Ernexa Therapeutics Inc 10-Q for FY2021 Q3
Ernexa Therapeutics Inc. (ERNA)
10-Q
2021-11-12
For: 2021-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Ernexa Therapeutics Inc filed this 10-Q on November 12, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $86.06M
- compared with a net loss of $2.02M a year earlier
- Diluted EPS
- -$1.70
- compared with -$0.11 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2021
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _________ to _____________
Commission file number: 001-11460
(Exact name of registrant as specified in its charter)
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(212 ) 582-1199
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐ |
Accelerated filer
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☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 8, 2021, the registrant had outstanding 52,043,818 shares of common stock, $0.005 par value per share.
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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Financial Statements (unaudited)
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1
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2
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3
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4
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Item 2.
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Item 3.
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Item 4.
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PART II – OTHER INFORMATION
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Item 1.
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35 | |
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Item 1A.
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35 | |
| Item 2. |
36 |
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Item 6.
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37 | |
| 38 | ||
In this report, “Brooklyn” refers to Brooklyn ImmunoTherapeutics, Inc. (formerly known as NTN Buzztime, Inc.) and “Brooklyn LLC” refers to Brooklyn ImmunoTherapeutics LLC, a
wholly owned subsidiary of Brooklyn. All references to “our company,” “we,” “us” or “our” mean Brooklyn. and its subsidiaries, including Brooklyn LLC, unless stated otherwise or the context otherwise requires.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts could be deemed forward-looking statements. We have tried, whenever possible, to identify these statements
by using words such as “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “seeks,” or words of similar meaning, or future or conditional verbs, such as “may,” “will,” “should,” “could,” “aims,” “intends” or “projects,” and
similar expressions, whether in the negative or the affirmative. Forward-looking statements reflect management’s beliefs and assumptions, are based on currently available operating, financial and competitive information and are subject to
various risks and uncertainties. Forward-looking statements by their nature address matters that are, to different degrees, subject to risks and uncertainties that could cause actual results to differ materially and adversely from those
expressed in any forward-looking statement.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you
should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in our forward-looking statements. We have identified important factors in
the cautionary statements included, or incorporated by reference, in this report, particularly in “Item 1A. Risk Factors” in Part II of this report, that we believe could cause actual results or events to differ materially from our
forward-looking statements.
We intend forward-looking statements to speak only as of the time they are made. Except as required by law, we do not
undertake, and expressly disclaim any obligation, to disseminate, after the date hereof, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any
such statements are based.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
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September 30,
2021
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December 31,
2020
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ASSETS
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(unaudited) |
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Current assets:
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Cash
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$
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$
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Tax receivable
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Prepaid expenses and other current assets
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Total current assets
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Property and equipment, net
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Right-of-use assets - operating leases
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Goodwill
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In-process research and development
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| Investment in NoveCite |
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Security deposits and other assets
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Total assets
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$
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$
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LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses
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Loans payable
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PPP Loan, current
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Operating lease liabilities, current
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| Other current liabilities | ||||||||
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Total current liabilities
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Contingent consideration
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Operating lease liabilities, non-current
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PPP Loan, non-current
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Other liabilities
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Total liabilities
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Stockholders’ and members’ equity (deficit):
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Class A membership units
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Class B membership units
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Class C membership units
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Common units
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| Series A convertible preferred stock | ||||||||
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Common stock, $
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Additional paid-in capital
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Accumulated deficit
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(
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)
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(
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)
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Total stockholders’ and members’ equity (deficit)
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(
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)
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|||||
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Total liabilities and stockholders’ and members’ equity (deficit)
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$
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$
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||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
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Operating expenses:
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Research and development
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| Acquired in-process research and development |
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General and administrative
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Transaction costs
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Change in fair value of contingent consideration
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(
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Total operating expenses
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Loss from operations
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(
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(
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(
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(
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Other income (expenses):
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Loss on sale of NTN assets
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(
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)
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Other income (expense), net
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(
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(
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Total other income (expenses), net
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(
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(
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(
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Net loss
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(
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(
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(
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(
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Series A convertible preferred stock dividend
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(
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)
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Net loss attributable to common stockholders
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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Net loss per common share - basic and diluted
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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)
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Weighted average shares outstanding - basic and diluted
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
For the three and nine months ended September 30, 2021 and 2020 (unaudited)
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Membership Equity
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Common
Stock
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Series A Convertible
Preferred Stock
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Additional
Paid-in
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Accumulated | |||||||||||||||||||||||||||||||||||||||
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Class A
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Class B
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Class C
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Common
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Shares
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Amount
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Shares
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Amount
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Capital
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Deficit
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Total
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|||||||||||||||||||||||||||||||||
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Balances at July 1, 2021
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$
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$
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$
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$
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$
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$
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$
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$
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(
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$
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Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net
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Issuance of common stock in connection with the acquisition of Novellus, Inc.
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Forfeiture of unvested restricted stock
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(
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(
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Stock based compensation
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-
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-
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Net loss
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-
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-
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(
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)
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(
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)
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|||||||||||||||||||||||||||||||
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Balances at September 30, 2021
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$
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$
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$
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$
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$
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$
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$
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$
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(
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)
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$
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|||||||||||||||||||||||
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||||||||||||||||||||||||||||||||||||||||||||
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Balances at January 1, 2021
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$
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$
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$
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$
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$
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$
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$
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$
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(
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)
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$
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(
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)
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||||||||||||||||||||||
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Brooklyn rights offerings membership units
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-
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-
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|||||||||||||||||||||||||||||||||
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Elimination of Brooklyn’s historical members’ equity
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(
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)
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(
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)
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(
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)
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(
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)
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-
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-
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Common stock to be retained by NTN stockholders
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Issuance of Series A convertible preferred stock retained by NTN stockholders
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(
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)
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||||||||||||||||||||||||||||||||
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Issuance of common stock to Brooklyn members
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|
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(
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)
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||||||||||||||||||||||||||||||||
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Issuance of common stock to Financial Advisor upon consummation of merger
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Issuance of common stock from the exercise of stock options
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Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net
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|||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the acquisition of Novellus, Inc. | ||||||||||||||||||||||||||||||||||||||||||||
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Issuance of common stock in lieu of cash dividend to Series A convertible preferred stockholders
|
|
|
|
|
|
|
|
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|
(
|
)
|
|
||||||||||||||||||||||||||||||||
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Forfeiture of unvested restricted stock
|
|
|
|
|
(
|
)
|
(
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)
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
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Stock based compensation
|
|
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-
|
|
-
|
|
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|||||||||||||||||||||||||||||||||
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Net loss
|
|
|
|
|
-
|
|
-
|
|
|
( |
) |
(
|
)
|
|||||||||||||||||||||||||||||||
|
Balances at September 30, 2021
|
$
|
|
$
|
|
$
|
|
$
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||||||||
| Membership Equity |
Accumulated |
|||||||||||||||||||||||
| Class A | Class B |
Class C
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Common
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Deficit
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Total | |||||||||||||||||||
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Balances at July 1, 2020
|
$
|
|
$
|
|
$
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|
$
|
|
$
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(
|
)
|
$
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|
|||||||||||
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Stock based compensation:
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||||||||||||||||||||||||
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Net loss
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|
|
|
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(
|
)
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(
|
)
|
||||||||||||||||
|
Balances at September 30, 2020
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
| Balances at January 1, 2020 |
$ |
$ |
$ |
$ |
$ |
( |
) | $ |
||||||||||||||||
| Stock based compensation |
||||||||||||||||||||||||
| Sale of members’ equity |
||||||||||||||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Balances at September 30, 2020 |
$ |
$ |
$ |
$ |
$ |
( |
) | $ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
(unaudited)
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For the nine months ended
September 30,
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2021
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2020
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Cash flows used in operating activities:
|
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Net loss
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$
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(
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)
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$
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(
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization
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Stock-based compensation
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Amortization of right-to-use asset
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Transaction costs - shares to Financial Advisor
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Loss on sale of NTN assets
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| Loss on disposal of fixed assets |
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| Gain on forgiveness of PPP Loan |
( |
) | ||||||
| Acquired in-process research and development |
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Change in fair value of contingent consideration
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(
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)
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|
|||||
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Changes in operating assets and liabilities:
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Account receivable
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Prepaid expenses and other current assets
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(
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)
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(
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)
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||||
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Security deposits and other non-current assets
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(
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)
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(
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)
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Accounts payable and accrued expenses
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(
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)
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|||||
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Operating lease liability
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(
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)
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(
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)
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||||
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Other liabilities
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||||||
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Net cash used in operating activities
|
(
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)
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(
|
)
|
||||
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Cash flows used in investing activities:
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||||||||
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Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
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Purchase of NTN, net of cash acquired
|
|
|
||||||
| Purchase of Novellus, net cash acquired |
( |
) | ||||||
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Proceeds from the sale of NTN assets, net of cash disposed
|
|
|
||||||
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Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows provided by financing activities:
|
||||||||
|
Net proceeds of common stock issued to Lincoln Park
|
||||||||
|
Proceeds from the exercise of stock options
|
||||||||
|
Proceeds from loans payable
|
||||||||
| Proceeds from the collection of subscription receivable |
||||||||
|
Repayment of NTN’s PPP loan
|
(
|
)
|
|
|||||
|
Proceeds from sale of members’ equity
|
|
|
||||||
|
Net cash provided by financing activities
|
|
|
||||||
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Net increase (decrease) in cash and cash equivalents
|
|
(
|
)
|
|||||
|
Cash and cash equivalents at beginning of period
|
|
|
||||||
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Cash and cash equivalents at end of period
|
$
|
|
$
|
|
||||
|
Supplemental disclosures of cash flow information:
|
||||||||
|
Cash paid during the period for:
|
||||||||
|
Interest
|
$
|
|
$
|
|
||||
|
Income taxes
|
$
|
|
$
|
|
||||
|
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
|
Issuance of common stock for Series A convertible preferred stock dividend
|
$ | $ | ||||||
|
Issuance of common stock for business combination
|
$
|
|
$
|
|
||||
| Issuance of common stock for Novellus acquisition |
$ | $ | ||||||
|
Forfeiture of unvested restricted stock
|
$
|
(
|
)
|
$
|
|
|||
|
Preferred shares issued in connection with reverse merger
|
$
|
|
$
|
|
||||
|
Initial measurement of ROU assets, net of tenant improvement allowance
|
$ | $ | ||||||
|
Initial measurement of operating lease liabilities
|
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
(Unaudited)
| 1) |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
|
Description of Business
Brooklyn ImmunoTherapeutics Inc. (“Brooklyn”), together with its subsidiaries including Brooklyn ImmunoTherapeutics LLC (“Brooklyn LLC”), is a
clinical stage biopharmaceutical company focused on exploring the role that cytokine, gene editing and cell therapy can have in treating patients with cancer, blood disorders and monogenic diseases. As used herein, the “Company” refers
collectively to Brooklyn and its subsidiaries.
On August 12, 2020, Brooklyn (then known as “NTN Buzztime, Inc.”), Brooklyn LLC and BIT Merger Sub, Inc., a wholly owned subsidiary of
Brooklyn (the “Merger Sub”), entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) pursuant to which, among other matters, Merger Sub merged with and into Brooklyn LLC, with Brooklyn LLC continuing as a
wholly owned subsidiary of Brooklyn and as the surviving company of the merger (the “Merger”). The Merger was closed on March 25, 2021. After the Merger, Brooklyn changed its name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics,
Inc.” The Merger was accounted for as a reverse acquisition, with Brooklyn LLC being deemed the acquiring company for accounting purposes.
On March 26, 2021, Brooklyn sold (the “Disposition”) its rights, title and interest
in and to the assets relating to the business it operated prior to the Merger, which was operated under the name “NTN Buzztime, Inc.,” to eGames.com Holdings LLC (“eGames.com”) in accordance with the terms of an asset purchase agreement dated
September 18, 2020, as amended, between Brooklyn and eGames.com (the “Asset Purchase Agreement”). (See Note 3.)
