impairment charge related to the IPR&D assets.Canadian business (the “Reporting Unit”). Goodwill and intangible assets acquiredclinical trials.a purchase combination thatthe future.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 thatrecognized only if it is more likely than not that the fair valueposition will be sustained upon examination by local, state or federal taxing authorities. Any tax benefits recognized in our financial statements are measured based on the largest benefit that has at least a 50% likelihood of being realized. At this time, we have no material uncertain tax positions for any recording period. For the three months ended March 31, 2021 2020 Change $ Change % Operating Expenses: Research and development $ 1,519,633 $ (38,971 ) 1,558,604 -3999 % General and administrative 1,636,557 1,053,505 583,052 55 % Transaction costs 5,765,407 - 5,765,407 N/A Change in fair value of contingent consideration (820,000 ) - (820,000 ) N/A Total operating expenses 8,101,597 1,014,534 Loss from operations (8,101,597 ) (1,014,534 ) Other Expenses: Other expense, net (2,564 ) (4,678 ) 2,114 -45 % Loss on sales of NTN assets (9,598,173 ) - (9,598,173 ) N/A Total other expenses (9,600,737 ) (4,678 ) Net loss attributable to common stockholders $ (17,702,334 ) $ (1,019,212 ) Reporting Unit is less than its carrying amount. If there are indications of impairment, then we performMerger and incur costs associated with being a quantitative impairment test.During out evaluation of impairment indicators as of March 31, 2020, we determined that the uncertainty relatingpublicly traded company.impactsupport of our investigator-sponsored studies.COVID-19 pandemic onthree months ended March 21, 2021 when compared against the Reporting Unit’s future operating results represented an indicator of impairment. Accordingly, we compared the estimated fair value of the Reporting Unitsame period in 2020 due to its carrying value at March 31, 2020, determined that a full impairment loss was warranted and recognized an impairment charge of $662,000stock-based compensation modification for the nine months ended September 30, 2020, allconversion of which was recorded duringcommon units into common shares and increase in clinical trials for new trial initiation.There was no goodwill impairment recorded for the three or nine months ended September 30, 2019.Depreciation and AmortizationThe decrease in depreciation and amortization expense for the three and nine months ended September 30, 2020 was primarily due to various equipment becoming fully depreciated and not replacing with new assets, and as a result of writing off our leasehold improvement assets when we terminated our lease and vacated our corporate headquarters in June 2020.Other Income (Expense), Net Three months ended
September 30, Increase in other 2020 2019 expense, net Total other expense, net $ (82,000 ) $ (16,000 ) $ (66,000 ) Nine months ended
September 30, Increase in other 2020 2019 income, net Total other income (expense), net $ 826,000 $ (189,000 ) $ 1,015,000 September 30,March 31, 2020, the increase in other expense, net, was primarily due to increased foreign currency losses related to our Canadian subsidiary and lossestransaction costs related to the disposal or saleissuance of common stock to our financial advisor upon consummation of the Merger.offset by a decreasedof IRX Therapeutics, LLC in 2018. The notes bear interest expenseat the rate of 14% and were due on December 31, 2019. On January 27, 2020, the notes were amended to lower long-term debt balances when comparedextend the maturity date to the same period in 2019.Forearlier of (i) a change of control and (ii) December 31, 2021, whichever comes first.ninethree months ended September 30, 2020,March 31, 2021 was incurred when we completed the increase in other income, net wasAsset Sale.due to a $1,225,000 gain related to the sale of all our assets used to conduct live-hosted trivia events, increased foreign currency gains relatedwith capital calls to our Canadian subsidiary, and decreased interest expense due to lower long-term debt balances, offset by a $286,000 loss related to the terminating our leases and disposing of related fixed assets, in each case, when compared to the same period in 2019.Income Taxes Three months ended
September 30, 2020 2019 Change Benefit (provision) for income taxes $ 19,000 $ (19,000 ) $ 38,000 Nine months ended
September 30, 2020 2019 Change Benefit (provision) for income taxes $ 23,000 $ (30,000 ) $ 53,000 We expect to incur state income tax liability in 2020 related to our U.S. operations. For the nine months ended September 30, 2020, an impairment to goodwill resulted in a net tax benefit in Canada. We have established a full valuation allowance for substantially all of our deferred tax assets, including the net operating loss carryforwards, since we do not believe that we are more likely than not to generate future taxable income to realize these assets.LIQUIDITY AND CAPITAL RESOURCESAs of September 30, 2020,members. At March 31, 2021, we had cash and cash equivalents of $8.4 million principally derived from contributions by our members. We have to date incurred operating losses, and restrictedwe expect these losses to increase in the future as we expand our drug development programs and operate as a publicly traded company. We anticipate using current cash on hand and our net proceeds from sales of approximately $1.7 million, includingcommon stock under the $1.0 million bridge loan we received in connection with entering into the Asset Purchase Agreement which is discussed further below, compared to approximately $3.4 million asfinance these activities. It will likely be some years before we obtain the necessary regulatory approvals to commercialize one or more of December 31, 2019. During the three and nine months ended September 30, 2020, we incurred a net loss of $1,481,000 and $4,722,000, respectively.In connection with preparing our financial statements as of and for the three and nine months ended September 30, 2020, 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.Our primary source of capital is cash from operations. We have experienced material decreases in subscription revenue, advertising revenue and cash flows from operations as a result of the impact of the COVID-19 pandemicdrug candidates. Based on the restaurant and bar industry. We expect the negative impact on our business to continue for as long as restaurants and bars continue to be negatively impacted by the pandemic, and which may continue thereafter if restaurants and bars seek to reduce their operating costs or choose not to re-open even if governmental orders and restrictions are eased or lifted. See “Recent Developments—COVID-19 Impact,” above.As a result of the impact of the pandemic on our business and taking into account our current financial condition and our existing sourcesforecasts of projected revenue and our projected subscription revenue, advertising revenue andavailable cash, flows from operations, if we are able to borrow an additional $500,000 from Fertilemind Management, LLCincluding as discussed below,mentioned above, we believe we will have sufficient cash resourcesfunds to pay forecasted cash outlays onlyfund our operations through mid-January 2021, but ifthe first quarter of 2022. There can be no assurance that we do not borrow such amount from Fertilemind Management, LLCwill ever be in a position to commercialize IRX-2 or any other party,drug candidate we believemay acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, it will obtainable on terms acceptable to us.cash resourcesfunds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to pay forecasted cash outlays onlyour 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.mid-December 2020, in each case, assuming Avidbank doescollaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not take actionsfavorable to foreclose on our assets in the eventus. If we are not in compliance with our financial covenants under our loan and security agreement with Avidbank, and