What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-20 compared with 2022-04-15 · 245 added, 276 removed, 65 unchanged (89% of the section changed)

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

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of

1933, as amended, (the “Securities Act”), and Section 21E of the Exchange Act, about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the

Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Exchange Act, about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations,

strategies and prospects.

You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters.

Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as

of the date they are made.

Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any

future results expressed or implied by the forward-looking statements.

Rather, forward-looking statements relate to anticipated or expected events, activities,

trends or results as of the date they are made.

Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ

materially from any future results expressed or implied by the forward-looking statements.

Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

These factors include

those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K.

These factors include those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K.

We do not undertake any obligation to update forward-looking statements except as required by applicable law.

We intend that all forward-looking statements be subject

to the safe harbor provisions of PSLRA.

We intend that all forward-looking

statements be subject to the safe harbor provisions of PSLRA.

These forward-looking statements reflect our views only as of the date they are made.

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.

We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using

gene-editing and cell therapy technology through a license with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc.

and Novellus, Ltd.

in July 2021, or the Acquisition.

Recent Developments

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,

Total consideration was $124.0 million, which consisted of (a) $22.8 million in cash and approximately and (b) approximately 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 a price of $14.5253 per share.

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 to effect:

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.

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.

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.

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.

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.

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.

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 trials.

INSPIRE trial in patients with squamous cell carcinoma of the oral cavity is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result of the pandemic.

We are a preclinical-stage biopharmaceutical company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.

in-licensed a portfolio of over 100 patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice TM and UltraSlice TM gene-editing proteins, and the ToRNAdo TM mRNA

delivery system, which we collectively refer to as our “mRNA technology platform.” We plan to develop and advance a pipeline of therapeutic products, both internally and through strategic partnerships, with the near-term focus on deploying our mRNA

technology platform through strategic partnerships.

We license our mRNA technology platform from Factor Limited under an exclusive license agreement.

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 are a pre-clinical 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 with respect to our intellectual property, 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 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.

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 we acquire and which 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 have included 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.

We have contracted with third parties to perform various clinical study and trial activities in the development and testing of potential

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

We accrue for third party expenses based on estimates of the services received and efforts expended during the reporting

If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly.

The expenses for some third-party services may be recognized on a straight-line basis if the

expected costs are expected to be incurred ratably during the period.

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.

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.

Comparison of the Years Ended December 31, 2022 and 2021

Years ended December 31,

(in thousands)

Operating expenses:

Research and development

Acquired in-process research and development

Impairment of in-process research and development

In-process research and development

General and administrative

Transaction costs

Change in fair value of contingent consideration

Total operating expenses

Loss from operations

Other expenses:

Loss on sale of NTN assets

Other income (expense), net:

Total other expense

Loss on sale of NTN assets

Change in fair value of warrant liabilities

Loss on non-controlling investment

Other (expense) income, net

Total other income (expense), net

Loss before income taxes

Provision for income taxes

Series A preferred stock dividend

Net loss attributable to common stockholders

Research and Development Expenses

Years ended December 31,

Stock-based compensation

Clinical trials

(in thousands)

License and MSA expense

Payroll-related

Stock-based compensation

Other expenses, net

Total research and development expenses

For the year ended December 31, 2021, our research and development expenses increased by approximately $8.75 million from the year ended December 31, 2020

due to upfront payments associated with licensed technology, which were expensed because there is no future alternative use for the licensed technology other than for the intended purpose, increased clinical trial expenses, increased headcount

and increased stock-based compensation when compared to 2020.

Acquired IPR&D

During the year ended December 31, 2021, we expensed the approximately $80.5 million 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.

For the year ended December 31, 2022, our research and development expenses decreased primarily due to a reduction in license expenses under the Original Factor License Agreement,

less stock-based compensation expense due to forfeitures of stock options and restricted stock units, and lower clinical trial expense.

These reductions were offset by expenses incurred related to the MSA, which was not in place in the prior year,

and other miscellaneous expense during 2022 when compared to the year ended December 31, 2021.