On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc. entered into an
agreement and plan of acquisition (the “Acquisition Agreement”) with (a) Novellus LLC, (b) Novellus, Inc., the sole equity holder of Novellus Therapeutics Limited (“Novellus, Ltd.”) and, prior to the closing under the Acquisition Agreement, a
wholly owned subsidiary of Novellus, LLC, and (c) a seller representative (the “Acquisition”). As part of the Acquisition, Brooklyn also acquired 25.0 %
of the total outstanding equity interests of NoveCite, Inc. (“NoveCite”), a corporation focused on developing an allogeneic mesenchymal stem cell product for patients with acute respiratory distress syndrome, including from COVID-19. (See Note
3.)
Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared
in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
As described above, the Merger closed on March 25, 2021. The Merger was accounted
for as a reverse acquisition, with Brooklyn LLC being deemed the acquiring company for accounting purposes. Brooklyn LLC’s historical financial statements have replaced Brooklyn’s historical financial statements with respect to periods prior to
the completion of the Merger (when Brooklyn operated under the name “NTN Buzztime, Inc.”. The Company retrospectively adjusted the weighted average shares used in determining loss per common share to reflect the conversion of the outstanding
Class A units, Class B units, Class C units, and common units of Brooklyn LLC that converted into shares of Brooklyn’s common stock upon the Merger and to reflect the effect of a reverse stock split of Brooklyn’s common stock that occurred immediately prior to the Merger.
Also
as described above, the Acquisition closed on July 16, 2021. The Acquisition was accounted for as an asset acquisition, and substantially all of the value was attributed to in-process research and development (“IPR&D”), with the exception of
the cash paid for the investment in NoveCite, which is being accounted for as an investment in equity securities. The IPR&D had no alternative future uses and no separate economic values from its original intended purpose and was therefore
expensed in the period the cost was incurred.
These
condensed consolidated financial statements should be read with the audited consolidated financial statements and notes thereto for the fiscal year ended, and as of, December 31, 2020, contained in Brooklyn’s Current Report on Form 8-K filed with
the Securities and Exchange Commission (the “SEC”) on March 31, 2021, as amended by an amendment thereto filed with the SEC on April 30, 2021. The accompanying condensed consolidated balance sheet as of December 31, 2020 has been derived from the
audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and nine months ended September 30, 2021 are not
necessarily indicative of the results to be anticipated for the entire year ending December 31, 2021, or any other period.
| 2) |
LIQUIDITY AND CAPITAL RESOURCES
|
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
The Company has incurred significant operating losses and has an accumulated deficit as a result of ongoing efforts to develop product candidates, including conducting clinical trials and providing general and administrative support for these
operations. As of September 30, 2021, the Company had a cash balance of $24,381,831 and an accumulated deficit of $151,231,510 (inclusive of $80,537,551
IPR&D expense related to the Acquisition, $9,648,173 related to the loss on sale of assets in the Disposition and $750,000 related to the change in fair value of contingent consideration). During the three and nine months ended September 30, 2021, the Company
incurred a net loss of $86,055,312 and $113,842,963 ,
respectively, and during the nine months ended September 30, 2021, the Company used cash in operating activities of $16,657,634 .
On April 26, 2021, Brooklyn entered into a common stock purchase agreement (the “First Purchase Agreement”)
with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provided that Brooklyn could offer
to Lincoln Park up to an aggregate of $20,000,000 of common stock over a 36 -month period commencing after May 10, 2021, the date that a registration statement covering the resale of shares of common stock issued under the First Purchase Agreement was declared
effective by the SEC. As of September 30, 2021,
Brooklyn had issued and sold an aggregate of 1,127,736 shares of common stock to Lincoln Park pursuant to the First Purchase
Agreement, resulting in gross proceeds of $20,000,000 .
On May 26, 2021, Brooklyn
entered into a second common stock purchase agreement (the “Second Purchase Agreement”) with Lincoln Park, which provides that Brooklyn may offer to Lincoln Park up to an aggregate of $40,000,000 of common stock over a 36 -month period commencing after June 4, 2021, the date that a registration statement covering the resale of shares of common stock issued under the Second Purchase Agreement was
declared effective by the SEC. As of September 30, 2021, Brooklyn had issued and sold an aggregate of 2,424,254 shares of common stock
to Lincoln Park pursuant to the Second Purchase Agreement, resulting in gross proceeds of $34,105,514 .
On July 16, 2021, Brooklyn used $22,882,181 of cash towards the purchase price of the Acquisition. The
remaining purchase price of the Acquisition was completed through the issuance of Brooklyn’s common stock.
The
Company believes its existing cash resources are
sufficient to fund its current operating plan for at least the next 12 months from the date these financial statements are being issued.
|
3)
|
MERGER, DISPOSITION AND ACQUISITION TRANSACTIONS
|
Merger
On
August 12, 2020, Brooklyn, Brooklyn LLC and the Merger Sub entered into the Merger Agreement. The Merger closed on March 25, 2021. After the Merger, Brooklyn changed its name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.” The
Merger was accounted for as a reverse acquisition, with Brooklyn LLC being deemed the acquiring company for accounting purposes. Brooklyn LLC, as the accounting acquirer, recorded the assets acquired and liabilities assumed of Brooklyn in the
Merger at their fair values as of the acquisition date. Brooklyn’s common stock trades on the NYSE American stock exchange under the ticker symbol “BTX”.
Brooklyn LLC was determined to be the
accounting acquirer based upon the terms of the Merger and other factors including (i) Brooklyn LLC members, having received common stock in the Merger that represented 96.35 % of Brooklyn’s outstanding common stock on a fully diluted basis as of immediately after the Merger, (ii) all of the directors of
Brooklyn immediately after the Merger having been designated by Brooklyn LLC under the terms of the Merger Agreement and (iii) existing members of Brooklyn LLC’s management having become the management of Brooklyn immediately after the Merger.
At the closing of
the Merger, all the outstanding membership interests of Brooklyn LLC converted into the right to receive an aggregate of 39,991,625
shares of common stock, of which 1,067,668 shares were issued as compensation to Maxim Group LLC, Brooklyn LLC’s financial advisor (the “Financial Advisor”)
for its services to Brooklyn LLC in connection with the Merger.
The purchase price
of $8,177,614 , which represents the consideration transferred in the Merger to stockholders of Brooklyn immediately before the Merger, was calculated based on the fair value of the common stock that
those
stockholders owned on March
25, 2021, immediately prior to the Merger, because that represented a more reliable measure of the fair value of consideration transferred in the Merger. The purchase price of $8,177,614 was calculated as follows:
|
Number of shares of common stock owned by
Brooklyn stockholders immediately before the Merger
|
|
|||
|
Multiplied by the fair value per share of common stock (i)
|
$
|
|
||
|
Total purchase price
|
$
|
|
| (i) |
|
Under the acquisition method
of accounting, the total purchase price has been allocated to the acquired tangible and intangible assets and assumed liabilities of Brooklyn based on their estimated fair values as of March 25, 2021, the Merger closing date. Because the
consideration paid by Brooklyn LLC in the Merger is more than the estimated fair values of Brooklyn’s
net assets deemed to be acquired, goodwill equal to the difference is reflected in the unaudited pro forma condensed consolidated balance sheet. The goodwill of $8,588,576 has been calculated using the fair values of the net assets of Brooklyn as of March 25, 2021.
The allocation of the estimated purchase
price to the tangible and intangible assets acquired and liabilities deemed to be assumed from Brooklyn, based on their estimated fair values as of March 25, 2021, is as follows:
|
Historical Balance
Sheet of
Brooklyn at
March 25, 2020
|
Fair Value
Adjustment to
Brooklyn
Pre-Merger
Assets
|
Purchase
Price
Allocation Pro
Forma
Adjustment
|
||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Accounts receivable
|
|
|
|
|||||||||
|
Prepaid expense and other current assets
|
|
|
|
|||||||||
|
Property and equipment, net
|
|
|
|
|||||||||
|
Software development costs
|
|
(
|
)
|
|
||||||||
|
Customers
|
|
|
|
|||||||||
|
Trade name
|
|
|
|
|||||||||
|
Accounts payable, accrued liabilities and other current liabilities
|
(
|
)
|
|
(
|
)
|
|||||||
|
Net assets acquired, excluding goodwill
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||
|
Total consideration
|
$
|
|
||||||||||
|
Net assets acquired, excluding goodwill
|
(
|
)
|
||||||||||
|
Goodwill
|
$
|
|
||||||||||
Brooklyn LLC was obligated
under the Merger Agreement to have $10,000,000 in cash and cash equivalents on its balance sheet at the effective time of the Merger.
To ensure Brooklyn LLC had the required funds, certain beneficial holders of Brooklyn LLC’s Class A membership interests entered into contractual commitments to invest $10,000,000 into Brooklyn LLC immediately prior to the closing of the Merger. During March 2021, Brooklyn offered to its Class A unit holders an additional 5 % rights offering for an additional $500,000
to be raised by a rights offering. Funding to the rights offering was received between February 17, 2021 and April 5, 2021.
Disposition
On March 26, 2021, Brooklyn sold its rights, title and interest in and to
the assets relating to the business it operated prior to the Merger to eGames.com in exchange for a purchase price of $2,000,000 and
assumption of specified liabilities relating to that business. The sale was completed in accordance with the terms of the Asset Purchase Agreement. Details of the Disposition are as follows:
|
Proceeds from sale:
|
||||
|
Cash
|
$
|
|
||
|
Escrow
|
|
|||
|
Assume advance/loans
|
|
|||
|
Interest on advance/loans
|
|
|||
|
Carrying value of assets sold:
|
||||
|
Cash and cash equivalents
|
(
|
)
|
||
|
Accounts receivable
|
(
|
)
|
||
|
Prepaids and other current assets
|
(
|
)
|
||
|
Property and equipment, net
|
(
|
)
|
||
|
Software development costs
|
(
|
)
|
||
|
Customers
|
(
|
)
|
||
|
Trade name
|
(
|
)
|
||
|
Goodwill
|
(
|
)
|
||
|
Other assets
|
(
|
)
|
||
|
Liabilities transferred upon sale:
|
||||
|
Accounts payable and accrued expenses
|
|
|||
|
Obligations under finance leases
|
|
|||
|
Lease liability
|
|
|||
|
Deferred revenue
|
|
|||
|
Other current liabilities
|
|
|||
|
Transaction costs
|
(
|
)
|
||
|
Total loss on sale of assets
|
$
|
(
|
)
|
|
Unaudited
Pro Forma Disclosure
The following unaudited
pro forma financial information summarizes the results of operations for the nine months ended September 30, 2021 and 2020 as if the Merger and the Disposition had been completed as of January 1, 2020. Pro forma information primarily reflects adjustments relating to the reversal of transaction costs.
Assuming that the Merger and the Disposition had been completed as of January 1, 2020, the transaction costs would have been expensed in the prior period.
|
Nine months ended September 30,
|
||||||||
|
2021
|
2020
|
|||||||
|
Net loss attributable to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Basic and diluted net loss per share attributable to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Acquisition
On July 16,
2021, Brooklyn and Brooklyn Acquisition Sub, Inc. entered into the “Acquisition Agreement.” The Acquisition closed contemporaneously with the execution and delivery of the Acquisition Agreement. At the closing:
• Brooklyn acquired all of the outstanding equity interests of Novellus, Inc. as the result of the merger of Brooklyn Acquisition Sub, Inc.
with and into Novellus, Inc., following which, Novellus, Inc., as the surviving corporation, became Brooklyn’s wholly owned subsidiary and Novellus Ltd. became Brooklyn’s indirectly owned subsidiary.
• Brooklyn acquired 25.0 % of the total outstanding equity
interests of NoveCite.
Brooklyn delivered consideration for the Acquisition totaling $124,022,181 , which consisted of (a) $22,822,181 in cash and (b) 7,022,230
shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102,000,000 , based on a price
of $14.5253 per share.
The Acquisition Agreement contains customary representations, warranties and certain indemnification provisions. A total of 740,766
of the shares issued as consideration have been placed in escrow for a period of up to 12 months in order to secure
indemnification obligations to Brooklyn under the Acquisition Agreement. The Acquisition Agreement also contains non-competition and non-solicitation provisions pursuant to which Novellus LLC has agreed not to engage in certain competitive
activities for a period of five years following the closing, including customary restrictions relating to employees. No employees
of Novellus Ltd. or Novellus, Inc. prior to the Acquisition continued their employment, or were otherwise engaged by Brooklyn, following the Acquisition.
