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What changed 10-K

Item 3. Legal Proceedings

2022-04-15 compared with 2021-03-11 · 150 added, 87 removed, 13 unchanged (95% of the section changed)

Legal Proceedings

time to time, we become subject to legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course

Litigation in general, and securities litigation in particular, can be expensive and disruptive to normal business

Moreover, the results of legal proceedings are difficult to predict.

An unfavorable resolution of one or more legal

proceedings could materially adversely affect our business, results of operations, or financial condition.

In addition, defending

any claim requires resources, including cash to pay legal fees and expenses, and our limited financial resources could severely

impact our ability to defend any such claim.

We are not currently subject to any pending material legal proceedings, except as

described below.

and our directors were named as defendants in ten substantially similar actions brought by purported stockholders of ours arising

out of the Merger:

NTN Buzztime, Inc.

From time to time, we become involved in litigation and arbitrations in the ordinary course of business.

Legal fees and other costs associated with such actions are expensed as incurred.

addition, we assess the need to record a liability for litigation and contingencies.

We reserve for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

Merger-Related Shareholder Litigation

Brooklyn (then known as NTN Buzztime, Inc.) and its former directors were named as defendants in ten substantially similar actions arising out of the Merger that were brought by purported

pre-Merger stockholders of Brooklyn:

NTN Buzztime, Inc., et al., No.

1:20-cv-08663-LGS (S.D.N.Y.);

Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:20-cv-08755-LGS (S.D.N.Y.);

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:20-cv-08747-LGS

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:21-cv-00047-LGS (S.D.N.Y.);

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:21-cv-00728-LGS (S.D.N.Y.);

NTN Buzztime, Inc.

1:20-cv-05106-EK-SJB

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:20-cv-05106-EK-SJB (E.D.N.Y.);

Buzztime, Inc., et al., No.

3:20-cv-02123-BAS-JLB (S.D.

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

3:21-cv-00157-WQH-AGS (S.D.

NTN Buzztime, Inc.

NTN Buzztime, Inc., et al., No.

1:20-cv-01401-CFC (D.

2 unchanged sentences

1:21-cv-00125-CFC (D.

30, 2021 ) (collectively, the “Stockholder Actions”).

Brooklyn also was named as a defendant in two of the actions

( Chinta and Nicosia ).

The Stockholder Actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities

Exchange Act of 1934 and Rule 14a-9 promulgated thereunder.

Henson and Monsour assert additional claims for breach

of fiduciary duty.

The complaints allege that defendants failed to disclose allegedly material information in the Form S-4 Registration

Statement filed with the SEC on October 2, 2020, including (1) certain details regarding any projections or forecasts we or Brooklyn

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”

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;

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 was served in Henson ,

Chinta , Amanfo , Falikman , Carlson and Gallo, but not in any of the other Stockholder Actions.

Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief.

and our directors deny any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been

asserted, in the Stockholder Actions , as we believe

the disclosures set forth in the Form S-4 complied fully with applicable law .

Nevertheless,

in order to avoid nuisance, potential expense and delay, and to provide additional information to the our stockholders,

we determined to voluntarily supplement the Form S-4 with further disclosures (the “Supplemental Disclosures”) on

Form 8-K, which we filed with the SEC on February 26, 2021.

These Supplemental Disclosures discussed, inter alia , (1) certain

details regarding any projections or forecasts we or Brooklyn may have made, and the analyses performed by our financial advisor,

Newbridge Securities Corporation;

and (2) information regarding whether or not we entered into any confidentiality agreements

with standstill and/or “don’t ask, don’t waive”

We believe that as a consequence of the issuance

of the Supplemental Disclosures all claims asserted in the Stockholder Actions have been rendered moot, and have requested that

all plaintiffs in the Stockholder Actions dismiss their claims voluntarily (or immediately inform us if they are not willing to

Since the issuance of the Supplemental Disclosures, the plaintiffs in Henson , Chinta , Monsour , Amanfo ,

Carlson and Nicosia have voluntarily dismissed their cases.

We expect the plaintiffs in the other Stockholder Actions

to do the same.

On March 2, 2021, the court in Haas issued an order to show cause why the case should not be dismissed

for failure to prosecute.

Plaintiffs in the Stockholder Actions reserve the right to seek payment by us to their attorneys of

a “mootness fee”

in an amount yet to be determined in connection with the issuance of the Supplemental Disclosures.

March 5, 2021, we and our directors were named as defendants in a putative class action brought by a purported stockholder in

the Court of Chancery of the State of Delaware, entitled Carlson v.

NTN Buzztime, Inc ., Case No.

2021-0193- (Del.