Impairment of In-Process Research and Development

As discussed in Part I, Item 1 of this Annual Report on Form 10-K, 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 would 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 therapies.

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 for the year ended December 31, 2022.

There was no similar impairment charge for the year ended December 31, 2021.

In-Process Research and Development

During the year ended December 31, 2021, we expensed the $80.5 million fair value of IPR&D acquired in the Novellus Acquisition because there was no future alternative use for

the IPR&D other than for its intended purpose.

There was no similar transaction for the year ended December 31, 2022.

General and Administrative Expenses

Years ended December 31,

(in thousands)

Professional fees

Stock-based compensation

Payroll-related

Stock-based compensation

Loss on disposal or sale of fixed assets

Other expenses, net

Total general and administrative expenses

The $11.42 million increase in general and administrative expense for the year ended December 31, 2021 from the year ended December 31, 2020 was primarily related to increased professional fees

such as legal, accounting and consulting fees associated with merger and acquisition activity, including the Merger and the Acquisition, as well as costs associated with becoming 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 2020.

The increase in general and administrative expense for the year ended December 31, 2022 primarily related to increased legal fees, settlements related to certain legal matters and

increased headcount, as well as severance expense for certain employees, including our former Chief Executive Officer, who resigned effective May 26, 2022.

Other increases included premiums for public company insurance policies and losses on the

disposal or sale of fixed assets, as compared to the same period in 2021.

These increases were offset by decreased stock-based compensation expense due primarily to forfeitures of stock options and restricted stock units as compared to the year

ended December 31, 2021.

Transaction Costs

For the year ended December 31, 2021, we incurred approximately $5.8 million in transaction costs 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 year ended December 31, 2020.

Change in Fair Value of Contingent Consideration

As of December 31, 2020, our contingent consideration liability was approximately $20.1 million and related to royalties we would be obligated to pay under certain IRX-2 license agreements

based on future revenues from any future IRX-2 product sales.

During the year ended December 31, 2021, the change in fair value of the contingent consideration was a decrease to the liability of $180,000, based on our third-party valuation

For the year ended December 31, 2021, we incurred approximately $5.8 million in transaction costs related to the issuance of common stock to Eterna LLC’s financial advisor upon

consummation of the Merger, and there were no comparable transaction costs for the year ended December 31, 2022.

Loss on Sales of NTN Assets

The approximately $9.6 million loss on the sale of NTN assets during the year ended December 31, 2021 was incurred upon completion of the Disposition, and there was no comparable loss on sale

for the year ended December 31, 2020.

Other Income (Expense), Net

We incurred a $9.6 million loss on the sale of NTN assets for year ended December 31, 2021 in connection with the Disposition, and there were no comparable transaction costs for the

year ended December 31, 2022.

Change in Fair Value of Warrant Liabilities

For the year ended December 31, 2022, we recognized a credit of $11.4 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 Q1-22 Common Warrants and Q1-22 Pre-Funded Warrant (as defined below) issued in connection with the Q1-22 PIPE Transaction (as defined below) over the $12.0 million gross proceeds received.

There were no

comparable credits or expenses for the year ended December 31, 2021.

Loss on Non-Controlling Investment

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

During the year ended December 31, 2022, we recognized approximately $0.9 million of loss on our 25%

non-controlling investment in NoveCite.

Of the $0.9 million loss for the year ended December 31, 2022, $0.5 million related to NoveCite’s results of operations for the year ended December 31, 2021.

We have not guaranteed obligation of NoveCite

nor are we otherwise committed to provide any financial support for NoveCite.

Therefore, we will record losses only up to our investment carrying amount.

There was no comparable loss for the year ended December 31, 2021.

Other (Expense) Income, Net

Years ended December 31,

Employer retention tax credit

Income from Brooklyn PPP loan forgiveness

Other expenses, net

(in thousands)

Q1-22 PIPE transaction fees

Liquidated damages

Interest expense, net

Total other income (expense), net

During the year ended December 31, 2021, we recognized an increase in other income, net of expense of $899,000, as compared to other expense of $43,000 for the year ended December 31, 2020,

primarily as a result of a withholding tax refund related to the employer retention tax credit under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S.

