Ernexa Therapeutics Inc. 10-K

ITEM 9A. Controls and Procedures Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this report under the supervision and with the participation of our management, including our Chief Executive Officer and Senior Vice President of Finance, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Senior Vice President of Finance concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report in providing reasonable assurance of achieving the desired control objectives due primarily to a material weakness discussed below. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Senior Vice President of Finance, we conduct an annual evaluation of the effectiveness of our internal control over financial reporting based on the guidelines established by the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. If management identifies any material weakness in the course of that evaluation, management cannot conclude that our internal controls over financial reporting are effective. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Based on the evaluation of the effectiveness of our internal over financial reporting as of December 31, 2020, we concluded that, due to the material weakness described below, our internal control over financial reporting was not effective as of December 31, 2020. In response to the impact of the pandemic on our business, we implemented measures to reduce our operating expenses and preserve capital, including by reducing our headcount. We reduced our headcount from 74 as of December 31, 2019 to 22 as of March 9, 2021. Due to a limited number of personnel, particularly in our accounting department, we do not have an internal audit department and we did not have the resources necessary to adequately perform an internal assessment or engage a third party to perform the assessment of our internal controls over financial reporting, which our management identified as a material weakness. Management’s Plan for Material Weakness in Internal Control over Financial Reporting Our management and board of directors are committed to improving our overall system of internal controls over financial reporting. To address the material weakness identified in our control environment, we plan to engage external resources with specialized knowledge and expertise, where appropriate, to assist management in performing the internal assessment of our internal controls over financial reporting. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. Other Information Not Applicable. 34 PART III ITEM 10. Directors, Executive Officers and Corporate Governance Board of Directors Set forth below are the names, ages, board committee assignments, tenure and certain biographical information of each of the members of our Board of Directors as of March 9, 2021. Name Age Director Since Committee Assignments Allen Wolff 49 2020 None Richard Simtob 51 2017 Audit, N&CG/C * Susan Miller 41 2019 Audit, N&CG/C Michael Gottlieb 51 2019 None * Committee chairperson **Nominating and Corporate Governance/Compensation Committee Allen Wolff was appointed as our chief executive officer and as a member of our board in January 2020. He was appointed as chairman of our board in April 2020. Mr. Wolff served as our interim chief executive officer from September 2019 until he was appointed as our chief executive officer. From January 2016 through September 2019, Mr. Wolff served as our chief financial officer and executive vice president and served as chief financial officer from December 2014 through January 2016. From July 2013 until December 2014, Mr. Wolff served as the chief financial strategist of PlumDiggity, a privately-held financial and marketing strategy firm that he co-founded. From October 2012 to July 2013, Mr. Wolff served as the chief financial officer of 365 Retail Markets, a privately-held company in the self-checkout point of sale technology industry, where he also served on its board of directors during such period. From July 2011 to April 2013, simultaneous with his role at 365 Retail Markets, Mr. Wolff held the leadership role of “Game Changer” at Crowdrise, an online fundraising platform company. Mr. Wolff joined Crowdrise after serving as the chief operating officer and chief financial officer from January 2011 to July 2011 of RetailCapital, LLC, a small business specialty finance company. Mr. Wolff co-founded PaySimple in January 2006 and held various roles including president, chief financial officer, executive vice president and director, from 2006 until he left the company in January 2011. From September 1998 until August 2012, Mr. Wolff was a principal for a casual dining restaurant. Mr. Wolff holds a B.A. from the University of Michigan and an MBA, from the University of Maryland, R.H. Smith School of Business. Mr. Wolff was chosen to serve on our board of directors because of our boards’ belief that our chief executive officer should serve on our board of directors, as well as his leadership of early stage, technology companies and ability to raise capital. Richard Simtob has served on our board of directors since July 2017. Since January 2001, Mr. Simtob has been serving as president of Simtob Consulting Group Corporation. Mr. Simtob is a minority-owner of Zoup! Holding, LLC, a company that operates and franchises fast-casual soup restaurants and has been serving as vice president since January 2018. Since April 2010, he has served as one of its directors, and served as its president from April 2010 to December 2017. From January 2004 through July 2009, Mr. Simtob was also a partner at Wireless Toyz Franchise, LLC, a cellular service provider, where he also served in various roles such as vice president of development, chief financial officer and chief operating officer. Mr. Simtob owns a Michigan-based driving school and eight swim school locations. Mr. Simtob studied at the University of Western Ontario. Mr. Simtob was chosen to serve on our board of directors because of his extensive experience in the restaurant industry. Susan Miller was appointed to our board of directors in August 2019. Ms. Miller is a partner with Morgan Kingston Advisors, LLC a boutique investment bank she co-founded in September 2018 focused on supporting middle market companies and their stakeholders across the restaurant and restaurant technology sectors, among others. From March 2007 until September 2018, Ms. Miller served as a managing director at Mastodon Ventures, Inc., a strategic advisory firm focused on the restaurant industry, and from June 2002 until March 2007 she held various positions with J.P. Morgan Securities Inc. Ms. Miller was a Cornell Tradition Fellow and graduated cum laude with a B.S. degree in applied economics and management from Cornell University and holds FINRA Series 63 and 79 securities licenses. Ms. Miller was chosen to serve on our board of directors because of her advisory, investment banking and capital markets experience in the restaurant and technology markets. Michael Gottlieb was appointed to our board of directors in November 2019. Since May 2020, Mr. Gottlieb has been serving as vice president of operations for Robot Cache USA, Inc., a company that offers a blockchain-based digital marketplace for videogames. From December 2019 until April 2020, Mr. Gottlieb provided consulting services to Digital Gaming Corporation, a computer software company, and from October 2019 until December 2019, he was in charge of its US business development. From April 2017 until October 2019, Mr. Gottlieb served as the studio head for MahiGaming San Diego, a developer of online and mobile gaming software, and from November 2014 until March 2017, Mr. Gottlieb served as senior director of game development for Bally Technologies and Scientific Games, gaming manufacturers. Mr. Gottlieb has a business degree from Northern Illinois University. He was chosen to serve on our board of directors because of his expertise in developing interactive gaming experiences and turning them into successful businesses. 35 Executive Officers The following table sets forth certain information regarding our executive officers as of March 9, 2021: Name Age Position Held Allen Wolff 49 Chief Executive Officer Sandra Gurrola 54 Senior Vice President of Finance Information regarding Mr. Wolff can be found under “Board of Directors” above. Sandra Gurrola was appointed as our senior vice president of finance in September 2019 and served as vice president of finance from September 2014 until September 2019. From November 2009 through September 2014, Ms. Gurrola served in various leadership accounting roles including director of accounting, director of financial reporting and compliance, and controller. From July 2007 until April 2009, Ms. Gurrola served as senior manager of financial reporting for Metabasis Therapeutics, Inc., a biotechnology company, and served as a consultant to Metabasis from September 2009 to November 2009. Ms. Gurrola holds a B.A. in English from San Diego State University. Family Relationships; Arrangements; Legal Proceedings There are no family relationships among any of our directors and executive officers. There are no arrangements or understandings with another person under which our directors and officers was or is to be selected as a director or executive officer. Additionally, none of our directors or executive officers is involved in any legal proceeding that requires disclosure under Item 401(f) of Regulation S-K. Committee Charters and Code of Ethics Our board of directors has adopted charters for its audit and nominating & corporate governance/compensation (N&CG/C) committees, which, among other things, outline the respective duties of the committees. Our board of directors has also adopted a code of conduct and ethics that applies to all our employees, officers and directors. Our code of conduct and ethics, our corporate governance guidelines and the charter of our audit and N&CG/C committee is available at www.buzztime.com/investors/ under the “Corporate Governance” heading. We intend to disclose any amendment to, or a waiver from, a provision of our code of conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in paragraph (b) of Item 406 of Regulation S-K by posting such information on that website. The information on our website is not incorporated by reference in this report. Audit Committee and Audit Committee Financial Expert The audit committee is currently comprised of two non-employee directors: Mr. Simtob and Ms. Miller, each of whom our board of directors has determined is an independent director under the rules of the NYSE American and of the Securities Exchange Act of 1934. Our Board of Directors has determined that each member of the audit committee is able to read and understand fundamental financial statements including our balance sheet, income statement and statement of cash flows. Our former director, Gregory Thomas, served on our audit committee and was determined by our board of directors to qualify as an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K. Mr. Thomas resigned from our board of directors and from the committees on which he served on April 30, 2020. Our board of directors has determined that none of the current members of the audit committee qualifies as an “audit committee financial expert.” Due in part to the fact that we were in the middle of a strategic process when Mr. Thomas resigned, the outcome of which could have led to a reverse merger, a reorganization, an assignment for the benefit of creditors, a bankruptcy, a liquidation, or similar transaction, and in part to our financial condition and the risks to which we have been subject since March 2020 arising from the effects of the COVID-19 pandemic on our business and financial condition, we have not appointed been successful in finding an individual to join our board of directors to replace Mr. Thomas as an audit committee financial expert. Changes in Stockholder Nomination Procedures There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last described in our definitive proxy statement filed with the SEC on April 26, 2019. 36 ITEM 11. Executive Compensation Executive Compensation Compensation Processes and Procedures The nominating and corporate governance committee (the “N&CG/C Committee”) of the NTN board of directors is responsible for determining the amount and form of compensation paid to our executive officers, including our chief executive officer. Our chief executive officer presents compensation recommendations to the N&CG/C Committee with respect to the executive officers who report to him. The N&CG/C Committee may accept or adjust such recommendations. The N&CG/C Committee is solely responsible for determining the compensation of our executive officers. Our full board of directors participates in evaluating the performance of our executive officers, except that Mr. Wolff, our chief executive officer and a member of our board of directors, does not participate when our board of directors evaluates his performance and he is not present during voting or deliberations regarding his performance or compensation matters. When determining executive officer compensation, and the various components that comprise it, the N&CG/C Committee evaluates and considers publicly available executive officer compensation survey data, to present a competitive compensation package to attract and retain top talent, including an appropriate level of salary, performance-based bonus, and/or equity incentives. Typically, the N&CG/C Committee evaluates between three and five different sources of compensation data to provide relevant market benchmark data for a given executive role. Additionally, the N&CG/C Committee is authorized to engage outside advisors and experts to assist and advise the N&CG/C Committee on matters relating to executive compensation. The N&CG/C Committee did not engage any outside advisors or experts to assist or advise the N&CG/C Committee on any matters relating to executive compensation during 2020 or the hiring of any executive officers. Our Named Executive Officers Under applicable SEC rules and regulations, all individuals who served as our principal executive officer during 2020, our two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers at the end of 2020, and up to two additional individuals who would have been one of our top two most highly compensated executive officer had they been serving as an executive officer at the end of 2020 are referred to as our “named executive officers.” Our named executive officers for 2020 were: Name Title Allen Wolff Chief Executive Officer Sandra Gurrola Senior Vice President of Finance 2020 Named Executive Officers Compensation Overview During 2020, our named executive officers received an annual base salary. As explained in more detail below under the caption entitled “2020 Incentive Plan,” the total amount of the performance bonuses earned by our named executive officers for 2020 has not yet been determined. None of our named executive officers receive or are eligible for any perquisites or benefits, other than benefits that are available to our other full-time employees. The employment of each of our named executive officers is at-will. During 2020, we had written employment agreements with Mr. Wolff and Ms. Gurrola. Each of the components of our 2020 executive compensation program is discussed below under the Summary Compensation Table. Summary Compensation Table The following table sets forth information concerning compensation during the years ended December 31, 2020 and 2019 awarded to, earned by or paid to our named executive officers. 2020 Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) (1) Option Awards ($) Non-Equity Incentive Plan Compensation ($) (2) All Other Compensation ($) Total ($) Allen Wolff 2020 322,213 19,591 (3) 202,250 — 49,985 — 594,040 Chief Executive Officer 2019 265,000 — 37,200 — — — 302,200 Sandra Gurrola 2020 190,000 110,833 (4) 60,750 — 12,663 — 374,246 Senior Vice President of Finance 2019 179,356 — 26,040 — — — 205,396 (1) The amounts reported in this column represents the aggregate grant date fair value of stock awards granted during the applicable year. These amounts were calculated in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, except that any estimate of forfeitures was disregarded. For a description of the assumptions used in computing the dollar amount recognized for financial statement reporting purposes with respect to the stock awards granted during 2019, see Note 13, Shareholders’ Equity, in the Notes to the accompanying Consolidated Financial Statements below. The dollar amount recognized for financial statement reporting purposes with respect to the stock awards granted during 2020 is based on the quoted market price of the stock at the measurement date, which is the grant date, and consist of, with respect to Mr. Wolff, the 75,000 stock unit award granted to him in January 2020 and the $20,000 he earned under the 2019 Interim CEO Performance Incentive Plan that was paid to him in March 2020 in 9,506 shares of our common stock, and with respect to Ms. Gurrola, the 25,000 stock unit award granted to her in January 2020. For additional information regarding such compensation, see the discussion under the caption entitled “2019 Interim CEO Performance Incentive Plan” and “Employment Agreements—Equity Grants.” 37 (2) Represents performance bonuses earned by the applicable named executive officer for 2020 based on our company’s achievement of performance objectives, as determined by the N&CG/C Committee. For additional information regarding 2020 performance bonuses, see the discussion under the caption entitled “2020 Incentive Plan.” (3) Represents a cash retention bonus that was paid in shares of our common stock to help us conserve cash. For additional information, see the discussion under the caption entitled “Employment Agreements—Stay Bonus.” (4) Represents a cash retention bonus. For additional information, see the discussion under the caption entitled “Retention Agreement.” Salaries . Each of our named executive officers receives a base salary. The base salary is the fixed cash compensation component of our executive compensation program and it recognizes individual performance, time in role, scope of responsibility, leadership skills and experience. The base salary compensates an executive for performing his or her job responsibilities on a day-to-day basis. Generally, base salaries are reviewed annually company-wide and adjusted (upward or downward) when appropriate based upon individual performance, expanded duties, changes in the competitive marketplace and, with respect to upward adjustments, if we are, financially and otherwise, able to pay it. We try to offer competitive base salaries to help attract and retain executive talent. 