we are able to continuesecure additional funding when needed, we may have to successfully manage our working capital deficit by managingdelay, reduce the timingscope of payments to our vendorsor eliminate one or more research and other third parties.We expect to meet our near term debt service obligationsdevelopment programs, which could have an adverse effect on our term loan with Avidbank and we satisfied our financial covenants under our related loan and security agreement asbusiness.September 30, 2020. However, unless in the very near term our subscription revenue, advertising revenue and cash flows from operations return to pre-pandemic levels and/or we raise substantial capital, we may not satisfy the liquidity covenant under the loan and security agreement, which is measured onFundsdaily basis, at all times during December 2020, which may result in Avidbank declaring a default and foreclosing on our assets. See Item 1A. Risk Factors in Part II of this report, below.Based on the factors described above, management concluded that there is substantial doubt regarding our ability to continue as a going concern through the twelve-month period subsequentcondition to the issuance dateclosing of these financial statements. As discussed in greater detail in the section entitled “—Overview and Highlights—Recent Developments—Proposed Reverse Merger and Asset Sale Transactions,” if we do not complete the Merger, we would likely bewere required to dissolvehave at least $10.0 million in cash and liquidate our assets,cash equivalents at the effective time of the Merger. In furtherance of, and we would be requiredprior to, pay all our debts and contractual obligations and set aside certain reserves for potential future claims. We may attempt to complete another strategic transaction like the Merger, orcertain of our members entered into agreements pursuant to which those members purchased units of Brooklyn LLC for an aggregate purchase price of $10.5 million.orin which we sold to raise additional capital through equity financings and/or alternative sources of debteGames.com our rights, title and interest in and to allow usthe assets relating to continue as a going concern. However, based on the strategic process conductedbusiness we operated prior to date, we do not believe that we would be able to identify and complete another reverse merger or consummate a financing to obtain sufficient additional financial resources when needed, on acceptable terms, or at all.The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets andMerger under the satisfaction of liabilitiesname “NTN Buzztime, Inc.” 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 LoanUnder a loan and security agreement we entered into with Avidbank in September 2018, or the Original LSA, we borrowed $4,000,000 in the formexchange for eGames.com’s payment of a 48-month term loan, allpurchase price of which we used to pay-off the $4,050,000$2.0 million and assumption of principal borrowed from our then-existing lender. In February 2020, we made a pre-payment on the term loan of approximately $150,000 following the sale in January 2020 of all our assets used to conduct live-hosted trivia events. In March 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 included the $83,333 monthly principal payment for March 2020 plus accrued interest and a $350,000 principal prepayment. As of September 30, 2020, the outstanding principal balance on the term loan was $725,000. See Note 9 to the unaudited condensed consolidated financial statements included herein for additional information regarding the Avidbank LSA.The monthly principal payment amounts under the Avidbank LSA was $300,000 for each of July, August, September, and October 2020, and will be $300,000 for November 2020 and $125,000 for December 2020.We must satisfy two financial covenants under the Avidbank LSA: a monthly minimum asset coverage ratio covenant, which we refer to as the ACR covenant, and a minimum liquidity covenant. 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 minimum liquidity covenant, 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. As of September 30, 2020, we were in compliance with both of those covenants. However, unless in the very near term our subscription revenue, advertising revenue and cash flows from operations return to pre-pandemic levels and/or we raise substantial capital, we may not satisfy the liquidity covenant under the loan and security agreement, which is measured on a daily basis, at all times during December 2020, which may result in Avidbank declaring a default and foreclosing on our assets.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. On June 1, 2020, we and Avidbank entered into a second amendment to the loan and security agreement to formally memorialize Avidbank’s consent to our borrowing of the PPP Loan (as defined below). We received Avidbank’s initial consent to borrow the PPP Loan in April 2020.We incurred approximately $26,000 of debt issuance costs related to the Original LSA and the amendment to the LSA. 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 September 30, 2020 was approximately $1,000 and is recorded as a reduction of long-term debt.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; eventsliabilities relating to bankruptcy or insolvency; and the occurrencesuch pre-Merger business.April 18,March 27, 2020, we issued a note in the principal amount of approximately $1,625,000 evidencing a loan (the “PPP Loan”) we received under the Paycheck Protection Program (the “PPP”) ofthen-President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act, administeredor the CARES Act, as amended on June 5, 2020 by the U.S. Small Business Administration (the “CARES Act”).Paycheck Protection Program, or PPP. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry back periods, and alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. On May 4, 2020, we were granted a loan from Silicon Valley Bank, which we refer to as the Brooklyn PPP Loan, in the aggregate amount of $309,905, pursuant to the PPP under Division A, Title I of the CARES Act. The Brooklyn PPP Loan, which was in the form of a Note we issued as of May 4, 2020, matures on April 18,May 5, 2022 and bears interest at a rate of 1.0% per annum. We must makeannum, payable monthly interest only payments beginningcommencing on November 18,4, 2020. One final payment of all unforgiven principal plusWe may prepay the Note at any accrued unpaid interest is due at maturity.time prior to maturity, with no prepayment penalties. Funds from the Brooklyn PPP Loan may only be used for payroll costs, rent and utilities. We are using the funds received from the Brooklyn PPP Loan for what we believe are qualifying expenses. Under the terms of the PPP, we may prepay theBrooklyn PPP Loan, at any time with no prepayment penalties. As of September 30, 2020, the outstanding principal balance of the PPP Loan was $1,625,000.Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.we submitted our loan forgiveness application for the PPP Loan, and in November 2020, the U.SU.S. Small Business Administration approved the forgiveness of approximately $1,093,000 of the $1,625,000 loan,principal amount of the NTN PPP Loan, leaving a principal balance of approximately $532,000,.Bridge LoanIn connection all of which, plus accrued and unpaid interest, was due and, in accordance with entering into the Asset Purchase Agreement with eGames.com, we issued to Fertilemind Management, LLC, an affiliateterms of eGames.com, an unsecured promissory note (the “Note”) in the principal amountagreement and plan of $1,000,000, evidencing a $1,000,000 loan received from Fertilemind Management, LLC on behalf of eGames.com (the “Bridge Loan”). We may use the loan proceedsmerger and reorganization for among other things, the payment of obligations related to the transactions contemplated by the Asset Purchase Agreement and the Merger, Agreement and other general working capital purposes. The principal amount accrues interest at rate of 8% per annum (increasing to 15% per annumpaid by us upon the occurrence of an event of default), compounded annually. The principal amount of the Bridge Loan and accrued interest thereon is due and payable upon the earlier of (i) the termination of the Asset Purchase Agreement, (ii) the closing of a Business Combination (as defined in the Note), and (iii) December 31, 2020. Upon the closing of the Asset Sale, the Bridge Loan will be applied against the purchase price under the Asset Purchase Agreement, and theMerger.will be extinguished.All of our obligations under the Note are subordinate3 to the indebtedness and all other obligations owed by us to Avidbank including under the Avidbank LSA.The Note includes customary events of default, including if any portion of the Note is not paid when due; if we default in the performance of any other material term, agreement, covenant or condition of the Note, subject to a cure period; if any final judgment for the payment of money is rendered against us and we do not discharge the same or cause it to be discharged or vacated within 90 days; if we make an assignment for the benefit of creditors, if it generally does not pay its debts as they become due; if a receiver, liquidator or trustee of ours is appointed, or if we are adjudicated bankrupt or insolvent. In the event of an event of default, the Note will accelerate and become immediately due and payable at the option of the holder.We are in discussions with Fertilemind Management, LLC regarding the possibility of borrowing an additional $500,000 on approximately December 1, 2020, which, if received, would also be applied toward the purchase price at the closing of the Asset Sale. No assurances can be given that we will obtain such $500,000 loan from Fertilemind Management, LLC or from any other party.Working CapitalAs of September 30, 2020, we had negative working capital (current liabilities in excess of current assets) of $137,000 compared to negative working capital of $25,000 as of December 31, 2019. The following table shows our change in working capital from December 31, 2019 to September 30, 2020. Increase
(Decrease) Working capital as of December 31, 2019 $ (25,000 ) Changes in current assets: Cash and cash equivalents (1,499,000 ) Restricted cash (50,000 ) Accounts receivable, net (1,063,000 ) Income tax receivable 13,000 Site equipment to be installed (298,000 ) Prepaid expenses and other current assets (380,000 ) Net decrease in current assets (3,277,000 ) Changes in current liabilities: Accounts payable (560,000 ) Accrued compensation (463,000 ) Accrued expenses - Sales taxes payable (117,000 ) Income taxes payable (3,000 ) Current portion of long-term debt, net (1,015,000 ) Current portion of obligations under operating leases (404,000 ) Current portion of obligations under finance leases 2,000 Current portion of deferred revenue (340,000 ) Other current liabilities (265,000 ) Net decrease in current liabilities (3,165,000 ) Net decrease in working capital (112,000 ) Working capital as of September 30, 2020 $ (137,000 ) Cash FlowsCash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows: Nine months ended
September 30, 2020 2019 Change Cash (used in) provided by: Operating activities $ (3,280,000 ) $ 1,761,000 $ (5,041,000 ) Investing activities (194,000 ) (964,000 ) 770,000 Financing activities 1,765,000 (826,000 ) 2,591,000 Effect of exchange rates 10,000 27,000 (17,000 ) Net decrease in cash, cash equivalents and restricted cash $ (1,699,000 ) $ (2,000 ) $ (1,697,000 ) Net cash (used in) provided by operations. The increase in cash used in operating activities was due to an increase in net loss of $4,635,000, after giving effect to adjustments made for non-cash transactions of negative $667,000, and an increase in cash used for operating assets and liabilities of $406,000, during the nine months ended September 30, 2020 when compared to the same period in 2019.Our largest use of cash is payroll and related costs. Cash used for payroll and related costs decreased $3,661,000 to $3,725,000 for the nine months ended September 30, 2020 from $7,386,000 for the same period in 2019, primarily due to reduced headcount. See “—Results of Operations—Operating Expenses,” above.Our primary source of cash is cash we generate from customers. Cash received from customers decreased $9,477,000 to $5,578,000 for the nine months ended September 30, 2020 from $15,055,000 for the same period in 2019. This decrease was primarily related to decreased subscription revenue, hardware revenue and revenue from live-hosted trivia events. The negative impact of the COVID-19 pandemic on the restaurant and bar industry was abrupt, and our business suffered materially as a result. See “Recent Developments—COVID-19 Impact,” above, and “—Results of Operations—Revenue,” above.Net cash used in investing activities. The $770,000 decrease in cash used in investing activities was primarily due to decreased capital expenditures and capitalized software development expenses.Net cash provided by (used in) financing activities. During the nine months ended September 30, 2020, we received $1,226,000 in net proceeds from the sale of all our assets used to conduct live-hosted trivia events, $1,625,000 in proceeds from the PPP Loan and $1,000,000 in proceeds from the Bridge Loan. There were no similar transactions during the same period in 2019. During the nine months ended September 30, 2020, we made $1,275,000 more in principal payments on long-term debt when compared to the same period in 2019.RECENT ACCOUNTING PRONOUNCEMENTSIn 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 ourcondensed 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 resultstatements included 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.OFF-BALANCE SHEET ARRANGEMENTSItem 3. Quantitative and Qualitative Disclosures About Market Risk.Item 3. Item 4. Controls and Procedures.Item 4. the Securities Exchange Act of 1934, or the Exchange Act, designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.Senior Vice President of Finance,(who serves as our principal executive officer and principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.Senior Vice President of Finance(who serves as our principal executive officer and principal financial officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report inMarch 31, 2021 providing reasonable assurance of achieving the desired control objectives.our most recently completed fiscal quarterthe three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Item 1. 1. Legal Proceedings.are subject tomay become involved in legal proceedings arising in the ordinary course of business. While management presently believesExcept as described above, we do not believe there is any litigation pending that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have, individually or in the aggregate, a material adverse effect on our business,results of operations, financial condition or operating results. We are not currently subject to any pending material legal proceedings except as described below.We and our directors have been named as defendants in six substantially similar actions brought by purported stockholders of ours arising out of the Merger: Henson v. NTN Buzztime, Inc., Case No. 1:20-cv-08663 (S.D.N.Y. filed Oct. 16, 2020); Chinta v. NTN Buzztime, Inc., Case No. 1:20-cv-01401 (D. Del. filed Oct. 16, 2020); Amanfo v. NTN Buzztime, Inc., Case No. 1:20-cv-08747 (S.D.N.Y. filed Oct. 20, 2020); Falikman v. NTN Buzztime, Inc., Case No. 1:20-cv-05106 (E.D.N.Y. filed Oct. 23, 2020); Haas v. NTN Buzztime, Inc., Case No. 3:20-cv-02123-BAS-JLB (S.D. Cal. filed Oct. 29, 2020); and Monsour v. NTN Buzztime, Inc., Case No. 1:20-cv-08755 (S.D.N.Y. file Oct. 20, 2020). These actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 14a-9 promulgated thereunder. Chinta asserts additional claims for breach of fiduciary duty under Delaware law. The complaints allege that 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 we or Brooklyn Immunotherapeutics, Inc. may have made, and the analyses performed by our financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not we entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints allege that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints request a 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; an accounting by us for all alleged damages suffered; a declaration that certain federal securities laws have been violated; and costs, including attorneys’ and expert fees and expenses. Process has been served in Henson, but not in any of the other actions. The deadline for defendants to respond to the complaint in Henson is December 21, 2020. Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief. We and our directors deny the allegations asserted against us in these actions and intend to oppose them vigorously.Item 1A. risk. risk. You should consider carefully the risks and uncertainties described under Item 1A of Part Iin the “Risk Factors” section of our 2019 10-K and in our other filingsCurrent Report on Form 8-K filed with the SEC subsequent to December 31, 2019, on May 11, 2021 together with all other information contained or incorporated by reference in this report before you invest in our common stock. If any of the risks described in this report in our 2019 10-K or in our other filings with the SEC subsequent to December 31, 2019such Current Report occur, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected.affected. Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment. Asthe date of this report, we do not believe there have been any material changes to the risk factors disclosed in our 2019 10-K except as described below.RISKS RELATED TO THE PROPOSED MERGER AND ASSET SALEContentsRisks Related to the MergerThe formula for determining the number of shares to be issued in the Merger to Brooklyn members is not adjustable based on the market price of NTN’s common stock, so the number of shares of NTN common stock that may be issued in the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.The Merger Agreement has set the formula for determining the number of shares to be issued to Brooklyn’s members in the Merger, and the number of shares to be so issued is only adjustable upward or downward under certain circumstances as described in the Merger Agreement. Any changes in the market price of NTN common stock before the completion of the Merger will not affect the number of shares of NTN common stock that Brooklyn members will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of NTN common stock declines from the market price on the date of the Merger Agreement, then Brooklyn members could receive merger consideration with substantially lower value for their equity interests in Brooklyn than the value of NTN common stock based on the market price on the date of the Merger Agreement. Similarly, if before the completion of the Merger the market price of NTN common stock increases from the market price on the date of the Merger Agreement, then Brooklyn members could receive merger consideration with substantially more value for their equity interests in Brooklyn than the value of NTN common stock based on the market price on the date of the Merger Agreement. Because the formula does not adjust as a result of changes in the value of NTN common stock, for each one percentage point that the market value of NTN common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Brooklyn members compared to the market price of the NTN common stock on the date of the Merger Agreement.35Item 6.Exhibits. The formula for determining the number of shares to be issued in the Merger to Brooklyn members is subject to an upward adjustment to the extent that Brooklyn has more than $10.0 million in cash and cash equivalents at the closing of the Merger and to the extent that NTN’s net cash at the closing of the Merger is less than zero dollars, and as a result, NTN’s stockholders could own less, and Brooklyn members could own more, of the combined company.The number of shares to be issued in the Merger to Brooklyn members will increase to the extent that Brooklyn has more than $10.0 million in cash and cash equivalents at the closing of the Merger, and will further increase to the extent that NTN’s net cash at the closing of the Merger is less than zero dollars. The increase based on the amount of Brooklyn’s cash and cash equivalents at the closing of the Merger is subject to a $15.0 million cap, except that to the extent that NTN’s net cash is less than zero, the number of shares to be issued in the Merger to Brooklyn members will increase to the extent that Brooklyn has more than $15.0 million in cash and cash equivalents at the closing, up to the absolute amount of NTN’s net cash. Accordingly, NTN’s stockholders could own less, and Brooklyn members could own more, of the combined company depending on the amount of cash and cash equivalents Brooklyn has at the closing and on the extent to which NTN’s net cash at the closing is negative.If the conditions to closing the Merger are not satisfied, the Merger may not occur.Even if NTN’s stockholders approve the issuance of shares of NTN common stock to Brooklyn’s members under the Merger Agreement and the change of control resulting therefrom and even if the beneficial holders of the Class A membership interests of Brooklyn approve the Merger and the Merger Agreement, other specified conditions must be satisfied or waived to complete the Merger. No assurances can be given that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and NTN and Brooklyn each may lose some or all of the intended benefits of the Merger.For example, one of the conditions to closing the Merger is that the deficit in NTN’s net cash not exceed $3.0 million. If the Asset Sale Proposal is approved by NTN’s stockholders and the Asset Sale closes, NTN expects that it will satisfy this closing condition. However, NTN has limited cash on hand and its cash flow from operations has suffered as result of the COVID-19 pandemic and any delay in the closing of the Asset Sale and/or the Merger, will increase the risk that NTN will not satisfy this closing condition. Further, if the Asset Sale is not approved by NTN’s stockholders or if the Asset Sale does not close for any other reason, NTN will likely not satisfy this condition.As another example, one of the conditions to closing the Merger is that, at the closing, Brooklyn have not less than $10 million in cash and cash equivalents on its balance sheet and have not more than $750,000 of indebtedness for borrowed money. To help ensure that Brooklyn meets this condition, Brooklyn has previously engaged in a rights offering to the beneficial holders of its Class A membership interests pursuant to which such beneficial holders who exercised their rights have agreed to make additional contributions to Brooklyn. Such members will exchange the additional membership interests they receive for their contribution for a portion of the shares of NTN common stock issuable to members of Brooklyn in the Merger. Although Brooklyn expects to receive at least $10 million in proceeds from the rights offering, there can be no assurance that these members will contribute what they have contractually agreed to contribute. If these members do not make their committed contributions, Brooklyn may not be able to satisfy the closing condition that it have not less than $10 million in cash and cash equivalents on its balance sheet at the closing of the Merger. If this closing condition is not satisfied, and if NTN does not waive the condition, the Merger will not occur.Failure to complete the Merger may result in NTN or Brooklyn paying a termination fee to the other party and could significantly harm the market price of NTN’s common stock and negatively affect the future business and operations of both companies.If the Merger is not completed and the Merger Agreement is terminated under certain circumstances, NTN or Brooklyn may be required to pay the other party a termination fee of $750,000, or reimburse the transaction expenses of the other party, up to a maximum of $250,000. Even