The action asserts claims for violations of Section 211(c) of the Delaware General Corporation Law and our bylaws

(and a concomitant breach of fiduciary duty), alleging that we failed to conduct an annual meeting of stockholders within thirteen

months of the previous annual meeting of stockholders, which took place on June 7, 2019.

Plaintiff is requesting certification

of a class, declaratory relief, injunctive relief to compel an annual meeting of stockholders, and fees and costs.

The complaint

does not yet appear to have been served upon any of the defendants.

We expect this action will be rendered moot upon our

holding of our special meeting of stockholders on March 15, 2021.

Del.) (collectively, the “Stockholder Actions”).

Only two of the Stockholder Actions (the Chinta and Nicosia cases) also named Brooklyn LLC.

These actions asserted claims alleging violations of Sections 14(a)

and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and both the Chinta and Nicosia cases alleged that Brooklyn LLC is a controlling person of Brooklyn.

The complaints generally alleged that the defendants failed to disclose

allegedly material information in a Registration Statement on Form S-4 filed on October 2, 2020, including:

(1) certain details regarding any projections or forecasts of Brooklyn or Brooklyn LLC may have made, and the analyses performed by

Brooklyn’s financial advisor, Newbridge Securities Corporation;

(2) conflicts concerning the sales process;

and (3) disclosures regarding whether or not Brooklyn entered into any confidentiality agreements with standstill and/or “don’t ask, don’t

waive” provisions.

The complaints generally alleged that these purported failures to disclose rendered such Registration Statement on Form S-4 false and misleading.

The complaints requested:

preliminary and permanent injunction of the Merger;

rescission of the Merger if executed and/or rescissory damages in unspecified amounts;

direction to the individual directors to disseminate a compliant Registration Statement on Form S-4;

an accounting by Brooklyn for all alleged damages

a declaration that certain federal securities laws had been violated;

and reimbursement of costs, including attorneys’ and expert fees and expenses.

On or about February 26, 2021, in order to render moot certain of the disclosure claims

asserted in the Stockholder Actions, to avoid nuisance, potential expense, and delay, and to provide additional information to Brooklyn’s stockholders, Brooklyn determined to voluntarily supplement the Form S-4 with certain additional

In exchange for those disclosures, the plaintiffs in each of the Stockholder Actions agreed to voluntarily dismiss their claims.

As of the date of this Annual Report on Form 10-K all ten actions have been dismissed.

Following the

dismissal the parties amicably resolved plaintiffs’ counsel’s request for an award of attorneys’ fees and expenses based on the purported benefit contented to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.

Dhesh Govender v.

Brooklyn Immunotherapeutics, LLC, et al., Index No.

650847/2021 (N.Y.

On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and

certain individuals that plaintiff alleges were directors of Brooklyn LLC.

The complaint is captioned, Dhesh Govender v.

Brooklyn Immunotherapeutics, LLC, et al., Index No.

650847/2021 (N.Y.

Plaintiff alleges that

Brooklyn LLC and certain of its officers engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment.

Plaintiff also asserts various breach of contract, fraud and quantum meruit claims based on

an alleged oral agreement pursuant to which he alleges Brooklyn LLC agreed to hire him as an executive once the Merger was completed.

In particular, plaintiff alleges that, in exchange for transferring an opportunity to obtain an agreement to

acquire a license from Novellus for its mRNA-based gene editing and cell reprogramming technology to Brooklyn LLC, he was promised a $500,000 salary and 7% of the equity of Brooklyn LLC.

Based on these and other allegations, plaintiff seeks

damages of not less than $10 million, a permanent injunction enjoining Brooklyn LLC from exercising the option to acquire such license from Novellus or completing the proposed Merger.

On or about February 19, 2021, an amended complaint was

filed asserting the same causes of action but withdrawing the request for injunctive relief.

On June 6, 2021, defendants filed a motion to compel arbitration or,

in the alternative, for partial dismissal of the complaint for failure to state viable fraud, quantum meruit and employment discrimination claims.

After obtaining extensions of time to respond, plaintiff opposed the defendants’ motion on

August 9, 2021.

The defendants filed their reply on September 3, 2021.

The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021 .

By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn

Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No.

01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on

February 3, 2022.

In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of

Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against the Company and Cherington based on the breach of these same promises

and a claim for quantum meruit against the Brooklyn LLC.

In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be

determined at the hearing.

Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a three-member arbitration panel.

At this stage in the

litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.

Allen Wolff, Michael Gottlieb, Richard Simtob, Susan Miller, and NTN Buzztime, Inc., C.A.

2021-0193-KSJM (Del.