In connection with the Acquisition, the co-founders of Novellus, Ltd. entered into lock-up agreements with respect to 3,377,690
of the shares received in the Acquisition, and Brooklyn’s Chair of the Board of Directors and its Chief Executive Officer and President entered into identical lock-up agreements with respect to their current holdings of Brooklyn stock. Each
lock-up agreement extends for a period of three years , provided that up to 75 % of the shares of common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of common stock on the NYSE American stock
exchange exceeds specified thresholds. The lock-up agreements include customary exceptions for transfers during the applicable lock-up period.
The Company expects the Acquisition will advance its evolution into a platform
company with a pipeline of next-generation engineered cellular, gene editing and cytokine programs. In addition, the acquisition of Novellus, Ltd. builds on the License Agreement. (See Note 9.) The completion of the acquisition of Novellus,
Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor Bioscience Limited
(“Factor”) under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene editing and cell therapy products, remained unchanged.
Although Brooklyn acquired all of the outstanding equity interests of Novellus, Inc., the Company accounted for the Acquisition as an asset
acquisition (as the assets acquired did not constitute a business as defined in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations), and
was measured by the amount of cash paid and by the fair value of the shares of common stock issued. As a result, substantially all of the value acquired was attributed to IPR&D, with the exception of the cash paid for the investment in
NoveCite, which is being accounted for as an investment in equity securities, as discussed further below.
Brooklyn paid $22,853,608 in
cash, net of cash acquired, as part of the consideration for the Acquisition, of which $1,000,000 was paid in cash for the
investment in NoveCite. Brooklyn also issued 7,022,230 shares of the Company’s common stock, of which 3,644,540 shares are unrestricted and 3,377,690
shares are subject to the three-year lockup. The unrestricted shares were valued at $10.05 per share, which was the closing price of Brooklyn’s common stock on July 16, 2021. The fair value of the restricted shares was discounted by approximately 35 % to $6.53 per restricted share,
which was derived from the average discount rate between the Black Scholes and Finnerty valuation models. The resulting fair value of the asset acquired is as follows:
|
|
Shares
Issued
|
Fair Value
Per Share
|
Fair Value of
Consideration
|
|||||||||
|
Cash paid
|
$
|
|
||||||||||
|
Cash acquired
|
(
|
)
|
||||||||||
|
Unrestricted shares
|
|
$
|
|
|
||||||||
|
Restricted shares
|
|
|
|
|||||||||
|
Total fair value of consideration paid
|
|
|||||||||||
|
Less amount of cash paid for NoveCite investment
|
(
|
)
|
||||||||||
|
Fair value of IPR&D acquired
|
$
|
|
||||||||||
IPR&D that is acquired through an asset purchase that has no alternative future uses and no separate economic values from its original intended purpose is expensed in the period the cost is incurred. Accordingly, the Company
expensed the fair value of the IPR&D during the third quarter of 2021 in the amount of $80,537,551 .
Investment in NoveCite
As a result of the Acquisition, Brooklyn owns 25 %
of NoveCite; Citius Pharmacueticals, Inc. (“Citius”) owns the remaining 75 %. A member of the Company’s management holds one of
three board seats on NoveCite’s board of directors in an advisory-only capacity. Citius’s officers and directors hold the other
two board seats. Citius also retains the ability, in its sole discretion, to increase the size of the board of directors of NoveCite. Pursuant to a subscription agreement, as amended, between NoveCite and
Novellus, LLC (the former parent of Novellus, Inc.), which was further amended and assigned to Brooklyn by Novellus, LLC upon the completion of the Acquisition, Citius has complete operational control and financial responsibility
for NoveCite. Citius’s officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. Therefore, despite Brooklyn’s ownership of greater than 20 %, which leads to a presumption that in the absence of predominant evidence to the contrary, an investor has the ability to exercise significant influence over an investee,
Brooklyn does not exercise any significant influence over NoveCite or its board of directors. Brooklyn also has no contractual rights in the profits or obligations to share in the losses of NoveCite. Accordingly, the Company is accounting
for its interest in NoveCite under ASC Topic 321, Investments – Equity Securities. Because NoveCite’s stock is not publicly traded and, therefore, does not have a readily
determinable fair value, the Company has elected to account for its investment at cost, which was $1,000,000 . The Company will
make adjustments to this amount when there are observable transactions for the identical or similar equity securities of the same issuer that would provide an indicator of fair value. In addition, if
qualitative factors indicate a potential impairment, fair value must be estimated and the investment written down to that fair value if it is lower than the carrying value.
| 4) |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest
priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
• Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
• Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
• Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.
The
following tables summarize the liabilities that are measured at fair value as of September 30, 2021 and December 31, 2020:
|
As of September 30, 2021
|
||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
|
Liabilities:
|
||||||||||||
|
Contingent consideration
|
|
|
$
|
|
||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
|
As of December 31, 2020
|
||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
|
Liabilities:
|
||||||||||||
|
Contingent consideration
|
|
|
$
|
|
||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
The contingent consideration is related to an asset purchase agreement
entered into between Brooklyn LLC and IRX Therapeutics (“IRX”) for the acquisition of substantially all of the net assets of IRX, according to which, Brooklyn LLC is obligated to pay royalties to certain noteholders and shareholders of IRX
based on future revenues from any future IRX-2 product sales.
Contingent consideration was initially valued at the transaction price and is subsequently valued at the end of each reporting period using
third-party valuation services or other market observable data. The third-party valuation services use industry standard valuation models, including discounted cash flow analysis, to determine the value. After completing its validation
procedures as of September 30, 2021, the Company increased the carrying amount of the contingent consideration for the three months ended September 30, 2021. During the three and nine months ended September 30, 2021, the Company adjusted the
carrying amount of its contingent consideration liabilities as follows:
|
|
Three months ended
September 30, 2021
|
Nine months ended
September 30, 2021
|
||||||
|
Balance as of beginning of period
|
$
|
|
$
|
|
||||
|
Fair value adjustments included in operating expenses
|
|
(
|
)
|
|||||
|
Balance as of end of period
|
$
|
|
$
|
|
||||
Contingent
consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the
Company believes would be made by a market participant. The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value of contingent consideration related to
updated assumptions and estimates are recognized within the statements of operations.
Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to
estimate the fair value of the liability and the timing in which the milestones are expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the
estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in
materially different fair value estimates.
For
purposes of this calculation, a royalty equal to 13 % of revenue (consisting of the royalty due to University of South Florida and the
royalty due to the collaborator) is assumed until 2029 and a royalty of 7 % of revenues is assumed from 2030 to 2038. The post patent
decline is 50 % in the first year and 10 %
thereafter. Income taxes were projected to be 26 % of net royalty savings. The cash flows were discounted by the liability specific
weighted average cost of capital of 26 % using the mid-point convention.
The investment in NoveCite does not have readily determinable value. Therefore, the Company uses the measurement alternative under ASC Topic 321, which is to record the investment at
cost minus impairment, if any, plus or minus changes resulting from observable transactions for the identical or similar equity securities of the same issuer
that would provide an indicator of fair value.
| 5) |
LEASES
|
The Company has operating leases for office and laboratory space in the boroughs of Brooklyn and Manhattan in New York, New
York, which expire in 2025 and 2026, respectively. In June 2021, the Company entered into an additional lease agreement to lease approximately 2,700
square feet of office and laboratory space in Cambridge, Massachusetts for approximately $56.00 per square foot annually. The lease
provides for annual escalation of the base rent based on the year-over-year increase of the consumer price index, as well as the payment of other customary expenses, such as common area maintenance fees, property taxes, and insurance. Upon
entering into the lease agreement, the Company paid a lease deposit of $25,331 . The lease expires in June 2028.
The Company adopted ASC Topic 842, Leases, on December 31, 2020 using the
modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any
expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize right-of-use assets (“ROU
assets”) and lease liabilities for short-term leases that have a term of 12 months or less.
Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets
represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. As the
rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the
present value of lease payments not yet paid, the Company estimates secured borrowing rates corresponding to the maturities of the leases.
The Company has elected the practical expedient to not separate non-lease components from the lease components to which
they relate and instead account for each as a single lease component for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance,
tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation
for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.
Operating leases are included in right of use assets - operating leases and operating lease liabilities, current and
long-term, on the balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in general and administrative costs in the statements of operations.
The Company recognizes operating lease expense and lease payments from the sublease on a straight-line basis in its
statements of operations over the lease terms. During the three and nine months ended September 30, 2021, the net operating lease expenses were as follows:
|
Three months ended
September 30, 2021
|
Nine months ended
September 30, 2021
|
|||||||
|
Operating lease expense
|
$
|
|
$
|
|
||||
|
Sublease income
|
(
|
)
|
(
|
)
|
||||
|
Variable lease expense
|
|
|
||||||
|
Total lease expense
|
$
|
|
$
|
|
||||
The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2021 and the
ending balances as of September 30, 2021, including the changes during the period.
|
Operating Lease
ROU Assets
|
||||
|
Operating lease ROU assets at
January 1, 2021
|
$
|
|
||
|
Amortization of operating lease
ROU assets
|
(
|
)
|
||
|
Addition of operating lease ROU
assets
|
|
|||
|
Operating lease ROU assets at
September 30, 2021
|
$
|
|
||
|
Operating Lease
Liabilities
|
||||
|
Operating lease liabilities at
January 1, 2021
|
$
|
|
||
|
Principal payments on operating
lease liabilities
|
(
|
)
|
||
|
Addition of operating lease
liabilities
|
|
|||
|
Operating lease liabilities at
September 30, 2021
|
|
|||
|
Less non-current portion
|
|
|||
|
Current portion at September 30,
2021
|
$
|
|
||
As of September 30, 2021, the Company’s operating leases had a weighted-average
remaining life of 5.1 years with a weighted-average discount rate of 12.76 %. The maturities of the operating lease liabilities are as follows:
|
As of
September 30, 2021
|
||||
|
2021
|
$
|
|
||
|
2022
|
|
|||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
Thereafter
|
|
|||
| Total payments | |
|
||
| Less imputed interest | ( |
) | ||
| Total operating lease liabilities | $ | |||
Sublease Agreement
On April 18, 2019, the Company entered into a sublease agreement with Nezu Asia Capital Management, LLC (the “Tenant”),
whereby the Tenant agreed to sublease approximately 999 square feet of space currently rented by the Company in the borough of Manhattan
in New York, New York for an initial term of eight years , commencing on May 15, 2019. The term of the sublease expires on October 31,
2026 with no option to extend the sublease term. Rent payments provided by the Tenant under the sublease agreement began on September 1, 2019. The sublease agreement stipulates an annual rent increase of 2.25 %. The Tenant is also responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during
the term of the sublease.
|
As of
September 30, 2021
|
||||
|
2021
|
$
|
|
||
|
2022
|
|
|||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
Thereafter
|
|
|||
|
$
|
|
|||
The Company received sublease payments in the amount of $62,116 during the nine months ended September 30, 2020. In accordance with ASC Topic 842, the Company treats the sublease as a separate lease, as the Company was not relieved
of the primary obligation under the original lease. The Company continues to account for the Manhattan lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of
the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sale-type or direct financing lease.
| 6) |
GOODWILL AND IN-PROCESS RESEARCH & DEVELOPMENT
|
The Company recorded goodwill and IPR&D in the amount of $2,043,747 and $6,860,000 , respectively, in connection with the 2018
acquisition of IRX. IPR&D assets are considered to be indefinite lived until the completion or abandonment of the associated research and development projects.