Small Business Administration, or the CARES Act, and the

forgiveness of Brooklyn LLC’s Paycheck Protection Program loan, or the PPP Loan, which was primarily offset by interest accrued on notes payable that we assumed as part of the acquisition of the assets of IRX Therapeutics, LLC in 2018.

bore interest at the rate of 14% and matured on December 31, 2021, on which date the Company repaid such notes in full, including all accrued and unpaid interest thereon.

PPP Loan forgiveness and ERC refunds

Other income, net

Total other (expense), income net

For the year ended December 31, 2022, the increase in other expense, net was primarily due to fees related to the Q1-22 PIPE Transaction (as defined below), which were allocated to

the warrants issued in connection with the transaction.

Additionally, we recorded a loss related to the liquidated damages we incurred under our registration rights agreement with the Q1-22 PIPE Investor (as defined below) as a result of not timely

filing with the SEC our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

These increases in expense to the year ended December 31, 2022 were offset by income from the sale of certain fixed assets and a decrease in interest

expense when compared to the year ended December 31, 2021.

During the year ended December 31, 2021, we recognized income from the forgiveness of our Paycheck Protection Program loan and for payroll tax refunds under the Employee Retention Credit

program, both of which were under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S.

Small Business Administration (the “CARES Act”).

We did not receive any such income for the year ended December 31, 2022.

Provision for Income Taxes

Our income tax provision is for state income tax related to our U.S.

At December 31, 2021 and 2020 we had available net

operating loss (“NOL”) carryforwards of approximately $20,679,000 and $0 for federal income tax purposes, respectively, of which $20,679,000 can be carried forward indefinitely.

We have available $1,397,000 and $747,000 state NOLs for the years

ended December 31, 2021 and 2020, respectively.

We also have foreign NOL carryforwards of $4,759,000 and $0 for the years ended December 31, 2021 and 2020, respectively, which carry forward indefinitely.

Section 382 of the Internal Revenue

Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income.

Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in

the table above related to the NOL carryforwards.

We continue to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified.

We have also established a full valuation allowance for

all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.

We recognized a provision for income taxes of approximately $45,000 and $64,000 for the years ended December 31, 2022 and 2021, respectively.

Our income tax provision is primarily

state income tax.

At December 31, 2022 and 2021, we had available net operating loss (“NOL”) carryforwards of approximately $35.6 million and $20.7 million for federal income tax purposes, respectively, of which $35.6 million can be

carried forward indefinitely.

We have available $28.8 million and $20.7 million of state NOLs for the years ended December 31, 2022 and 2021, respectively, which begin to expire in 2041.

We also have foreign NOL carryforwards of $6.3 million and

$4.8 million for the years ended December 31, 2022 and 2021, respectively, which carry forward indefinitely.

Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in

control to offset future taxable income.

Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards.

We continue to disclose the NOL carryforwards at their

original amount in the table above as no potential limitation has been quantified.

We have also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more

likely than not able to generate future taxable income to realize these assets.

Liquidity and Capital Resources

At December 31, 2021, we had cash and cash equivalents of approximately $17.0 million.

During the second quarter of 2021, we entered into

Purchase Agreements 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 $60.0 million in shares of our common stock.

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 April 12 , 2022, we had issued

and sold approximately 3,552,000 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.” On March 9, 2022, we consummated the

PIPE Transaction, resulting in net proceeds of approximately $11 million.

see “—Recent Developments—PIPE Transaction.” Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity

under the Purchase Agreements for a period of one-year following consummation of the PIPE Transaction.

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.

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 Annual Report on Form 10-K.

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.

At December 31, 2022, we had cash and cash equivalents of approximately $15.5 million, of which approximately $4.1 million was restricted cash, as discussed below.

