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Item 2. Management’s Discussion and Analysis

2022-07-01 compared with 2021-11-12 · 242 added, 495 removed, 48 unchanged (94% of the section changed)

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

Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read with, the unaudited condensed

consolidated financial statements and notes included in Item 1 of Part I of this report, to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations.

On March 25, 2021, BIT Merger Sub, Inc., a wholly owned subsidiary of Brooklyn (then known as NTN Buzztime, Inc.) merged with and into Brooklyn LLC, with Brooklyn LLC surviving

as a wholly owned subsidiary of Brooklyn.

This transaction, which we refer to as the Merger, was completed in accordance with the terms of an agreement and plan of merger and reorganization dated August 12, 2020 among Brooklyn (then known as NTN

Buzztime, Inc.), BIT Merger Sub, Inc.

and Brooklyn LLC.

In accordance with such agreement and plan of merger, on March 25, 2021 Brooklyn amended its restated certificate of incorporation in order to effect:

You should read this discussion together with the unaudited interim condensed consolidated financial statements, related notes, and other financial information

included elsewhere in this Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in the Form 10-K/A filed with the Securities

and Exchange Commission (the “SEC”) on June 30, 2022 (the “10-K/A”), as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Original 10-K”),

filed with the SEC on April 15, 2022, to the extent the information contained in the Original 10-K was not superseded by the information contained in the 10-K/A.

The following discussion contains assumptions, estimates and other forward-looking

statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors,” in Part I, Item 1A of the 10-K/A and as described from time to time in our other filings with the SEC.

These risks could cause our

actual results to differ materially from those anticipated in these forward-looking statements.

We are a biopharmaceutical company utilizing our mRNA technology platform, including mRNA-based cell reprogramming and gene editing technologies, to create next generation mRNA, gene-editing and

cell therapies, including iPSC therapies for multiple therapeutic indications.

Our mRNA technology platform, which includes novel lipid nanoparticles (“LNPs”) for mRNA delivery and targeted transgene insertion, was acquired through a license

with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc.

and Novellus, Ltd.

in July 2021, which we refer to as the Acquisition.

We are also evaluating our strategy for IRX-2, a novel cytokine-based therapy, to

treat patients with cancer.

Acquisition of Novellus

On July 16, 2021, we acquired Novellus, Inc.

and Novellus, Inc.’s wholly owned subsidiary, Novellus, Ltd.

Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite,

As consideration for the Acquisition, we paid $22.9 million in cash and delivered 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement, were valued at a total of $102.0 million based on an agreed upon price

of $14.5253 per share.

At the date of issuance, the fair value of the shares were approximately $58.7 million.

Merger with NTN Buzztime, Inc.

On March 25, 2021, we completed the Merger with NTN Buzztime, Inc.

In accordance with the Merger Agreement, on March 25, 2021, Brooklyn amended its restated certificate of incorporation in order

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

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

On March 26, 2021, Brooklyn sold its rights, title and interest in and to the assets relating to the business 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 Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between Brooklyn and eGames.com.

The Merger has been accounted for as a reverse acquisition in accordance with United States generally accepted accounting

principles, or GAAP.

Under this method of accounting, Brooklyn LLC was deemed the “acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes.

Operations prior to the

Merger are those of Brooklyn LLC, and the historical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.

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 common units of Brooklyn LLC into shares of Brooklyn’s common stock upon the Merger, and all share and per

share amounts of common stock have been retrospectively restated to reflect the reverse split described above.

On July 16, 2021, Brooklyn Acquisition Sub, Inc., a wholly owned subsidiary of Brooklyn, merged with and into Novellus, Inc.,

which is the sole equity holder of Novellus Therapeutics Limited or Novellus, Ltd., which merger we refer to as the Acquisition.

As part of the Acquisition, Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc.,

or NoveCite, a corporation focused on developing an allogeneic mesenchymal stem cell, or MSC, product for patients with acute respiratory distress syndrome, including from COVID-19.

The Acquisition was accounted for as an asset acquisition, and

substantially all the value was attributed to in-process research and development, or IPR&D, with the exception of the value allocated to the investment in NoveCite, which was accounted for as an investment in equity securities.

We are a clinical-stage biopharmaceutical company focused on exploring the role that cytokine-based therapy can have on the

immune system in treating patients with cancer, both as a single agent and in combination with other anti-cancer therapies.

We are seeking to develop IRX‑2, a novel cytokine-based therapy, to treat patients with cancer.

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 Bioscience Limited, or Factor, and

through the Acquisition.

On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings

LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business.

This transaction, which we refer to as the Disposition, was completed in

accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.

The Merger has been accounted for as a reverse acquisition in accordance with U.S.

generally accepted accounting principles, or GAAP.

Under this method of accounting, Brooklyn LLC was deemed the

“acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes.

Operations prior to the Merger are those of Brooklyn LLC, and the historical financial statements of

Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.

IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines.

Together, these cytokines are

believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike existing cancer therapies, which rely on targeting the cancer directly.

IRX-2 is prepared from the

supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMNCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.

While IRX‑2 is a cytokine mixture, one of its active components is IL‑2, a cytokine-signaling molecule in the immune system.

IL‑2 is a protein that regulates the activities of

white blood cells (leukocytes and often lymphocytes) that are responsible for immunity.

IL‑2 is part of the body’s natural response to microbial infection, and in discriminating between foreign, or non-self and “self,” IL‑2 mediates its effects by

binding to IL‑2 receptors, which are expressed by lymphocytes.

The major sources of IL‑2 are activated CD4 + T cells and activated CD8 + T cells.

Together, these cytokines are believed to signal,

enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly.

IRX-2 is prepared from the supernatant of

pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.

Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells.

This may promote better tolerance, broader targeting and a natural molecular conformation

leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL‑2 therapies.

Aside from optimizing IRX-2 manufacture, we are also modifying our manufacturing process to allow us to develop additional drugs with a variety of cytokine mixtures to expand

our product offerings.

Regarding IRX-2 development, our strategy is:

Advance our product candidate IRX-2 through clinical development.

IRX-2 is a human blood-based IL 2 therapy being studied for

multiple types of cancer, including squamous cell cancer of the head and neck.