In connection with the Acquisition (see Note 3), the Company
expensed the fair value of the IPR&D it acquired in the amount of $80,537,551 , as the Company determined there were no future
alternative uses or separate economic values from its original intended purpose. (See Note 3.)
|
7)
|
ACCRUED EXPENSES
|
Accrued expenses consisted of the following:
|
September 30,
2021
|
December 31,
2020
|
|||||||
|
Accrued compensation
|
$
|
|
$
|
|
||||
|
Accrued research and development expenses
|
|
|
||||||
|
Accrued general and administrative expenses
|
|
|
||||||
|
Accrued interest
|
|
|
||||||
|
Total accrued expenses
|
$
|
|
$
|
|
||||
| 8) |
DEBT
|
Loans Payable
In connection with the acquisition of IRX in 2018, Brooklyn LLC assumed certain notes
payable (the “IRX Notes”) in the amount of $410,000 . On January 27, 2020, the IRX Notes were amended to extend the maturity date to the
earlier of (i) a change of control, as defined, or (ii) December 31, 2021. As of September 30, 2021, accrued and unpaid interest on the IRX Notes was $194,590 .
Payment Protection Program Loan
Brooklyn LLC PPP Loan.
On May 4, 2020, Brooklyn LLC issued a note in the principal amount of $309,905 to Silicon Valley Bank evidencing a loan (the “Brooklyn LLC PPP Loan”) Brooklyn LLC received under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid,
Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “CARES Act”). Brooklyn LLC PPP Loan bears interest at a rate of 1.0 % per annum.
Under the terms of the Cares Act, certain amounts of the Brooklyn LLC PPP Loan could be forgiven if they were used for qualifying expenses, as described in the CARES Act. In June 2021, Brooklyn LLC submitted its loan
forgiveness application for the Brooklyn LLC PPP Loan, and in September 2021, the lender informed Brooklyn LLC that the U.S Small Business Administration approved the forgiveness of 100% of the outstanding principal and interest. As of September
30, 2021, there was no outstanding principal balance of the Brooklyn LLC PPP Loan.
Brooklyn PPP Loan.
On April 18, 2020,
Brooklyn (then known as NTN Buzztime, Inc.) was granted a loan (the “Brooklyn PPP Loan”) in the aggregate amount of $1,625,000 , pursuant to
the PPP under the CARES Act. Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act. In October 2020 the U.S. Small Business Administration
approved the forgiveness of $1,093,000 of the $1,625,000
principal amount of the Brooklyn PPP Loan, leaving a principal balance of approximately $532,000 , all of which, plus accrued and unpaid
interest, was due and, in accordance with the terms of the Merger Agreement, paid by Brooklyn upon the closing of the Merger.
| 9) |
COMMITMENTS AND CONTINGENCIES
|
Legal Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs
associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the
amount can be reasonably estimated.
Merger-Related Shareholder Litigation
Brooklyn (then known as NTN Buzztime, Inc.) and its former directors were named as defendants in ten substantially similar actions arising out of the Merger that were brought by purported pre-Merger stockholders of
Brooklyn: Henson v. NTN Buzztime, Inc., et al., No. 1:20-cv-08663-LGS (S.D.N.Y.); Monsour v. NTN Buzztime, Inc., et al., No. 1:20-cv-08755-LGS (S.D.N.Y.); Amanfo v. NTN Buzztime, Inc., et al., No. 1:20-cv-08747-LGS (S.D.N.Y.); Carlson v. NTN
Buzztime, Inc., et al., No. 1:21-cv-00047-LGS (S.D.N.Y.); Finger v. NTN Buzztime, Inc., et al., No. 1:21-cv-00728-LGS (S.D.N.Y.); Falikman v. NTN Buzztime, Inc., et al., No. 1:20-cv-05106-EK-SJB (E.D.N.Y.); Haas v. NTN Buzztime, Inc., et al.,
No. 3:20-cv-02123-BAS-JLB (S.D. Cal.); Gallo v. NTN Buzztime, Inc., et al., No. 3:21-cv-00157-WQH-AGS (S.D. Cal.); Chinta v. NTN Buzztime, Inc., et al., No. 1:20-cv-01401-CFC (D. Del.); and Nicosia v. NTN Buzztime, Inc., et al., No.
1:21-cv-00125-CFC (D. Del.) (collectively, the “Stockholder Actions”). Only two of the Stockholder Actions (the Chinta and Nicosia
cases) also named Brooklyn. These actions asserted claims alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder and both the Chinta and Nicosia cases alleged that
Brooklyn LLC is a controlling person of Brooklyn. The complaints generally alleged that the defendants failed to disclose allegedly material information in a Form S-4 Registration Statement filed on October 2, 2020, including: (1) certain
details regarding any projections or forecasts of Brooklyn or Brooklyn LLC may have made, and the analyses performed by Brooklyn’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3)
disclosures regarding whether or not Brooklyn entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints generally alleged that these purported failures to disclose rendered the Form
S-4 false and misleading. The complaints requested: preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate
a compliant Form S-4; an accounting by Brooklyn for all alleged damages suffered; a declaration that certain federal securities laws had been violated; and reimbursement of costs, including attorneys’ and expert fees and expenses. On or about
February 26, 2021, in order to moot certain of the disclosure claims asserted in the Stockholder Actions, to avoid nuisance, potential expense, and delay, and to provide additional information to Brooklyn’s stockholders, Brooklyn determined to
voluntarily supplement the Form S-4 with certain additional disclosures. In exchange for those disclosures, the plaintiffs in each of the Stockholder Actions agreed to voluntarily dismiss their claims. All ten actions have now been dismissed. Following the dismissal the parties amicably resolved plaintiffs’ counsel’s request for an award of
attorneys’ fees and expenses based on the purported benefit contended to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.
Dhesh Govender v. Brooklyn
Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021)
On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and certain individuals that plaintiff alleges were directors of Brooklyn LLC. The complaint is
captioned, Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021). Plaintiff purports to state claims against Brooklyn LLC and the individual defendants under the New York State
Executive Law and the New York State Administrative Code, as well as other statutory and common law claims for alleged unlawful and discriminatory conduct based on race, national origin and hostile work environment. Plaintiff also asserts
various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleges Brooklyn LLC agreed to hire him as an executive once the Merger was completed. In particular, plaintiff alleges that,
in exchange for transferring an opportunity to obtain an agreement to acquire a license from Novellus for its mRNA-based gene editing and cell reprogramming technology to Brooklyn LLC, he was promised a $500,000 salary and 7 % of the
equity of Brooklyn LLC. Based on these and other allegations, plaintiff seeks damages of not less than $10 million, a permanent
injunction enjoining Brooklyn LLC from exercising the option to acquire such license from Novellus or completing the proposed Merger. On or about February 19, 2021, an amended complaint was filed asserting the same causes of action but
withdrawing the request for injunctive relief. On or about April 26, 2021, the parties entered into a stipulation whereby the defendants agreed to accept service of the amended complaint without waiver of any defenses, including
jurisdictional defenses, except for improper service, and the plaintiff agreed to extend defendants’ time to respond to the complaint to June 6, 2021. On June 6, 2021, we filed a motion to compel arbitration or, in the alternative, for
partial dismissal of the complaint for failure to state viable fraud, quantum meruit and employment discrimination claims. After obtaining extensions of time to respond, plaintiff opposed the defendants’ motion on August 9, 2021. The
defendants filed their reply on September 3, 2021. Thereafter, the plaintiff filed an order to show cause to seal certain financial information he had provided in opposition to the defendants’ motion to compel arbitration, which the
defendants did not oppose. The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021, and the parties are presently awaiting the Court’s decision. At this stage in the
litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.
Carlson v. Allen Wolff, Michael
Gottlieb, Richard Simtob, Susan Miller, and NTN Buzztime, Inc., C.A. No.
2021-0193-KSJM (Del. Ch. Ct.)
On or about March 12, 2021, Douglas Carlson, a purported stockholder of Brooklyn (then known as NTN Buzztime, Inc.), filed a verified class action complaint against Brooklyn and its then current members of the board of directors, for
allegedly breaching their fiduciary duties and violating Section 211(c) of the Delaware General Corporation Law. In particular, plaintiff seeks to compel the defendants to hold an annual stockholder meeting. Plaintiff also moved for
summary judgment at the same time that he filed his complaint. In order to moot the claim addressed in the complaint, Brooklyn agreed to hold its annual meeting on June 29, 2021, which date was subsequently rescheduled to August 20, 2021.
On or about May 6, 2021, the parties entered into a stipulation, which was “so ordered” by the court, extending defendants’ time to respond to the complaint and to file their answering brief in opposition to plaintiff’s motion for summary
judgment on or before July 16, 2021 and providing that plaintiff’s reply brief in support of his motion for summary judgment is due on or before August 20, 2021. On or about July 12, 2021, the parties entered in a further amended scheduling
order, which provided that defendants were to respond to the complaint and file their answering brief in opposition to plaintiff’s motion for summary judgment on or before September 16, 2021 and plaintiff was to file a reply brief in
support of his motion for summary judgment on or before October 20, 2021. On August 20, 2021, Brooklyn convened its 2021 annual meeting of stockholders. Due to the lack of a required quorum, the meeting was adjourned to September 3, 2021.
Thereafter, Brooklyn obtained a quorum, and the annual meeting was held on September 3, 2021. On September 10, 2021, Brooklyn filed a report on Form 8-K with the SEC announcing the results of the annual meeting. On September 16, 2021, the
parties filed a stipulation seeking voluntary dismissal of the complaint as moot. The Court entered the dismissal on September 16, 2021 with prejudice as to the named plaintiff and without prejudice as to other members of the purported
class and retained jurisdiction for the purpose of determining any fee application to the extent it cannot be resolved amicably by the parties. The parties have reached an agreement in principle with respect to plaintiff’s counsel’s request
for an award of fees and expenses that is subject to the parties agreeing to the terms of a written agreement that is presently being negotiated.
Robert Garfield Matter
On April 29, 2021, Robert Garfield, a purported
stockholder of Brooklyn, sent to Brooklyn a demand letter that had purportedly been sent to Brooklyn (then known as NTN Buzztime, Inc.) on or about March 16, 2021. The demand letter asserts that Brooklyn (then known as NTN Buzztime,
Inc.) made material misstatements in a prospectus issued in seeking a stockholder vote on March 15, 2021 with respect to an amendment to Brooklyn’s certificate of incorporation to increase the number of authorized shares from 15 million to 100 million.
The demand letter seeks to have Brooklyn deem the amendment to the certificate of incorporation ineffective or seek valid stockholder approval of such amendment and for Brooklyn to implement internal controls.
Brooklyn
decided to seek stockholder ratification of the March 15, 2021 stockholder vote concerning an amendment to Brooklyn’s certificate of incorporation to increase the number of authorized shares from 15 million to 100
million pursuant to Sections 204 and 205 of the Delaware General Corporation Law. Stockholder ratification was obtained at the annual meeting of stockholders that took place on September 3, 2021. As a result of the ratification, Garfield has
advised that the claims set forth in his demand letter are moot. The parties are presently attempting to resolve Garfield’s counsel’s request for an award of attorney’s fees and expenses for the purported benefit that Garfield
contends was received by stockholders as a result of the stockholder ratification. If agreement cannot be reached, Garfield’s counsel has reserved the right to seek a fee from the Court and defendants have reserved their right to
challenge any fee application.
Edmund Truell Matter
On May 14, 2021, Edmund Truell, a stockholder of Brooklyn, alleged that he sustained a loss because he was unable to sell shares of
common stock timely due to a delay caused by Brooklyn’s issuance of stock certificates in lieu of electronic book entry.
Emerald Private Equity Fund, LLC Matter
By letter dated July 7, 2021, Emerald Private Equity Fund, LLC, a stockholder of Brooklyn, made a demand pursuant to 8 Del. C.
220 to inspect certain books and records of Brooklyn. The stated purpose of the demand is to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper stock
certificates. The stockholder states that it is making its demand for the purpose of investigating whether: (i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement; (ii) certain restrictions on the
sale of Brooklyn common stock were proper and applied without favor; (iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of
Brooklyn’s common stock; and (iv) it should pursue remedial measures and/or report alleged misconduct to the SEC. Brooklyn has responded to the demand letter and has produced certain information to Emerald in connection with the
demand, which is subject to the terms of a confidentiality agreement between the parties. Emerald has requested that Brooklyn produce additional information, which request Brooklyn is presently considering.