2019 Interim CEO Performance Incentive Plan In connection with Mr. Wolff’s appointment as interim chief executive officer in September 2019, Mr. Wolff was eligible to participate in the 2019 Interim CEO Performance Incentive Plan (the “2019 Interim CEO PIP”). The 2019 Interim CEO PIP is a performance incentive plan under which, for the achievement of each of the performance goals thereunder, we agreed to grant to Mr. Wolff such number of shares of our common stock equal to $20,000 divided by the closing price per share of our common stock on the date of grant. Upon grant, such shares would be fully vested. The performance goals were related to: (1) the retainment of certain key employees determined by the N&CG/C Committee through at least March 17, 2020; (2) having a target amount of unrestricted cash, as determined and approved by the N&CG/C Committee, as of March 17, 2020; and (3) meeting target sales for our Buzztime Basic product offering, as determined and approved by the N&CG/C Committee, by March 31, 2020. In March 2020, the N&CG/C Committee determined that the performance goal related to the retainment of key employees was achieved, and we issued 9,506 shares to Mr. Wolff, representing $20,000 worth of shares of our common stock, net of withholding taxes. The value of these shares is reflected in Mr. Wolff’s 2020 compensation in the “Stock Awards” column in the 2020 Summary Compensation Table. 2020 Incentive Plan On June 1, 2020, the N&CG/C Committee approved the NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. Fiscal Year 2020 (the “2020 Incentive Plan”). The 2020 Incentive Plan permits the payout of any incentive compensation earned under the plan to be paid, at the discretion and in the sole determination of the N&CG/C Committee, either in (i) cash, (ii) shares of our common stock issued under the NTN Buzztime, Inc. 2019 Performance Incentive Plan or any successor long-term incentive plan, or (iii) any combination of (i) and (ii). If incentive compensation is paid in shares, the number of shares issued is determined by dividing the amount earned by the closing price of our common stock on the date on which the N&CG/C Committee approves the amount of incentive compensation earned. Payments under the 2020 Incentive Plan, if any, are contingent on the applicable participant’s continued employment with us on the payout date. Each 2020 Incentive Plan participant has a target payout amount assigned according to such participant’s position and job level. The table below sets forth the target payout amounts for our named executive officers under the 2020 Incentive Plan, assuming all performance measures are achieved at a rate of 100%: Name Target Payment Amount Allen Wolff $ 150,000 Sandra Gurrola $ 38,000 38 The performance targets were established by the N&CG/C Committee in June 2020 and fall into three categories, the achievement of which will be determined following each quarter or year, as applicable: strategic, financial and operational. All incentive-based compensation payable to Mr. Wolff and Ms. Gurrola is subject to any clawback policy that we may establish. Under the terms of the 2020 Incentive Plan, the performance-based bonuses, if earned, were to be paid as follows: 16.66% if the applicable performance targets for each of our 1st, 2nd and 3rd fiscal quarters were or are achieved, and 50% if the applicable performance targets for the applicable fiscal year are achieved. To preserve cash, we did not pay any amounts in respect of the performance targets for either of the 1 st , 2 nd or 3 rd fiscal quarters despite the applicable performance targets being achieved at certain levels. As of December 31, 2020, approximately $63,000 has been accrued for bonuses earned under the 2020 Incentive Plan. Employment Agreements We entered into an employment agreement with Mr. Wolff dated March 19, 2018, which was amended in each of September 2019, January 2020, March 2020 and September 2020. We entered into an employment agreement with Ms. Gurrola dated September 17, 2010, which was amended in each of January 2020 and May 2020. The following is a summary of the material terms of those employment agreements, as amended. Base Salary . Mr. Wolff’s base salary is $325,000 and will increase to $350,000 effective July 1, 2021. However, in an effort to help preserve cash, up to 20% of Mr. Wolff’s base salary may be paid in shares of our common stock at Mr. Wolff’s discretion. Mr. Wolff elected to receive 20% of his base salary in shares of our common stock from January 2020 through March 2020. Ms. Gurrola’s base salary is $190,000. Incentive Bonus . The target payout amount of Mr. Wolff’s and Ms. Gurrola’s incentive performance-based bonus for 2020 is $150,000 and $38,000, respectively. See “2020 Incentive Plan,” above for additional information. Stay Bonus . Mr. Wolff was also entitled to receive a $30,000 cash bonus if he were to remain employed with us for at least 180 days from September 17, 2019, the date on which he was appointed as interim chief executive officer. To preserve cash, we agreed to issue to him such number of shares of our common stock equal to a pro rata amount of the $30,000 bonus (determined by multiplying $30,000 by a fraction, the numerator of which is the number of days lapsed between September 17, 2019 and January 14, 2020, the effective date of the amendment to his employment agreement appointing him as chief executive officer, and the denominator of which is 180) divided by the closing price of our common stock on January 14, 2020. As a result, we issued 5,102 shares of our common stock to Mr. Wolff in respect of this bonus, the value of which was net of withholding taxes on the amount of bonus earned. The value of these shares issued is reflected in Mr. Wolff’s 2020 compensation in the “Bonus” column in the 2020 Summary Compensation Table. CiC Bonus . Under the terms of the amendment we entered into with Mr. Wolff in September 2020 to his employment agreement, if Mr. Wolff is continuously employed by us through the consummation of a change in control (as defined in his employment agreement) and such transaction is consummated before March 31, 2021 (a “Qualifying CiC”), then he is eligible to receive a cash bonus of $162,500, subject to tax withholding and other authorized deductions and subject to Mr. Wolff delivering a general release of claims in our favor, and we will pay his COBRA premiums for up to six months following the termination of his employment with us or, if earlier, until he becomes eligible for medical insurance coverage in connection with new employment. Mr. Wolff agreed that he will not be eligible for his severance payments or benefits under the terms of his employment agreement upon the consummation of a Qualifying CiC because his employment with us will automatically terminate upon the consummation of such Qualifying CiC due to his resignation without good reason. Equity Grants . Under the terms of their employment agreements, in January 2020, Mr. Wolff and Ms. Gurrola were each granted a stock unit award of 75,000 and 25,000 shares of our common stock, respectively. The awards were made under, and are subject to, our 2019 Performance Incentive Plan, and vest quarterly beginning on the 3-month anniversary of the grant date, in each case, subject to the executive’s continued service to us as of the applicable vesting date. Retention Agreement In connection with entering into the amendment to Ms. Gurrola’s employment agreement in May 2020, we entered into a retention bonus and general release of all claims agreement with Ms. Gurrola, pursuant to which, in exchange for the reduction in her severance compensation from nine months of her base salary to two months of her base salary, and subject to Ms. Gurrola signing and not revoking a general release of claims in our favor, we agreed to pay her a retention bonus of $110,833, which is equivalent to seven months of her monthly salary, and which was payable in three installments, the last of which was made on June 19, 2020. If, prior to August 31, 2020, Ms. Gurrola’s employment was terminated by us for cause or by her without good reason, she agreed to return to us 50% of the amount of the retention bonus paid to her on or before such termination of employment and we would have had no obligation to pay any unpaid retention bonus. 39 Termination of Employment and Change-in-Control Arrangements Each of the employment agreements of Mr. Wolff and Ms. Gurrola provides for certain benefits upon termination of employment under specified circumstances. If the executive’s employment is terminated by us or by the executive, we will pay him or her any accrued and unpaid base salary and reimburse him or her for expenses incurred through the date of termination of employment. We refer to the foregoing as the “accrued obligations.” In addition to the accrued obligations, if Mr. Wolff’s employment with us is terminated by us without cause or by him for good reason, subject to him delivering to us a general release of claims in our favor, we will pay him as severance an amount equal to one month of his base salary for every full year of full-time employment, subject to a minimum of six months and a maximum of nine months, payable in substantially equal installments on a bi-weekly basis over the applicable severance period, and we will reimburse him for COBRA insurance premiums for a period of months equal to the number of months paid in severance. Mr. Wolff has been employed with us for six years. Mr. Wolff will not receive any such severance payment or benefits upon the consummation of a Qualifying CiC because his employment with us will automatically terminate upon the consummation of such Qualifying CiC due to his resignation without good reason. In addition to the accrued obligations, if Ms. Gurrola’s employment with us is terminated by us without cause or by her for good reason, subject to her delivering to us a general release of claims in our favor, we will pay her as severance an amount equal to two months of her base salary, payable in one lump sum, plus the incentive compensation she is eligible to receive under the 2020 Incentive Plan, and if so paid, she will waive payment to her of such incentive compensation under the 2020 Incentive Plan. We will also reimburse her for COBRA insurance premiums for a period of nine months. Ms. Gurrola has been employed with us for over 11 years. In the event of a change in control and if the executive is employed by us through the effective date of the change in control, then 100% of the then unvested portion of the stock units and stock options we granted to each of Mr. Wolff and Ms. Gurrola then outstanding will vest and, as applicable, become exercisable as of immediately before such effective date. Other than as described above and the agreements that govern their equity awards, we do not have any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payment to a named executive officer at, following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control or a change in the named executive officer’s responsibilities following a change in control. Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning equity awards held by the named executive officers that were outstanding as of December 31, 2020: 2020 Outstanding Equity Awards at Fiscal Year-End Option Awards Stock Awards Name Date of Grant Number of Securities Underlying Unexercised Options Exercisable (#) Number of Securities Underlying Unexercised Options Unexercisable (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock that have not Vested (#) Market Value of Shares or Units of Stock that have not Vested ($) Allen Wolff 01/19/20 (1) – – $ – – 46,875 $ 105,000 03/19/19 (2) – – $ – – 4,167 $ 9,334 03/19/18 (2) – – $ – – 1,250 $ 2,800 03/23/15 (3) 10,000 – $ 27.50 03/22/25 – – 12/29/14 (3) 5,000 – $ 22.50 12/28/24 – – Sandra Gurrola 01/19/20 (1) – – $ – – 15,625 $ 35,000 03/19/19 (2) – – $ – – 2,917 $ 6,534 03/19/18 (2) – – $ – – 250 $ 560 05/25/16 (3) 500 – $ 8.50 05/24/26 – – 03/23/15 (3) 4,000 – $ 27.50 03/22/25 – – 09/08/14 (3) 1,000 – $ 22.50 09/07/24 – – 04/08/13 (3) 200 – $ 12.00 04/07/23 – – (1) The restricted stock units vest at a rate of 12.50% of the shares subject to the award in eight substantially equal quarterly installments beginning on the three-month anniversary of the grant date. (2) The restricted stock units vest at a rate of 16.67% of the shares subject to the award on the six-month anniversary of the grant date and the remaining units vest in 30 substantially equal monthly installments thereafter. (3) The option vests and becomes exercisable at the rate of 25% of the shares underlying the option on the first anniversary of the option grant date, and the remaining shares underlying the option vest in 36 substantially equal monthly installments thereafter. 40 We account for stock-based payments including equity awards under our equity incentive plans in accordance with the requirements of FASB ASC No. 718, Compensation – Stock Compensation. For a discussion regarding the effect of a change in control on certain equity awards held by Mr. Wolff and Ms. Gurrola, see “Termination of Employment and Change-in-Control Arrangements,” above. Director Compensation We compensate our non-employee directors for their service in such capacity with annual retainers and equity compensation as described below. Directors who are also our employees do not receive any additional compensation for their services as directors. We do not pay fees to any of our directors for meeting attendance. The N&CG/C Committee reviews our non-employee director compensation practices and policies at least annually and makes a recommendation to our board of directors as to the amount, form and terms of non-employee director compensation. Our board of directors, taking the N&CG/C Committee’s recommendation into consideration, sets the amount, form and terms of non-employee director compensation. Annual Retainers We pay our non-employee directors a $25,000 annual retainer for their services as directors. We pay the chairman of our board of directors, assuming she or he is a non-employee director, an additional $20,000 annual retainer for services in such capacity. We pay our non-employee directors an additional annual retainer for their service on board committees as set forth in the table below. Chairperson Member Audit Committee $ 10,000 $ 5,000 N&CG/C Committee $ 10,000 $ 5,000 The annual retainers are paid quarterly in arrears and are paid no later than 30 days following the end of the applicable quarter. Each non-employee director may elect that the retainer payment he or she is eligible to receive, or a portion of such retainer, be paid in the form of a restricted stock award under our equity incentive plan rather than cash. Such an election must be made during an open trading window under our insider trading policy and no later than the 15th day of the last month of the quarter for which the retainer is to be paid. An election applies only to the quarter for which it is made. Once an election is made with respect to a quarter, it may not be withdrawn or substituted unless our board of directors determines, in its sole discretion, that the withdrawal or substitution is occasioned by an extraordinary or unanticipated event. Restricted stock awards will be made on the same date as a cash retainer payment would otherwise be paid, will vest in full on the date of grant, and the amount of shares subject to such award will equal the amount of the applicable cash retainer payment divided by the closing price of our common stock on the last day of the applicable quarter. Equity Compensation We grant stock options to our non-employee directors upon the commencement of their service as a director and upon their re-election to our board of directors. The stock options are granted under our stockholder-approved equity incentive plan. In connection with the commencement of a new non-employee director’s term of service, we grant to such new director a stock option to purchase 600 shares of our common stock. These stock options have an exercise price equal to the closing price of our common stock on the date of grant, and are fully vested and exercisable on the date of grant as to 50% of the shares and the remaining 50% of the shares vest and become exercisable, subject to the director’s continued service on our board of directors, in 12 equal monthly installments beginning in the month immediately following the date of grant. Each non-employee director who is re-elected for an additional term of service on our board of directors is automatically granted a stock option to purchase 400 shares of our common stock on the date of our annual stockholder meeting. These stock options have an exercise price equal to the closing price of our common stock on the date of grant and vest and become exercisable, subject to the director’s continued service on our board of directors, in 12 equal monthly installments thereafter. The stock options described above expire on the earlier of 10 years from the date of grant or 90 days from the date the director ceases to serve on our board of directors. In the event of a change in control the N&CG/C Committee may in its discretion determine that these stock options vest and become fully exercisable as of immediately before such change in control. 2020 Director Compensation The following table sets forth the compensation of each director, who is not a named executive officer, for service during 2020. This table excludes Mr. Wolff, who is a named executive officer and does not receive any compensation from us for his service as a director. See the section above entitled “Executive Compensation” for information about Mr. Wolff’s compensation. 