if a termination fee is not payable or transaction expenses are not reimbursable in connection with a termination of the Merger Agreement, we will have incurred significant legal, financial, advisory, accounting, audit and other general operating expenses, which must be paid whether or not the Merger is completed. Further, if the Merger is not completed, it could significantly harm the market price of our common stock and further increase the doubt as to our ability to continue as a going concern. In addition, if the Merger Agreement is terminated and our board of directors Brooklyn determines to seek another business combination, there can be no assurance that we will be able to find a partner and close an alternative transaction on terms that are as or more favorable than the terms set forth in the Merger Agreement.36The Merger is subject to the approval by our stockholders of various proposals at the special meeting and approval by the beneficial holders of the Class A membership interests of Brooklyn of the Merger and the Merger Agreement. Failure to obtain these approvals would prevent the closing of the Merger.Before the Merger can be completed, our stockholders of must approve various proposals—(i) the issuance of shares of our common stock to the members of Brooklyn pursuant to the terms of the Merger Agreement and the change of control resulting therefrom, (ii) a reverse stock split of the outstanding shares of our common stock within a range of one new share for every 3 to 10 (or any number in between) shares outstanding (if the reverse stock split is implemented in connection with the merger, the ratio will be mutually agreed upon by our board of directors and Brooklyn’s managers, and if not implemented in connection with the merger, will be determined by our board of directors), and (iii) amendments to our certificate of incorporation to increase the authorized number of shares of our common stock and provide the holders of our Series A Convertible Preferred Stock with voting rights (in order to help ensure the tax-deferred nature of the transactions contemplated by the Merger Agreement)—and the holders of a majority of the beneficial interests in the Class A membership interests of Brooklyn must approve the Merger and the Merger Agreement. The failure to obtain these approvals would result in the Merger not being completed unless, with respect to the proposed amendment to our certificate of incorporation to increase the authorized number of shares of our common stock, such failure is waived by Brooklyn, and we have a sufficient number of shares of authorized common stock, including following the implementation of the reverse stock split, to issue the number shares of our common stock required to be issued in the Merger.Certain of the officers and directors of NTN and certain of the officers and managers of Brooklyn have interests in the Merger that are different from the stockholders of NTN and members of Brooklyn, respectively, and that may influence them to support or approve the Merger without regard to the interests of the stockholders of NTN or the members of Brooklyn.Certain officers and directors of NTN and certain officers and managers of Brooklyn participate in arrangements that provide them with interests in the Merger that are different from the interests of the stockholders of NTN and members of Brooklyn including, among others, the continued service as an officer or director of the combined company, severance benefits, the acceleration of vesting of equity awards, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined company in accordance with Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). These interests, among others, may influence the officers and directors of NTN and the officers and managers of Brooklyn to support or approve the Merger.The market price of our common stock following the Merger may decline as a result of the Merger.The market price of our common stock may decline as a result of the Merger for a number of reasons including if:Exhibit ●investors react negatively to the prospects of the combined company’s product candidates, business and financial condition following the Merger;●the effect of the Merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or●the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.NTN stockholders and Brooklyn members will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.After the completion of the Merger, the current stockholders of NTN and the current members of Brooklyn will own a smaller percentage of the combined company than their ownership in the respective companies prior to the Merger. At the effective time of Merger, Brooklyn’s members will exchange their equity interests in Brooklyn for shares of NTN common stock representing between approximately 94.08% and 96.74% of the outstanding common stock of NTN immediately after the effective time of the Merger on a fully diluted basis (less a portion of such shares which will be allocated to Maxim Group, LLC in respect of the success fee owed to it by Brooklyn), and NTN’s stockholders as of immediately prior to the effective time, will own between approximately 5.92% and 3.26% of the outstanding common stock of NTN immediately after the effective time on a fully diluted basis. Consequently, NTN stockholders and Brooklyn members will be able to exercise less influence over the management and policies of the combined company following the closing of the Merger than they currently exercise over the management and policies of their respective companies.37NTN stockholders and Brooklyn members may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.If the combined company is not able to realize the strategic and financial benefits currently anticipated from the Merger, NTN stockholders and Brooklyn members will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent that the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the Merger.The combined company may need to raise additional capital by issuing securities or debt or through licensing or other arrangements, which may cause dilution to the combined company’s stockholders or restrict the combined company’s operations or impact its proprietary rights. Future issuances of the combined company’s common stock pursuant to options outstanding following the Merger and under its equity incentive plan could result in additional dilution.The combined company may be required to raise additional funds sooner than currently planned. If either NTN or Brooklyn hold less cash at the time of the closing of the Merger than the parties currently expect, the combined company may need to raise additional capital sooner than expected. Additional financing may not be available to the combined company when needed or it may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may include covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of the combined company’s technologies or product candidates and proprietary rights, or grant licenses on terms that are not favorable to the combined company.In addition, the exercise or conversion of some or all of the combined company’s outstanding options (or, after the Merger, the issuance of equity awards under the combined company’s equity incentive plan) could result in additional dilution in the percentage ownership interest of current NTN stockholders and Brooklyn members in the combined company.During the pendency of the Merger, NTN and Brooklyn may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.Covenants in the Merger Agreement impede the ability of NTN and Brooklyn to make acquisitions, subject to certain exceptions relating to fiduciary duties, or to complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during such period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties and, with respect to NTN, other than the asset sale. Any such transactions could be favorable to such party’s securityholders.Certain provisions of the Merger Agreement may discourage third parties from submitting alternative acquisition proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.The terms of the Merger Agreement prohibit NTN and Brooklyn from soliciting alternative acquisition proposals or cooperating with persons making unsolicited acquisition proposals, except in limited circumstances where the board of directors of NTN and the board of managers of Brooklyn, as applicable, determines in good faith that an unsolicited alternative acquisition proposal is or is reasonably likely to lead to a superior offer and that failure to cooperate with the proponent of that proposal would reasonably be likely to be inconsistent with the board’s fiduciary duties.Because the lack of a public market for Brooklyn’s securities makes it difficult to evaluate the value of such securities, the members of Brooklyn may receive shares of NTN common stock in the Merger that have a value that is less than, or greater than, the fair market value of Brooklyn’s securities and/or NTN may pay more than the fair market value of Brooklyn’s securities.The outstanding securities of Brooklyn are privately held and not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Brooklyn. Because the percentage of NTN common stock to be issued to Brooklyn members was determined based on negotiations between NTN and Brooklyn, it is possible that the value of NTN common stock to be received by Brooklyn members in the Merger will be less than the fair market value of Brooklyn, or NTN may pay more than the aggregate fair market value for Brooklyn.38Litigation relating to the Merger could require NTN, Brooklyn or the combined company to incur significant costs and suffer management distraction and could delay or enjoin the Merger.NTN and Brooklyn are subject to shareholder litigation relating to the Merger. See “Item 1. Legal Proceedings,” above for information regarding such litigation. Such litigation may create uncertainty relating to the Merger, or delay or enjoin the Merger. The combined company may continue to be involved in this litigation after the closing of the Merger. Litigation is often expensive and may divert management’s attention and resources, which could adversely affect NTN’s, Brooklyn’s or the combined company’s business. By virtue of the applicable self-insured retention in NTN’s directors and officers insurance policy, NTN and the combined company may bear all or a significant amount of the costs associated with this litigation. In addition, such insurance may not be sufficient to cover all costs or damages related to this litigation.The ownership of the combined company common stock is expected to be concentrated, which may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause the combined company stock price to decline.Executive officers and directors of the combined company and their affiliates are expected to beneficially own or control approximately 39.7% of the outstanding shares of the combined company common stock following the closing of the Merger on a fully diluted basis. Accordingly, these executive officers, directors and their affiliates, acting as a group, will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the combined company assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the combined company, even if such a change of control would benefit the other stockholders of the combined company. The significant concentration of stock ownership may adversely affect the trading price of the combined company’s common stock due to investors’ perception that conflicts of interest may exist or arise.Risks Related to the Asset SaleWhile the Asset Sale is pending, it creates unknown impacts on NTN’s future which could materially and adversely affect its business, financial condition and results of operations.While the Asset Sale is pending, it creates unknown impacts on NTN’s future. Therefore, NTN’s current or potential business partners may decide to delay, defer or cancel entering into new business arrangements with NTN pending consummation of the Asset Sale. The occurrence of these events individually or in combination could materially and adversely affect NTN’s business, financial condition and results of operations.The failure to consummate the Asset Sale may materially and adversely affect NTN’s business, financial condition and results of operations.The Asset Sale is subject to various closing conditions including stockholder approval of the Asset Sale as required under applicable law. NTN cannot control these conditions and cannot assure you that they will be satisfied. If the Asset Sale is not consummated, NTN may be subject to a number of risks, including the following:●NTN may not satisfy the closing condition in the Merger Agreement that the deficit in NTN’s net cash not exceed $3.0 million;●NTN may not be able to identify an alternate transaction, or if an alternate transaction is identified, such alternate transaction may not result in terms as favorable to NTN as compared to the terms of the Asset Sale;●the trading price of NTN common stock may decline to the extent that the current market price reflects a market assumption that the Asset Sale will be consummated;●NTN’s expenses related to the Asset Sale, such as legal, accounting and financial advisor fees, must be paid even if the Asset Sale is not completed; and●NTN’s relationships with its customers, suppliers and employers may be negatively impacted which may harm its business.The occurrence of any of these events individually or in combination could materially and adversely affect NTN’s business, financial condition and results of operations, which could cause the market value of NTN common stock to decline.In addition, if the Asset Sale does not close and the Merger does close, the aggregate ownership percentage of the combined company by NTN stockholders will likely decrease due to an increase in the deficit of NTN’s net cash as a result of not receiving the $2.0 million in the Asset Sale.Failure to complete the Asset Sale may result in NTN paying a termination fee to eGames.com.If the Asset Sale is not completed and the Asset Purchase Agreement is terminated under certain circumstances, NTN may be required to pay eGames.com a termination fee of $250,000. Even if a termination fee is not payable in connection with a termination of the Asset Purchase Agreement, NTN will have incurred significant legal, financial, advisory, accounting, audit and other general operating expenses, which must be paid whether or not the Asset Sale is completed.Certain of the officers and directors of NTN have interests in the Asset Sale that are different from the stockholders of NTN and that may influence them to support or approve the Asset Sale without regard to the interests of the stockholders of NTN.Certain officers and directors of NTN participate in arrangements that provide them with interests in the Asset Sale that are different from the interests of the stockholders of NTN including, among others, change-in-control benefits and the acceleration of vesting of equity awards. In addition, as an inducement to eGames.com to enter into the Asset Purchase Agreement, eGames.com required that, contingent and effective upon the closing of the Asset Sale, Allen Wolff, our chief executive officer, become the chief executive officer of eGames.com, and that his employment as NTN’s chief executive officer terminate at such time. Mr. Wolff entered into an employment agreement with eGames.com on September 18, 2020, the effectiveness of which is contingent upon the closing of the Asset Sale. The NTN board of directors and its strategic committee were made aware of the material terms of Mr. Wolff’s employment agreement with eGames.com and considered them before approving the Asset Purchase Agreement. Neither the board of directors of NTN, nor its strategic committee, nor any advisor to NTN, was involved in the negotiations regarding the terms of Mr. Wolff’s employment with eGames.com. In addition, after NTN and eGames.com entered into the Asset Purchase Agreement, eGames.com and Sandra Gurrola, NTN’s senior vice president of finance, have had discussions