Treatment of patients in the INSPIRE trial has been completed, and patients who participated in the trial are currently being monitored for event-free

survival with top-line data estimated to be available in the first half of 2022.

Advance combination trials with checkpoint inhibitors.

Once INSPIRE trial data are released, we plan to use those results as a

catalyst in addition to data from the other clinical trials in the program with multiple data read-outs anticipated in 2022 and later.

Pursue partnerships to advance the IRX-2 clinical program .

We are pursuing partnering opportunities with leading biopharmaceutical companies for the development and

commercialization of IRX-2.

Regulatory strategy.

We believe that our assets may present opportunities for potential breakthroughs in the treatment of cancer and other indications.

endeavor to seek breakthrough therapy designation with regulatory agencies for IRX-2 for one or more indications.

We cannot, however, assure that we will receive breakthrough therapy designation for any future indications or that any

breakthrough therapy designation we do receive will necessarily lead to a faster approval time.

Intellectual Property .

We continue to pursue additional intellectual property based on data from IRX clinical studies.

Pre-Clinical Results

Our findings to date from nonclinical studies of IRX‑2 include murine acute toxicology as well as acute and chronic primate studies.

These studies detected circulating

associated cytokines yet were associated with benign toxicological findings.

A further murine study demonstrated PD/PDL‑1 synergy when additively administered with IRX‑2.

Clinical Program

IRX‑2 currently remains under development and has not yet been approved for marketing authorization in any jurisdiction.

The ongoing development program is investigating use of

IRX‑2 as an immunotherapeutic neoadjuvant (pre-surgical) and adjuvant (post-operative) treatment for advanced head and neck squamous cell carcinoma, or HNSCC, and other solid tumors.

The HNSCC development program is being conducted under U.S.

Food and Drug Administration, or FDA Investigational New Drug

#11,137 filed on June 30, 2003 and is ongoing.

The HNSCC program has received fast track designation, approved November 7, 2003, and orphan drug designation, conferred on July 7, 2005, from the FDA.

We have not submitted a request for orphan drug

designation in the European Union, although we may seek such designation in the future.

Clinical studies in humans with HNSCC involving IRX‑2 show immune marker activation in patients treated with IRX‑2.

In a prior phase 2a clinical trial, a correlation was shown

between marker activation and disease-free survival in head and neck cancer.

Results from this study were used to support the initiation of the INSPIRE study, a Phase 2B study involving 105 patients with HNSCC.

Details of this trial can be found at

clinicaltrials.gov (NCT02609386).

Other Indications

Other than the INSPIRE study, all clinical studies using IRX-2 are investigator-sponsored studies for which we are providing IRX‑2 as study drug and financial support to

conduct the trial.

These studies include:

Monotherapy studies:

BR-101 - A study involving 16 patients with neoadjuvant breast cancer performed at the Providence Portland Medical Center.

Details of this trial can be found at clinicaltrials.gov (NCT02950259).

CIN-201 - An open label single arm Phase 2 trial of the IRX‑2 regimen in women with cervical squamous intraepithelial neoplasia 3 or squamous vulvar intraepithelial

Details of this trial can be found at clinicaltrials.gov (NCT03267680).

Combination studies:

BAS-104 - A basket study originally intended to enroll 100 patients with metastatic bladder, renal, non-small cell lung cancer, or NSCLC, melanoma, and head and neck

cancer being held at the Moffitt Cancer Center, using IRX‑2 in conjunction with Opdivo (Nivolumab), an immunotherapy cancer treatment marketed by Bristol-Myers Squibb Company.

This trial was discontinued after 11 subjects were enrolled

due to insurance reimbursement challenges.

Details of this trial can be found on clinicaltrials.gov (NCT03758781).

HCC-107 - A study involving 28 patients with metastatic hepatocellular carcinoma, or HCC, being held at City of Hope Medical Center, HonorHealth Research Institute, and

Texas Oncology at Baylor Charles A.

Simmons Cancer Center using IRX‑2 in conjunction with Opdivo, a cancer treatment marketed by Bristol-Myers Squibb Company.

Details of this trial can be found at clinicaltrials.gov

(NCT03655002).

GI-106 - A study involving 20 patients with metastatic gastric and gastroesophageal junction cancers (GI) being held at City of Hope Medical Center, HonorHealth Research

Institute, and Texas Oncology at Baylor Charles A.

Simmons Cancer Center using IRX‑2 in conjunction with Keytruda (Pembrolizumab), an immunotherapy cancer treatment marketed by Merck.

Details of this trial can be found at clinicaltrials.gov (NCT03918499).

MHN-102 - A study involving 15 patients with metastatic head and neck cancer being held at the H.

Lee Moffitt Cancer Center and Research Institute and University of

Michigan Health System using IRX‑2 in conjunction with Imfinzi (Durvalumab), a cancer treatment marketed by AstraZeneca plc.

Details of this trial can be found at clinicaltrials.gov

(NCT03381183).

BR-202 - A study involving 30 patients with neoadjuvant triple negative breast cancer, held at the Providence Portland Medical Center using IRX‑2 in conjunction with a

programmed cell death protein 1, or PD1, and chemotherapy treatments.

Details of this trial can be found at clinicaltrials.gov (NCT04373031).

We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to

greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies.

Enrollment in the ongoing Phase 2b INSPIRE trial, or the INSPIRE trial, has been completed, with top-line data estimated

to be available by the third quarter of 2022.

Once INSPIRE trial data are released, we plan to use those results in addition to data from the other clinical trials in the program to evaluation our strategy with IRX-2.

Impact of COVID-19 Pandemic

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19

This is a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak.

The spread of SARS CoV‑2 from China to other countries

resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020.

While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our

development plans, and on the ability to conduct our clinical trials There can be no assurance that this analysis will enable us to avoid or remediate part or all of any impact from the spread of COVID-19 or its consequences, including downturns in

business sentiment generally.

The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time,

and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID‑19 pandemic.

Further, the specific clinical outcomes, or future pandemic related impacts of emerging SARS-CoV-2 variants cannot be

reliably predicted.