John Westman v. Novellus, Inc., Christopher Rohde, and Matthew Angel, Civil Action No. 2181CV01949
(Middlesex County (Massachusetts) Superior Court)
On or about September 7, 2021, John Westman, a former employee of Novellus, Inc., filed a Complaint in
Middlesex County (Massachusetts) Superior Court against Novellus, Inc. and the company’s founders and former executives, Christopher Rohde and Matthew Angel. Brooklyn acquired Novellus, Inc. on July 16, 2021. Westman’s
claims relate to alleged conduct that took place before Brooklyn acquired Novellus, Inc. Pursuant to the July 16, 2021 Agreement and Plan of Acquisition, as well as a separate agreement among Brooklyn, Novellus, Inc., Mr.
Rohde, and Mr. Angel, Mr. Rohde and Mr. Angel have agreed, subject to certain limitations to assume the defense of, and pay the fees associated with defending against, these claims. On October 19, 2021, the court granted the
parties’ joint request to stay the case pending arbitration. The parties requested to initiate arbitration through JAMS in Boston, Massachusetts, and defendants agreed to be responsible for fees of JAMS and the arbitrator.
Defendants and Brooklyn deny any wrongdoing.
Licensing Agreements
USF
Brooklyn LLC has license agreements with University
of South Florida Research Association, Inc. (“USF”), granting Brooklyn LLC the right to sell, market, and distribute IRX-2, subject to a 7 %
royalty payable to USF based on a percentage of gross product sales. Under the license agreement with USF, Brooklyn LLC is obligated to repay patent prosecution expenses incurred by USF. To date, Brooklyn LLC has not recorded any product
sales, or obligations related to USF patent prosecution expenses. The license agreement terminates upon the expiration of the IRX-2 patents.
Novellus, Ltd. and Factor
In December 2020, Brooklyn LLC entered into option agreements (the
“Option Agreements”) with Novellus, Ltd. and Factor (together, the “Licensors”) to obtain the right to exclusively license the Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the
development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle cell disease, and beta thalassemia (the “Licensed Technology”). The option was exercisable
before February 28, 2021 (or April 30, 2021 if the Merger had not closed by that date) and required Brooklyn LLC to pay a non-refundable option fee of $500,000 and then an initial license fee of $4.0 million (including the non-refundable fee of $500,000 ) in order to exercise the option.
In April 2021, Brooklyn LLC and the Licensors amended the Option Agreements to extend the exercise period to May 21, 2021 and to require Brooklyn, LLC to pay a
total $1,000,000 of the $4,000,000
initial license fees to the Licensors by April 15, 2021.
In April 2021, Brooklyn LLC and the Licensors entered into an exclusive license agreement (the “License Agreement”) pursuant to which Brooklyn LLC acquired an exclusive worldwide license to the Licensed Technology.
Under the terms of the License Agreement, Brooklyn LLC is obligated to pay the Licensors a total of $4.0 million in
connection with the execution of the License Agreement, all of which had been paid as of June 30, 2021.
The completion of the acquisition of Novellus, Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical
development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene
editing and cell therapy products, remained unchanged. Accordingly, Brooklyn LLC is obligated to pay to Factor a fee of $3,500,000
in October 2022, which will be in addition to a fee of $2,500,000 paid to Factor in October 2021.
Brooklyn
LLC is also required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization milestones. In general, upon its
achievement of these milestones, Brooklyn LLC will be obligated to pay, in the case of development and regulatory milestones, milestone payments to the Licensors in specified amounts and, in the case of commercialization milestones,
specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Brooklyn LLC fails to timely achieve certain delineated milestones, the Licensors will have the right to terminate
Brooklyn LLC’s rights under provisions of the License Agreement relating to those milestones.
Novellus, Ltd. also has a license agreement with Factor, which was entered into in February 2015, amended in June 2018 and March 2020, and then amended and restated
in November 2020. This license agreement provides for Novellus, Ltd. to use over 45 granted patents owned by Factor
throughout the world covering synthetic mRNA, RNA-based gene editing, and RNA-based cell reprogramming, in addition to specific patents covering methods for treating specific diseases. There are also more than 50 pending patent applications throughout the world focused on these and other aspects of the technology. The patent coverage includes
granted patents and pending patent applications in the United States, Europe, and Japan, along with other major life sciences markets.
Novellus, Ltd. is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory
milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Novellus, Ltd. will be obligated, in the case of development and regulatory milestones, to make milestone payments of up to $51 million in aggregate to Factor and, in the case of commercialization milestones, specified royalties with respect to product sales,
sublicense fees or sales of pediatric review vouchers. In the event Novellus, Ltd. fails to timely achieve certain delineated milestones, Factor may have the right to terminate Novellus, Ltd.’s rights under provisions of the License
Agreement relating to those milestones.
NoveCite
In October 2020, Novellus, Ltd. (as
sublicensor) and NoveCite (as sublicensee) entered into an exclusive license agreement (the “Sublicense”) to license novel cellular therapy for acute respiratory distress syndrome, which NoveCite is licensing from Factor. Under
the sublicense agreement, NoveCite is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization
milestones. In general, upon its achievement of these milestones, NoveCite will be obligated, in the case of development and regulatory milestones, to make milestone payments to the Novellus, Ltd. in specified amounts and, in
the case of commercialization milestones, specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers.
Under the terms of the Sublicense, in the
event that Novellus, Ltd. receives any revenue involving the original cell line included in the licensed technology, then Novellus, Ltd. shall remit to NoveCite 50 % of such revenue.
Royalty Agreements
Collaborator Royalty Agreement
Effective June 22, 2018, IRX terminated its Research,
Development and Option Facilitation Agreement and its Options Agreement (the “RDO and Options Agreements”) with a collaborative partner (the “Collaborator”), pursuant to a termination agreement (the “Termination Agreement”). The Termination Agreement was assigned to Brooklyn, LLC in November 2018 when Brooklyn LLC acquired the assets of IRX. In
connection with the Termination Agreement, all of the rights granted to the Collaborator under the RDO and Options Agreements were terminated, and Brooklyn LLC has no obligation to refund any payments received from the Collaborator. As
consideration for entering into the Termination Agreement, the Collaborator will receive a royalty equal to 6 % of revenues from the
sale of IRX-2, for the period of time beginning with the first sale of IRX-2 through the later of (i) the twelfth anniversary of the first sale of IRX-2 or (ii) the expiration of the last IRX patent, or other exclusivity of IRX-2.
Investor Royalty Agreement
On
March 22, 2021, Brooklyn LLC restated its royalty agreement with certain beneficial holders of Brooklyn ImmunoTherapeutics Investors GP LLC and Brooklyn ImmunoTherapeutics Investors LP, whereby such beneficial holders will continue to receive,
on an annual basis, royalties in an aggregate amount equal to 4 % of the net revenues of IRX-2, a cytokine-based therapy being
developed by Brooklyn LLC to treat patients with cancer.
Royalty Agreement with certain former IRX Therapeutics
Investors
On May 1, 2012, IRX Therapeutics entered into a royalty agreement (the “IRX Investor Royalty Agreement”)
with certain investors who participated in a financing transaction. The IRX Investor Royalty Agreement was assigned to Brooklyn LLC in November 2018 when Brooklyn LLC acquired the assets of IRX. Pursuant to the IRX Investor Royalty Agreement,
when Brooklyn LLC becomes obligated to pay royalties to USF under the agreement described above under “Licensing Agreements-USF,” it will pay an additional royalty of 1 % of gross sales to an entity organized by the investors who participated in such financing transaction. There are no termination provisions in the IRX Investor Royalty
Agreement. Brooklyn LLC has not recognized any revenues to date, and no royalties are due pursuant to any of the above-mentioned royalty agreements.
| 10) |
STOCK-BASED COMPENSATION
|
Equity Incentive Plans
Brooklyn’s stock-based compensation plans consist of the
Restated 2020 Equity Incentive Plan (the “Restated 2020 Plan”) and the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”). Brooklyn’s board of directors has designated its 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 Brooklyn’s special meeting of stockholders held on March 15,
2021, the stockholders approved the 2020 Equity Incentive Plan (the “2020 Plan”), which provided for the issuance of up to 3,368,804
shares of common stock. At Brooklyn’s annual meeting of stockholders held on September 3, 2021, the stockholders approved the Restated 2020 Plan, which provides for (1) an increase in the number of shares of common stock that can be issued under the
plan by 5,116,132 to 8,484,936
shares of common stock in total and (2) an annual increase in the number of shares reserved for issuance on January 1 of each year from 2022 through 2031 equal to the lesser of (i) 5 % of the number of shares of common stock outstanding on the immediately preceding December 31 and (ii) such smaller number of shares of common stock as may be determine by the
board of directors. No other provision of the 2020 Plan were amended.
Awards under the Restated 2020 Plan may be granted to officers,
directors, employees and consultants of the Company. Stock options granted under the Restated 2020 Plan may either be incentive stock options or nonqualified stock options, may have a term of up to ten years no stock options outstanding under the Restated 2020 Plan.
In June 2019 Brooklyn adopted the 2019 Performance Incentive Plan
(the “2019 Plan”), Upon the approval of the 2020 Plan, no future grants could be made under the 2019 Plan. As of September 30, 2021, all outstanding options under the 2019 Plan either had been exercised or had expired in accordance with the terms of
the applicable award or the 2019 Plan.
In May 2021, Brooklyn’s board of directors adopted the 2021
Inducement Plan, which provides for the grant of up to 1,500,000 share-based awards as material inducement awards to new employees in
accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company Guide. The 2021 Inducement Plan expires in May 2031. As of September 30, 2021, there were 372,880 nonqualified stock options and 221,640 restricted stock
units (“RSUs”) outstanding under the 2021 Inducement Plan.
Stock-Based Compensation
Stock Options
The Company records stock-based compensation in accordance with
ASC Topic 718, Compensation – Stock Compensation. The Company estimates the fair value of each stock option award granted with service-based vesting requirements, using the Black-Scholes option pricing model. The Company recognizes the fair value of
stock options granted as expense on a straight-line basis over the requisite service period.
The risk-free rate is based on the observed interest rates
appropriate for the expected life. The expected life (estimated period of time outstanding) of the stock options granted is estimated using the “simplified” method as permitted by the SEC’s Staff Accounting Bulletin No. 110, Share-Based Payment.
Expected volatility is based on the Company’s historical volatility over the expected life of the stock option granted, and the Company assumes no dividends.
There were no 232,300 nonqualified stock options during the three months ended September 30, 2021. During the nine months ended September 30, 2021, Brooklyn granted 3,598,048 nonqualified stock options, including two
stock option grants made to Howard J. Federoff, M.D., Ph.D. upon his appointment as Brooklyn’s chief executive officer and president.
Dr. Federoff was granted a nonqualified stock option covering 2,627,915 shares of common stock (the “Time-Based Option”). The Time-Based Option was granted at a per share exercise price equal to the closing price of
the common stock on the NYSE American stock exchange on the date of grant. Of the shares covered by the Time-Based Option, 25 % will vest
on the one-year anniversary of the grant date, and the remaining shares will vest in substantially 36 equal monthly installments
thereafter, so long as Dr. Federoff provides continuous service to the Company throughout the relevant vesting date.
Dr. Federoff was also granted a performance-based nonqualified
stock option covering 597,253 shares of common stock (the “Milestone Option”). The Milestone Option was granted at a per share exercise
price equal to the closing price of common stock on the NYSE American stock exchange on the date of grant, and its fair value is $4,288,738 .
The Milestone Option will fully vest upon the first concurrence by the U.S. Food and Drug Administration that a proposed investigation may proceed following review of a Company filed investigational new drug application in connection with that the
License Agreement. This milestone is subject to Dr. Federoff’s continuous service with the Company through such vesting date.