regarding her possible employment with eGames.com following the closing of the Merger. As of the date of this report, the parties continue to be in discussions and Ms. Gurrola has not accepted any offer. These interests, among others, may influence the officers and directors of NTN to support or approve the Asset Sale.RISKS RELATED TO OUR BUSINESSOur cash flows from operations and liquidity have been materially adversely affected by the effects of the COVID-19 pandemic. We need to raise capital in the near term and/or complete a strategic transaction, and our inability to do so could result in our lender foreclosing on all of our assets and/or us pursuing a restructuring, which may include a reorganization or bankruptcy under Federal bankruptcy laws, assignment for the benefit of creditors, or a dissolution, liquidation and/or winding up.The negative impact of the COVID-19 pandemic on the restaurant and bar industry was abrupt and substantial, and our business, cash flows from operations and liquidity suffered, and continues to suffer, materially as a result. In many jurisdictions, including those in which we have many customers and prospective customers, restaurants and bars were ordered by the government to shutdown or close all on-site dining operations in the latter half of March 2020. Since then, governmental orders and restrictions impacting restaurants and bars in certain jurisdictions were eased or lifted as the number of COVID-19 cases decreased or plateaued, but as jurisdictions began experiencing a resurgence in COVID-19 cases, many jurisdictions reinstated such orders and restrictions, including mandating the shutdown of bars and the closing of all on-site dining operations of restaurants. Jurisdictions that have not imposed governmental orders and restrictions on restaurants and bars or reinstated them could do so at any time. At its peak, approximately 70% of our customers had their subscriptions to our services temporarily suspended. As of November 10, 2020, approximately 11% of our customers remain on subscription suspensions, but that percentage could increase, perhaps materially, at any time due to the effects of the pandemic on our customers, including as jurisdictions reinstate governmental orders and restrictions impacting our customers. Even in jurisdictions in which governmental orders and restrictions were eased or lifted, certain of our customers have requested, and others could request, to continue their subscription suspensions because, for example, such customers choose not to re-open despite being permitted to do so. As a result, we have experienced material decreases in subscription revenue, advertising revenue and cash flows from operations, which we expect 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 jurisdictions are eased or lifted.The full extent to which the COVID-19 pandemic will, directly or indirectly, impact our business, results of operations and financial condition is currently highly uncertain, including due to factors that currently are also highly uncertain, including when, and the extent to which, the negative impact of the pandemic will improve, including when a substantial majority of restaurants across the U.S. and Canada will be permitted to offer on-site dining and operate at or close to pre-pandemic levels or when a substantial majority of bars across the U.S. and Canada will be permitted to re-open and operate at or close to pre-pandemic levels, when our customers will re-open, or if they will subscribe to our service if and when they do, the ultimate impact of the pandemic and how long it endures, the impact of the current or future resurgences in COVID-19 cases, and the actions required or recommended to contain or treat COVID-19. However, unless in the very near term our subscription revenue, advertising revenue and cash flows from operations return to pre-pandemic levels and/or we raise substantial capital, the amount of time and the amount of cash we have to maintain operations and sustain the negative effects of the pandemic is very limited.As of September 30, 2020, we had cash, cash equivalents and restricted cash of approximately $1,710,000. As of September 30, 2020, $0.7 million of principal was outstanding under our term loan with Avidbank, $1.6 million of principal was outstanding under the PPP Loan, and $1.0 million of principal was outstanding under the Bridge Loan. As a result of the impact of the pandemic on our business and taking into account our current financial condition and our existing sources of projected revenue and our projected subscription revenue, advertising revenue and cash flows from operations, if we are able to borrow an additional $500,000 from Fertilemind Management, LLC or any other party on or before December 1, 2020, we believe we will have sufficient cash resources to pay forecasted cash outlays only through mid-January 2021, but if we do not borrow such amount from the Fertilemind Management, LLC or any other party, we believe we will have sufficient cash resources to pay forecasted cash outlays only through mid-December 2020, in each case, assuming Avidbank does not take actions to foreclose on our assets in the event we are out of compliance with our financial covenants, and we are able to continue to successfully manage our working capital deficit by managing the timing of payments to our vendors and other third parties. See, “If we fail to comply with our financial covenants to Avidbank, it may declare a default, which could lead to all payment obligations becoming immediately due and payable and have a material adverse effect on our financial condition and business,” below.We need to complete the Merger or the Asset Sale or raise capital to meet our debt service obligations to Avidbank and fund our working capital needs. We currently have no arrangements for such capital and no assurances can be given that we will be able to raise such capital when needed, on acceptable terms, or at all. The effects of the pandemic on macroeconomic conditions and the capital markets make it more challenging to raise capital. The going concern explanatory paragraph included in the report of our independent registered public accounting firm on our consolidated financial statements as of and for the year ended December 31, 2019 and management’s going concern assessment for the three and nine months ended September 30, 2020 could also impair our ability to raise capital. If we are unable to complete the Merger or the Asset Sale or raise sufficient additional capital in the very near term, we will likely default on our payment obligations to Avidbank and not satisfy our financial covenants to Avidbank, and if we do, Avidbank may declare a default, which could lead to all payment obligations becoming immediately due and payable. In addition, we will be required to curtail or terminate some or all of our business operations and we may determine to pursue a restructuring, which may include a reorganization or bankruptcy under Federal bankruptcy laws, assignment for the benefit of creditors, or a dissolution, liquidation and/or winding up. Our investors may lose their entire investment in the event Avidbank forecloses on our personal property to satisfy our payment obligations and/or in the event of a reorganization, bankruptcy, assignment for the benefit of creditors, liquidation, dissolution or winding up.If we fail to comply with our financial covenants to Avidbank, it may declare a default, which could lead to all payment obligations becoming immediately due and payable and have a material adverse effect on our financial condition and business.We must comply with financial covenants our loan and security agreement with Avidbank: our unrestricted cash we have in deposit accounts or securities accounts maintained with Avidbank must be not less than the outstanding principal at all times and our asset coverage ratio must be no less than 1.25 to 1.00 at each month-end. As of September 30, 2020, we were in compliance with these covenants. There can be no assurance, however, that