What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-11 compared with 2022-07-01 · 204 added, 142 removed, 148 unchanged (70% of the section changed)

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filed with the SEC on April 15, 2022, to the extent the information contained in the Original 10-K was not superseded by the information contained in the 10-K/A.

with the SEC on April 15, 2022, to the extent the information contained in the Original 10-K was not superseded by the information contained in the 10-K/A.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

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.

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

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

• 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, 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.

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

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

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, Inc.

$14.5253 per share.

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

mRNA, Gene-Editing, and Cellular Medicines

We are advancing the technology that we obtained through a license with Factor and through the Acquisition of Novellus, Inc.

and Novellus, Ltd.

in July 2021 to evaluate and develop mRNA,

gene-editing, and cellular medicines, with an initial focus on hematologic and solid tumors.

We expect that the first-generation product candidates will include gene-editing mRNA for in vivo cell engineering and induced pluripotent stem cell

(“iPSC”)-derived cytotoxic lymphocytes (“iCLs”) and immune-modulating cells (“iIMCs”).

We expect to begin preclinical development, including manufacturing process development, of iCLs and iIMCs for clinical indications including hematologic and

solid tumors, as well as other indications that require overcoming molecular cues of the tissue microenvironment.

The prior work of Novellus and NoveCite shows evidence for preclinical efficacy of iPSC-derived cells 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 applications.

We expect that second generation products will involve more complex 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 products.

We are also exploring opportunities to advance in vivo mRNA cell

engineering therapies for hematologic and solid tumors by combining the NoveSlice gene editing technology with ToRNAdo TM , the in-licensed LNP technology.

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

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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.

Results of the Phase 2b INSPIRE trial, or the INSPIRE trial, released in June 2022, showed outcomes favored IRX-2 in certain predefined subgroups but the INSPIRE trial did not meet the primary

endpoint of Event-Free Survival (“EFS”) at two years of follow up.

One hundred and fifty patients were enrolled in the study.

At two years of follow-up in the intention-to-treat (ITT, n=105) population the median EFS was 48.3 months and was not

reached in the control arm (Hazard Ratio 1.10 (95% Confidence Interval, 0.6-2.1;

p value=0.62)).

Subgroups favoring the IRX-2 arm included patients with later stage (III and IV) disease and those that did not receive chemotherapy.

Trends in EFS

rates as defined by the Kaplan-Meier estimate at two years of follow-up in patients with later stage (III and IV) disease were 57.2 (40.3, 70.9) vs 49.4 (28.3, 67.4) in favor of IRX-2.

In patients that did not receive chemotherapy (radiation only)

as part of adjuvant treatment, the EFS Kaplan-Meier estimate at two years of follow-up was 76.4 (52.2, 89.4) vs 60.6 (29.4, 81.4) in favor of IRX-2.

There were no new safety signals observed with IRX-2.

We currently do not have plans to further

develop the IRX-2 product candidate.

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 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.

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

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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 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.

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.

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.

Recent Developments

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The PIPE Transaction closed on March 9, 2022.

We incurred fees of $1.0 million through March 31,

We incurred fees of $1.0 million through June 30,

2022 related to the PIPE Transaction.

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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 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,

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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

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 our

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.

Because the PIPE Investor was unable to use the

resale registration statement for at least 10 consecutive calendar days, we accrued $0.2 million during the first quarter of 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 for the six months ended June 30, 2022 in the accompanying condensed consolidated statements of operations.

We paid the $0.2 million liquidated damages payment in June 2022.

On June 30, 2022, we filed the Q1 2022 10-Q along with the 10-K/A, and on July 1, 2022, we provided notice to the PIPE Investor that it may resume use of the resale

registration statement.

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

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.

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

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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.

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,

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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.

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 Months Ended March 31, 2022 and 2021

Three months ended March 31,

Comparison of the Three and Six Months Ended June 30, 2022 and 2021

Three months ended June 30,

Six months ended June 30,

(in thousands)

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General and administrative

Impairment of in-process research and

Transaction costs

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Loss from operations

Other expense, net:

Other income (expense), net:

Loss on sale of NTN assets

Warrant liabilities expense

Change in fair value of warrant liabilities

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.

Total other income (expense), net

Research and Development Expenses

Three months ended March 31,

Three months ended June 30,

(in thousands)

Stock-based compensation

Payroll-related

Clinical trials

Professional fees

Other expenses, net

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.

Six months ended June 30,

(in thousands)

Payroll-related

Stock-based compensation

Clinical trials

Professional fees

Other expenses, net

Total research and development expenses

For the three and six months ended June 30, 2022, our research and development expenses decreased primarily due to a $4.0 million license fee paid in 2021 to Factor and Novellus, Ltd.

“Licensors”) under the exclusive license agreement with the Licensors, as well as due to a decrease in clinical trial and other miscellaneous expense, offset by increased stock compensation expense due to increased equity awards granted during

2022, as compared to equity awards granted in 2021, and increased payroll expense due to increased headcount, as well as increased severance expense when compared to the same periods in 2021.

In January 2022, we completed a reduction in our workforce involving eight research and development employees.

As a result, we incurred approximately $0.5 million for severance and

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

In June 2022, we made the decision to consolidated our research and development in Cambridge, Massachusetts, and as a result, we accrued approximately $0.1 million for

severance and termination-related costs for certain employees in the San Diego, California location.