Both the Time-Based Option and the Milestone Option were granted
outside of Brooklyn’s equity incentive plans discussed above. The unvested portion of the Time-Based Option and the Milestone Option will be cancelled upon the termination of Dr. Federoff’s employment with the Company for any reason, subject to
certain vesting acceleration provisions upon a qualifying termination, as described in his employment agreement with Brooklyn. Unless earlier terminated in accordance with their terms, each of the Time-Based Option and the Milestone Option will
otherwise expire on the tenth anniversary of their respective grant date and be subject to the terms and conditions of the respective option agreement approved by Brooklyn. Each of the Time-Based Option and the Milestone Option was intended to
constitute an “employment inducement grant” in accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company Guide and was offered as an inducement material to Dr. Federoff in connection with his
hiring.
The following weighted-average assumptions were used for grants
issued during the three and nine months ended September 30, 2021:
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Three months ended
September 30, 2021
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Nine months ended
September 30, 2021
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| Weighted average risk-free rate |
% | % | ||||||
| Weighted average volatility |
% | % | ||||||
| Dividend yield |
% | % | ||||||
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Expected term
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There were no options exercised during the three months ended September 30, 2021. During the nine months ended September 30, 2021, there were 1,300 options exercised for total cash proceeds of $10,202 47,010 . There were no
RSUs
Outstanding RSUs are settled in an equal number of shares of
common stock on the vesting date of the award. An RSU 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 three and nine months
ended September 30, 2021, Brooklyn granted 116,350 and 221,640 RSUs, respectively, with a weighted average grant date fair value of $10.07 and $14.60 , respectively. No No
The Company recognizes the intrinsic value of RSUs granted as
expense on a straight-line basis over the requisite service period.
Restricted Stock
Pursuant to the Merger, Brooklyn LLC’s 3,427 outstanding restricted common units were exchanged for 629,643
shares of Brooklyn’s restricted common stock. There were no changes to any conditions and requirements of the restricted common stock. The shares vest quarterly beginning on March 31, 2021 and continuing through December 31, 2022. Due to the
modification of the restricted common units, the fair value of the restricted common stock immediately after the Merger was compared to the fair value of the restricted common units immediately prior to the Merger, and the change in fair value of $249,905 was recognized in the statement of operations for the nine months ended September 30, 2021. The Company recognizes the fair value of restricted
common stock as an expense on a straight-line basis over the requisite service period.
Stock-based compensation expense for the three months ended
September 30, 2021 and 2020 was $1,728,304 and $22,734 , respectively. Stock based compensation for the nine months ended September 30, 2021 and 2020 was $3,301,697 (including the $249,905 of modification expense discussed above) and $68,202 , respectively. Forfeitures are recognized as incurred. Stock-based compensation is recorded in general and administrative expense and research
and development expense in the statement of operations.
| 11) |
STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)
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Equity Line Offerings
On April 26, 2021, Brooklyn and Lincoln
Park executed the First Purchase Agreement and a related registration rights agreement. Pursuant to the First Purchase Agreement, Brooklyn had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated
to purchase, up to $20,000,000 of shares of Brooklyn’s common stock. Sales of common stock by Brooklyn, if any, were subject to
certain limitations, and could occur from time to time, at Brooklyn’s sole discretion. For entering into the First Purchase Agreement, Brooklyn issued to Lincoln Park 56,041 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $20,000,000 in shares of common stock. During the three months ending September 30, 2021, Brooklyn issued and sold to Lincoln Park a total of 1,127,736 shares of common stock for gross proceeds of $20,000,000 ,
and no further shares may be sold to Lincoln Park under the First Purchase Agreement.
On May
26, 2021, Brooklyn executed the Second Purchase Agreement and a related registration rights agreement. Pursuant to the Second Purchase Agreement, Brooklyn has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park
would be obligated to purchase, up to $40,000,000 of shares of Brooklyn’s common stock. Sales of common stock by Brooklyn, if
any, are subject to certain limitations, and may occur from time to time, at Brooklyn’s sole discretion. For entering into the Second Purchase Agreement, Brooklyn issued to Lincoln Park 50,000 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $40,000,000 in shares of common stock.
Under the Second Purchase Agreement, on any business day selected by Brooklyn, Brooklyn may direct Lincoln Park to purchase up to 60,000
shares of common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to 80,000
shares, provided that the closing sale price of the common stock is not below $5.50 on the purchase date, and (ii) the Regular Purchase may be increased to up to 120,000 shares, provided that the closing sale price of the common stock is not below $7.00 on the purchase date. In each case, Lincoln Park’s maximum commitment in any single Regular
Purchase may not exceed $1,000,000 under the First Purchase Agreement and $2,000,000 under the Second Purchase Agreement. The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of common stock immediately
preceding the time of sale. In addition to Regular Purchases, Brooklyn may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds
certain threshold prices as set forth in the Second Purchase Agreement.
The
Second Purchase Agreement also prohibits Brooklyn from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares of common stock then beneficially owned by Lincoln Park and its
affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99 %
of the then total outstanding shares of common stock. Brooklyn has the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.
Actual
sales of shares of common stock to Lincoln Park under the Second Purchase Agreements depend on a variety of factors to be determined by Brooklyn from time to time, including, among others, market conditions, the trading price of the common
stock and determinations by Brooklyn as to the appropriate sources of funding for Brooklyn and its operations. The Company expects that any net proceeds received by Brooklyn from such sales to Lincoln Park will be used for research and
development, working capital and general corporate purposes.
As
of September 30, 2021, Brooklyn had issued and sold 3,551,990 shares of common stock under the First Purchase Agreement and the
Second Purchase Agreement for total net proceeds of $52,025,414 . As of September 30, 2021, there were 445,627 shares remaining to be sold under the Second Purchase Agreement.
Reverse Stock-Split
On
March 25, 2021, immediately prior to the Merger, Brooklyn filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split. As a result of the reverse stock split, the
number of issued and outstanding shares of common stock immediately prior to the reverse stock split was reduced into a smaller number of shares, such that every of common stock held by a stockholder of Brooklyn immediately prior to the reverse stock split were combined and reclassified into one share of common stock after the reverse stock split.
Immediately
following the reverse stock split there were 1,514,373 shares of common stock outstanding prior to the Merger. No fractional shares
were issued in connection with the reverse stock split.
Merger
Under the terms of the Merger
Agreement (see Notes 1 and 3), on March 25, 2021, Brooklyn issued shares of common stock to the equity holders of Brooklyn LLC. The 86,667
Class A units of Brooklyn LLC were converted into 22,274,718 shares of common stock; the 15,000,000 Class B units were converted into 2,514,714
shares of common stock; the 10,000,000 Class C units were converted into 1,676,308 shares of common stock; 629,643 shares of common units were
converted into 629,643 shares of common stock, and 10,500,000 rights options were converted into 11,828,575 shares of common stock. Brooklyn also
issued 1,067,879 shares of common stock to the Financial Advisor pursuant to the Merger Agreement.
Acquisition
Under the terms of the Acquisition (see Notes 1 and 3), on July 16, 2021, Brooklyn
issued 7,022,230 shares of common stock, of which 3,644,540 shares are unrestricted and 3,377,690 shares are subject to a three-year lockup agreement, provided that up to 75 %
of the shares of common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of common stock on the principal market for the common stock exceeds specified thresholds.
| 12) |
RECENT ACCOUNTING PRONOUNCEMENTS
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In May 2021, the Financial Accounting Standards Board (the
“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses the accounting for certain modifications or
exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for the Company) and interim periods within those fiscal years, with early adoption
permitted. The Company does not expect the adoption of this update to have a significant impact on its financial statements.
In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842) – Lessors - Certain Leases with Variable Lease Payments, which amends the lessor classification guidance to introduce additional criteria when classifying leases with variable lease payments
that do not depend on a reference index or a rate. This guidance is effective for annual periods beginning after December 15, 2021 (January 1, 2022 for the Company), with early adoption permitted. The Company does not expect the adoption of this
update to have a significant impact on its financial statements.
| 13) |
SUBSEQUENT EVENTS
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Management has evaluated subsequent events through the date of this filing and concluded there are no material
subsequent events to be disclosed.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read with, the unaudited condensed
consolidated financial statements and notes included in Item 1 of Part I of this report, to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations.
Background
On March 25, 2021, BIT Merger Sub, Inc., a wholly owned subsidiary of Brooklyn (then known as NTN Buzztime, Inc.) merged with and into Brooklyn LLC, with Brooklyn LLC surviving
as a wholly owned subsidiary of Brooklyn. This transaction, which we refer to as the Merger, was completed in accordance with the terms of an agreement and plan of merger and reorganization dated August 12, 2020 among Brooklyn (then known as NTN
Buzztime, Inc.), BIT Merger Sub, Inc. and Brooklyn LLC. In accordance with such agreement and plan of merger, on March 25, 2021 Brooklyn amended its restated certificate of incorporation in order to effect:
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prior to the Merger, a reverse stock split of its common stock, par value $0.005 per share, at a ratio of one-for-two; and
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following the Merger, a change in its corporate name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”
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On March 26, 2021, Brooklyn sold its rights, title and interest in and to the assets relating to the business it operated prior to the Merger, which it had operated under the
name “NTN Buzztime, Inc.,” to eGames.com Holdings LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we
refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between Brooklyn and eGames.com.
The Merger has been accounted for as a reverse acquisition in accordance with United States generally accepted accounting
principles, or GAAP. Under this method of accounting, Brooklyn LLC was deemed the “acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the
Merger are those of Brooklyn LLC, and the historical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger. The weighted average shares used in
determining loss per common share were retrospectively adjusted to reflect the conversion of the outstanding Class A, Class B, Class C and common units of Brooklyn LLC into shares of Brooklyn’s common stock upon the Merger, and all share and per
share amounts of common stock have been retrospectively restated to reflect the reverse split described above.
On July 16, 2021, Brooklyn Acquisition Sub, Inc., a wholly owned subsidiary of Brooklyn, merged with and into Novellus, Inc.,
which is the sole equity holder of Novellus Therapeutics Limited or Novellus, Ltd., which merger we refer to as the Acquisition. As part of the Acquisition, Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc.,
or NoveCite, a corporation focused on developing an allogeneic mesenchymal stem cell, or MSC, product for patients with acute respiratory distress syndrome, including from COVID-19. The Acquisition was accounted for as an asset acquisition, and
substantially all the value was attributed to in-process research and development, or IPR&D, with the exception of the value allocated to the investment in NoveCite, which was accounted for as an investment in equity securities.
Overview
We are a clinical-stage biopharmaceutical company focused on exploring the role that cytokine-based therapy can have on the
immune system in treating patients with cancer, both as a single agent and in combination with other anti-cancer therapies. We are seeking to develop IRX‑2, a novel cytokine-based therapy, to treat patients with cancer. IRX‑2 active constituents,
namely Interleukin-2, or IL‑2, and other key cytokines, are postulated to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike existing cancer therapies, which rely on
targeting the cancer directly. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing cell‑therapy technology through a license with Factor Bioscience Limited, or Factor, and
through the Acquisition.
IRX-2
IRX‑2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL‑2, and other key cytokines. Together, these cytokines are
believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the
supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMNCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.
While IRX‑2 is a cytokine mixture, one of its active components is IL‑2, a cytokine-signaling molecule in the immune system. IL‑2 is a protein that regulates the activities of
white blood cells (leukocytes and often lymphocytes) that are responsible for immunity. IL‑2 is part of the body’s natural response to microbial infection, and in discriminating between foreign, or non-self and “self,” IL‑2 mediates its effects by
binding to IL‑2 receptors, which are expressed by lymphocytes. The major sources of IL‑2 are activated CD4+ T cells and activated CD8+ T cells.
Unlike existing recombinant IL‑2 therapies, IRX‑2 is derived from human blood cells. This may promote better tolerance, broader targeting and a natural molecular conformation
leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL‑2 therapies.
Aside from optimizing IRX-2 manufacture, we are also modifying our manufacturing process to allow us to develop additional drugs with a variety of cytokine mixtures to expand
our product offerings.
Regarding IRX-2 development, our strategy is:
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Advance our product candidate IRX-2 through clinical development. IRX-2 is a human blood-based IL 2 therapy being studied for
multiple types of cancer, including squamous cell cancer of the head and neck. Treatment of patients in the INSPIRE trial has been completed, and patients who participated in the trial are currently being monitored for event-free
survival with top-line data estimated to be available in the first half of 2022.