The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical

While our Phase 2b clinical study in patients with squamous cell carcinoma of the oral cavity, known as the INSPIRE study, is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result

of the pandemic.

Further, with respect to the INSPIRE study, we anticipate that the COVID-19 pandemic will slow our ability to close out trial sites and report trial data.

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic.

This is largely

a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak.

The spread of COVID-19 from China to other countries resulted in the

Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020.

Despite progress in vaccination efforts, the longer-term impact of the COVID-19 pandemic on our development plans and on the ability to conduct our

clinical trials remains uncertain and cannot be predicted with confidence.

COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the

conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the

marketplace in which we operate and may have a material adverse effects on our operations.

COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply.

In addition, a

recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for

an extended period of time, our liquidity and cash resources could be negatively impacted.

The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments,

which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

Further, the specific clinical outcomes, or future pandemic related impacts of emerging

COVID-19 variants cannot be reliably predicted.

Engineered Cellular and Genetic Medicines

We are exploring opportunities to advance oncology, blood disorders and monogenic disease therapies using gene-editing and cell

therapy technology through a license with Factor and through our acquisition of Novellus, Inc.

and Novellus, Ltd.

in July 2021.

The product candidates resulting from the acquisition will initiate with unedited (that is, not gene modified), induced

pluripotent stem cells (or iPSCs)-derived allogeneic mesenchymal stem cells, or iMSC.

We will begin preclinical development of iMSC towards clinical indications where inhibiting inflammation and/or supporting recovery of bone marrow stromal cells

are required.

The prior work of Novellus and NoveCite, with iMSC show evidence for preclinical efficacy in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS) and interactions with the U.S.

Food and Drug

Administration, or FDA, provided guidance on Chemistry, Manufacturing and Controls, or CMC, and manufacturing plans, which will be undertaken in a similar manner for additional iMSC applications.

Second generation iMSC products will involve gene

Here, we anticipate the step-wise addition of genes, using the in-licensed Factor gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations.

Development of processes to advance CMC

and manufacturing will follow the experience from first generation iMSC.

Clinical indications for gene-modified iMSC will include solid tumors and conditions associated with chronic inflammation.

Pluripotent Stem Cell-Derived MSC

MSC, also known as mesenchymal stromal cells, were originally discovered and isolated from bone marrow in the 1970s and have

been isolated from various tissue sources including muscle, umbilical cord, liver, placenta, skin, amniotic fluid, synovial membrane, and tooth root.

MSC have been intensely investigated for clinical applications within the last decades with a very

strong record of safety and tolerability.

However, the majority of registered clinical trials applying MSC therapy for diverse human diseases have fallen short of expectations, despite the encouraging pre-clinical outcomes in varied animal disease

This can be attributable to inconsistent properties of MSC across studies as a result of variations in tissue source, donor variability, as well as isolation and manufacturing methodologies.

The generation of MSC from an iPSC source eliminates many of the sources of variability attributable to tissue-derived MSC.

Sources of reduced variability include the use a

single tissue source and single donor as well as the ability to make larger cell banks due to the more extensive proliferation capacity of iMSC.

Moreover, development of iMSC products can leverage decades of valuable manufacturing, preclinical and

clinical experience with MSC.

Brooklyn plans to deploy iMSC products in clinical indications that harness their anti-inflammatory and tumor homing properties.

Further, gene editing the iPSC can produce a stable source for iMSC that are endowed

with additional therapeutically beneficial properties that are not present in tissue-derived MSC or native iMSC.

Bone Marrow Transplant

Brooklyn is exploring the use of iMSC to address primary graft failure or poor graft function after bone marrow or

hematopoietic stem cell transplant, or BM/HSCT.

Previous studies with tissue-derived MSC have demonstrated a rejuvenation of the bone marrow stromal environment and success with a subsequent BM/HSCT.

Preclinical studies are being conducted to

demonstrate the ability of iMSC to home to the bone marrow and influence the microenvironment.

In addition, an advisory board of world class experts in BM/HSCT has been assembled to guide the clinical trial design and selection of clinical

populations that are most likely to show benefit of a secondary transplant after treatment with iMSC.

Tumor Localized Delivery of Immune Stimulating Cytokines

The ability of MSC to migrate and home to sites of inflammation, including tumors, makes MSC attractive for delivery of

oncology therapeutics.

We intend to use gene editing of iPSC to produce a cell line with expression of the immune stimulatory cytokines IL7 and IL15, which then can be used to generate iMSC that express both IL7 and IL15.

Following systemic

delivery of the gene edited iMSC, migration and homing to tumor will result in a localized and more sustained delivery of these potent cytokines in the tumor microenvironment without producing the side effects that occur with high dose systemic

administration of these cytokines.

Precision Genetic Medicines

The ability to engineer site-specific DNA endonucleases with high fidelity (gene editing) has opened a new therapeutic arena for addressing the underlying genetic basis of

Gene editing systems that possess both high specificity (low off-target editing) and high efficiency for on-target editing enable the in vivo use of the gene editing machinery to specifically modify patient DNA in target tissues and thus

address the genetic underpinnings of numerous disease states.

Brooklyn’s in-licensed technologies are being leveraged to develop genetic medicines that can achieve precision in vivo gene editing to address disorders that occur primarily as a

result of mutations in a single gene.

The initial disease and gene targets being pursued include familial transthyretin amyloidosis (TTR gene mutations) and Stargardt disease (ABC4A gene mutation).

Autologous Cell Therapy

The in-licensed technology for mRNA-based cellular reprogramming is highly efficient and safer than methods that utilize viral vectors or plasmid DNA for expression of

reprogramming factors since it eliminates the chance of DNA integration and potential for creating mutations in genomic DNA.

Also, the proprietary reprogramming process utilizes daily repeated transfection of mRNA for expression of reprogramming

factors and can achieve a rapid generation of iPSC clones (in 2 weeks) from patient tissue biopsy.

This rapid and efficient process therefore reduces the potential negative impact of low quantity biopsy material and this enhances reproducibility

of autologous iPSC generation.

Furthermore, by delivering mRNA for a gene editing nuclease, genomic modifications, including correction of mutations, can be simultaneously performed thus streamlining overall manufacturing time to produce

gene-corrected autologous cells.