On or about March 12, 2021, Douglas Carlson, a purported stockholder of Brooklyn (then known as NTN Buzztime, Inc.), filed a verified

class action complaint against Brooklyn and its then current members of the board of directors, for allegedly breaching their fiduciary duties and violating Section 211(c) of the Delaware General Corporation Law.

In particular, plaintiff

seeks to compel the defendants to hold an annual stockholder meeting.

Plaintiff also moved for summary judgment at the same time that he filed his complaint.

In order to moot the claim addressed in the complaint, Brooklyn agreed to hold its

annual meeting on June 29, 2021, which date was subsequently rescheduled to August 20, 2021.

On or about May 6, 2021, the parties entered into a stipulation, which was “so ordered” by the court, extending defendants’ time to respond to the

complaint and to file their answering brief in opposition to plaintiff’s motion for summary judgment on or before July 16, 2021 and providing that plaintiff’s reply brief in support of his motion for summary judgment is due on or before

August 20, 2021.

On or about July 12, 2021, the parties entered in a further amended scheduling order, which provided that defendants were to respond to the complaint and file their answering brief in opposition to plaintiff’s motion for

summary judgment on or before September 16, 2021 and plaintiff was to file its reply brief in support of his motion for summary judgment on or before October 20, 2021.

On August 20, 2021, Brooklyn convened its 2021 annual meeting.

lack of a required quorum, the meeting was adjourned to September 3, 2021.

Thereafter, Brooklyn obtained a quorum, and the annual meeting was held on September 3, 2021.

On September 10, 2021, Brooklyn filed a report on Form 8-K with the SEC

announcing the results of the annual meeting.

On September 16, 2021, the parties filed a stipulation seeking voluntary dismissal of the complaint as moot.

The Court entered the dismissal on September 16, 2021 with prejudice as to the named

plaintiff and without prejudice as to other members of the purported class and retained jurisdiction for the purpose of determining any fee application to the extent it cannot be resolved amicably the parties.

Thereafter, on or about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of fees and expenses for the purported benefit that Carlson contended was received by

stockholders as a result of his action.

Edmund Truell Matter

On May 14, 2021, Edmund Truell, a stockholder of Brooklyn, alleged that he sustained a loss because he was unable to sell shares of common stock timely due to a delay caused by Brooklyn’s

issuance of stock certificates in lieu of electronic book entry.

Emerald Private Equity Fund, LLC Matter

By a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), a stockholder of Brooklyn, made a demand pursuant to 8

220 to inspect certain books and records of Brooklyn.

The stated purpose of the demand is to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper stock certificates,

including investigating whether:

(i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement;

(ii) certain restrictions on the sale of Brooklyn common stock following the Merger were proper and applied without

(iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of Brooklyn’s common stock;

and (iv) it should pursue remedial measures

and/or report alleged misconduct to the SEC.

Brooklyn has responded to the demand letter and has produced certain information to Emerald in connection with the demand, which is subject to the terms of a confidentiality agreement entered

into among the parties, including certain additional stockholders who have subsequent joined as parties to such agreement.

In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose

and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional

information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and

former directors of the Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims

for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty.

Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor

on behalf of individual stockholders whom counsel represents in addition to Emerald;

and the Company has agreed to respond to Emerald’s counsel by April 22, 2022.

The Company can provide no assurance that such pre-suit early resolution

discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed.

The Company intends to defend itself vigorously against any and all

Additionally, on April 7, 2022, the Company received a demand for indemnification from its financial advisor as it relates to the aforementioned potential lawsuit.

John Westman v.

Novellus, Inc., Christopher Rohde, and Matthew Angel, Civil Action No.

2181CV01949 (Middlesex County (Massachusetts) Superior Court)

On or about September 7, 2021, John Westman, a former employee of Novellus, Inc.

filed a Complaint in Middlesex County (Massachusetts)

Superior Court against Novellus, Inc.

and the company’s founders and former executives, Christopher Rohde and Matthew Angel (collectively, “Defendants”).

Brooklyn acquired Novellus, Inc.

on July 16, 2021.

Westman’s claims relate to

alleged conduct that took place before Brooklyn acquired Novellus, Inc.

Pursuant to the July 16, 2021 Agreement and Plan of Acquisition, as well as a separate agreement among Brooklyn, Novellus, Inc., Mr.

Rohde, and Mr.

Angel are essentially assuming the defense of and paying the fees associated with defending against these claims.

To that end, on September 10, 2021, Morgan Lewis accepted service on behalf of all defendants.

On December 24, 2021,

Westman dismissed the case without prejudice so the parties could mediate the matter.

The parties’ February 2022 mediation was unsuccessful, but Mr.

Westman has not refiled suit.

Mine Safety Disclosures

Not Applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.