we will satisfy these covenants through December 31, 2020. If we fail to comply with our covenants, Avidbank may declare a default, which could lead to all payment obligations becoming immediately due and payable, and would have a material adverse effect on our financial condition and business. Avidbank has a first-priority security interest in all our existing and future personal property. Accordingly, in an event of a default, Avidbank could dispose of such property to satisfy our payment obligations.Our common stock could be delisted or suspended from trading on the NYSE American if we do not regain compliance with continued listing criteria with which we are currently not compliant or if we fail to meet any other continued listing criteria.As previously reported, in March 2020, we received a letter from NYSE Regulation Inc. stating that we are not in compliance with Section 1003(a)(iii) of the NYSE American Company Guide (the “Company Guide”) because we reported stockholders’ equity of less than $6 million as of December 31, 2019 and had net losses in five of our most recent fiscal years ended December 31, 2019. Our stockholders’ equity was $5.1 million as of December 31, 2019. On June 11, 2020, NYSE Regulation notified us that we are not in compliance with Section 1003(a)(ii) of the Company Guide because we reported stockholders’ equity of less than $4.0 million as of March 31, 2020 and had net losses in five of our most recent fiscal years ended December 31, 2019.On June 11, 2020, the NYSE Regulation notified us that it has accepted our plan to regain compliance with Section 1003(a)(iii) of the Company Guide and granted us a plan period through September 27, 2021 to regain compliance. On August 12, 2020, NYSE Regulation notified us that we are not in compliance with Section 1003(a)(i) of the Company Guide because we reported stockholders’ equity of less than $2.0 million as of June 30, 2020 and had net losses in five of our most recent fiscal years ended December 31, 2019. We continue to be subject to the procedures and requirements of Section 1009 of the Company Guide.The listing of our common stock on the NYSE American is being continued during the plan period pursuant to an extension. The NYSE Regulation staff will review us periodically for compliance with initiatives outlined in our plan. If we are not in compliance with Sections 1003(a)(i), (ii) and (iii) by September 27, 2021 or if we do not make progress consistent with our plan during the plan period, NYSE Regulation staff will initiate delisting proceedings as appropriate.We can give no assurances that we will be able to address our non-compliance with the NYSE American continued listing standards or, even if we do, that we will be able to maintain the listing of our common stock on the NYSE American. Our common stock could be delisted because we do not make progress consistent with our plan during the plan period, because we do not regain compliance by September 27, 2021, or because we become out of compliance with other NYSE American listing standards. In addition, we may determine to pursue business opportunities that 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 reason could, among other things, substantially impair our ability to raise additional capital; result in a loss of institutional investor interest and fewer financing opportunities for us; and/or result in potential breaches of representations or covenants in agreements pursuant to which we made representations or covenants relating to our compliance with applicable listing requirements. Claims related to any such breaches, with or without merit, could result in costly litigation, significant liabilities and diversion of our management’s time and attention and could have a material adverse effect on our financial condition, business and results of operations. In addition, the delisting of our common stock for whatever reason may materially impair our stockholders’ ability to buy and sell shares of our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock.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.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.NoneItem 3. Defaults Upon Senior Securities.NoneItem 4. Mine Safety Disclosures.Not ApplicableNone42ExhibitDescription DescriptionIncorporated byBy Reference2.1Agreement and Plan of Merger and Reorganization, dated August 12, 2020, among NTN Buzztime, Inc., BIT Merger Sub, Inc. and Brooklyn Immunotherapeutics LLC^3.1Exhibit to Form 8-K filed on August 14, 20202.2Asset Purchase Agreement dated September 18, 2020 by and between NTN Buzztime, Inc. and eGames.com Holdings LLC^Exhibit to Form 8-K filed on September 18, 20203.1(a) Exhibit to Form 10-Q filed on August 14, 2013 3.1(b)3.1(a) Exhibit to Form 8-K filed on June 17, 2016 3.1(c)3.1(b) Exhibit to Form 8-K filed on April 12, 2017 3.1(d)3.1(c) Exhibit to Form 8-K filed on June 9, 2017 3.2Bylaws (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, 2018March 31, 202110.1(a)8% Promissory Note issued by NTN Buzztime, Inc. on September 18, 2020Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Authorized Share Increase) Exhibit to Form 8-K filed on September 18, 2020March 31, 202110.1(b)Guaranty by Aram Fuchs in favorCertificate of NTN Buzztime, Inc.Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Name Change) Exhibit to Form 8-K filed on September 18, 2020March 31, 202110.2*Amendment #4 to Employment Agreement madeAmended and entered into as of September 18, 2020 between NTN Buzztime, Inc. and Allen Wolff.Restated Bylaws Exhibit to Form 8-K filed on September 18, 2020March 31, 202110.3 Form of Support Agreement among NTN Buzztime, Inc., Brooklyn Immunotherapeutics LLC and the officers and directors of NTN Buzztime, Inc. (solely in their capacity as actual or potential stockholders of NTN Buzztime, Inc.)August 14, 2020March 31, 202110.4 Form of Support Agreement among NTN Buzztime, Inc., Brooklyn Immunotherapeutics LLC and certain beneficial holders of Class A membership interests of Brooklyn Immunotherapeutics LLC (solely in their capacity as actual or potential beneficial holders of such interests)August 14, 2020March 31, 202131.1 Executive Employment Agreement, dated as of April 1, 2021 and effective as of April 16, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Howard J. Federoff. Form of Indemnification Agreement Schedule identifying agreements substantially identical to the form of indemnification agreement filed as Exhibit 10.6 Registration Rights Agreement, dated as of April 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC Exclusive License Agreement, dated as of April 26, 2021, between Factor Bioscience Limited, Novellus Therapeutics Limited and Brooklyn ImmunoTherapeutics LLC 31.2Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith32.1# 32.2# Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Furnished101.INSXBRL Instance DocumentFiled herewith101.SCH ^Certain schedulesaddenda have been omitted pursuant to Item 601(a)(5) of Regulation S-K. We hereby undertake to furnish copies of the omitted addenda upon request by the Securities and Exchange Commission, provided that we may request confidential treatment pursuant to Rule 24b‑2 of the Securities Exchange Act of 1934 for the addenda so furnished.Certain exhibits have been omitted pursuant to pursuant Instruction 4 of Item 1.01 of Form 8-K and Item 601(b)(2)601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SECSecurities and Exchange Commission or its staff upon request.*Indicates management contract or compensatory plan.#as amended, and is not to be incorporated herein by reference into any filing of the Companyregistrant whether made before or after the date hereof, regardless of any general incorporation language in such filing.43SIGNATURES NTN BUZZTIME,BROOKLYN IMMUNOTHERAPEUTICS, INC. Date: November 13, 2020May 17, 2021By: Sandra M. GurrolaHoward J. FederoffHoward J. Federoff Sandra M. GurrolaSenior ViceChief Executive Officer and President of Finance(on behalf of the Registrant, and as its Principal Financial Officer)44