This approach, leveraging the proprietary in licensed technologies, can be employed to produce cell therapies addressing genetic diseases (e.g.

sickle cell disease) of infectious diseases (e.g.

Third Quarter 2021 and Recent Developments

Listing on The Nasdaq Global Market

We transferred the listing of our common stock to The Nasdaq Global Market effective October 25, 2021, after voluntarily

withdrawing the listing from the NYSE American stock exchange.

The common stock continues to trade under the stock symbol “BTX.”

License Agreements

On April 26, 2021, Brooklyn LLC entered into an exclusive license agreement, or the License Agreement, with Novellus, Ltd.

and Factor, or the Licensors, to license the

Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle

cell disease, and beta thalassemia.

Through the License Agreement, Brooklyn LLC acquired an exclusive worldwide license to develop and commercialize certain cell-based therapies to treat cancer and rare blood disorders, including sickle cell

disease, based on patented technology and know-how of Novellus, Ltd.

The License Agreement provides that Brooklyn LLC is obligated to pay the Licensors a total of $4,000,000 in connection with the execution of the License Agreement, all of which

has been paid.

Brooklyn LLC is obligated to pay to the Licensors additional fees of $5,000,000 in October 2021 and $7,000,000 in October 2022.

The completion of our acquisition of Novellus, Inc., the sole equity holder of Novellus, Ltd., on July 16, 2021 relieves us from potential obligations to pay Novellus, Ltd.

certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement.

The agreements with Factor under the License Agreement remain unchanged.

Brooklyn LLC is obligated to pay Factor $2,500,000 in

October 2021, which has been paid, and $3,500,000 in October 2022.

Under the terms of the License Agreement, Brooklyn LLC is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical

development and regulatory milestones and specified commercialization milestones.

In general, upon its achievement of these milestones, Brooklyn LLC will be obligated, in the case of development and regulatory milestones, to make milestone payments

to Licensor in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers.

In the event Brooklyn LLC fails to timely achieve

certain delineated milestones, the Licensors may have the right to terminate the rights of Brooklyn LLC under provisions of the License Agreement relating to those milestones.

The Licensors are responsible for preparing, filing, prosecuting and maintaining all patent applications and patents under the License Agreement.

If, however, the Licensors

determine not to maintain a particular licensed patent or not to prepare, file and prosecute a licensed patent, Brooklyn LLC will have the right, but not the obligation, to assume those responsibilities in the territory at its expense.

Novellus, Ltd.

is a pre-clinical development, manufacturing, and technology licensing entity focused on engineered cellular medicines.

Novellus, Ltd.

has developed mRNA-based

cell reprogramming and gene editing technologies to create engineered cellular medicines.

The synthetic mRNA is non-immunogenic—it is capable of successfully evading the cellular innate immune system and then is capable of expressing high levels of

proteins for cell reprogramming and gene editing.

The mRNA may be formulated for injection into target tissues for cellular uptake and therapeutic treatment.

The synthetic mRNA technology may be used to edit gene mutations through mRNA chemistry or expressed gene-editing proteins to treat genetic and rare diseases.

It may also be

used to reprogram human non-pluripotent cells and IPSCs.

The IPSCs may then be differentiated into pure populations of varying therapeutic cell types.

The reprogramming technology offers a rapid, cost-effective and patient specific therapy using

the engineered stem cells created from IPSCs.

Novellus, Ltd.

has licenses from Factor to use over 45 granted patents throughout the world covering synthetic mRNA, RNA-based gene editing, and RNA-based cell reprogramming,

in addition to specific patents covering methods for treating specific diseases.

There are also more than 50 pending patent applications throughout the world focused on these and other aspects of the technology.

The patent coverage includes granted

patents and pending patent applications in the United States, Europe, and Japan, along with other major life sciences markets.

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

Purchase Agreements

On April 26, 2021, Brooklyn and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed a purchase agreement, or the First Purchase Agreement, and a related registration

rights agreement.

Pursuant to the First Purchase Agreement, Brooklyn had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of Brooklyn’s common stock.

common stock by Brooklyn, if any, were subject to certain limitations, and could occur from time to time, at Brooklyn’s sole discretion.

For entering into the First Purchase Agreement, Brooklyn issued to Lincoln Park 56,041 shares of common shares

as consideration for Lincoln Park’s commitment to purchase up to $20.0 million in shares of common stock.

As of September 30, 2021, Brooklyn issued and sold to Lincoln Park a total of 1,127,736 shares of common stock for gross proceeds of

$20,000,000, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, Brooklyn executed a purchase agreement, or the Second Purchase Agreement, and a related registration rights agreement.

Pursuant to the Second

Purchase Agreement, Brooklyn has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to

$40,000,000 of shares of Brooklyn’s common stock.

Sales of common stock by Brooklyn, if any, are subject to certain limitations, and may occur from time to time, at Brooklyn’s sole discretion.

For entering into the Second Purchase Agreement,

Brooklyn issued to Lincoln Park 50,000 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $40,000,000 in shares of common stock.

Under the Second Purchase Agreement, on any business day selected by Brooklyn, Brooklyn may direct Lincoln Park to purchase up to 60,000 shares of common stock on such business

day, which we refer to as a Regular Purchase, provided, however, that (i) the Regular Purchase may be increased to up to 80,000 shares, provided that the closing sale price of the common stock is not below $5.50 on the purchase date, and (ii) the

Regular Purchase may be increased to up to 120,000 shares, provided that the closing sale price of the common stock is not below $7.00 on the purchase date.

In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not

exceed $1,000,000 under the First Purchase Agreement and $2,000,000 under the Second Purchase Agreement.

The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of common stock immediately preceding

the time of sale.

In addition to Regular Purchases, Brooklyn may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold

prices as set forth in the Second Purchase Agreement.

The Second Purchase Agreement also prohibits Brooklyn from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares

of common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of common

Brooklyn has the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.

Actual sales of shares of common stock to Lincoln Park under the Second Purchase Agreements depend on a variety of factors to be determined by Brooklyn from time to time,

including, among others, market conditions, the trading price of the common stock and determinations by Brooklyn as to the appropriate sources of funding for Brooklyn and its operations.