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Advance combination trials with checkpoint inhibitors. Once INSPIRE trial data are released, we plan to use those results as a
catalyst in addition to data from the other clinical trials in the program with multiple data read-outs anticipated in 2022 and later.
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Pursue partnerships to advance the IRX-2 clinical program. We are pursuing partnering opportunities with leading biopharmaceutical companies for the development and
commercialization of IRX-2.
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Regulatory strategy. We believe that our assets may present opportunities for potential breakthroughs in the treatment of cancer and other indications. We will
endeavor to seek breakthrough therapy designation with regulatory agencies for IRX-2 for one or more indications. We cannot, however, assure that we will receive breakthrough therapy designation for any future indications or that any
breakthrough therapy designation we do receive will necessarily lead to a faster approval time.
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Intellectual Property. We continue to pursue additional intellectual property based on data from IRX clinical studies.
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Pre-Clinical Results
Our findings to date from nonclinical studies of IRX‑2 include murine acute toxicology as well as acute and chronic primate studies. These studies detected circulating
associated cytokines yet were associated with benign toxicological findings. A further murine study demonstrated PD/PDL‑1 synergy when additively administered with IRX‑2.
Clinical Program
IRX‑2 currently remains under development and has not yet been approved for marketing authorization in any jurisdiction. The ongoing development program is investigating use of
IRX‑2 as an immunotherapeutic neoadjuvant (pre-surgical) and adjuvant (post-operative) treatment for advanced head and neck squamous cell carcinoma, or HNSCC, and other solid tumors.
HNSCC
The HNSCC development program is being conducted under U.S. Food and Drug Administration, or FDA Investigational New Drug
#11,137 filed on June 30, 2003 and is ongoing. The HNSCC program has received fast track designation, approved November 7, 2003, and orphan drug designation, conferred on July 7, 2005, from the FDA. We have not submitted a request for orphan drug
designation in the European Union, although we may seek such designation in the future.
Clinical studies in humans with HNSCC involving IRX‑2 show immune marker activation in patients treated with IRX‑2. In a prior phase 2a clinical trial, a correlation was shown
between marker activation and disease-free survival in head and neck cancer. Results from this study were used to support the initiation of the INSPIRE study, a Phase 2B study involving 105 patients with HNSCC. Details of this trial can be found at
clinicaltrials.gov (NCT02609386).
Other Indications
Other than the INSPIRE study, all clinical studies using IRX-2 are investigator-sponsored studies for which we are providing IRX‑2 as study drug and financial support to
conduct the trial. These studies include:
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Monotherapy studies:
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BR-101 - A study involving 16 patients with neoadjuvant breast cancer performed at the Providence Portland Medical Center. Details of this trial can be found at clinicaltrials.gov (NCT02950259).
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CIN-201 - An open label single arm Phase 2 trial of the IRX‑2 regimen in women with cervical squamous intraepithelial neoplasia 3 or squamous vulvar intraepithelial
neoplasia 3. Details of this trial can be found at clinicaltrials.gov (NCT03267680).
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Combination studies:
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BAS-104 - A basket study originally intended to enroll 100 patients with metastatic bladder, renal, non-small cell lung cancer, or NSCLC, melanoma, and head and neck
cancer being held at the Moffitt Cancer Center, using IRX‑2 in conjunction with Opdivo (Nivolumab), an immunotherapy cancer treatment marketed by Bristol-Myers Squibb Company. This trial was discontinued after 11 subjects were enrolled
due to insurance reimbursement challenges. Details of this trial can be found on clinicaltrials.gov (NCT03758781).
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HCC-107 - A study involving 28 patients with metastatic hepatocellular carcinoma, or HCC, being held at City of Hope Medical Center, HonorHealth Research Institute, and
Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Opdivo, a cancer treatment marketed by Bristol-Myers Squibb Company. Details of this trial can be found at clinicaltrials.gov
(NCT03655002).
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GI-106 - A study involving 20 patients with metastatic gastric and gastroesophageal junction cancers (GI) being held at City of Hope Medical Center, HonorHealth Research
Institute, and Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Keytruda (Pembrolizumab), an immunotherapy cancer treatment marketed by Merck. Details of this trial can be found at clinicaltrials.gov (NCT03918499).
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MHN-102 - A study involving 15 patients with metastatic head and neck cancer being held at the H. Lee Moffitt Cancer Center and Research Institute and University of
Michigan Health System using IRX‑2 in conjunction with Imfinzi (Durvalumab), a cancer treatment marketed by AstraZeneca plc. Details of this trial can be found at clinicaltrials.gov
(NCT03381183).
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BR-202 - A study involving 30 patients with neoadjuvant triple negative breast cancer, held at the Providence Portland Medical Center using IRX‑2 in conjunction with a
programmed cell death protein 1, or PD1, and chemotherapy treatments. Details of this trial can be found at clinicaltrials.gov (NCT04373031).
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Impact of COVID-19 Pandemic
The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19
pandemic. This is a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of SARS CoV‑2 from China to other countries
resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our
development plans, and on the ability to conduct our clinical trials There can be no assurance that this analysis will enable us to avoid or remediate part or all of any impact from the spread of COVID-19 or its consequences, including downturns in
business sentiment generally. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time,
and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID‑19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging SARS-CoV-2 variants cannot be
reliably predicted.
The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical
trials. While our Phase 2b clinical study in patients with squamous cell carcinoma of the oral cavity, known as the INSPIRE study, is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result
of the pandemic. Further, with respect to the INSPIRE study, we anticipate that the COVID-19 pandemic will slow our ability to close out trial sites and report trial data.
Engineered Cellular and Genetic Medicines
We are exploring opportunities to advance oncology, blood disorders and monogenic disease therapies using gene-editing and cell
therapy technology through a license with Factor and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021. The product candidates resulting from the acquisition will initiate with unedited (that is, not gene modified), induced
pluripotent stem cells (or iPSCs)-derived allogeneic mesenchymal stem cells, or iMSC. We will begin preclinical development of iMSC towards clinical indications where inhibiting inflammation and/or supporting recovery of bone marrow stromal cells
are required. The prior work of Novellus and NoveCite, with iMSC show evidence for preclinical efficacy in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS) and interactions with the U.S. Food and Drug
Administration, or FDA, provided guidance on Chemistry, Manufacturing and Controls, or CMC, and manufacturing plans, which will be undertaken in a similar manner for additional iMSC applications. Second generation iMSC products will involve gene
editing. Here, we anticipate the step-wise addition of genes, using the in-licensed Factor gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations. Development of processes to advance CMC
and manufacturing will follow the experience from first generation iMSC. Clinical indications for gene-modified iMSC will include solid tumors and conditions associated with chronic inflammation.
Pluripotent Stem Cell-Derived MSC
MSC, also known as mesenchymal stromal cells, were originally discovered and isolated from bone marrow in the 1970s and have
been isolated from various tissue sources including muscle, umbilical cord, liver, placenta, skin, amniotic fluid, synovial membrane, and tooth root. MSC have been intensely investigated for clinical applications within the last decades with a very
strong record of safety and tolerability. However, the majority of registered clinical trials applying MSC therapy for diverse human diseases have fallen short of expectations, despite the encouraging pre-clinical outcomes in varied animal disease
models. This can be attributable to inconsistent properties of MSC across studies as a result of variations in tissue source, donor variability, as well as isolation and manufacturing methodologies.
The generation of MSC from an iPSC source eliminates many of the sources of variability attributable to tissue-derived MSC. Sources of reduced variability include the use a
single tissue source and single donor as well as the ability to make larger cell banks due to the more extensive proliferation capacity of iMSC. Moreover, development of iMSC products can leverage decades of valuable manufacturing, preclinical and
clinical experience with MSC. Brooklyn plans to deploy iMSC products in clinical indications that harness their anti-inflammatory and tumor homing properties. Further, gene editing the iPSC can produce a stable source for iMSC that are endowed
with additional therapeutically beneficial properties that are not present in tissue-derived MSC or native iMSC.
Bone Marrow Transplant
Brooklyn is exploring the use of iMSC to address primary graft failure or poor graft function after bone marrow or
hematopoietic stem cell transplant, or BM/HSCT. Previous studies with tissue-derived MSC have demonstrated a rejuvenation of the bone marrow stromal environment and success with a subsequent BM/HSCT. Preclinical studies are being conducted to
demonstrate the ability of iMSC to home to the bone marrow and influence the microenvironment. In addition, an advisory board of world class experts in BM/HSCT has been assembled to guide the clinical trial design and selection of clinical
populations that are most likely to show benefit of a secondary transplant after treatment with iMSC.
Tumor Localized Delivery of Immune Stimulating Cytokines
The ability of MSC to migrate and home to sites of inflammation, including tumors, makes MSC attractive for delivery of
oncology therapeutics. We intend to use gene editing of iPSC to produce a cell line with expression of the immune stimulatory cytokines IL7 and IL15, which then can be used to generate iMSC that express both IL7 and IL15. Following systemic
delivery of the gene edited iMSC, migration and homing to tumor will result in a localized and more sustained delivery of these potent cytokines in the tumor microenvironment without producing the side effects that occur with high dose systemic
administration of these cytokines.
Precision Genetic Medicines
The ability to engineer site-specific DNA endonucleases with high fidelity (gene editing) has opened a new therapeutic arena for addressing the underlying genetic basis of
disease. Gene editing systems that possess both high specificity (low off-target editing) and high efficiency for on-target editing enable the in vivo use of the gene editing machinery to specifically modify patient DNA in target tissues and thus
address the genetic underpinnings of numerous disease states. Brooklyn’s in-licensed technologies are being leveraged to develop genetic medicines that can achieve precision in vivo gene editing to address disorders that occur primarily as a
result of mutations in a single gene. The initial disease and gene targets being pursued include familial transthyretin amyloidosis (TTR gene mutations) and Stargardt disease (ABC4A gene mutation).
Autologous Cell Therapy
The in-licensed technology for mRNA-based cellular reprogramming is highly efficient and safer than methods that utilize viral vectors or plasmid DNA for expression of
reprogramming factors since it eliminates the chance of DNA integration and potential for creating mutations in genomic DNA. Also, the proprietary reprogramming process utilizes daily repeated transfection of mRNA for expression of reprogramming
factors and can achieve a rapid generation of iPSC clones (in 2 weeks) from patient tissue biopsy. This rapid and efficient process therefore reduces the potential negative impact of low quantity biopsy material and this enhances reproducibility
of autologous iPSC generation. Furthermore, by delivering mRNA for a gene editing nuclease, genomic modifications, including correction of mutations, can be simultaneously performed thus streamlining overall manufacturing time to produce
gene-corrected autologous cells. This approach, leveraging the proprietary in licensed technologies, can be employed to produce cell therapies addressing genetic diseases (e.g. sickle cell disease) of infectious diseases (e.g. HIV).
Third Quarter 2021 and Recent Developments
Listing on The Nasdaq Global Market
We transferred the listing of our common stock to The Nasdaq Global Market effective October 25, 2021, after voluntarily
withdrawing the listing from the NYSE American stock exchange. The common stock continues to trade under the stock symbol “BTX.”
License Agreements
On April 26, 2021, Brooklyn LLC entered into an exclusive license agreement, or the License Agreement, with Novellus, Ltd. and Factor, or the Licensors, to license the
Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle
cell disease, and beta thalassemia. Through the License Agreement, Brooklyn LLC acquired an exclusive worldwide license to develop and commercialize certain cell-based therapies to treat cancer and rare blood disorders, including sickle cell
disease, based on patented technology and know-how of Novellus, Ltd.
The License Agreement provides that Brooklyn LLC is obligated to pay the Licensors a total of $4,000,000 in connection with the execution of the License Agreement, all of which
has been paid. Brooklyn LLC is obligated to pay to the Licensors additional fees of $5,000,000 in October 2021 and $7,000,000 in October 2022.
The completion of our acquisition of Novellus, Inc., the sole equity holder of Novellus, Ltd., on July 16, 2021 relieves us from potential obligations to pay Novellus, Ltd.
certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreements with Factor under the License Agreement remain unchanged. Brooklyn LLC is obligated to pay Factor $2,500,000 in
October 2021, which has been paid, and $3,500,000 in October 2022.