41 2020 Director Compensation Name Fees Earned or Paid in Cash Option Awards (2) All Other Compensation Total Richard Simtob $ 40,000 $ – $ – $ 40,000 Susan Miller $ 35,000 $ – $ – $ 35,000 Michael Gottlieb $ 25,000 $ – $ – $ 25,000 Gregory Thomas (1) $ 20,000 $ – $ – $ 20,000 (1) Mr. Thomas resigned from our board of directors effective April 30, 2020. (2) No stock option awards were granted during 2020. As of December 31, 2020, our non-employee directors had options outstanding to purchase the following number of shares of our common stock: Name # of Shares Subject to Outstanding Options Richard Simtob 1,400 Susan Miller 600 Michael Gottlieb 600 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth the number and percentage ownership of NTN common stock as of March 9, 2021 by: ● all persons known to NTN to be the beneficial owner of more than 5% of NTN common stock; ● each of NTN’s directors; ● each of NTN’s named executive officers; and ● all of NTN’s current executive officers and directors as a group. Except as otherwise indicated in the footnotes to the table below: (i) each of the persons named has sole voting and investment power with respect to the shares of common stock shown, subject to applicable community property and similar laws; and (ii) the address for each director and named executive officer is c/o NTN Buzztime, Inc., 6965 El Camino Real, Suite 105-Box 517, Carlsbad, California 92009. The information in the table is based solely on statements in filings with the SEC or other reliable information. Name Number of Shares Beneficially Owned Percent of Common Stock (1) Directors and Named Executive Officers: Allen Wolff (2) 126,690 4.2 Richard Simtob (3) 57,494 1.9 Michael Gottlieb (4) 19,586 * Sandra Gurrola (5) 22,013 * Susan Miller (6) 600 * All executive officers and directors as a group (5 persons) (7) 226,383 7.5 5 % Stockholders: Ault Global Holdings, Inc. (8) 295,000 9.9 Gentile Guy (9) 175,000 5.9 * Less than 1% (1) Included as outstanding for purposes of this calculation are 2,976,774 shares of common stock outstanding as of March 9, 2021 plus, in the case of each particular person, the shares of common stock subject to options exercisable for, or restricted stock units that may be settled in, shares of common stock within 60 days after March 9, 2021 held by that person, which instruments are specified by footnote. Shares subject to outstanding options and restricted stock units other than as described in the preceding sentence are not deemed to be outstanding for purposes of this calculation. (2) Includes 15,000 shares subject to options and 10,347 shares subject to restricted stock units held by Mr. Wolff. (3) Includes 1,400 shares subject to options held by Mr. Simtob. (4) Includes 600 shares subject to options held by Mr. Gottlieb. (5) Includes 5,700 shares subject to options and 3,597 shares subject to restricted stock units held by Ms. Gurrola. (6) Consists of 600 shares subject to options held by Ms. Miller. (7) Includes 23,300 shares subject to options and 13,944 shares subject to restricted stock units held by our directors and executive officers. (8) The number of shares is the number stated as beneficially owned as of January 28, 2021 in a Schedule 13D filed with the SEC on January 29, 2021. In that filing, Ault Global Holdings, Inc. states that it has sole power to vote and dispose of 295,000 shares of our common stock, and lists its address as 11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141. (9) The number of shares is the number stated as beneficially owned as of February 10, 2021 in a Schedule 13G filed with the SEC on February 16, 2021. In that filing, Gentile Guy states that he has sole power to vote and dispose of 175,000 shares of our common stock, and lists his address as 103 Ave De Deigo , San Juan, Puerto Rico 00911. 42 Equity Compensation Plan Information The following table sets forth information as of December 31, 2020 regarding our compensation plans authorizing us to issue equity securities and the number of securities. Plan Category (a)Number of securities to be issued upon exercise of outstanding options, warrants and rights (b)Weighted-average exercise price of outstanding options, warrants and rights (c)Number of securities remaining available for future issuance under equity compensation plans, excluding securities reflected in column (a) Equity compensation plans approved by security holders 117,000 (1) $ 21.76 100,000 Equity compensation plans not approved by security holders — $ — 85,000 (2) 117,000 185,000 (1) Includes (a) 33,000 shares issuable upon exercise of options and vesting of RSUs granted pursuant to the NTN Buzztime, Inc. 2010 Performance Incentive Plan, as amended, and (b) 84,000 shares issuable upon exercise of options and vesting of RSUs granted pursuant to the NTN Buzztime, Inc. 2019 Performance Incentive Plan. Both of those plans are broad-based incentive plans, which allows for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, and cash awards to employees, consultants and non-employee directors. (2) This plan allows for the issuance of non-qualified stock options to any prospective employee who has not previously been an employee or director of the company or who has not been employed by the company for a bonafide period of time. ITEM 13. Certain Relationships and Related Transactions , and Director Independence Related Party Transactions Since January 1, 2019, there has not been nor are there currently proposed any transactions or series of similar transactions to which we were or are to be a party in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years (which was $89,000) and in which any director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. Company Policy Regarding Related Party Transactions Pursuant to its charter, our audit committee has the responsibility to review, approve and oversee any transaction between the Company and a related person (as defined in Item 404 of Regulation S-K) and to develop policies and procedures for the committee’s approval of such transactions. Indemnity Agreements We have entered into indemnity agreements with each of our directors and executive officers. The indemnity agreements provide that we will indemnify these individuals under certain circumstances against certain liabilities and expenses they may incur in their capacities as our directors or officers. We believe that the use of such indemnity agreements is customary and that the terms of the indemnity agreements are reasonable and fair to us, and are in our best interests to attract and retain experienced directors and officers. 43 Director Independence Our board of directors has determined that each of our current directors other than Mr. Wolff is independent as defined under NYSE American listing standards. Our board of directors has also determined that each current member of each of our Audit Committee and Nominating and Corporate Governance/Compensation Committee is independent as defined under the NYSE American listing standards and applicable SEC rules. In making this determination, our board of directors found that none of these directors had a material or other disqualifying relationship with us. ITEM 14. Principal Accountant Fees and Services The following table presents the aggregate fees billed for each of the last two fiscal years for professional services rendered by Squar Milner LLP (which effective as of November 1, 2020, merged with Baker Tilly US, LLP) for the audit of our annual financial statements, review of our quarterly financial statements and for other services: 2020 2019 Audit Fees $ 230,000 $ 176,000 Audit-Related Fees – – Tax Fees – – All Other Fees – – $ 230,000 $ 176,000 Audit Committee Pre-Approval Policies and Procedures The audit committee has adopted a policy whereby all engagements of our independent auditor must be pre-approved by the audit committee. The audit committee has delegated to its chairman the authority to evaluate and approve engagements on behalf of the committee in the event that a need arises for pre-approval between committee meetings. If the chairman approves any such engagements, the chairman reports that approval to the full committee at the next committee meeting. All audit and permitted non-audit and tax services must be pre-approved by the audit committee except for certain services other than audit, review or attest services that meet the “de minimis exception” under 17 CFR Section 210.2-01, namely: ● the aggregate amount of fees paid for all such services is not more than 5% of the total fees paid by the Company to its auditor during the fiscal year in which the services are provided; ● such services were not recognized by the Company at the time of the engagement to be non-audit services; and ● such services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit. During fiscal years 2020 and 2019, there were no such services that were performed pursuant to the “de minimis exception.” 44 PART IV ITEM 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as a part of this report: (1) Consolidated Financial Statements. The consolidated financial statements of the Company and its consolidated subsidiaries are set forth in the “Index to Consolidated Financial Statements” on page F-1. (2) Financial Statement Schedules. None (3) Exhibits. Exhibit Description Filed or Furnished Herewith Incorporated By Reference From the Document Indicated Previously Filed by the Registrant 2.1 Agreement and Plan of Merger and Reorganization, dated August 12, 2020, among NTN Buzztime, Inc., BIT Merger Sub, Inc. and Brooklyn Immunotherapeutics LLC ** Annex A to the proxy statement/prospectus/consent solicitation statement forming a part of the S-4 Registration Statement filed on January 20, 2021 2.2 Form of Support Agreement among NTN Buzztime, Inc., Brooklyn Immunotherapeutics LLC and the officers and directors of NTN Buzztime, Inc. Exhibit to Form 8-K filed on August 14, 2020 2.3 Form of Support Agreement among NTN Buzztime, Inc., Brooklyn Immunotherapeutics LLC and certain beneficial holders of Class A membership interests of Brooklyn Immunotherapeutics LLC Exhibit to Form 8-K filed on August 14, 2020 2.4(a) Asset Purchase Agreement dated September 18, 2020 by and between NTN Buzztime, Inc. and eGames.com Holdings LLC ** Annex D-1 to the proxy statement/prospectus/consent solicitation statement forming a part of the S-4 Registration Statement filed on January 20, 2021 2.4(b) Omnibus Amendment and Agreement entered into as of November 19, 2020 by and among eGames.com Holdings LLC, NTN Buzztime, Inc., and Fertilemind Management, LLC Annex D-2 to the proxy statement/prospectus/consent solicitation statement forming a part of the S-4 Registration Statement filed on January 20, 2021 2.4(c) Second Omnibus Amendment and Agreement entered into as of January 12, 2021 by and among eGames.com Holdings LLC, NTN Buzztime, Inc., and Fertilemind Management, LLC Annex D-3 to the proxy statement/prospectus/consent solicitation statement forming a part of the S-4 Registration Statement filed on January 20, 2021 3.1(a) Restated Certificate of Incorporation. Exhibit to Form 10-Q filed on August 14, 2013 3.1(b) Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split). Exhibit to Form 8-K filed on June 17, 2016 3.1(c) Certificate of Decrease of the Series A Convertible Preferred Stock. Exhibit to Form 8-K filed on April 12, 2017 3.1(d) Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock). Exhibit to Form 8-K filed on June 9, 2017 3.2 Bylaws (as amended and restated and further amended through December 6, 2018). Exhibit to Form 8-K filed on December 7, 2018 4.1 Form of Certificate of Common Stock of NTN Buzztime, Inc. Exhibit to Form 8-K filed on June 17, 2016 4.2 Description of registrant’s securities Exhibit to Form 10-K filed on March 19, 2020 10.1(a) 8% Promissory Note issued by NTN Buzztime, Inc. on September 18, 2020. Exhibit to Form 8-K filed on September 18, 2020 10.1(b) Guaranty by Aram Fuchs in favor of NTN Buzztime, Inc. Exhibit to Form 8-K filed on September 18, 2020 10.1(c) 10% Promissory Note issued by NTN Buzztime, Inc. on December 1, 2020 Exhibit to Form 8-K filed on November 23, 2020 10.1(d) 10% Promissory Note issued by NTN Buzztime, Inc. on January 12, 2021 Exhibit to Form 8-K filed on January 15, 2021 10.2 Asset Purchase Agreement between NTN Buzztime, Inc. and Sporcle, Inc. dated January 13, 2020 Exhibit to Form 8-K filed on January 15, 2020 10.3* Amended 2010 Performance Incentive Plan. Exhibit to Definitive Proxy Statement on Schedule 14A filed on April 24, 2015 10.4* NTN Buzztime, Inc. 2014 Inducement Plan. Exhibit to Form 10-Q filed on November 7, 2014 45 10.5* Limited Term Employment and Separation Agreement and General Release of All Claims dated September 17, 2019 by and between NTN Buzztime, Inc. and Ram Krishnan. Exhibit to Form 8-K filed on September 17, 2019 10.6(a)* Employment Agreement by and between the registrant and Allen Wolff dated March 19, 2018. Exhibit to Form 10-Q filed on May 11, 2018 10.6(b)* Stock Unit Agreement under the Amended 2010 Performance Incentive Plan between the registrant and Allen Wolff dated March 19, 2018. Exhibit to Form 10-Q filed on May 11, 2018 10.6(c)* First Amendment to Employment Agreement by and between NTN Buzztime, Inc. and Allen Wolff dated September 17, 2019. Exhibit to Form 8-K filed on September 17, 2019 10.6(d)* 2019 Interim CEO Performance Incentive Plan. Exhibit to Form 8-K filed on September 17, 2019 10.6(e)* Second Amendment to Employment Agreement by and between NTN Buzztime, Inc. and Allen Wolff dated January 14, 2020. Exhibit to Form 8-K filed on January 15, 2020 10.6(f)* Third Amendment to Employment Agreement by and between NTN Buzztime, Inc. and Allen Wolff dated March 27, 2020. Exhibit to Form 8-K filed on March 30, 2020 10.6(g)* Amendment #4 to Employment Agreement made and entered into as of September 18, 2020 between NTN Buzztime, Inc. and Allen Wolff. Exhibit to Form 8-K filed on September 18, 2020 10.7(a)* Employment Agreement dated September 17, 2019 by and between NTN Buzztime, Inc. and Sandra Gurrola. Exhibit to Form 8-K filed on September 17, 2019 10.7(b)* First Amendment to Employment Agreement by and between NTN Buzztime, Inc. and Sandra Gurrola dated January 14, 2020. Exhibit to Form 8-K filed on January 15, 2020 10.7(c)* Second Amendment to Employment Agreement by and between NTN Buzztime, Inc. and Sandra Gurrola dated May 27, 2020. Exhibit to Form 8-K filed on June 2, 2020 10.7(d)* Retention Bonus and General Release of Claims Agreement by and between NTN Buzztime, Inc. and Sandra Gurrola dated May 27, 2020. Exhibit to Form 8-K filed on June 2, 2020 10.8* NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. fiscal Year 2020. Exhibit to Form 8-K filed on June 2, 2020 10.9(a)* 2019 Performance Incentive Plan. Exhibit to Definitive Proxy Statement on Schedule 14A filed on April 26, 2019 10.9(b)* Form of Incentive Stock Option Agreement under the 2019 Performance Incentive Plan. Exhibit to Form S-8 filed on June 14, 2019 10.9(c)* Form of Nonstatutory Stock Option Agreement under the 2019 Performance Incentive Plan. Exhibit to Form S-8 filed on June 14, 2019 10.9(d)* Form of Nonstatutory Stock Option Agreement for Directors under the 2019 Performance Incentive Plan. Exhibit to Form S-8 filed on June 14, 2019 10.9(e)* Form of Stock Unit Agreement under the 2019 Performance Incentive Plan. Exhibit to Form S-8 filed on June 14, 2019 10.9(f)* Form of Restricted Stock Grant Agreement under the 2019 Performance Incentive Plan. Exhibit to Form S-8 filed on June 14, 2019 10.10* NTN Buzztime, Inc. Non-Employee Director Compensation Policy. Exhibit to Form 10-Q filed on August 6, 2018 10.11(a) Paycheck Protection Program Note issued by NTN Buzztime, Inc. in favor of Level One Bank dated April 18, 2020. Exhibit to Form 8-K filed on April 21, 2020 10.11(b) Acknowledgment and Agreement Regarding Loan Forgiveness dated April 18, 2020. Exhibit to Form 8-K filed on April 21, 2020 10.12(a) Office lease, dated for reference purposes only July 26, 2018, by and between Burke Aston Partners, LLC and the registrant Exhibit to Form 10-Q filed on November 9, 2018 10.12(b) Lease Termination, Surrender and Buy-Out Agreement by and between NTN Buzztime, Inc. and Burke Aston Partners, LLC dated June 25, 2020. Exhibit to Form 8-K filed on July 1, 2020 10.13* Form of Director and Officer Indemnification Agreement Exhibit to Form 10-K filed on March 22, 2019. 46 21.1 Subsidiaries of NTN Buzztime, Inc. X 23.1 Consent of Baker Tilly US, LLP X 24.1 Power of attorney (included on the signatures page of this report) X 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1# Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2# Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X * Management Contract or Compensatory Plan ** Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC or its staff upon request. # Furnished herewith. This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing. ITEM 16. Form 10-K Summary None. 47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 11, 2021 NTN BUZZTIME, INC. By: /s/ Sandra Gurrola Sandra Gurrola Senior Vice President of Finance (As Principal Financial Officer and Principal Accounting Officer) KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allen Wolff and Sandra Gurrola, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Allen Wolff Chief Executive Officer and Director March 11, 2021 Allen Wolff (Principal Executive Officer) /s/ Sandra Gurrola Vice President of Finance (Principal Financial March 11, 2021 Sandra Gurrola Officer and Principal Accounting Officer) /s/ Richard Simtob Director March 11, 2021 Richard Simtob /s/ Susan Miller Director March 11, 2021 Susan Miller /s/ Michael Gottlieb Director March 11, 2021 Michael Gottlieb 48 NTN BUZZTIME, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2020 and 2019 F-5 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2020 and 2019 F-6 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2020 and 2019 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 F-8 Notes to the Consolidated Financial Statements F-9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of NTN Buzztime, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NTN Buzztime, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5 to the financial statements, the Company incurred a significant net loss for the year ended December 31, 2020 and as of December 31, 2020 had a negative working capital balance, and does not expect to have sufficient cash or working capital resources to fund operations for the twelve-month period subsequent to the issuance date of these financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 5. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. F- 2 Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Company’s audit committee and that: (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition Critical Audit Matter Description As discussed in Note 6 to the consolidated financial statements, the Company generates revenue by charging subscription fees to partners for access to its 24/7 trivia network, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling digital-out-of-home advertising direct to advertisers and on national ad exchanges, by licensing its entertainment and trivia content to other entities, and by providing professional services such as custom game design or development of new platforms on its existing tablet form factor. In general, when multiple performance obligations are present in a customer contract, the transaction price is allocated to the individual performance obligation based on the relative stand-alone selling prices, and the revenue is recognized when or as each performance obligation has been satisfied. Discounts are treated as a reduction to the overall transaction price and allocated to the performance obligations based on the relative stand-alone selling prices. All revenues are recognized net of sales tax collected from the customer. The related audit effort in evaluating management’s judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: ● We evaluated management’s significant accounting policies related to these customer agreements for reasonableness. ● We selected a sample of customer agreements and performed the following procedures: ○ Obtained and read contract source documents for each selection, including master agreements, and other documents that were part of the agreement. ○ Tested management’s identification of significant terms for completeness, including the identification of distinct performance obligations and variable consideration. ○ Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. ● We evaluated the reasonableness of management’s estimate of stand-alone selling prices for products and services that are not sold separately. ● We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. Capitalized software development costs Critical Audit Matter Description As discussed in Note 6 to the consolidated financial statements, the Company capitalizes costs related to developing certain internal-use software in accordance with ASC No. 350-40. The Company recognizes the capitalized costs on a straight-line basis over the estimated useful lives, which are generally two to three years. The Company capitalized $244,000 and impaired $248,000 of software costs in the year ended December 31, 2020 and had total capitalized software development costs, net of accumulated amortization, of $1.36 million as of December 31, 2020. F- 3 Auditing the Company’s capitalization of software development costs is complex. Management applies significant judgment in determining which software projects, and activities within those projects, qualify for capitalization, as only those costs incurred in certain stages of software development or implementation can be capitalized in accordance with the applicable accounting standards. In addition, measuring the appropriate amounts to capitalize requires the Company to maintain detailed records of time spent by personnel on implementation and development activities across all projects in development. Finally, management applies judgment in determining when to cease the capitalization of costs that will be placed in service. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included, among others: ● We inspected underlying documentation to evaluate whether the costs were appropriately capitalizable under the applicable accounting standards. ● We inquired of project managers for significant projects to assess the nature of the costs, including the internal time devoted to capitalizable activities and the externally contracted costs. ● We evaluated the software implementation timeline and the related underlying documentation obtained to support the capitalization period for implementation and development amounts as well as the date the costs were placed in service. /s/ BAKER TILLY US, LLP We have served as the Company’s auditor since 2013. San Diego, California March 11, 2021 F- 4 NTN BUZZTIME, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value amount) December 31, 2020 December 31, 2019 ASSETS Current Assets: Cash and cash equivalents $ 777 $ 3,209 Restricted cash - 50 Accounts receivable, net of allowances of $748 and $354, respectively 116 1,195 Site equipment to be installed 655 1,090 Prepaid expenses and other current assets 176 526 Total current assets 1,724 6,070 Restricted cash, long-term - 150 Operating lease right-of-use assets 36 2,101 Fixed assets, net 502 2,822 Software development costs, net of accumulated amortization of $3,081 and $3,341, respectively 1,361 1,915 Deferred costs 72 274 Goodwill - 696 Other assets 50 97 Total assets $ 3,745 $ 14,125 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 270 $ 835 Accrued compensation 64 588 Accrued expenses 238 490 Sales taxes payable 6 131 Income taxes payable 9 3 Current portion of long-term debt 1,500 2,739 Current portion of obligations under operating leases 36 409 Current portion of obligations under finance leases 22 21 Current portion of deferred revenue 76 460 Other current liabilities 139 419 Total current liabilities 2,360 6,095 Long-term debt 532 - Long-term obligations under operating leases - 2,891 Long-term obligations under finance leases - 20 Long-term deferred revenue 2 2 Other liabilities - 26 Total liabilities 2,894 9,034 Shareholders’ Equity Series A 10% cumulative convertible preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at December 31, 2020 and 2019 1 1 Common stock, $0.005 par value, 15,000 shares authorized at December 31, 2020 and 2019; 2,966 and 2,901 shares issued at December 31, 2020 and 2019, respectively 15 14 Treasury stock, at cost, 10 shares at December 31, 2020 and 2019 (456 ) (456 ) Additional paid-in capital 136,934 136,721 Accumulated deficit (135,888 ) (131,457 ) Accumulated other comprehensive income 245 268 Total shareholders’ equity 851 5,091 Total liabilities and shareholders’ equity $ 3,745 $ 14,125 See accompanying notes to consolidated financial statements F- 5 NTN BUZZTIME, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share amounts) Years Ended December 31, 2020 2019 Revenue from contracts with customers Subscription revenue $ 4,882 $ 14,278 Hardware revenue 426 2,350 Other revenue 492 3,178 Total revenue from contracts with customers 5,800 19,806 Operating expenses: Direct operating costs (includes depreciation and amortization of $1,538 and $2,517, respectively) 2,907 7,483 Selling, general and administrative 8,091 13,175 Impairment of capitalized software 248 550 Impairment of goodwill 662 - Depreciation and amortization (excluding depreciation and amortization included in direct operating costs) 201 360 Total operating expenses 12,109 21,568 Operating loss (6,309 ) (1,762 ) Other expense, net: Interest expense, net (138 ) (249 ) Other income (expense), net 2,026 (9 ) Total other income (expense), net 1,888 (258 ) Loss before income taxes (4,421 ) (2,020 ) Benefit (provision) for income taxes 6 (27 ) Net loss (4,415 ) (2,047 ) Series A preferred stock dividend (16 ) (16 ) Net loss attributable to common shareholders $ (4,431 ) $ (2,063 ) Net loss per common share - basic and diluted $ (1.51 ) $ (0.72 ) Weighted average shares outstanding - basic and diluted 2,928 2,875 Comprehensive loss Net loss $ (4,415 ) $ (2,047 ) Foreign currency translation adjustment (23 ) 68 Total comprehensive loss $ (4,438 ) $ (1,979 ) See accompanying notes to consolidated financial statements F- 6 NTN BUZZTIME, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the years ended December 31, 2020 and 2019 (in thousands) Series A Cumulative Convertible Preferred Stock Common Stock Treasury Additional Paid-in Accumulated Accumulated Other Comprehensive Shares Amount Shares Amount Stock Capital Deficit Income Total Balances at January 1, 2019 156 $ 1 2,875 $ 14 $ (456 ) $ 136,552 $ (129,394 ) $ 200 $ 6,917 Foreign currency translation adjustment - - - - - - - 68 68 Net loss - - - - - - (2,047 ) - (2,047 ) Issuance of common stock upon vesting of restricted stock units - - 26 - - (37 ) - - (37 ) Dividend paid to Series A preferred stockholders - - - - - - (16 ) - (16 ) Non-cash stock based compensation - - - - - 206 - - 206 Balances at December 31, 2019 156 $ 1 2,901 $ 14 $ (456 ) $ 136,721 $ (131,457 ) $ 268 $ 5,091 Foreign currency translation adjustment - - - - - - - (23 ) (23 ) Net loss - - - - - - (4,415 ) - (4,415 ) Issuance of common stock in lieu of cash compensation - - 23 - - 43 - - 43 Issuance of common stock upon vesting of restricted stock units - - 42 1 - (29 ) - - (28 ) Dividend paid to Series A preferred stockholders - - - - - - (16 ) - (16 ) Non-cash stock based compensation - - - - - 199 - - 199 Balances at December 31, 2020 156 $ 1 2,966 $ 15 $ (456 ) $ 136,934 $ (135,888 ) $ 245 $ 851 See accompanying notes to consolidated financial statements F- 7 NTN BUZZTIME, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the years ended December 31, 2020 2019 Cash flows provided by operating activities: Net loss $ (4,415 ) $ (2,047 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 1,739 2,877 Provision for doubtful accounts 121 196 Transfer of fixed assets to sales-type lease - 10 Amortization of operating lease right-of-use-assets 173 291 Stock-based compensation 199 206 Amortization of debt issuance costs 14 9 Common stock issued for compensation in lieu of cash payment 61 - Gain from the asset sale of Stump! Trivia and OpinioNation (1,225 ) - Loss from the termination of operating lease 9 - Loss from the disposition of assets 645 689 Gain from PPP loan forgiveness (1,093 ) - Impairment of capitalized software 248 550 Impairment of goodwill 662 - Changes in assets and liabilities: Accounts receivable 958 (248 ) Site equipment to be installed 52 337 Operating lease liabilities (165 ) (215 ) Prepaid expenses and other assets 335 (5 ) Accounts payable and accrued liabilities (1,730 ) 669 Income taxes payable 5 1 Deferred costs 202 151 Deferred revenue (384 ) (835 ) Other liabilities (305 ) 108 Net cash (used in) provided by operating activities (3,894 ) 2,744 Cash flows provided by (used in) investing activities: Capital expenditures (22 ) (128 ) Capitalized software development expenditures (244 ) (966 ) Net proceeds from the sale of Stump! Trivia 1,226 - Proceeds from sale of other assets - 29 Net cash provided by (used in) investing activities 960 (1,065 ) Cash flows provided by (used in) financing activities: Proceeds from long-term debt 3,125 - Payments on long-term debt (2,750 ) (1,000 ) Debt issuance costs on long-term debt (3 ) - Principal payments on finance leases (19 ) (45 ) Payroll tax remitted on net share settlement of equity awards (46 ) (37 ) Dividends paid to Series A preferred shareholders (16 ) (16 ) Net cash provided by (used in) financing activities 291 (1,098 ) Effect of exchange rate on cash and cash equivalents 11 42 Net (decrease) increase in cash, cash equivalents and restricted cash (2,632 ) 623 Cash, cash equivalents and restricted cash at beginning of year 3,409 2,786 Cash, cash equivalents and restricted cash at end of year $ 777 $ 3,409 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 96 $ 246 Income taxes $ 26 $ 26 Supplemental disclosure of non-cash investing and financing activities: Site equipment transferred to fixed assets $ 76 $ 521 Initial measurement of operating lease right-of-use assets and liabilities $ - $ 3,458 Assets acquired under operating lease $ 71 $ 57 Reconciliation of cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents $ 777 $ 3,209 Restricted cash - 50 Restricted cash, long-term - 150 Total cash, cash equivalents and restricted cash at end of period $ 777 $ 3,409 See accompanying notes to consolidated financial statements F- 8 NTN BUZZTIME, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2020 and 2019 1. Organization of Company Description of Business NTN Buzztime, Inc. (the “Company”) was incorporated in Delaware in 1984 as Alroy Industries and changed its corporate name to NTN Communications, Inc. in 1985. The Company changed its name to NTN Buzztime, Inc. in 2005 to better reflect the growing role of the Buzztime consumer brand. The Company delivers interactive entertainment and innovative technology to its partners in a wide range of verticals – from bars and restaurants to casinos and senior living centers. By enhancing the overall guest experience, the Company believes it helps its hospitality partners acquire, engage, and retain patrons. Through social fun and friendly competition, the Company’s platform creates bonds between our hospitality partners and their patrons, and between patrons themselves. The Company believes this unique experience increases dwell time, revenue, and repeat business for venues – and has also created a large and engaged audience which it connects with through its in-venue TV network. Until the significant disruptions to the restaurant and bar industry resulting from the COVID-19 pandemic, or the pandemic, that began in March 2020, over 1 million hours of trivia, card, sports and arcade games were played on the Company’s network each month. Since March 2020, approximately 100,000 hours per month of such games have been played on the network each month. The Company generates revenue by charging subscription fees to partners for access to its 24/7 trivia network, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling digital-out-of-home (DOOH) advertising direct to advertisers and on national ad exchanges, by licensing the Company’s entertainment and trivia content to other parties, and by providing professional services such as custom game design or development of new platforms on the Company’s existing tablet form factor. Until February 1, 2020, the Company also generated revenue by hosting live trivia events. The Company sold all of its assets used to host live trivia events in January 2020. (See Note 4). As of December 31, 2020, 1,036 venues subscribed to the Company’s interactive entertainment network and approximately 18% of its network subscriber venues were affiliated with national and regional restaurant brands. See Note 2 for more information regarding the impact of the COVID-19 pandemic on these venues and the Company’s subscription revenues. The Company owns several trademarks and consider the Buzztime®, Playmaker®, Mobile Playmaker, and BEOND Powered by Buzztime trademarks to be among its most valuable assets. These and the Company’s other registered and unregistered trademarks used in this document are the Company’s property. Other trademarks are the property of their respective owners. Basis of Accounting Presentation The consolidated financial statements include the accounts of NTN Buzztime, Inc. and its wholly-owned subsidiaries: IWN, Inc., IWN, L.P., Buzztime Entertainment, Inc., NTN Wireless Communications, Inc., NTN Software Solutions, Inc., NTN Canada, Inc., NTN Buzztime, Ltd. and BIT Merger Sub Inc., all of which, other than NTN Canada, Inc. and BIT Merger Sub, Inc., are dormant subsidiaries. Unless otherwise indicated, references to the Company include its consolidated subsidiaries. Reclassifications Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings. 2. COVID-19 Update The negative impact of the COVID-19 pandemic on the restaurant and bar industry was abrupt and substantial, and the Company’s business, cash flows from operations and liquidity suffered, and continues to suffer, materially as a result. In many jurisdictions, including those in which the Company has many customers and prospective customers, restaurants and bars were ordered by the government to shut-down or close all on-site dining operations in the latter half of March 2020. Since then, governmental orders and restrictions impacting restaurants and bars in certain jurisdictions were eased or lifted as the number of COVID-19 cases decreased or plateaued, but as jurisdictions began experiencing a resurgence in COVID-19 cases, many jurisdictions reinstated such orders and restrictions, including mandating the shut-down of bars and the closing of all on-site dining operations of restaurants. The Company has experienced material decreases in subscription revenue, advertising revenue and cash flows from operations, which the Company expects to continue for at least as long as the restaurant and bar industry continues to be negatively impacted by the COVID-19 pandemic, and which may continue thereafter if restaurants and bars seek to reduce their operating costs or are unable to re-open even if restrictions within their jurisdictions are eased or lifted. For example, at its peak, approximately 70% of the Company’s customers had their subscriptions to our services temporarily suspended. As of December 31, 2020, approximately 19% of the Company’s customers remain on subscription suspensions. F- 9 The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Such estimates and assumptions affect, among other things, the allowance for doubtful accounts, site equipment to be installed, fixed assets, capitalized software development and right-of-use assets. Events and changes in circumstances that affect such estimates and assumptions after December 31, 2020, including those resulting from the impacts of the pandemic, will be reflected in future periods. 3. Merger Agreement and Asset Purchase Agreement Proposed Merger with Brooklyn Immunotherapeutics LLC On August 12, 2020, the Company entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) with Brooklyn Immunotherapeutics LLC (“Brooklyn”), a privately-held, biopharmaceutical company focused on exploring the role that cytokine-based therapy can have in treating patients with cancer. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of the conditions set forth in the agreement, BIT Merger Sub, Inc., the Company’s wholly-owned subsidiary formed solely for purposes of carrying out the merger, will merge with and into Brooklyn, with Brooklyn surviving the merger as a wholly-owned subsidiary of the Company and Brooklyn’s members receiving newly issued shares of the Company’s common stock in exchange for their ownership interests in Brooklyn (the “Merger”). The Merger, if completed, will result in a change in control of the Company. If the Merger is completed, the Company expects to change its name to Brooklyn ImmunoTherapeutics, Inc. and the combined company will focus on Brooklyn’s business of exploring the role that cytokine-based therapy can have on the immune system in treating patients with cancer. Upon completion of the Merger, the board of directors of the combined company is expected to consist entirely of individuals designated by Brooklyn and the officers of the combined company are expected to be members of Brooklyn’s current management team. If the Merger is completed, at the effective time of the Merger, Brooklyn’s members will exchange their equity interests in Brooklyn for shares of the Company’s common stock representing between approximately 94.08% and 96.74% of the outstanding common stock of the Company immediately following the effective time of the Merger on a fully diluted basis (less a portion of such shares which will be allocated to Brooklyn’s banker, Maxim, in respect of the success fee owed to it by Brooklyn), and the Company’s stockholders as of immediately prior to the effective time, will own between approximately 5.92% and 3.26% of the outstanding common stock of the Company immediately after the effective time of the Merger on a fully diluted basis. The exact number of shares to be issued in the Merger will be determined pursuant to a formula in the Merger Agreement that takes into account the amount of Brooklyn’s cash and cash equivalents as of the closing of the Merger and the amount by which the Company’s net cash is less than zero at the closing. Proposed Asset Sale to eGames.com Holdings LLC When the Company announced the signing of the Merger Agreement, it also announced that it was continuing to explore the sale of substantially all of the assets relating to its current business to provide additional capital and allow the combined company following the closing of the Merger, if it closes, to be in a position to focus exclusively on Brooklyn’s business. On September 18, 2020, the Company and eGames.com Holdings LLC (“eGames.com”) entered into an asset purchase agreement (as amended from time to time, the “APA”) pursuant to which, subject to the terms and conditions thereof, the Company will sell and assign (the “Asset Sale”) all of its right, title and interest in and to the assets relating to its current business (the “Purchased Assets”) to eGames.com. The Purchased Assets comprise substantially all of the Company’s assets. At the closing of the Asset Sale, in addition to assuming specified liabilities of the Company, eGames.com will pay the Company $2.0 million in cash. In connection with entering into the APA, the sole owner of eGames.com absolutely, unconditionally and irrevocably guaranteed to the Company the full and prompt payment when due of any and all amounts, from time to time, payable by eGames.com under the APA. In connection with entering into the APA, Fertilemind Management, LLC, an affiliate of eGames.com (“Fertilemind”), on behalf of eGames.com, made a $1.0 million