We expect that any net proceeds received by Brooklyn from

such sales to Lincoln Park will be used for research and development, working capital and general corporate purposes.

As of September 30, 2021, Brooklyn had issued and sold 3,551,990 shares of common stock under the First Purchase Agreement and the Second Purchase Agreement for total net

proceeds of $52.0 million.

Acquisition of Novellus

On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc.

entered into an agreement and plan of acquisition, or the Acquisition

Agreement, with (a) Novellus LLC, (b) Novellus, Inc., the sole equity holder of Novellus, Ltd.

and, prior to the closing under the Acquisition Agreement, a wholly owned subsidiary of Novellus, LLC, and (c) a seller representative.

Novellus, Ltd.

a pre-clinical stage biotechnology company organized under the laws of Ireland that is developing engineered cellular medicines using its licensed, patented non-immunogenic mRNA, high-specificity gene editing, mutation-free and footprint-free cell

reprogramming and serum-insensitive mRNA lipid delivery technologies.

The closing of the transaction contemplated by the Acquisition Agreement, or the Acquisition, was held contemporaneously with the execution and delivery of the Acquisition

At the closing:

Brooklyn acquired all of the outstanding equity interests of Novellus, Inc.

as the result of the merger of Brooklyn Acquisition Sub, Inc.

with and into Novellus, Inc., following which Novellus, Inc., as the

surviving corporation, became Brooklyn’s wholly owned subsidiary and Novellus Ltd.

became Brooklyn’s indirectly owned subsidiary.

Brooklyn acquired 25.0% of the total outstanding equity interests of NoveCite, Inc., a corporation focused on developing an MSC product for patients with acute respiratory distress syndrome, including from

We delivered consideration for the Acquisition totaling approximately $124.0 million, which consisted of (a) $22.8 million in cash and (b) 7,022,230 shares of common stock,

which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.

The Acquisition Agreement contains customary representations, warranties and certain indemnification provisions.

740,766 of the shares issued as consideration have been placed in escrow for a period of up to 12 months in order to secure indemnification obligations to us under the Acquisition Agreement.

The Acquisition Agreement also contains non-competition

and non-solicitation provisions pursuant to which Novellus LLC has agreed not to engage in certain competitive activities for a period of five years following the closing, including customary restrictions relating to employees.

No employees of

We are advancing our gene-editing and cell therapy technology in oncology, blood disorders and monogenic disorders through a license with Factor and through the Acquisition of Novellus, Inc.

Novellus, Ltd.

or Novellus, Inc.

prior to the Acquisition continued their employment, or were otherwise engaged by us, following the Acquisition.

In connection with the Acquisition, the co-founders of Novellus, Ltd.

entered into lock-up agreements with respect to 3,377,690

of the shares received in the Acquisition, and our Chair of the Board of Directors and its Chief Executive Officer and President entered into identical lock-up agreements with respect to their current holdings of our stock.

Each lock-up agreement

extends for a period of three years, provided that up to 75% of the shares of common stock subject to the lock-up agreement may be released from the lock-up

restrictions earlier if the price of common stock on our principal stock exchange, now The Nasdaq Global Market, exceeds specified thresholds.

The lock-up agreements include customary exceptions for transfers during the applicable lock-up period.

We expect the Acquisition will advance our evolution into a platform company with a pipeline of next-generation engineered cellular, gene editing and cytokine programs.

addition, the acquisition of Novellus, Ltd.

builds on the License Agreement.

(See “Second Quarter 2021 and Recent Developments—License Agreements” above.) The completion of the acquisition of Novellus, Ltd.

relieves Brooklyn LLC from potential

obligations to pay Novellus, Ltd.

certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement.

The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive

rights to develop certain next-generation mRNA gene editing and cell therapy products, remains unchanged.

in July 2021.

We expect that the first-generation product candidates resulting from the Acquisition will be derived from unedited (that is, not gene modified), induced pluripotent stem cells (“iPSC”)-derived allogeneic mesenchymal

stem cells (“iMSC”).

We expect to begin preclinical development of iMSC for clinical indications for which inhibiting inflammation and/or supporting recovery of bone marrow stromal cells is required.

The prior work of Novellus and NoveCite with

iMSC shows evidence for preclinical efficacy in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS).

Interactions with the FDA provided guidance on Chemistry, Manufacturing and Controls (“CMC”), and manufacturing

plans, which will be undertaken in a similar manner for additional iMSC applications.

We expect that second generation iMSC products will involve gene editing, for which we anticipate using the stepwise addition of genes provided by the

in-licensed Factor Bioscience gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations.

Development of processes to advance CMC and manufacturing will follow the experience from first

generation iMSC products.

We expect clinical indications for gene-modified iMSC will include solid tumors and other conditions associated with episodic and/or chronic inflammation.

We are also exploring opportunities to advance in vivo gene

therapies for monogenic and other diseases by combining the NoveSlice gene editing technology in combination with ToRNAdo TM , the in-licensed LNP technology.

Recent Developments

PIPE Transaction

On March 6, 2022, we entered into a Securities Purchase Agreement with an investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of

approximately 6,857,000 units (the “Units”), each of which consisted of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) one warrant (the

“Common Warrants”) to purchase one share of common stock, for an aggregate purchase price of approximately $12.0 million (the “Subscription Amount”).

The PIPE Transaction closed on March 9, 2022.

We incurred fees of $1.0 million through March 31,

2022 related to the PIPE Transaction.

Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to

customary adjustments.

The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.

Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires five-and-one-half years from the date of

issuance, and is subject to customary adjustments.

The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof,

subject to increase to 9.99% at the option of the holder.

The Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity,

as these warrants provide for a cashless settlement provision that fails the requirement of the indexation guidance under ASC 815-40.

The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair

value presented within the statement of operations.

The fair values of the Common Warrants and the Pre-Funded Warrants at the issuance date totaled $12.6 million in the aggregate, which was $0.6 million more than the Subscription Amount.

excess $0.6 million represents an inducement to the PIPE Investor to enter into the PIPE Transaction and was recorded in warrant liabilities expense in the accompanying consolidated statement of operations.