On March 6, 2022, we entered into a securities purchase agreement (the “Q1-2022 Purchase Agreement”) with an investor (the “Q1-22 PIPE Investor”), providing for the private

placement (the “Q1-22 PIPE Transaction”) to the Q1-22 PIPE Investor of approximately 343,000 units, each unit consisting of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (each, a “Q1-22 Pre-Funded Warrant”) to

purchase one share of common stock) and (ii) one warrant (each, a “Q1-22 Common Warrant”) to purchase one share of common stock, for an aggregate gross purchase price of approximately $12.0 million.

The Q1-22 PIPE Transaction closed on March 9,

2022 for net proceeds of approximately $11.0 million.

The Q1-22 PIPE Investor exercised all of the Q1-22 Pre-Funded Warrants on July 12, 2022 at an exercise price of $0.10 per share for total proceeds of approximately $7,000.

Pursuant to Q1-22

Purchase Agreement, we are prohibited from issuing equity in variable rate transactions for a period of one-year following consummation of the Q1-22 PIPE Transaction, including issuing equity under the Second Purchase Agreement (as defined below).

On October 18, 2022, we entered into a facility sublease agreement (the “Sublease”) for approximately 45,500 square feet of office and laboratory space in Somerville,

Massachusetts.

The term of the Sublease is approximately 10 years, and we will pay approximately $63.0 million in base rental payments over the 10-year term, plus our share of the Sublessor’s parking spaces and operating expenses.

As part of the

Sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the lease.

The letter of credit was issued by our commercial bank,

which required that we cash collateralize the letter of credit with $4.1 million of cash deposited in a restricted account maintained by such bank.

The amount of required restricted cash collateral will decline in parallel with the reduction in

the amount of the letter of credit over the term of the sublease.

The amount of restricted cash reduces by an equal amount our available working capital.

On November 23, 2022, we entered into a securities purchase agreement (the “Q4-22 Purchase Agreement”) with certain investors (the “Q4-22 PIPE Investors”), providing for the private

placement (the “Q4-22 PIPE Transaction”) to the Q4-22 Investors of approximately 2,185,000 units, each unit consisting of (i) one share of common stock and (ii) two warrants, each exercisable to purchase one share of common stock at an exercise

price of $3.28 per share (the “Q4-22 Warrants”), at a purchase price of $3.53 per unit (inclusive of $0.125 per Q4-22 Warrant), for net proceeds of approximately $7.4 million.

In April 2021, we and an investment group (the “Investment Group”) executed a purchase agreement (the “First Purchase Agreement”), pursuant to which we had the

right, but not the obligation, to sell to the Investment Group, and the Investment Group was obligated to purchase, up to $20.0 million of shares of our common stock.

Sales of common stock by us were subject to certain limitations, and could occur

from time to time, at our sole discretion.

In consideration for the Investment Group’s entry into the First Purchase Agreement, we issued the Investment Group approximately 3,000 shares of common stock.

As of December 31, 2022, we had issued and

sold to the Investment Group approximately 56,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares may be sold to the Investment Group under the First Purchase Agreement.

In May 2021, we and the Investment Group executed a second purchase agreement (the “Second Purchase Agreement”), pursuant to which we have the right, but not

the obligation, to sell to the Investment Group, and the Investment Group would be obligated to purchase, up to $40.0 million of shares of our common stock.

Sales of common stock by us are subject to certain limitations, and may occur from time to

time, at our sole discretion.

In consideration of the Investment Group’s entry into the Second Purchase Agreement, we issued to the Investment Group 50,000 shares of common stock.

Actual sales of shares of common stock to the Investment Group under the Second Purchase Agreement depend on a variety of factors to be determined by us from

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

As of December 31, 2022, we had issued and sold approximately 121,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of

$34.1 million.

Pursuant to the securities purchase agreement in respect of the Q1-22 PIPE Transaction, we were prohibited from issuing additional shares under the Second Purchase Agreement for a period of one-year immediately following the closing

of the Q1-22 PIPE Transaction.

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.

In the near-term, we intend to focus on licensing opportunities for our in-licensed technology, but there can be no assurance that we will enter into agreements with respect to such opportunities on such terms and within a

timeframe necessary to satisfy our need for working capital.