bridge loan to the Company. On November 19, 2020, the Company, eGames.com and Fertilemind entered into an omnibus amendment and agreement pursuant to which, among other things, eGames.com agreed to provide, or cause Fertilemind, on behalf of eGames.com, to provide, an additional $0.5 million bridge loan to the Company on December 1, 2020, and the parties agreed to increase the interest rate on the $1.0 million bridge loan Fertilemind made to the Company in September 2020 from 8% to 10% effective December 1, 2020. Fertilemind provided the $0.5 million bridge loan to the Company on December 1, 2020. On January 12, 2021, the Company, eGames.com and Fertilemind entered into a second omnibus amendment and agreement pursuant to which, among other things, eGames.com agreed to provide, or cause Fertilemind, on behalf of eGames.com, to provide an additional $0.2 million bridge loan to the Company on January 12, 2021. Fertilemind provided the $0.2 million bridge loan to the Company on January 12, 2021. The principal and accrued interest of each of the loans provided by Fertilemind to the Company will be applied toward the $2.0 million purchase price at the closing of the Asset Sale. F- 10 4. Live Hosted Trivia Asset Sale On January 13, 2020, the Company entered into an asset purchase agreement with Sporcle, Inc., a Delaware corporation (“Sporcle”), pursuant to which the Company agreed to sell to Sporcle all of its assets necessary for Sporcle to conduct the live-hosted knowledge-based trivia events known as Stump! Trivia and OpinioNation for $1,360,000 in gross proceeds. On the closing date of the transaction (January 31, 2020), the Company received $1,260,000. The remaining $100,000 was being held back until the one-year anniversary of the closing date, or January 31, 2021, to satisfy indemnification claims, if any, for which the Company is liable. In August 2020, the Company and Sporcle entered into an agreement and amendment to the asset purchase agreement to change the end of the indemnification period from January 31, 2021 to August 31, 2020 in exchange for a $40,000 reduction to the $100,000 holdback amount. On September 1, 2020, the Company received the $60,000 holdback amount. The Company recorded a net gain of approximately $1,225,000 on this asset sale. 5. Going Concern Uncertainty In connection with preparing its financial statements as of and for the year ended December 31, 2020, the Company’s management evaluated whether there are conditions or events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about the Company’s ability to continue as a going concern through twelve months after the date that such financial statements are issued. During the year ended December 31, 2020, the Company incurred a net loss of $4,415,000. As of December 31, 2020, the Company had $777,000 of cash, total debt outstanding of $2,032,000, and negative working capital of $636,000. The total debt outstanding consists of $532,000 of principal outstanding under the loan the Company received in April 2020 under the Paycheck Protection Program and $1,500,000 of principal outstanding under the loans the Company received in connection with entering into the APA, as amended, which, if the closing of the Asset Sale occurs, will be applied toward the $2.0 million purchase price eGames.com will owe the Company at the closing of the Asset Sale. See Note 2 for more information on the Asset Sale. In November 2020, the Company was informed that approximately $1,093,000 of the $1,625,100 loan under the Paycheck Protection Program would be forgiven, leaving a principal balance of approximately $532,000. All amounts owing under the loan and security agreement with Avidbank were paid on December 31, 2020, when the term loan matured, and Avidbank released its security interest in all of the Company’s existing personal property. As a result of the impact of the COVID-19 pandemic on the Company’s business and taking into account its current financial condition and its existing sources of projected revenue and cash flows from operations, the Company believes it will have sufficient cash resources to pay forecasted cash outlays only through mid-March 2021, assuming the Company is able to continue to successfully manage its working capital deficit by managing the timing of payments to its vendors and other third parties. Based on the factors described above, management concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern through the twelve-month period subsequent to the issuance date of these financial statements. The Company needs to complete the Merger or the Asset Sale or raise capital to meet its debt service obligations and fund its working capital needs. The Company currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital when needed, on acceptable terms, or at all. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern. 6. Summary of Significant Accounting Policies and Estimates Consolidation —The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates —Preparing the Company’s consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to deferred costs and revenues; depreciation of fixed assets; allowance for doubtful accounts; site equipment to be installed; stock-based compensation assumptions; impairment of fixed assets, software development costs, intangible assets and goodwill; contingencies, including the reserve for sales tax inquiries; and the provision for income taxes, including the valuation allowance. The Company bases its estimates on a combination of historical experience and various other assumptions that it believes are reasonable under the circumstances. Actual results may differ materially from these estimates. F- 11 Cash and Cash Equivalents —The Company considers all highly liquid investment instruments with original maturities of three months or less, or any investment redeemable without penalty or loss of interest, to be cash equivalents. Assessments of Functional Currencies —The United States dollar is the Company’s functional currency, except for its operations in Canada where the functional currency is the Canadian dollar. The financial position and results of operations of the Canadian subsidiary is measured using the foreign subsidiary’s local currency as the functional currency. In accordance with Accounting Standards Codification (“ASC”) No. 830, Foreign Currency Matters , revenues and expenses of its foreign subsidiary have been translated into U.S. dollars at weighted average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the years ended December 31, 2020 and 2019, the Company recorded $16,000 and $48,000 of foreign currency transaction losses, respectively, due to settlements of intercompany transactions, re-measurement of intercompany balances with its Canadian subsidiary and other non-functional currency denominated transactions, which are included in other income (expense) in the accompanying consolidated statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect the Company’s results of operations and period-to-period comparisons of its operating results. The Company does not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2020, the net impact to the Company’s results of operations from the effect of exchange rate fluctuations was immaterial. Allowance for Doubtful Accounts —The Company maintains allowances for doubtful accounts for estimated losses resulting from nonpayment by its customers. The Company reserves for all accounts that have been suspended or terminated from its Buzztime network services and for customers with balances that are greater than a predetermined number of days past due. The Company analyzes historical collection trends, customer concentrations and creditworthiness, economic trends and anticipated changes in customer payment patterns when evaluating the adequacy of its allowance for doubtful accounts for specific and general risks. Additional reserves may also be established if specific customers’ balances are identified as potentially uncollectible. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Site Equipment to be Installed — Site equipment to be installed consists of fixed assets related to the Company’s tablet platform that have not yet been placed in service and are stated at cost. Such equipment includes the Classic Playmaker, tablets, other associated electronics and the computers located at customer’s sites. These assets remain in site equipment to be installed until installed at the Company’s customer sites, at which point, the cost of the deployed site equipment is reclassified to fixed assets and depreciated over the estimated useful life. The Company evaluates the recoverability of site equipment to be installed for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future net cash flows expected to be generated. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. During the year ended December 31, 2020 and 2019, the Company recognized a loss of approximately $307,000 and $591,000, respectively, for the disposition of site equipment to be installed for which the Company did not expect to generate future cash flows. Fixed Assets — Fixed assets are recorded at cost. Equipment under finance leases is recorded at the present value of future minimum lease payments. The Company evaluates the recoverability of its fixed assets for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. If the carrying amount of the asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. During the year ended December 31, 2020, the Company recognized a loss of approximately $54,000 of fixed assets related to deployed site equipment in the ordinary course of business. As discussed further in Note 16, the Company terminated its lease for its corporate headquarters and vacated the facility as of June 30, 2020. As a result, during the year ended December 31, 2020, the Company wrote-off approximately $890,000 of unamortized tenant improvement allowance that is recorded as part of the gain on termination of lease, as well as approximately $87,000 in leasehold improvement assets and $197,000 in furniture and fixtures and the Company’s vehicle. During the year ended December 31, 2019, total loss for the disposition of fixed assets was approximately $127,000. Depreciation of fixed assets is computed using the straight-line method over the estimated useful lives of the assets. Depreciation of leasehold improvements and fixed assets under finance leases is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease period. F- 12 The Company incurs a relatively significant level of depreciation expense in relation to its operating income. The amount of depreciation expense in any fiscal year is largely related to the equipment located at the Company’s customers’ sites. Such equipment is depreciated over one to three years based on the shorter of the contractual finance lease period or the estimated useful life, which considers anticipated technology changes. Machinery and equipment are depreciated over three to five years. If the Company’s fixed assets turn out to have longer lives, on average, than estimated, then its depreciation expense would be significantly reduced in those future periods. Conversely, if the fixed assets turn out to have shorter lives, on average, than estimated, then its depreciation expense would be significantly increased in those future periods. As of December 31, 2020, the Company determined there were no changes to the estimated useful lives for any of its assets. Goodwill —Goodwill represents the excess of costs over fair value of assets of businesses acquired (reporting unit). Goodwill and intangible assets acquired in a purchase combination determined to have an indefinite useful life are not amortized, but instead are assessed annually, or at interim periods, for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. If after assessing the totality of events or circumstances the Company determines it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company must perform the one-step impairment test outlined in ASC No. 350, Intangibles – Goodwill and Other. Revenue Recognition —The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers . The Company generates revenue by charging subscription fees to partners for access to its 24/7 trivia network, by selling and leasing tablet and hardware equipment for custom usage beyond trivia/entertainment, by selling DOOH advertising direct to advertisers and on national ad exchanges, by licensing its entertainment and trivia content to other entities, and by providing professional services such as custom game design or development of new platforms on its existing tablet form factor. Until February 1, 2020, the Company also generated revenue from hosting live trivia events. The Company sold all of its assets used to host live trivia events in January 2020. In general, when multiple performance obligations are present in a customer contract, the transaction price is allocated to the individual performance obligation based on the relative stand-alone selling prices, and the revenue is recognized when or as each performance obligation has been satisfied. Discounts are treated as a reduction to the overall transaction price and allocated to the performance obligations based on the relative stand-alone selling prices. All revenues are recognized net of sales tax collected from the customer. ASC No. 606 specifies certain criteria that an arrangement with a customer must have in order for a contract to exist for purposes of revenue recognition, one of which is that it must be probable that the Company will collect the consideration to which it will be entitled under the contract. As a result of the impact that the COVID-19 pandemic has had, and continues to have, on the Company’s customers, the Company determined that due to the uncertainty of collectability of the subscription fees for certain customers, the Company’s arrangement with those customers no longer meets all the criteria needed for a contract to exist for revenue recognition purposes. Therefore, the Company did not recognize revenue for these customers and fully reserved for accounts receivable in the allowance for doubtful accounts. The Company only recognized revenue for the arrangements that continued to meet the contract criteria, including the criteria that collectability was probable. Revenue Streams The Company disaggregates revenue by material revenue stream as follows: Years ended December 31, 2020 2019 $ % of Total Revenue $ % of Total Revenue Subscription revenue 4,882,000 84.2 % 14,278,000 72.1 % Hardware revenue 426,000 7.3 % 2,350,000 11.9 % Other revenue 492,000 8.5 % 3,178,000 16.0 % Total 5,800,000 100.0 % 19,806,000 100.0 % F- 13 The following describes how the Company recognizes revenue under ASC No. 606. Subscription Revenue - Prior to the COVID-19 pandemic, the Company recognized the recurring subscription fees it received for its services over time as customers received and consumed the benefits of such services, the Company’s equipment to access the Company’s content and the installation of the equipment. In general, customers pay for the subscription services during the month in which they receive the services. Due to the timing of providing the services and receiving payment for the services, the Company does not record any unbilled contract asset. Occasionally, a customer will prepay up to one year of services, in which case, the Company will record deferred revenue on the balance sheet related to such prepayment and will recognize the revenue over the time the customer receives the Company’s services. Revenue from installation services is also recorded as deferred revenue and recognized over the longer of the contract term and the expected term of the customer relationship using the straight-line method. The Company has certain contingent performance obligations with respect to repairing or replacing equipment and will recognize any revenue related to the performance of such obligations at the point in time the Company performs them. As discussed above, as a result of the impact that the COVID-19 pandemic has had, and continues to have, on the Company’s customers, the Company determined that due to the uncertainty of collectability of the subscription fees for certain customers, the Company’s arrangement with those customers no longer meets all the criteria needed for a contract to exist for revenue recognition purposes. Therefore, the Company did not recognize revenue for these customers and fully reserved for accounts receivable in the allowance for doubtful accounts. Costs associated with installing the equipment are considered direct costs. Costs associated with sales commissions are considered incremental costs for obtaining the contract because such costs would not have been incurred without obtaining the contract. The Company expects to recover both costs through future fees it collects and both costs are recorded in deferred costs on the balance sheet and amortized on a straight-line basis. For installation costs that are of an amount that is less than or equal to the deferred installation revenue for the related contract, the amortization period approximates the longer of the contract term and the expected term of the customer relationship. For any excess costs that exceed the deferred revenue, the amortization period of the excess cost is the initial term of the contract, which is generally one to two years because the Company can still recover that excess cost in the initial term of the contract. The Company amortizes commissions over the longer of the contract term and the expected term of the customer relationship. Sales-type Lease Revenue – For certain customers that lease equipment under sale-type lease arrangements, the Company recognizes revenue in accordance with ASC No. 842, Leases. Such revenue is recognized at the time of installation based on the net present value of the leased equipment. Interest income is recognized over the life of the lease for customers who have remaining lease payments to make. In the event a customer under a sales-type lease arrangement prepays for the lease in full prior to receiving the equipment under the lease, such amounts are recorded in deferred revenue and recognized as revenue once the equipment has been installed and activated at the customer’s location. The cost of the leased equipment is recognized at the same time as the revenue. The Company has not recognized revenue under sales-type lease arrangements after the year ended December 31, 2019 and does not expect to in the future. Equipment Sales – The Company recognizes revenue from equipment sales at a point in time, which is when control has been transferred to the customer, the customer holds legal title and the customer has significant risks and rewards of ownership. Generally, the Company has determined that any customer acceptance provisions of the equipment is a formality, as the Company has historically demonstrated the ability to produce and deliver similar equipment. If the Company sells equipment with unique specifications, then customer control of the equipment will occur upon customer acceptance as defined in the contract, and revenue will be recognized