In connection with the PIPE Transaction, we and the PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which we agreed to prepare and file a

registration statement with the Securities and Exchange Commission (the “SEC”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the

Common Warrants.

We agreed to use our best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved.

such registration statement on April 29, 2022, which became effective on May 11, 2022.

Pursuant to the registration rights agreement, we are obligated to pay the PIPE Investor liquidated damages equal to 2% of the Subscription Amount per month, with a maximum

aggregate payment of 12% of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the related securities for more than 10 consecutive calendar days or more than an aggregate of

fifteen calendar days (which need not be consecutive calendar days) during any 12-month period.

On May 24, 2022, we provided the PIPE Investor with notice that it was not able to resell the securities under the registration agreement because we did not timely file this

Quarterly Report on Form 10-Q (the “Q1 2022 10-Q”) with the SEC, and that the PIPE Investor could not use the registration statement to resell the related securities until we filed the Q1 2022 10-Q.

Because the PIPE Investor was unable to use

the registration statement for at least 10 consecutive calendar days, we accrued $0.2 million during the three months ended March 31, 2022 for the estimated contingent loss we expect to incur as a result of the late Q1 2022 10Q filing, which is

recorded in other expense, net in the accompanying condensed consolidated statements of operations.

Basis of Presentation

We are a development stage company and have had no revenues from product sales to date.

We will not have revenues from product sales until such time as we receive regulatory

approval of our drug 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.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries, benefits and other costs, including stock-based compensation, for our executive and administrative

personnel, legal and other professional fees, travel, insurance, and other corporate costs.

We will not have revenues from product sales until such time as we receive regulatory approval of our

product candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.

Research and Development Expenses

We expense our research and development costs as incurred.

Our research and development expenses consist of costs incurred for company-sponsored research and

development activities, as well as support for selected investigator-sponsored research.

Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are

incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.

IPR&D that is acquired

through an asset acquisition and has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.

The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for

clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related

to our product development efforts.

In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential

The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows.

Payments under the contracts depend on factors such as the achievement of certain events or

milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions.

Preclinical and clinical study and trial

associated activities such as production and testing of clinical material require significant up-front expenditures.

We anticipate paying significant portions of a study’s or trial’s cost before such begins and incurring additional expenditures as

the study or trial progresses and reaches certain milestones.

Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting estimates during the three and nine months ended September 30, 2021 to augment the critical accounting estimates disclosed under “Item 2.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations--Critical Accounting Policies and Estimates” in Part I of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.

Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as

support for selected investigator-sponsored research.

Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to

have any alternative future uses other than the specific research and development project for which it was intended.

In-Process Research and Development (“IPR&D”) that is acquired through an asset acquisition and has no alternative future

uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.

The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials,

expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product

development efforts.

In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential products.

financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows.

Payments under the contracts depend on factors such as the achievement of certain events or milestones, the

successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions.

Preclinical and clinical study and trial associated

activities such as production and testing of clinical material require significant up-front expenditures.

We anticipate paying significant portions of a study’s or trial’s cost before such begins and incurring additional expenditures as the study

or trial progresses and reaches certain milestones.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and

other professional fees, travel, insurance, and other corporate costs.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2021 and 2020

Three months ended September 30,

Operating expenses:

Research and development

Acquired IPR&D

General and administrative

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

Other income (expenses):

Other income (expense), net

Total other income (expenses), net

Nine months ended September 30,

Comparison of Three Months Ended March 31, 2022 and 2021

Three months ended March 31,

(in thousands)

Operating expenses:

Research and development

Acquired IPR&D

General and administrative

Transaction costs

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

Other expenses:

Other expense, net:

Loss on sale of NTN assets

Other income (expense), net

Total other expenses

Series A convertible preferred stock dividend

Net loss attributable to common stockholders

We had no revenues for the three and nine months ended September 30, 2021 or 2020.

Warrant liabilities expense

Loss on non-controlling investment

Other expense, net

Total other expense, net

Loss before income taxes

Provision for income taxes

We had no revenues for the three months ended March 31, 2022 or 2021.

Research and Development Expenses

Three months ended September 30,

Payroll-related

Stock-based compensation

Other expenses, net

Total research and development expense

Nine months ended September 30,

Three months ended March 31,

(in thousands)

Payroll-related

Stock-based compensation

Clinical trials

Other expenses, net

Total research and development expense

For the three months ended September 30, 2021, our research and development expenses increased primarily due to increased

headcount and stock-based compensation for the issuance of equity awards, offset by a decrease in other miscellaneous research and development expenses when compared to the same period in 2020.

For the nine months ended September 30, 2021, our

research and development expenses increased due to upfront payments associated with licensed technology, increased clinical trial expenses, increased headcount and increased stock-based compensation when compared to the same period in 2020.

We expect research and development expenses to grow as we expand our gene-editing cell‑therapy research and clinical trial activities.

Acquired IPR&D

During the three and months ended September 30, 2021, we expensed the $80,537,551 fair value of the IPR&D acquired in the Acquisition

because there is no future alternative use for the IPR&D other than for its intended purpose.

Total research and development expenses

For the three months ended March 31, 2022, our research and development expenses increased primarily due to increased headcount, offset by a decrease in clinical trial expense and other

miscellaneous research and development expenses when compared to the same period in 2021.

On January 3, 2022, we completed a reduction in our workforce (the “Reduction”), involving eight research and development employees (53% of our workforce at that time).

We believe the Reduction

will enable us to better align our workforce with the needs of our business and focus more of our capital resources on our cell therapy and gene editing platform..

In connection with the Reduction, we incurred approximately $0.5 million for

severance and termination-related costs, which we recorded during the first quarter of 2022.

General and Administrative Expenses

Three months ended September 30,

Professional fees

Three months ended March 31,

(in thousands)

Stock-based compensation

Payroll-related

Other expenses, net

Total general and administrative expense

Nine months ended September 30,

Professional fees

Stock-based compensation

Payroll-related

Loss on disposal of fixed assets

Other expenses, net

Total general and administrative expense

The increase in general and administrative expense for the three and nine months ended September 30, 2021 was primarily related

to increased professional fees such as legal, accounting and consulting fees associated with merger and acquisition activity as well as costs associated with being a publicly traded company, increased stock-based compensation resulting from the

issuance of equity awards, increased payroll-related expense due to an increase in our headcount and increased insurance expenses when compared to the same periods in 2020.