While we are not presently pursuing product development, we may do so in the future, and current and potential licensing partners may seek to do so.

Developing product candidates,

conducting clinical trials and commercializing products are expensive, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates Based on our current financial condition and

forecasts of available cash, 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 Annual Report on Form 10-K for the year ended December 31, 2022.

We can provide no assurance that we will be able to satisfy our near- or long-term cash needs through licensing transactions, 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 of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the cost and timing of regulatory approvals;

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the effect of competition and market developments;

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 (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.

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

the scope, rate of progress and cost of 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 public or private equity offerings, debt financings,

strategic partnerships, out-license collaborations or other means.

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 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

Equity Securities

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

6,857,000 Units, each of which consisted of (i) one share of our common stock (or, in lieu thereof, one Pre-Funded Warrant) and (ii) one Common Warrant, resulting in net proceeds of approximately $11 million.

The PIPE Transaction closed on March

see “—Recent Developments—PIPE Transaction.”

On April 26, 2021, we and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed the First Purchase Agreement, pursuant to which we 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, subject to certain limitations.

In consideration for Lincoln Park’s entry into the First Purchase Agreement, we issued Lincoln Park

approximately 56,000 shares of common stock.

As of December 31, 2021, we issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares

may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, we and Lincoln Park executed the Second Purchase Agreement, pursuant to which we have the right from time to time, but not the obligation,

to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40.0 million of shares of Brooklyn’s common stock, subject to certain limitations.

In consideration of Lincoln Park’s entry into the Second Purchase Agreement, we

issued to Lincoln Park 50,000 shares of common stock.

As of December 31, 2021, Brooklyn had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of $34.1 million.

to the Securities Purchase Agreement in respect of the PIPE Transaction, we may not effect transactions under the Second Purchase Agreement for a period of one year immediately following closing of the PIPE Transaction.

For further information on the Purchase Agreements, 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.

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.

Brooklyn LLC PPP Loan .

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $310,000 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 CARES Act administered by the U.S.

Small Business Administration.

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 202 1 , Brooklyn LLC submitted its loan forgiveness application for the Brooklyn LLC PPP Loan, and in September 202 1 , the lender informed Brooklyn LLC that the U.S Small Business Administration had approved the forgiveness of 100% of the outstanding principal and interest of the

Brooklyn LLC PPP Loan.

As of December 31, 2021, there was no outstanding principal balance under the Brooklyn LLC PPP Loan.

Uses of Funds

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.

have an adverse effect on our business.

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

For the years ended

(in thousands)

Cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net (decrease) increase in cash and cash equivalents

Net Cash Used in Operating Activities

Our operations used $23.5 million during the year ended December 31, 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.

License Obligations .

We are obligated to pay certain amounts to Factor pursuant to the license agreement we entered into in April 2021, including $2.5 million in October 2021, which was paid, and $3.5 million in October 2022.

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 $750,000 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 202 6 and June 2028.

Acquisition .

On July 16, 2021, we used approximately $22,882,000 of cash as partial consideration for the Acquisition, and we issued common stock valued at a total of $102.0 million, based on a price of

$14.5253 per share, for the remaining portion of the Acquisition’s purchase price.

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.

The decrease in cash used in operating activities was due to a decrease in net loss of $3.5 million, after giving effect to adjustments made for non-cash transactions, offset by an

increase in cash provided by operating assets and liabilities of $6.0 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The decrease in cash used in operations was primarily driven by increased accrued

compensation due to severance accruals, accrued costs for litigation matters, amounts due to related party for the License Fee Obligation and increased insurance liabilities.

Net Cash Used in Investing Activities

The decrease in net cash used in investing activities was primarily due to $22.9 million of cash used to purchase Novellus during the year ended December 31, 2021, which was offset

by proceeds of approximately $0.3 million from the Merger and the Disposition.

There were no similar transactions during the year ended December 31, 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 raising transactions of approximately $42.9 million,

net, offset by a decrease in principal payments made for long-term debt arrangements of $0.9 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S.

preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the

consolidated financial statements, as well as the reported revenue and expenses during the reporting periods.