at that time. Costs associated with the equipment sold is recognized at the same point in time as the revenue. The Company expects to recognize an immaterial amount of equipment sales revenue in the future. Advertising Revenue – The Company recognizes advertising revenue either over the time the advertising campaign airs in its customers’ locations or at a point in time by impression. For advertising campaigns that are airing over a specific period of time (regardless of number of impressions), the Company uses the time elapsed output method to measure its progress toward satisfying the performance obligation. When the Company contracts with an advertising agent, the Company shares in the advertising revenue generated with that agent. In these cases, the Company generally recognizes revenue on a net basis, as the agent typically has the responsibility for the relationship with the advertiser and the credit risk. When the Company contracts directly with the advertiser, it will recognize the revenue on a gross basis and will recognize any revenue share arrangement it has with a third party as a direct expense, as the Company has the responsibility for the relationship with the advertiser and the credit risk. Generally, there is no unbilled revenue associated with the Company’s advertising activities. Content Licensing – The Company licenses content (trivia packages) to a certain customer, who in turn installs the content on its equipment that it sells to its customers. The content license is characterized as a “right to use intellectual property as it exists at the point in time at which the license is granted,” meaning the Company is not expected to undertake activities that affect the intellectual property or any such activities would not affect the intellectual property the customer is using. The content license is considered to be on consignment, and the Company retains title of the licensed content throughout the license period. The Company’s customer has no obligation to pay for the licensed content until the customer sells and installs the content to its customer. Accordingly, the Company recognizes revenue at the point in time when such installation occurs. The Company recognizes costs related to developing the content during the period incurred. F- 14 Live-hosted Trivia Revenue – As of February 1, 2020, the Company no longer has revenue related to hosting live- trivia events as a result of the sale of all of the Company’s assets used to host live trivia events in January 2020. The Company recognized revenue from hosting live-trivia events at a point in time, which is when the event took place. Some customers hosted their own trivia events and the Company provided the game materials. In those cases, the Company recognized the revenue at the point in time the Company sent the game materials to the customer. The Company recognized related costs at the same point in time the revenue was recognized. Generally, there was no unbilled revenue or deferred revenue associated with live-hosted trivia events. Professional Development Revenue – Depending on the type of development work the Company is performing, the Company will recognize revenue, and associated costs, at the point in time when the Company satisfies each performance obligation, which is generally when the customer can direct the use of, and obtain substantially all of the remaining benefits of the goods or service provided. For services provided over time, the corresponding revenue is generally recognized over the time the Company provides such services. Any payments received before satisfying the performance obligations are recorded as deferred revenue and recognized as revenue when or as such obligations are satisfied. The Company does not have unbilled revenue assets associated with professional development services. Revenue Concentrations The Company’s customers predominantly range from small independently operated bars and restaurants to bars and restaurants operated by national chains. This results in diverse venue sizes and locations. During 2019, the Company’s agreements with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees ended in November 2019 in accordance with their terms. As a result, the Company ended 2019 with 1,440 sites. As of December 31, 2020, the number of sites declined to 1,036 venues, primarily due to customers terminating their subscriptions or going out of business relating to the effects of the COVID-19 pandemic on their business. The table below sets forth the approximate amount of revenue the Company generated from Buffalo Wild Wings corporate-owned restaurants and its franchisees during the years ended December 31, 2020 and 2019, and the percentage of total revenue that such amount represents for such periods: Year Ended December 31, 2020 2019 Buffalo Wild Wings revenue $ 199,000 $ 6,820,000 Percent of total revenue 3 % 34 % As of December 31, 2020 and 2019, approximately $112,000 and $158,000, respectively, was included in gross accounts receivable from Buffalo Wild Wings corporate-owned restaurants and its franchisees. The geographic breakdown of the Company’s revenue for the years ended December 31, 2020 and 2019 were as follows: Year Ended December 31, 2020 2019 United States $ 5,480,000 $ 19,153,000 Canada 320,000 653,000 Total $ 5,800,000 $ 19,806,000 Contract Assets and Liabilities The Company enters into contracts and may recognize contract assets and liabilities that arise from these contracts. The Company recognizes revenue and corresponding cash for customers who auto pay via their bank account or credit card, or the Company recognizes a corresponding accounts receivable for customers the Company invoices. The Company may receive consideration from customers, per the terms of the contract, prior to transferring goods or services to the customer. In such instances, the Company records a contract liability and recognizes the contract liability as revenue when all revenue recognition criteria are met. The table below shows the balance of contract liabilities as of January 1, 2020 and December 31, 2020, including the change during the period. Deferred Revenue Balance at January 1, 2020 $ 460,000 New performance obligations 218,000 Revenue recognized (600,000 ) Balance at December 31, 2020 78,000 Less non-current portion (2,000 ) Current portion at December 31, 2020 $ 76,000 F- 15 The Company capitalizes installation costs associated with installing equipment in a customer location and sales commissions as a deferred cost asset on the balance sheet. For installation costs that are of an amount that is less than or equal to the deferred installation revenue for the related contract, the amortization period approximates the longer of the contract term and the expected term of the customer relationship. For any excess installation costs that exceed the deferred revenue, the amortization period of the excess cost is the initial term of the contract, which is generally one to two years because the Company can still recover that excess cost in the initial term of the contract. The Company amortizes commission costs over the longer of the contract term and the expected term of the customer relationship. The table below shows the balance of the unamortized installation cost and sales commissions as of January 1, 2020 and December 31, 2020, including the change during the period. Installation Costs Sales Commissions Total Deferred Costs Balance at January 1, 2020 $ 187,000 $ 87,000 $ 274,000 Incremental costs deferred 98,000 70,000 168,000 Deferred costs recognized (233,000 ) (137,000 ) (370,000 ) Balance at December 31, 2020 52,000 20,000 72,000 Research and Development — Research and development costs, which include the cost of equipment the Company is evaluating for future integration or use, are expensed as incurred. For the years ended December 31, 2020 and 2019, research and developments costs totaled $2,000 and $26,000, respectively, and are included in selling, general and administrative expense. Software Development Costs —The Company capitalizes costs related to developing certain software products in accordance with ASC No. 350. The Company recognizes costs related to interactive programs on a straight-line basis over the programs’ estimated useful lives, generally two to three years. Amortization expense relating to capitalized software development costs totaled $551,000 and $519,000 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, approximately $123,000 and $177,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete. The Company performed its annual review of software development projects for the years ended December 31, 2020 and 2019, and determined to abandon various software development projects that the Company concluded were no longer a current strategic fit or for which it determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, for the year ended December 31, 2020 and 2019, the Company recognized an impairment charge of $248,000 and $550,000, respectively. Impairment of capitalized software is shown separately on the Company’s consolidated statement of operations. Advertising Costs – There were no marketing-related advertising costs for the either of the years ended December 31, 2020 or 2019. Shipping and Handling Costs —Shipping and handling costs are included in direct operating costs in the accompanying consolidated statements of operations and are expensed as incurred. Stock-Based Compensation —The Company records stock-based compensation in accordance with ASC No. 718 , Compensation – Stock Compensation. 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. Income Taxes —Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. F- 16 ASC No. 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion is measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required. Earnings Per Share —Basic and diluted loss per common share have been computed by dividing the losses applicable to common stock by the weighted average number of common shares outstanding. The Company’s basic and fully diluted earnings per share (“EPS”) calculation are the same since the increased number of shares that would be included in the diluted calculation from assumed exercise of common stock equivalents would be anti-dilutive to the net loss in each of the years shown in the consolidated financial statements. Segment Reporting —In accordance with ASC No. 280, Segment Reporting , the Company has determined that it operates as one operating segment. Decisions regarding the Company’s overall operating performance and allocation of its resources are assessed on a consolidated basis. Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. This ASU enhances and simplifies various aspect of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year and interim-period accounting for enacted changes in tax law. The amendment is effective for public companies with fiscal years beginning after December 15, 2020, (which was January 1, 2021 for the Company); early adoption is permitted. The Company does not expect that the adoption of this accounting standard update to have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments , which supersedes current guidance requiring recognition of credit losses when it is probable that a loss has been incurred. The ASU requires an entity to establish an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. This ASU will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. For smaller reporting companies, the effective date for this standard has been delayed and will be effective for fiscal years beginning after December 15, 2022 (which will be January 1, 2023 for the Company). The Company is evaluating the impact that the adoption of this accounting standard update will have on its consolidated financial statements. 7. Restricted Cash At the commencement date of the Company’s lease for its corporate headquarters on December 1, 2018, the Company’s primary lender, Avidbank, issued a $250,000 letter of credit to the lessor as security, which amount was reduced by $50,000 to $200,000 on December 1, 2019 and was to be reduced by the same amount December 1 of each year thereafter, provided there has been no default under the lease. Avidbank required the Company to deposit $250,000 in a restricted cash account maintained with the bank, which amount was and would be reduced as the amount required under the letter of credit is reduced. The Company recorded the $250,000 deposit as restricted cash on its balance sheet, with $50,000 plus any earned interest being recorded in short-term restricted cash and the balance being recorded in long-term restricted cash. In June 2020, the Company terminated its lease for its corporate headquarters, and as part of the consideration to the lessor for the early least termination, the lessor received the $200,000 of restricted cash provided for under the letter of credit in July 2020. (See Note 16 for more information on the lease termination.) F- 17 8. Fixed Assets, Net Fixed assets are recorded at cost and consist of the following at December 31, 2020 and 2019: As of December 31, 2020 2019 Site equipment $ 7,830,000 $ 8,856,000 Machinery and equipment 1,423,000 1,570,000 Furniture and fixtures - 314,000 Leasehold improvements - 1,240,000 Vehicle - 15,000 9,253,000 11,995,000 Accumulated depreciation and amortization (8,751,000 ) (9,173,000 ) Total $ 502,000 $ 2,822,000 Depreciation expense totaled $1,188,000 and $2,358,000 for the years ended December 31, 2020 and 2019, respectively. The geographic breakdown of the Company’s long-term tangible assets for the last two fiscal years were as follows: As of December 31, 2020 2019 United States $ 487,000 $ 2,760,000 Canada 15,000 62,000 Total fixed assets $ 502,000 $ 2,822,000 9. Goodwill The Company’s goodwill balance of $696,000 as of December 31, 2019 related to the excess of costs over the fair value of assets the Company acquired in 2003 related to its Canadian business (the “Reporting Unit”). In the Company’s evaluation of impairment indicators as of March 31, 2020, it determined that the uncertainty relating to the impact of the COVID-19 pandemic on the Reporting Unit’s future operating results represented an indicator of impairment. Accordingly, the Company compared the estimated fair value of the Reporting Unit to its carrying value at March 31, 2020, determined that a full impairment loss was warranted and recognized an impairment charge of $662,000 for the three months ended March 31, 2020. No further evaluations are necessary after March 31, 2020. In addition to the impairment loss recognized, fluctuations in the amount of goodwill shown on the accompanying balance sheets can occur due to changes in the foreign currency exchange rates used when translating NTN Canada’s financial statement from Canadian dollars to US dollars during consolidation. The following table shows the changes in the carrying amount of goodwill for the year ended December 31, 2020. Goodwill balance at January 1, 2020 $ 696,000 Activity for the three months ended March 31, 2020 Effects of foreign currency (34,000 ) Goodwill impairment (662,000 ) Goodwill balance at December 31, 2020 $ - 10. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to the short maturity of these instruments. The carrying value of the Company’s debt approximates fair value as interest rates approximate market rates for similar types of borrowing arrangements. ASC No. 820, Fair Value Measurements and Disclosures, applies to certain assets and liabilities that are being measured and reported on a fair value basis. Broadly, the ASC No. 820 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC No. 820 also establishes a fair value hierarchy for ranking the quality and reliability of the information used to determine fair values. This hierarchy is as follows: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. During the year ended December 31, 2020, there were no assets or liabilities that were measures at fair value on a recurring or non-recurring basis. There were no transfers between fair value measurement levels during the year ended December 31, 2020. F- 18 11. Credit Risk At times, the Company’s cash balances held in financial institutions are in excess of federally insured limits. The Company performs periodic evaluations of the relative credit standing of financial institutions and seeks to limit the amount of risk by selecting financial institutions with a strong credit standing. The Company believes it is not exposed to any significant credit risk with respect to its cash and cash equivalents. The Buzztime network provides services to group viewing locations, generally restaurants, sports bars and lounges throughout North America. Concentration of credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company’s customer base, and their dispersion across many different geographic locations. The Company performs credit evaluations of new customers and generally requires no collateral. The Company maintains an allowance for doubtful accounts to provide for credit losses. 12. Basic and Diluted Earnings Per Common Share Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of potential common shares. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding plus potential common shares. Stock options, restricted stock units, and other convertible securities are considered potential common shares and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. Options, restricted stock units and convertible preferred stock representing approximately 201,000 and 210,000 shares of common stock were excluded from the computations of diluted net loss per common share for the years ended December 31, 2020 and 2019, respectively, as their effect was anti-dilutive. 13. Shareholders’ Equity Equity Incentive Plans The Company’s stock-based compensation plans include the NTN Buzztime, Inc. 2019 Performance Incentive Plan (the “2019 Plan”), the NTN Buzztime, Inc. Amended 2010 Performance Incentive Plan (the “2010 Plan”) and the NTN Buzztime, Inc. 2014 Inducement Plan (the “2014 Plan”). The Company’s board of directors designated its nominating and corporate governance/compensation committee as the administrator of the foregoing plans (the “Plan Administrator”). Among other things, the Plan Administrator selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures, if any, and other provisions of the award. At the Company’s 2019 Annual Meeting of Stockholders, the Company’s stockholders approved the 2019 Plan, which provides for the issuance of up to 240,000 shares of Company common stock. Awards the under the 2019 Plan may be granted to officers, directors, employees and consultants of the Company. Stock options granted under the 2019 Plan may either be incentive stock options or nonqualified stock options, have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. As of December 31, 2020, there were stock options to purchase approximately 2,000 shares of common stock and 82,000 restricted stock units outstanding under the 2019 Plan. As a result of stockholder approval of the 2019 Plan, no future grants will be made under the 2010 Plan. All awards that are outstanding under the 2010 Plan will continue to be governed by the 2010 Plan until they are exercised or expire in accordance with the terms of the applicable award or the 2010 Plan. As of December 31, 2020, there were stock options to purchase approximately 24,000 shares of common stock and 9,000 restricted stock units outstanding under the 2010 Plan. The 2014 Plan provides for the grant of up to 85,000 share-based awards to a new employee as an inducement material to the new employee entering into employment with the Company and expires in September 2024. As of December 31, 2020, there were no stock options or restricted stock units outstanding under the 2014 Plan. Stock-Based Compensation Valuation Assumptions The Company uses the historical stock price volatility as an input to value its stock options under ASC No. 718. The expected term of stock options represents the period of time options are expected to be outstanding and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. F- 19 The following weighted-average assumptions were used for grants issued during 2019 under the ASC No. 718 requirements: 2019 Weighted average risk-free rate 1.68 % Weighted average volatility 105.53 % Dividend yield 0.00 % Expected term 5.37 years There were no stock option grants issued during the year ended December 31, 2020. The Company estimates forfeitures, based on historical activity, at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Stock-based compensation expense for employees during the years ended December 31, 2020 and 2019 was $199,000 and $206,000, respectively, and is expensed in selling, general and administrative expenses and credited to the additional paid-in-capital account. Stock Option Activity The following table summarizes stock option activities for the years ended December 31, 2020 and 2019: Outstanding Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding January 1, 2019 147,000 $ 18.20 6.08 $ - Granted 3,000 3.15 - - Cancelled (6,000 ) 13.32 - - Forfeited (2,000 ) 6.24 - - Outstanding December 31, 2019 142,000 18.26 5.14 - Cancelled (115,000 ) 17.55 - - Forfeited (1,000 ) 8.09 - - Outstanding December 31, 2020 26,000 $ 21.76 4.56 $ - Options vested and exercisable at December 31, 2020 26,000 $ 21.76 4.56 $ - The per-share weighted average grant-date fair value of stock options granted during the year ended December 31, 2019 and $2.49. There were no stock options granted during the year ended December 31, 2020. As of December 31, 2020, all stock options were fully vested and there was no unamortized stock based compensation expense remaining. A deferred tax asset generally would be recorded related to the expected future tax benefit from the exercise of the non-qualified stock options. However, due to a history of net operating losses (“NOLs”), a full valuation allowance has been recorded related to the tax benefit for non-qualified stock options. Restricted Stock Unit Activity Outstanding restricted stock units (“RSUs”) are settled in an equal number of shares of common stock on the vesting date of the award. A stock unit award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the respective vesting date. Because RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date. During the years ended December 31, 2020 and 2019, the Company granted approximately 172,000 and 77,000 RSUs, respectively. The weighted average grant date fair value of the restricted stock units awarded during the years ended December 31, 2020 and 2019 was $2.51 and $3.35, respectively. F- 20 During the year ended December 31, 2019, 30,000 of the 77,000 RSUs granted for the period were awarded as a performance-based award granted to the Company’s former chief executive officer in connection with his resignation. The award would have vested in full upon the effective date of a change in control transaction in which an individual, entity or group acquired all of the Company’s then-outstanding equity interests on or before March 17, 2020, or in which an individual, entity or group acquired 51% of our then-outstanding equity interests on or before March 17, 2020, and then that same individual, entity or group acquired the remaining equity so that it held all of the Company’s then-outstanding equity interests on or before June 17, 2020. Continuing service was not required for vesting to occur. Because a change in control is not considered probable until a change in control occurs, and because the change in control did not occur as discussed above, the Company did not recognize stock compensation expense on this award and this award expired unvested. In connection with the resignation of the Company’s former chief executive officer, the vesting of 10,000 of his RSUs was accelerated, 5,000 in September 2019 and 5,000 in October 2019. The modification of this award resulted in the Company recognizing stock compensation expense for the accelerated vesting of RSUs in the period in which the accelerated vesting occurred. With the exception of the performance-based award and the acceleration of vesting of RSUs discussed above, RSUs typically vest over a period of two to three years, generally in monthly or quarterly increments. Some awards may have an initial cliff period of six months before the monthly vesting begins. All outstanding RSUs as of December 31, 2020 are subject to accelerated vesting in the event of a change in control. The following table summarizes restricted stock unit activity for the years ended December 31, 2020 and 2019: Outstanding Restricted Stock Units Weighted Average Fair Value per Share January 1, 2019 61,000 $ 4.94 Granted 77,000 3.35 Released (38,000 ) 4.09 Canceled (43,000 ) 4.17 December 31, 2019 57,000 $ 3.57 Granted 172,000 2.51 Released (58,000 ) 3.05 Cancelled (80,000 ) 2.65 December 31, 2020 91,000 $ 2.71 Balance expected to vest at December 31, 2020 78,000 Under the 2010 Plan, in lieu of paying cash to satisfy withholding taxes due upon the settlement of vested restricted stock units, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. During the years ended December 31, 2020 and 2019, approximately 58,000 and 38,000 restricted stock units vested and were settled, respectively, and as a result of employees electing to satisfy applicable withholding taxes by having the Company withhold shares, approximately 42,000 and 26,000 shares of common stock were issued, respectively. Cumulative Convertible Preferred Stock The Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, 2020 and 2019. The Series A Preferred Stock provides for a cumulative annual dividend of $0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. The Company paid approximately $16,000 in cash for payment of dividends in each of the years ended December 31, 2020 and 2019. F- 21 The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate. At December 31, 2020, the conversion rate was 1.8563 and, based on that conversion rate, one share of Series A Convertible Preferred Stock would have converted into approximately 0.54 shares of common stock, and all the outstanding shares of the Series A Convertible Preferred Stock would have converted into approximately 84,000 shares of common stock in the aggregate. There were no conversions during either of the years ended December 31, 2020 and 2019. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock. The conversion rate will adjust under the following circumstances: 1. If the Company (a) pays a dividend or makes a distribution in shares of its common stock, (b) subdivides its outstanding shares of common stock into a greater number of shares, (c) combines its outstanding shares of common stock into a smaller number of shares, or (d) issues by reclassification of its shares of common stock any shares of its common stock (other than a change in par value, or from par value to no par value, or from no par value to par value), then the conversion rate in effect immediately prior to the applicable event will be adjusted so that the holders of the Series A Convertible Preferred Stock will be entitled to receive the number of shares of common stock which they would have owned or have been entitled to receive immediately following the happening of the event, had the Series A Convertible Preferred Stock been converted immediately prior to the record or effective date of the applicable event. 2. If the outstanding shares of the Company’s common stock are reclassified (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or if the Company consolidates with or merge into another corporation and the Company is not the surviving entity, or if the Company sells all or substantially all of its property, assets, business and goodwill, then the holders of the Series A Convertible Preferred Stock will thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such holders upon such reclassification, consolidation, merger or sale, if the Series A Convertible Preferred Stock had been converted immediately prior thereto. 3. If the Company issues common stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount (as defined below), then the Equivalent Preference Amount will immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of common stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance, by (B) the total number of shares of common stock outstanding immediately after such issuance. The “Equivalent Preference Amount” is the value that results when the liquidation preference of one share of Series A Convertible Preferred Stock (which is $1.00) is multiplied by the conversion rate in effect at that time; thus the conversion rate applicable after the adjustment in the Equivalent Preference Amount as described herein will be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Convertible Preferred Stock. 14. Income Taxes For each of the years ended December 31, 2020 and 2019, current tax provisions and current deferred tax provisions were recorded as follows: Years ended December 31, 2020 2019 Current Tax Provision Federal $ - $ - State (14,000 ) (25,000 ) Foreign 5,000 2,000 (9,000 ) (23,000 ) Deferred Tax Provision Federal - - State (12,000 ) 2,000 Foreign 27,000 (6,000 ) 15,000 (4,000 ) Total Tax Provision Federal - - State (26,000 ) (23,000 ) Foreign 32,000 (4,000 ) $ 6,000 $ (27,000 ) F- 22 The net deferred tax assets and liabilities have been reported in other liabilities in the consolidated balance sheets at December 31, 2020 and 2019 as follows: As of December 31, 2020 2019 Deferred Tax Assets: NOL carryforwards $ 1,873,000 $ 14,730,000 UK NOL carryforwards 572,000 552,000 Allowance for doubtful accounts 193,000 92,000 Compensation and vacation accrual - 57,000 Operating accruals - 6,000 Research and experimentation, AMT and foreign tax credits 126,000 126,000 Texas margin tax credit 91,000 106,000 Fixed assets and intangibles 397,000 - Lease liabilities 9,000 854,000 Other 704,000 846,000 Total gross deferred tax assets 3,965,000 17,369,000 Valuation allowance (3,516,000 ) (16,218,000 ) Net deferred tax assets 449,000 1,151,000 Deferred Tax Liabilities: Capitalized software 354,000 497,000 Right of use assets 10,000 544,000 Fixed assets and intangibles - 45,000 Foreign 47,000 47,000 Other 4,000 - Total gross deferred liabilities 415,000 1,133,000 Net deferred taxes $ 34,000 $ 18,000 The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 21% is as follows: As of December 31, 2020 2019 Tax at federal income tax rate $ 930,000 $ 424,000 State provision (26,000 ) (23,000 ) Foreign tax differential 35,000 (2,000 ) Change in valuation allowance (939,000 ) (429,000 ) Permanent items 6,000 3,000 Total Provision $ 6,000 $ (27,000 ) The net change in the total valuation allowance for the year ended December 31, 2020 was an increase of approximately $939,000. The net change in the total valuation allowance for the year ended December 31, 2019 was an increase of approximately $429,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the portion of deferred taxes not utilized through the reversal of deferred tax liabilities will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. At December 31, 2020, the Company has available net operating loss (“NOL”) carryforwards of approximately $5,310,000 for federal income tax purposes. The NOL carryforwards for state purposes are approximately $16,051,000. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards due to continued operating losses. Further, the Company performed an analysis as of December 31, 2020 to determine limitations on its ability to utilize NOL carryforwards under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”) resulting from any changes in ownership. This analysis indicates that an ownership change occurred on June 9, 2020 that would limit the use of approximately $61,965,000 of NOLs. Under IRC Section 382 and similar state provisions, ownership changes will limit the annual utilization of net operating loss carryforwards existing prior to a change in control that are available to offset future taxable income. Such limitations have reduced the gross deferred tax assets disclosed in the table above related to the NOL carryforwards by an estimated $11,021,000. The Company discloses the NOL carryforwards at their 382 limitation amount in the table above as potential limitation has been quantified. The Company has also established a full valuation allowance for substantially all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not that it would be able to generate future taxable income to realize these assets. F- 23 The Merger described in Note 3 above will likely result in an ownership change for purposes of Section 382, but no formal analysis is expected to be undertaken in this regard. In addition, the Company has approximately $114,000 of state tax credit tax carryforwards that expire in the years 2021 through 2027. The deferred tax assets as of December 31, 2020 include a deferred tax asset of $439,000 representing NOLs arising from the exercise of stock options by Company employees for 2005 and prior years. To the extent the Company realizes any tax benefit for the NOLs attributable to the stock option exercises, such amount would be credited directly to stockholders’ equity. United States income taxes were not provided on unremitted earnings from non-United States subsidiaries. Such unremitted earnings are considered to be indefinitely reinvested and determination of the amount of taxes that might be paid on these undistributed earnings is not practicable. The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2016. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities. 15. Long-term Debt Term Loan Under a loan and security agreement the Company entered into with Avidbank in September 2018, or the Original LSA, the Company borrowed $4,000,000 in the form of a 48-month term loan, all of which it used to pay-off the $4,050,000 of principal borrowed from its then-existing lender. In February 2020, the Company made a pre-payment on the term loan of approximately $150,000 following the sale in January 2020 of all its assets used to conduct live-hosted trivia events. In March 2020, the Company entered into an amendment to the Original LSA. In connection with entering into the amendment, the Company made a $433,000 payment on the term loan, which included the $83,333 monthly principal payment for March 2020 plus accrued interest and a $350,000 principal prepayment. All amounts owing under the term loan were paid on December 31, 2020, when the term loan matured, and Avidbank released its security interest in all of the Company’s existing personal property. The Company incurred approximately $26,000 of debt issuance costs related to the Original LSA and the amendment to the LSA. The debt issuance costs were amortized to interest expense using the effective interest rate method over the life of the loan and were fully amortized as of December 31, 2020. Paycheck Protection Program Loan On April 18, 2020, the Company issued a note in the principal amount of approximately $1,625,000 evidencing a loan the Company received under the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “CARES Act”). The PPP Loan bears interest at a rate of 1.0% per annum. Under the terms of the Paycheck Protection Program, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In October 2020, the Company submitted its loan forgiveness application for the PPP Loan, and in November 2020, the lender informed the Company that the U.S Small Business Administration approved the forgiveness of approximately $1,093,000 of the $1,625,000 loan, leaving a principal balance of approximately $532,000. The unforgiven principal balance, plus accrued and unpaid interest, is due at the closing of the Asset Sale, if the Asset Sale occurs, or at the closing of the Merger, if the Merger occurs. If neither the Asset Sale nor the Merger occurs, the unforgiven principal balance, plus accrued and unpaid interest, is due at maturity, April 18, 2022. The Company began making monthly interest only payments on November 18, 2020. The Company may prepay the PPP Loan at any time with no prepayment penalties. As of December 31, 2020, the outstanding principal balance of the PPP Loan was approximately $532,000. (See Note 3 for more information on the Asset Sale and the Merger.) F- 24 Bridge Loans In connection with entering into the APA, the Company issued to Fertilemind an unsecured promissory note (the “First Note”) in the principal amount of $1,000,000, evidencing a $1,000,000 loan received from Fertilemind on behalf of eGames.com. As described below, until December 1, 2020, the principal amount of the First Note accrued interest at the rate of 8% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. On November 19, 2020, eGames.com agreed to loan, or cause Fertilemind, on behalf of eGames.com, to loan an additional $500,000 to the Company on December 1, 2020. Upon receipt of such $500,000 loan, on December 1, 2020, the Company issued a second unsecured promissory note (the “Second Note”) evidencing such loan. In connection with borrowing the additional $500,000 loan, the interest rate of the First Note increased from 8% to 10% beginning on December 1, 2020. On January 12, 2021, eGames.com agreed to loan, or cause Fertilemind, on behalf of eGames.com, to loan an additional $200,000 to the Company on January 12, 2021. Upon receipt of such $200,000 loan, on January 12, 2021, the Company issued a third unsecured promissory note (the “Third Note,” and together with the First Note and the Second Note, the “Bridge Notes”) evidencing such loan. The principal amount of the Second Note and the Third Note accrues interest at the rate of 10% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. The principal amount of the Bridge Notes and accrued interest thereon is due and payable upon the earlier of (i) the termination of the APA, (ii) the closing of a Business Combination (as defined in the Bridge Notes), and (iii) April 30, 2021. Upon the closing of the Asset Sale, the outstanding principal amount of the Bridge Notes and all accrued and unpaid interest thereon will be applied against the purchase price under the APA, and the Bridge Notes will be extinguished. The Company may use the proceeds under the Bridge Notes for, among other things, the payment of obligations related to the transactions contemplated by the APA and the Merger and other general working capital purposes. As of December 31, 2020, the outstanding principal balance of the First Note and Second Note was $1,500,000 in the aggregate, and combined with the Third Note in January 2021, the outstanding principal balance of the Bridge Notes is currently $1,700,000. As of December 31, 2020, the Company recorded approximately $29,000 of accrued and unpaid interest related to the First Note and Second Note. The Bridge Notes include customary events of default, including if any portion of either of the Bridge Notes is not paid when due; if the Company defaults in the performance of any other material term, agreement, covenant or condition of either of the Bridge Notes, subject to a cure period; if any final judgment for the payment of money is rendered against the Company and it does not discharge the same or cause it to be discharged or vacated within 90 days; if the Company makes an assignment for the benefit of creditors, if the Company generally does not pay its debts as they become due; if a receiver, liquidator or trustee is appointed for the Company, or if it is adjudicated bankrupt or insolvent. In the event of an event of default, the Bridge Notes will accelerate and become immediately due and payable at the option of the holder. Interest expense related to total long-term debt for the years ended December 31, 2020 and 2019 was $118,000 and $236,000, respectively. 