We expect general and administrative expenses to increase in future periods as we increase our business activities and incur costs associated with being a publicly traded

Total general and administrative expenses

The increase in general and administrative expense for the three months ended March 31, 2022 was primarily related to non-cash

stock-based compensation expense from increased equity awards, increased headcount, increased premiums for public company insurance policies, increased other expenses, net, primarily due to legal-related matters, and losses on the disposal of

fixed assets when compared to the same period in 2021.

Transaction Costs

There were no transaction costs for the three months ended September 30, 2021.

For the nine months ended September 30, 2021,

the $5,765,407 in transaction costs related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger.

Change in Fair Value of Contingent Consideration

For the three and nine months ended September 30, 2021, the change in fair value of the contingent consideration was an increase to the liability of $70,000 and a decrease to

the liability of $750,000, respectively, based on our quarterly valuation analyses.

There were no changes to the fair value of contingent consideration for the three and months ended September 30, 2020.

The $5.8 million in transaction costs during the three months ended March 31, 2021 related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger, and

there were no comparable transaction costs for the three months ended March 31, 2022.

Loss on Sales of NTN Assets

The $9,648,173 loss on the sale of NTN assets for the nine months ended September 30, 2021 was incurred when we completed the

Other Income (Expense), Net

Three months ended September 30,

Income from Brooklyn PPP Loan forgiveness

Interest expense, net

Other expenses, net

Total other income (expense), net

Nine months ended September 30,

Income from Brooklyn PPP Loan forgiveness

The $9.6 million loss on the sale of NTN assets for the three months ended March 31, 2021 was incurred when we completed the Disposition, and there was no comparable loss on sale for the three

months ended March 31, 2022.

Warrant Liabilities Expense

The $1.3 million of warrant liabilities expense is includes (1) $0.6 million related to the excess fair value of the Common Warrants and Pre-Funded Warrant issued in connection with the PIPE

Transaction over the $12.0 million gross proceeds received and (2) the change in the aggregate fair value of the Common Warrants and Pre-Funded Warrants of approximately $0.7 million from the March 9, 2022 issuance date to March 31, 2022.

was no comparable expense for the three months ended March 31, 2021.

Loss on Non-Controlling Investment

The $0.6 million of loss on non-controlling investment, of which $0.5 million relates to the prior year, is related to our 25% share of NoveCite’s earnings or losses.

We account for our

investment in NoveCite under the equity method.

There was no comparable expense for the three months ended March 31, 2021.

Other Expense, Net

Three months ended March 31,

(in thousands)

PIPE transaction fees

Liquidated damages

Interest expense, net

Other expenses, net

Total other income (expense), net

For the three and nine months ended September 30, 2021, we recognized an increase in other income, net of expense primarily

as a result of the forgiveness of our PPP Loan, which was primarily offset by interest accrued on notes payable of that we assumed as part of the acquisition of the assets of IRX Therapeutics, LLC in 2018.

The notes bear interest at the rate of

14% and were due on December 31, 2019.

On January 27, 2020, the notes were amended to extend the maturity date to the earlier of (i) a change of control and (ii) December 31, 2021, whichever comes first.

Other (expense) income , net

Total other expense, net

For the three months ended March 31, 2022, we recognized an increase in other expense, net of approximately $1.4 million compared to the same period in 2021, primarily as a result of $1.0 million

of other expense related to fees allocated to the PIPE Transaction, which was allocated to the warrants issued in connection with the transaction.

Additionally, we accrued for a loss for the estimated liquidated damages we expected to incur as a

result of not timely filing the Q1 2022 10Q with the SEC.

These increases in expense were offset by a decrease in interest expense of $13,000 for the three months ended March 31, 2022 when compared to the same period in 2021 due to the payoff of

certain long-term debt at December 31, 2021.

Liquidity and Capital Resources

At September 30, 2021, we had cash and cash equivalents of $24,381,831.

During the second quarter of 2021, we entered into the First Purchase Agreement and Second Purchase

Agreement with Lincoln Park, pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60,000,000 in shares of our common stock.

Future sales of common

stock by us, if any, are subject to certain limitations, and may occur from time to time, at our sole discretion.

As of November 9, 2021, we had issued and sold 3,551,990 shares of common stock for total gross proceeds of $54.1 million and net

proceeds of $52.0 million.

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

We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our drug development programs and operate as a publicly traded

We anticipate using current cash on hand and our net proceeds from sales of common stock under the Second Purchase Agreement to finance these activities.

It will likely be some years before we obtain the necessary regulatory approvals to

commercialize one or more of our drug candidates.

Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we have sufficient funds to fund our operations for the next twelve months from the

filing of these financial statements.

There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other drug candidate we may acquire, or that we will obtain any additional financing that we require in the future or,

even if such financing is available, that it will obtainable on terms acceptable to us.

At March 31, 2022, we had cash and cash equivalents of approximately $23.5 million.

On March 9, 2022, we issued 5,500,000 shares of common stock and Pre-Funded Warrants representing approximately

1,357,000 shares of common stock for net proceeds of approximately $11.0 million in connection with the PIPE Transaction.

Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity

in variable rate transactions for a period of one-year following consummation of the PIPE Transaction, including issuing equity under the Second Purchase Agreement.

We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our product development programs and operate as a publicly traded company.

product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives.

It will likely be some years before we obtain the necessary

regulatory approvals to commercialize one or more of our product candidates.

Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our operations

for the next twelve months from the filing of the financial statements contained in this Q1 2022 10-Q.

There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other product candidate we may acquire, or that we

will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.

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

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

• future clinical trial results;

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

the cost and timing of regulatory approvals;

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

our products;

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

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

1 unchanged sentence

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

We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase

Agreement, public or private equity offerings, debt financings, corporate collaborations or other means.

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

future clinical trial results.

We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase Agreement (to the

extent we are permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means.

We may also seek governmental grants to support our clinical trials and preclinical trials.