The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the

date of the consolidated financial statements, as well as the reported expenses during the reporting periods.

We continually evaluate our judgments, estimates and assumptions.

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Actual results may differ from these estimates.

We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our

consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and

(b) disclosure of contingent assets and liabilities at the date of the consolidated financial statements;

(c) the reported amounts of revenues and expenses during the reporting period and (d) the reported amount of the fair value of

assets acquired in connection with business combinations.

Actual results could differ from those estimates.

Our significant estimates and assumptions include the recoverability and useful lives of long-lived assets and the contingent

consideration liability.

We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated

financial statements.

Goodwill Impairment

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc.

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Goodwill is not amortized but is tested for impairment annually, or if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying

Since management evaluates Brooklyn as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the

Since management evaluates Eterna as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the

entity is less than its carrying value.

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Goodwill is considered impaired if the carrying value of the entity exceeds its fair value.

Impairment of Long-Lived Assets

We review long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be

An impairment exists when the carrying value of the long-lived asset is not recoverable and exceeds its fair value.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants.

hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

These might include quoted prices for

similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest

rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.

The carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivable, prepaid assets and other current assets, accounts payable and accrued expenses, other

current liabilities and other liabilities approximate fair value based due to their short maturities.

The carrying value of loans payable approximates its fair market value because the effective yield on this debt, which includes contractual

interest rates as well as other finance charges, is comparable to rates of returns for instruments of similar credit risk.

Commitment and Contingencies

We follow ASC No.450-20, Loss Contingencies , to report accounting for contingencies.

Liabilities for loss contingencies arising from claims,

assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for equity awards granted to employees, directors and certain consultants.

The Company estimates the fair value of stock options using

the Black-Scholes option pricing model.

The fair value of stock options granted is recognized as expense over the requisite service period.

Stock-based compensation expense for share-based payment awards is recognized using the straight-line

single-option method.

Recent Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260),

Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of

Freestanding Equity-Classified Written Call Options .

Newly Adopted Accounting Standards

In July 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-05, Leases (Topic 842) – Lessors - Certain Leases with Variable Lease

Payments, which amends the lessor classification guidance to introduce additional criteria when classifying leases with variable lease payments that do not depend on a reference index or a rate.

We adopted this ASU effective January 1,

2022, which did not have a material impact on our financial statements.

In May 2021, the FASB issued ASU 2021-04 , Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options .

ASU 2021-04 addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options.

ASU 2021-04 is effective for fiscal years beginning

after December 15, 2021 (January 1, 2022 for us) and interim periods within those fiscal years, with early adoption permitted.

We do not expect the adoption of this update to have a significant impact on our financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842) – Lessors - Certain Leases with Variable Lease Payments, which amends the lessor

classification guidance to introduce additional criteria when classifying leases with variable lease payments that do not depend on a reference index or a rate.

This guidance is effective for annual periods beginning after December 15, 2021

(January 1, 2022 for us), with early adoption permitted.

We do not expect the adoption of this update to have a significant impact on its financial statements.

We adopted this ASU effective January 1, 2022, which did not have a material impact on our financial statements.

In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance, which requires a business

entity to disclose information about certain government assistance that it has received, including (i) the type of assistance, (ii) an entity’s accounting for the assistance and (iii) the effect of the assistance on the entities accounting

We adopted this standard effective January 1, 2022, which did not have a material impact on the Company’s financial statements.

We have approximately $0.6 million in payroll tax refunds recorded in other receivable on the accompanying

consolidated balance sheets as of December 31, 2022 and 2021 pursuant to the Employee Retention Credit program under the CARES Act.

Accounting Standard to be Adopted

In June 2022, the FASB issued 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.

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

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

Financial Statements and Supplementary Data

See “Index to Consolidated Financial Statements” on page F-1 for a listing of the Consolidated Financial Statements filed with this Annual Report on Form 10-K.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 7. Management’s Discussion and Analysis