16. Leases As Lessee The Company has an operating lease for its warehouse facility in Ohio. The warehouse lease requires the Company to pay utilities, insurance, taxes and other operating expenses. The Company terminated its lease for its corporate headquarters as of June 30, 2020, which is discussed further below. The Company also has property held under finance leases that expire at various dates through 2021. The Company’s leases do not contain any residual value guarantees or material restrictive covenants. Upon adoption of ASC No. 842, Leases (“ASC No. 842”), the Company recognized on its consolidated balance sheet as of January 1, 2019 an initial measurement of approximately $3,458,000 of operating lease liabilities and approximately $2,336,000 of corresponding operating right-of use assets, net of tenant improvement allowances, the amounts of which were primarily related to the Company’s corporate headquarters. The initial measurement of the finance leases under ASC No. 842 did not have a material change from the balances of the finance lease liabilities and assets recorded prior to the adoption of ASC No. 842. There was also no cumulative effect adjustment to accumulated deficit as a result of the transition to ASC No. 842. The Company recorded the initial recognition of the operating leases as a supplemental noncash financing activity on the accompanying consolidated statement of cash flows. The adoption of ASC No. 842 did not have a material impact on the Company’s consolidated statement of operations. Corporate Headquarters Lease Termination As part of the Company’s on-going efforts to implement measures designed to reduce operating expenses and preserve capital as it continued to seek to mitigate the substantial negative impact of the COVID-19 pandemic on the Company’s business, on June 25, 2020, the Company entered into a Lease Termination, Surrender and Buy-Out Agreement (the “Lease Termination Agreement”) with Burke Aston Partners, LLC (the “Lessor”) to terminate, effective June 30, 2020, the lease dated July 26, 2018 for the Company’s corporate headquarters. Absent the Lease Termination Agreement, the lease would have expired in accordance with its terms in April 2026. Since January 1, 2020, the Company reduced its headcount from 74 to 22 employees, all of whom are currently working remotely, and the Company did not currently need a corporate headquarters of the size subject to that lease. F- 25 Pursuant to the Lease Termination Agreement, in exchange for allowing the Company to terminate the lease early, the Company agreed to (i) allow the Lessor to keep its security deposits of approximately $260,000, which includes $200,000 of restricted cash under a letter of credit, (ii) pay the Lessor approximately $121,000 for past due rent, and (iii) pay the Lessor $80,000 if the Company sells all or any material part of its assets or all or any material part of its equity interests and $5,000 if the Lessor needs to dispose of furniture that remained in the office space. In July 2020, the Lessor informed the Company that it needed to dispose of the remaining furniture, and the Company paid the Lessor $5,000 to do so. As a result of the lease termination, the Company recorded a gain on the termination of the lease of approximately $9,000 during the three months ended June 30, 2020, which includes writing off the remaining balances of the right-of-use asset of approximately $1,913,000 and the corresponding lease liability of approximately $3,135,000, applying the principal portion of past due rents to be paid in July 2020 of approximately $64,000, writing off of the unamortized tenant improvement allowance of approximately $890,000, and applying the security deposit of approximately $260,000. Additionally, as part of the lease termination and vacating the facility, the Company recorded a loss on the disposal of fixed assets of approximately $282,000 during the three months ended June 30, 2020, which includes approximately $197,000 in furniture and fixtures and the Company’s vehicle, and $85,000 in other leasehold improvement assets. The tables below show the initial measurement of the operating lease right-of-use assets and liabilities as of January 1, 2020 and the balances as of December 31, 2020, including the changes during the year. Operating lease right-of-use assets Operating lease right-of use assets at January 1, 2020 $ 2,101,000 Amortization of operating lease right-of-use assets (173,000 ) Addition of operating lease right-of -use asset 71,000 Write-off of right-of-use asset due to headquarters lease termination (1,913,000 ) Write-off of right-of-use asset related to other lease terminations (50,000 ) Operating lease right-of-use assets at December 31, 2020 $ 36,000 Operating lease liabilities Operating lease liabilities at January 1, 2020 $ 3,300,000 Principal payments on operating lease liabilities (165,000 ) Addition of operating lease liability 71,000 Write-off of lease liability related to headquarters lease termination (3,135,000 ) Write-off of lease liability related to other lease terminations (35,000 ) Operating lease liabilities at December 31, 2020 36,000 Less non-current portion - Current portion at December 31, 2020 $ 36,000 As of December 31, 2020, the Company’s operating lease has a weighted-average remaining lease term of 0.8 years and a weighted-average discount rate of 5.0%. The maturity of the operating lease liability is as follows: As of December 31, 2020 2021 $ 37,000 Total operating lease payments 37,000 Less imputed interest (1,000 ) Present value of operating lease liabilities $ 36,000 Total lease expense was approximately $294,000 and $542,000 for the twelve months ended December 31, 2020 and 2019, respectively. Lease expense was recorded in selling, general and administrative expenses. F- 26 The tables below show the beginning balances of the finance lease right-of-use assets and liabilities as of January 1, 2020 and the ending balances as of December 31, 2020, including the changes during the periods. The Company’s finance lease right-of-use assets are included in “Fixed assets, net” on the accompanying consolidated balance sheet. Finance lease right-of-use assets Initial measurement at January 1, 2020 $ 41,000 Less depreciation of Finance lease right-of-use assets (21,000 ) Finance lease right-of-use assets at December 31, 2020 $ 20,000 Finace lease liabilities Initial measurement at January 1, 2020 $ 41,000 Less principal payments on Finance lease liabilities (19,000 ) Finance lease liabilities as of December 31, 2020 22,000 Less non-current portion - Current portion at December 31, 2020 $ 22,000 As of December 31, 2020, the Company’s finance leases have a weighted-average remaining lease term of 0.9 years and a weighted-average discount rate of 5.52%. The maturities of the finance lease liabilities are as follows: As of December 31, 2020 2021 22,000 Total Finance lease payments 22,000 Less imputed interest - Present value of Finance lease liabilities $ 22,000 For the years ended December 31, 2020 and 2019, total lease costs under finance leases were approximately $21,000 and $48,000, respectively. As Lessor ASC No. 842 did not make fundamental changes to lease accounting guidance for lessors. Therefore there was no financial statement impact due to the adoption of ASC No. 842. As a lessor, the Company has two types of customer contracts that involve leases: right-to-use operating leases and sales-type leases. Right-to-use operating leases. Certain customers enter into contracts to obtain subscription services from the Company, which includes the Company’s content (nonlease component) and equipment installed in the customer locations so the customer can access the content (lease component). The timing and pattern of the transfer of both the subscription services and the equipment are the same, that is, the Company’s subscription services are made available to its customer at the same time as the equipment is installed. Additionally, the Company has determined that the lease component of these customer contracts is an operating lease. Accordingly, the Company has concluded that these contracts qualify for the practical expedient permitted under ASC No. 842 to not separate the nonlease component from the related lease component. Instead, the Company treats the combined component as a single performance obligation under Topic 606, Revenue from Contracts with Customers, as the Company has concluded that the nonlease component (subscription services) is the predominant component of the combined component. Sales-type leases. As with the contracts under right-of-use operating leases, certain customers enter into contracts to obtain subscription services from the Company, which includes the Company’s content (nonlease component) and equipment installed in the customer locations so the customer can access the content (lease component). Generally, the equipment lease term is for three years and the customer prepays its lease in full. After the lease term, the lessee may purchase the equipment for a nominal fee or lease new equipment. Although the timing and pattern of the transfer of both the subscription services and the equipment may be the same, the provisions of the contract related to the equipment results in a sales-type lease, and therefore, the Company cannot treat both the nonlease component and the lease component as a combined component. Accordingly, the nonlease component is accounted for under Topic 606 and the sales-type lease is accounted for under Topic 842 and separately disaggregated on the Company’s statement of operations. Since November 2019, the Company no longer has contracts under sales-type lease arrangements and does not expect to enter into contracts with sales-type lease arrangements in the future. F- 27 17. Commitments and Contingencies Litigation From time to time, the Company is subject to legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm its financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition or operating results. The Company is not currently subject to any pending material legal proceedings except as described below. The Company and its directors were named as defendants in ten substantially similar actions brought by purported stockholders of the Company arising out of the Merger: Henson v. NTN Buzztime, Inc. , No. 1:20-cv-08663-LGS (S.D.N.Y. filed Oct. 16, 2020); Monsour v. NTN Buzztime, Inc. , No. 1:20-cv-08755-LGS (S.D.N.Y. filed Oct. 20, 2020); Amanfo v. NTN Buzztime, Inc. , No. 1:20-cv-08747-LGS (S.D.N.Y. filed Oct. 20, 2020); Carlson v. NTN Buzztime, Inc. , No. 1:21-cv-00047-LGS (S.D.N.Y. filed Jan. 4, 2021); Finger v. NTN Buzztime, Inc. , No. 1:21-cv-00728-LGS (S.D.N.Y. filed Jan. 26, 2021); Falikman v. NTN Buzztime, Inc. , No. 1:20-cv-05106-EK-SJB (E.D.N.Y. filed Oct. 23, 2020); Haas v. NTN Buzztime, Inc. , No. 3:20-cv-02123-BAS-JLB (S.D. Cal. Oct. 29, 2020); Gallo v. NTN Buzztime, Inc. , No. 3:21-cv-00157-WQH-AGS (S.D. Cal. filed Jan. 28, 2021); Chinta v. NTN Buzztime, Inc. , No. 1:20-cv-01401-CFC (D. Del. filed Oct. 16, 2020); and Nicosia v. NTN Buzztime, Inc. , No. 1:21-cv-00125-CFC (D. Del. filed Jan. 30, 2021 ) (collectively, the “Stockholder Actions”). Brooklyn also was named as a defendant in two of the actions ( Chinta and Nicosia ). The Stockholder Actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. Henson and Monsour assert additional claims for breach of fiduciary duty. The complaints allege that defendants failed to disclose allegedly material information in the Form S-4 Registration Statement filed with the SEC on October 2, 2020, including (1) certain details regarding any projections or forecasts the Company or Brooklyn may have made, and the analyses performed by the Company’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not the Company entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints allege that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints request a preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate a compliant Registration Statement; an accounting by the Company for all alleged damages suffered; a declaration that certain federal securities laws have been violated; and costs, including attorneys’ and expert fees and expenses. Process was served in Henson , Chinta , Amanfo , Falikman , Carlson and Gallo, but not in any of the other Stockholder Actions. Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief. The Company and its directors deny any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been asserted, in the Stockholder Actions, as the Company believes the disclosures set forth in the Form S-4 complied fully with applicable law. Nevertheless, in order to avoid nuisance, potential expense and delay, and to provide additional information to the Company’s stockholders, the Company determined to voluntarily supplement the Form S-4 with further disclosures (the “Supplemental Disclosures”) on Form 8-K, filed on February 26, 2021. These Supplemental Disclosures discussed, inter alia , (1) certain details regarding any projections or forecasts the Company or Brooklyn may have made, and the analyses performed by the Company’s financial advisor, Newbridge Securities Corporation; and (2) information regarding whether or not the Company entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The Company believes that as a consequence of the issuance of the Supplemental Disclosures all claims asserted in the Stockholder Actions have been rendered moot, and have requested that all plaintiffs in the Stockholder Actions dismiss their claims voluntarily (or immediately inform the Company if they are not willing to do so). Since the issuance of the Supplemental Disclosures, the plaintiffs in Henson , Chinta , Monsour , Amanfo , Carlson and Nicosia have voluntarily dismissed their cases. The Company expects the plaintiffs in the other Stockholder Actions to do the same. On March 2, 2021, the court in Haas issued an order to show cause why the case should not be dismissed for failure to prosecute. Plaintiffs in the Stockholder Actions reserve the right to seek payment by the Company to their attorneys of a “mootness fee” in an amount yet to be determined in connection with the issuance of the Supplemental Disclosures. On March 5, 2021, the Company and its directors were named as defendants in a putative class action brought by a purported stockholder in the Court of Chancery of the State of Delaware, entitled Carlson v. NTN Buzztime, Inc ., Case No. 2021-0193- (Del. Ch. filed Mar. 5, 2021). The action asserts claims for violations of Section 211(c) of the Delaware General Corporation Law and the Company’s bylaws (and a concomitant breach of fiduciary duty), alleging that the Company failed to conduct an annual meeting of stockholders within thirteen months of the previous annual meeting of stockholders, which took place on June 7, 2019. Plaintiff is requesting certification of a class, declaratory relief, injunctive relief to compel an annual meeting of stockholders, and fees and costs. The complaint does not yet appear to have been served upon any of the defendants. The Company expects this action will be rendered moot upon the Company’s holding of its special meeting of stockholders on March 15, 2021. 18. Accumulated Other Comprehensive Income Accumulated other comprehensive income includes the accumulated gains or losses from foreign currency translation adjustments. The Company translated the assets and liabilities on the balance sheet of its subsidiary, NTN Canada Inc., into U.S. dollars using the period end exchange rate. Revenue and expenses were translated using the weighted-average exchange rates for the reporting period. As of December 31, 2020 and 2019, $245,000 and $268,000, respectively, of accumulated foreign currency translation adjustments were recorded in accumulated other comprehensive income. 19. Retirement Savings Plan In 1994, the Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees who have completed at least three months of service, have worked a minimum of 250 hours in a quarter, and have reached age 18 to defer up to 50% of their pay on a pre-tax basis. The Company does not contribute a match to the employees’ contribution. 20. Subsequent Event Third Bridge Loan As discussed in Note 3 and Note 15, in addition to the First Note and Second Note the Company issued in exchange for the $1,000,000 bridge loan and the $500,000 bridge loan Fertilemind, on behalf of eGames.com, gave to the Company on September 18, 2020 and December 1, 2021, respectively, on January 12, 2021, eGames.com agreed to loan, or cause Fertilemind, on behalf of eGames.com, to loan an additional $200,000 to the Company on January 12, 2021. Upon receipt of such $200,000 loan, on January 12, 2021, the Company issued a third unsecured promissory note (the “Third Note,” and together with the First Note and the Second Note, the “Bridge Notes”) evidencing such loan. The principal amount of the Third Note accrues interest at the rate of 10% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. The principal amount of the Bridge Notes and accrued interest thereon is due and payable upon the earlier of (i) the termination of the APA, (ii) the closing of a Business Combination (as defined in the Bridge Notes), and (iii) April 30, 2021. Upon the closing of the Asset Sale, the outstanding principal amount of the Bridge Notes and all accrued and unpaid interest thereon will be applied against the purchase price under the APA, and the Bridge Notes will be extinguished. The Company may use the proceeds under the Bridge Notes for, among other things, the payment of obligations related to the transactions contemplated by the APA and the Merger and other general working capital purposes. F- 28