Further, we may seek to raise capital to fund

additional product development efforts even if we have sufficient funds for our planned operations.

may seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned operations.

Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders.

There can be no assurance that any

such required additional funding will be available to us at all or available on terms acceptable to us.

Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses

on terms that are not favorable to us.

If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our

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.

Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are

not favorable to us.

If we are not able to secure additional funding when needed, we may have to delay the commercialize of our products, reduce the scope of or eliminate one or more research and development programs, which could have an adverse

effect on our business.

Sources of Funds

PIPE Transaction

On March 9, 2022, we issued 5,500,000 shares of common stock, Pre-Funded Warrants exercisable for approximately 1,357,000 shares of common stock and Common Warrants exercisable for approximately

6,857,000 shares of common stock for net proceeds of approximately $11.0 million in connection with the PIPE Transaction.

Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity

in variable rate transactions for a period of one-year following consummation of the PIPE Transaction, including issuing equity under the Second Purchase Agreement.

Equity Securities

During the second quarter, we entered into the First Purchase Agreement and the Second Purchase Agreement with Lincoln Park,

pursuant to which, subject to specified terms and conditions, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60.0 million in shares of our common stock.

November 9, 2021, we had issued and sold 3,551,990 shares of common stock for total gross proceeds of $54.1 million and net proceeds of $52.0 million and a total of $5.9 million of common stock remained available for sale under the Second Purchase

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

As a condition to the closing of the Merger, Brooklyn LLC was required to have at least $10.0 million in cash and cash

equivalents at the effective time of the Merger.

In furtherance of, and prior to, the Merger, certain of its members entered into agreements pursuant to which those members purchased additional units of Brooklyn LLC for an aggregate purchase price

of $10.5 million.

As a condition to the closing of the Merger, we were required to have at least $10.0 million in cash and cash equivalents at the effective time of the Merger.

In furtherance

of, and prior to, the Merger, certain of our members entered into agreements pursuant to which those members purchased units of Brooklyn LLC for an aggregate purchase price of $10.5 million during the three months ended March 31, 2021.

Disposition .

On March 26, 2021, we completed the Disposition, in which we sold to eGames.com our rights, title and interest in and to the

assets relating to the business we operated prior to the Merger under the name “NTN Buzztime, Inc.” in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger

Brooklyn LLC PPP Loan .

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $309,905 to Silicon Valley Bank

evidencing the loan, or the Brooklyn LLC PPP Loan, Brooklyn LLC received under the Paycheck Protection Program, or PPP, of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S.

Small Business Administration, or the CARES

Brooklyn LLC PPP Loan had an interest rate of 1.0% per annum.

Under the terms of the CARES Act, certain amounts of the Brooklyn LLC PPP Loan could be forgiven if they were used for

qualifying expenses as described in the CARES Act.

In June 2020, Brooklyn LLC submitted its loan forgiveness application for the Brooklyn LLC PPP Loan, and in September 2020, the lender informed Brooklyn LLC that the U.S Small Business

Administration approved the forgiveness of 100% of the outstanding principal and interest.

As of September 30, 2021, there was no outstanding principal balance of the Brooklyn LLC PPP Loan.

On March 26, 2021, we completed the Disposition, in which we sold to eGames.com our rights, title and interest in and to the assets relating to the business we operated prior to the Merger under

the name “NTN Buzztime, Inc.” in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business.

Uses of Funds

Net Cash Used in Operating Activities .

Our operations used $16.7 million during the nine months ended September 30, 2021.

Our cash use for operating activities is influenced by the level of our net loss and the

amount of cash we invest in personnel and technology development to support anticipated growth in our business.

Our operations used $5.4 million during the three months ended March 31, 2022 compared to $3.4 million in the comparable period.

Our results for the quarter ended March 31, 2022 include

approximately $1.0 million of fees incurred through March 31, 2022 related to the PIPE Transaction.

These fees were allocated to the fair value of the Common Warrants and the Pre-Funded Warrants and recorded in other expense, net on the

accompanying condensed consolidated statements of operations.

Our cash use for operating activities is influenced by the level of our net loss and the amount of cash we invest in personnel and technology development to support anticipated growth in our

License Obligations .

We are obligated to pay certain amounts to Factor pursuant to the license agreement we entered into in April 2021, including $3.5 million in October 2022.

The license agreement also provides for milestone payments

and royalties on the net sale of product developed under the license agreement.

Lease Obligations .

We are obligated to pay approximately $660,000 per year for our facilities leases, subject to annual increases and to a sharing of common area expenses with other tenants in

the building.

The leases expire at varying times between December 2025 and June 2028.

Acquisition .

On July 16, 2021, we used $22,882,181 of cash towards the purchase of the Acquisition.

The remaining purchase price of

the Acquisition was completed through the issuance of common stock.

Brooklyn PPP Loan .

On April 18, 2020, Brooklyn (then known as NTN Buzztime, Inc.) was granted a loan, which we refer to as the Brooklyn PPP Loan, in the aggregate amount of $1,625,000, pursuant

to the PPP under the CARES Act.

Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act.

In October 2020 the U.S.

Small Business Administration

approved the forgiveness of $1,093,000 of the $1,625,000 principal amount of the Brooklyn PPP Loan, leaving a principal balance of approximately $532,000, all of which, plus accrued and unpaid interest, was due and, in accordance with the terms of

the Merger Agreement, paid by Brooklyn upon the closing of the Merger.

We are obligated to pay approximately $0.7 million per year for our facilities leases, subject to annual increases and to a sharing of common area expenses with other tenants in the building.

leases expire at varying times between December 2026 and June 2028.

Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting estimates during the three months ended March 31, 2022 from those described in “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” section of the 10-K/A.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 12 to the condensed consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial

condition, expenses, results of operations, liquidity, capital expenditures or capital resources.

There were no recent accounting pronouncements issued during the three months ended March 31, 2022 that would have impacted our financial statements or operations.

Quantitative and Qualitative Disclosures About Market Risk.

Under the rules and regulations of the Securities and Exchange Commission or SEC, as a smaller reporting company we are not required to provide

the information otherwise required by this item.

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

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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis