What changed in this filing

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Item 1A. Risk Factors

2021-05-17 compared with 2020-11-13 · 79 added, 425 removed, 1 unchanged (100% of the section changed)

Risk Factors.

investment in our common stock involves a high degree of risk.

You should consider carefully the risks and uncertainties described

under Item 1A of Part I of our 2019 10-K and in our other filings with the SEC subsequent to December 31, 2019, 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, 2019 occur, our

business, financial condition, results of operations and our future growth prospects could be materially and adversely affected.

Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

As of the 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.

RELATED TO THE PROPOSED MERGER AND ASSET SALE

Related to the Merger

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.

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.

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

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.

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.

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.

the conditions to closing the Merger are not satisfied, the Merger may not occur.

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.

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.

example, one of the conditions to closing the Merger is that the deficit in NTN’s net cash not exceed $3.0 million.

Asset Sale Proposal is approved by NTN’s stockholders and the Asset Sale closes, NTN expects that it will satisfy this closing

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

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.

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.

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

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.

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

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.

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.

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.

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.

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.

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.

market price of our common stock following the Merger may decline as a result of the Merger.

market price of our common stock may decline as a result of the Merger for a number of reasons including if:

react negatively to the prospects of the combined company’s product candidates, business and financial condition following

effect of the Merger on the combined company’s business and prospects is not consistent with the expectations of financial

or industry analysts;

combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial

or industry analysts.

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.

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

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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.

and Brooklyn are subject to shareholder litigation relating to the Merger.

See “Item 1.

Legal Proceedings,”

for information regarding such litigation.

Such litigation may create uncertainty relating to the Merger, or delay or enjoin the

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.

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.

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.

Related to the Asset Sale

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.

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

The occurrence of these events individually or in combination could materially and adversely affect NTN’s business,

financial condition and results of operations.

failure to consummate the Asset Sale may materially and adversely affect NTN’s business, financial condition and results

of operations.

Asset Sale is subject to various closing conditions including stockholder approval of the Asset Sale as required under applicable

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:

may not satisfy the closing condition in the Merger Agreement that the deficit in NTN’s net cash not exceed $3.0 million;

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;

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;

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;

relationships with its customers, suppliers and employers may be negatively impacted which may harm its business.

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.

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.

to complete the Asset Sale may result in NTN paying a termination fee to eGames.com.

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.

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.

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.

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.

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

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.

RELATED TO OUR BUSINESS

cash flows from operations and liquidity have been materially adversely affected by the effects of the COVID-19 pandemic.

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.

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.

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.

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

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.

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 ,”

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.

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.

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.

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.

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

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’

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.

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

We continue to be subject to the procedures and requirements of Section 1009 of the Company Guide.

listing of our common stock on the NYSE American is being continued during the plan period pursuant to an extension.

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.

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.

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.

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.

our common stock were delisted or suspended from trading on the NYSE American, it may be subject to the so-called “penny

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

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.

Unregistered Sales of Equity Securities and Use of Proceeds.

Defaults Upon Senior Securities.

Mine Safety Disclosures.

An investment in our common stock involves a high degree of risk .

You should consider carefully the risks and uncertainties

described in the “Risk Factors” section of our Current Report on Form 8-K filed with the SEC on May 11, 2021 together with all other information contained or incorporated by reference in this report

before you invest in common stock.

If any of the risks described in this report or in such Current Report occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected .

Under these circumstances, the trading price of common stock could

decline, and you may lose all or part of your investment.

Incorporated By Reference

Restated Certificate of Incorporation

Exhibit to Form 10-Q filed on August 14, 2013

Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split)

Exhibit to Form 8-K filed on June 17, 2016

Certificate of Decrease of the Series A Convertible Preferred Stock

Exhibit to Form 8-K filed on April 12, 2017

Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock)

Exhibit to Form 8-K filed on June 9, 2017

Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Reverse Stock Split)