General and Administrative Expenses

Three months ended March 31,

Three months ended June 30,

(in thousands)

Payroll-related

Impairment of ROU asset

Professional fees

Stock-based compensation

Occupancy expense

Other expenses, net

Total general and administrative expenses

Six months ended June 30,

(in thousands)

Payroll-related

Impairment of ROU asset

Professional fees

Stock-based compensation

Occupancy expense

Loss on disposal of fixed assets

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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.

The increase in general and administrative expense for the three and six months ended June 30, 2022 was primarily related to increased headcount as well as severance expense for certain employees,

including our former Chief Executive Officer, who resigned effective May 26, 2022.

We also recognized a non-cash impairment charge on our San Diego, California right-of-use (“ROU”) operating lease asset due to our intent to consolidate our

research and development activities in Cambridge, Massachusetts and to sublease the San Diego, California facility.

Other increases include premiums for public company insurance policies, non-cash stock-based compensation expense due to increased

equity awards, increased other expenses, net, primarily due to legal-related matters, and losses on the disposal of fixed assets when compared to the same periods in 2021.

Impairment of In-Process Research and Development

As discussed above, in June 2022, we received the results from the INSPIRE phase 2 trial of IRX-2.

The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair value

assigned to the technologies of IRX that we acquired in 2018.

Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE trial did not meet the primary endpoint of Event-Free Survival (EFS) at two years of follow up.

Significant additional clinical development work will be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor

The INSPIRE trial is the only company sponsored study of IRX-2.

IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, which have either ended or are

not currently active.

Based on the totality of available information, we currently do not have plans to further develop the IRX-2 product candidate.

As such, we determined that the carrying value of the IPR&D asset was impaired and recognized a

non-cash impairment charge of approximately $6.0 million on the condensed consolidated balance sheet as of June 30, 2022, which reduced the value of this asset to zero.

Transaction Costs

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.

The $5.8 million in transaction costs during the six months ended June 30, 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 same periods in 2022.

Loss on Sales of NTN Assets

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.

A $0.1 million and $9.6 million loss on the sale of NTN assets for the three and six months ended June 30, 2021, respectively, were incurred when we completed the Disposition, and there were no

comparable losses on sale for the three and six months ended June 30, 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.

For the three months ended June 30, 2022, we recognized a credit of $10.8 million for the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock

during the quarter.

For the six months ended June 30, 2022, we recognized a credit of $10.1 million for the change in the fair value of warrant liabilities, which was offset by $0.6 million in expense 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.

There were no comparable expenses for the three and six months ended June 30, 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.

During the three and six months ended June 30, 2022, we recognized $0.3 million and $0.9 million of loss on our 25% non-controlling investment in NoveCite, respectively.

Of the $0.9 million loss

for the six months ended June 30, 2022, $0.5 million relates to the prior year.

We account for our investment in NoveCite under the equity method.

There were no comparable expenses for the three and six months ended June 30, 2021.

Other Expense, Net

Three months ended March 31,

Three months ended June 30,

(in thousands)

PIPE transaction fees

Interest expense, net

Other (expense) income , net

Total other expense, net

Six months ended June 30,

(in thousands)

PIPE transaction fees

Liquidated damages

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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.

For the three months ended June 30, 2022, we recognized an immaterial decrease in other expense, net when compared to the same period in 2021.

During the six months ended June 30, 2022, our

increase in other expense, net was primarily due to fees related to the PIPE Transaction, which was allocated to the warrants issued in connection with the transaction.

Additionally, we incurred a loss related to the liquidated damages we incurred

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 and an increase in other income for the six months ended June 30, 2022 when compared to the same period in

Liquidity and Capital Resources

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

At June 30, 2022, we had cash and cash equivalents of approximately $19.4 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.

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 continue in the future as we further develop our product development programs and operate as a publicly traded company.

Developing 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 Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the “Q2 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:

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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

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 business.

Uses of Funds

Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows:

For the six months ended

(in thousands)

Cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net increase in cash and cash equivalents

Net Cash Used in Operating Activities

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 $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.

The decrease in cash used in operating activities was due to a decrease in net loss of $0.6 million, after giving effect to adjustments made for non-cash transactions, offset by an

increase in cash provided by operating assets and liabilities of $1.4 million during the six months ended June 30, 2022 compared to the same period in 2021.

The increase in cash provided by operating assets and liabilities was primarily driven by

increased accrued compensation due to higher headcount and severance as well as accrued costs for litigation matters, offset by a decrease in prepaid expenses and other current assets during the six months ended June 30, 2022 compared to the same

period in 2021.

Net Cash (Used in) Provided by Investing Activities

The increase in net cash used in investing activities was primarily due to purchases of capital equipment of $0.2 million offset by proceeds from the sale of fixed assets of $0.1 million during the

six months ended June 30, 2022 compared to the same period in 2021.

Also, the six months ended June 30, 2021 included proceeds of approximately $0.3 million from the Merger and the Disposition transactions.

There were no similar transactions

during the six months ended June 30, 2022.

Net Cash Provided by Financing Activities

The decrease in net cash provided by financing activities was primarily the result of a decrease in net proceeds from capital raises of approximately $47 million, net, offset by a

decrease in principal payments made for long-term debt arrangements of $0.5 million during the six months ended June 30, 2022 compared to the same period in 2021.

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

There were no significant changes in our critical accounting estimates during the three and six months ended June 30, 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

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

In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).

The FASB issued ASU 2022-03 to (1) clarify the

guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce

new disclosure requirements for equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security

is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal

years with early adoption permitted.

We are evaluating when to adopt the amendments in ASU 2022-02.

We do not expect a material impact as a result of adopting this amendment.

Quantitative and Qualitative Disclosures About Market Risk.

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Item 2. Management’s Discussion and Analysis