Under the terms of the License Agreement, Brooklyn LLC is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical
development and regulatory milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Brooklyn LLC will be obligated, in the case of development and regulatory milestones, to make milestone payments
to Licensor in specified amounts and, in the case of commercialization milestones, to specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Brooklyn LLC fails to timely achieve
certain delineated milestones, the Licensors may have the right to terminate the rights of Brooklyn LLC under provisions of the License Agreement relating to those milestones.
The Licensors are responsible for preparing, filing, prosecuting and maintaining all patent applications and patents under the License Agreement. If, however, the Licensors
determine not to maintain a particular licensed patent or not to prepare, file and prosecute a licensed patent, Brooklyn LLC will have the right, but not the obligation, to assume those responsibilities in the territory at its expense.
Novellus, Ltd. is a pre-clinical development, manufacturing, and technology licensing entity focused on engineered cellular medicines. Novellus, Ltd. has developed mRNA-based
cell reprogramming and gene editing technologies to create engineered cellular medicines. The synthetic mRNA is non-immunogenic—it is capable of successfully evading the cellular innate immune system and then is capable of expressing high levels of
proteins for cell reprogramming and gene editing. The mRNA may be formulated for injection into target tissues for cellular uptake and therapeutic treatment.
The synthetic mRNA technology may be used to edit gene mutations through mRNA chemistry or expressed gene-editing proteins to treat genetic and rare diseases. It may also be
used to reprogram human non-pluripotent cells and IPSCs. The IPSCs may then be differentiated into pure populations of varying therapeutic cell types. The reprogramming technology offers a rapid, cost-effective and patient specific therapy using
the engineered stem cells created from IPSCs.
Novellus, Ltd. has licenses from Factor to use over 45 granted patents throughout the world covering synthetic mRNA, RNA-based gene editing, and RNA-based cell reprogramming,
in addition to specific patents covering methods for treating specific diseases. There are also more than 50 pending patent applications throughout the world focused on these and other aspects of the technology. The patent coverage includes granted
patents and pending patent applications in the United States, Europe, and Japan, along with other major life sciences markets.
There can be no assurance that Brooklyn LLC can successfully develop and commercialize the technology licensed under the License Agreement.
Purchase Agreements
On April 26, 2021, Brooklyn and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed a purchase agreement, or the First Purchase Agreement, and a related registration
rights agreement. Pursuant to the First Purchase Agreement, Brooklyn had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of Brooklyn’s common stock. Sales of
common stock by Brooklyn, if any, were subject to certain limitations, and could occur from time to time, at Brooklyn’s sole discretion. For entering into the First Purchase Agreement, Brooklyn issued to Lincoln Park 56,041 shares of common shares
as consideration for Lincoln Park’s commitment to purchase up to $20.0 million in shares of common stock. As of September 30, 2021, Brooklyn issued and sold to Lincoln Park a total of 1,127,736 shares of common stock for gross proceeds of
$20,000,000, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.
On May 26, 2021, Brooklyn executed a purchase agreement, or the Second Purchase Agreement, and a related registration rights agreement. Pursuant to the Second
Purchase Agreement, Brooklyn has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to
$40,000,000 of shares of Brooklyn’s common stock. Sales of common stock by Brooklyn, if any, are subject to certain limitations, and may occur from time to time, at Brooklyn’s sole discretion. For entering into the Second Purchase Agreement,
Brooklyn issued to Lincoln Park 50,000 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $40,000,000 in shares of common stock.
Under the Second Purchase Agreement, on any business day selected by Brooklyn, Brooklyn may direct Lincoln Park to purchase up to 60,000 shares of common stock on such business
day, which we refer to as a Regular Purchase, provided, however, that (i) the Regular Purchase may be increased to up to 80,000 shares, provided that the closing sale price of the common stock is not below $5.50 on the purchase date, and (ii) the
Regular Purchase may be increased to up to 120,000 shares, provided that the closing sale price of the common stock is not below $7.00 on the purchase date. In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not
exceed $1,000,000 under the First Purchase Agreement and $2,000,000 under the Second Purchase Agreement. The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of common stock immediately preceding
the time of sale. In addition to Regular Purchases, Brooklyn may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold
prices as set forth in the Second Purchase Agreement.
The Second Purchase Agreement also prohibits Brooklyn from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares
of common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of common
stock. Brooklyn has the right to terminate the Second Purchase Agreement at any time, at no cost or penalty.
Actual sales of shares of common stock to Lincoln Park under the Second Purchase Agreements depend on a variety of factors to be determined by Brooklyn from time to time,
including, among others, market conditions, the trading price of the common stock and determinations by Brooklyn as to the appropriate sources of funding for Brooklyn and its operations. We expect that any net proceeds received by Brooklyn from
such sales to Lincoln Park will be used for research and development, working capital and general corporate purposes.
As of September 30, 2021, Brooklyn had issued and sold 3,551,990 shares of common stock under the First Purchase Agreement and the Second Purchase Agreement for total net
proceeds of $52.0 million.
Acquisition of Novellus
On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc. entered into an agreement and plan of acquisition, or the Acquisition
Agreement, with (a) Novellus LLC, (b) Novellus, Inc., the sole equity holder of Novellus, Ltd. and, prior to the closing under the Acquisition Agreement, a wholly owned subsidiary of Novellus, LLC, and (c) a seller representative. Novellus, Ltd. is
a pre-clinical stage biotechnology company organized under the laws of Ireland that is developing engineered cellular medicines using its licensed, patented non-immunogenic mRNA, high-specificity gene editing, mutation-free and footprint-free cell
reprogramming and serum-insensitive mRNA lipid delivery technologies.
The closing of the transaction contemplated by the Acquisition Agreement, or the Acquisition, was held contemporaneously with the execution and delivery of the Acquisition
Agreement. At the closing:
|
•
|
Brooklyn acquired all of the outstanding equity interests of Novellus, Inc. as the result of the merger of Brooklyn Acquisition Sub, Inc. with and into Novellus, Inc., following which Novellus, Inc., as the
surviving corporation, became Brooklyn’s wholly owned subsidiary and Novellus Ltd. became Brooklyn’s indirectly owned subsidiary.
|
|
•
|
Brooklyn acquired 25.0% of the total outstanding equity interests of NoveCite, Inc., a corporation focused on developing an MSC product for patients with acute respiratory distress syndrome, including from
COVID-19.
|
We delivered consideration for the Acquisition totaling approximately $124.0 million, which consisted of (a) $22.8 million in cash and (b) 7,022,230 shares of common stock,
which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.
The Acquisition Agreement contains customary representations, warranties and certain indemnification provisions. A total of
740,766 of the shares issued as consideration have been placed in escrow for a period of up to 12 months in order to secure indemnification obligations to us under the Acquisition Agreement. The Acquisition Agreement also contains non-competition
and non-solicitation provisions pursuant to which Novellus LLC has agreed not to engage in certain competitive activities for a period of five years following the closing, including customary restrictions relating to employees. No employees of
Novellus Ltd. or Novellus, Inc. prior to the Acquisition continued their employment, or were otherwise engaged by us, following the Acquisition.
In connection with the Acquisition, the co-founders of Novellus, Ltd. entered into lock-up agreements with respect to 3,377,690
of the shares received in the Acquisition, and our Chair of the Board of Directors and its Chief Executive Officer and President entered into identical lock-up agreements with respect to their current holdings of our stock. Each lock-up agreement
extends for a period of three years, provided that up to 75% of the shares of common stock subject to the lock-up agreement may be released from the lock-up
restrictions earlier if the price of common stock on our principal stock exchange, now The Nasdaq Global Market, exceeds specified thresholds. The lock-up agreements include customary exceptions for transfers during the applicable lock-up period.
We expect the Acquisition will advance our evolution into a platform company with a pipeline of next-generation engineered cellular, gene editing and cytokine programs. In
addition, the acquisition of Novellus, Ltd. builds on the License Agreement. (See “Second Quarter 2021 and Recent Developments—License Agreements” above.) The completion of the acquisition of Novellus, Ltd. relieves Brooklyn LLC from potential
obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive
rights to develop certain next-generation mRNA gene editing and cell therapy products, remains unchanged.
Basis of Presentation
Revenues
We are a development stage company and have had no revenues from product sales to date. We will not have revenues from product sales until such time as we receive regulatory
approval of our drug candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including stock-based compensation, for our executive and administrative
personnel, legal and other professional fees, travel, insurance, and other corporate costs.
Research and Development Expenses
We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and
development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are
incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended. IPR&D that is acquired
through an asset acquisition and has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.
The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for
clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related
to our product development efforts.
In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential
products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or
milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial
associated activities such as production and testing of clinical material require significant up-front expenditures. We anticipate paying significant portions of a study’s or trial’s cost before such begins and incurring additional expenditures as
the study or trial progresses and reaches certain milestones.
Critical Accounting Policies and Estimates
There were no significant changes in our critical accounting estimates during the three and nine months ended September 30, 2021 to augment the critical accounting estimates disclosed under “Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations--Critical Accounting Policies and Estimates” in Part I of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.
Results of Operations
Comparison of Three and Nine Months Ended September 30, 2021 and 2020
|
Three months ended September 30,
|
||||||||||||||||
|
2021
|
2020
|
Change
|
% Change
|
|||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
$ |
1,466,652
|
$ |
923,529
|
$ |
543,123
|
59
|
%
|
||||||||
|
Acquired IPR&D
|
80,537,551
|
-
|
80,537,551
|
N/A
|
||||||||||||
|
General and administrative
|
4,258,178
|
1,084,057
|
3,174,121
|
293
|
% |
|||||||||||
|
Change in fair value of contingent consideration
|
70,000
|
-
|
70,000
|
N/A
|
|
|||||||||||
|
Total operating expenses
|
86,332,381
|
2,007,586
|
84,324,795
|
4,200
|
%
|
|||||||||||
|
Loss from operations
|
(86,332,381
|
)
|
(2,007,586
|
)
|
(84,324,795
|
)
|
4,200
|
%
|
||||||||
|
Other income (expenses):
|
||||||||||||||||
|
Other income (expense), net
|
277,069
|
(12,559
|
)
|
289,628
|
2,306
|
%
|
||||||||||
|
Total other income (expenses), net
|
277,069
|
(12,559
|
)
|
289,628
|
2,306
|
%
|
||||||||||
|
Net loss
|
$
|
(86,055,312
|
)
|
$
|
(2,020,145
|
)
|
$
|
(84,035,167
|
)
|
4,160
|
%
|
|||||
|
Nine months ended September 30,
|
||||||||||||||||
|
2021
|
2020
|
Change
|
% Change
|
|||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
$ |
8,379,062
|
$ |
2,299,669
|
$ |
6,079,393
|
264
|
%
|
||||||||
|
Acquired IPR&D
|
80,537,551
|
-
|
80,537,551
|
N/A
|
||||||||||||
|
General and administrative
|
10,515,088
|
2,741,652
|
7,773,436
|
284
|
%
|
|||||||||||
|
Transaction costs
|
5,765,407
|
-
|
5,765,407
|
N/A
|
||||||||||||
|
Change in fair value of contingent consideration
|
(750,000
|
)
|
-
|
(750,000
|
)
|
N/A
|
||||||||||
|
Total operating expenses
|
104,447,108
|
5,041,321
|
99,405,787
|
1,972
|
%
|
|||||||||||
|
Loss from operations
|
(104,447,108
|
)
|
(5,041,321
|
)
|
(99,405,787
|
)
|
1,972
|
%
|
||||||||
|
Other expenses:
|
||||||||||||||||
|
Loss on sale of NTN assets
|
(9,648,173
|
)
|
-
|
(9,648,173
|
)
|
N/A
|
||||||||||
|
Other income (expense), net
|
252,318
|
(31,482
|
)
|
283,800
|
901
|
%
|
||||||||||
|
Total other expenses
|
(9,395,855
|
)
|
(31,482
|
)
|
(9,364,373
|
)
|
29,745
|
%
|
||||||||
|
Net loss
|
(113,842,963
|
)
|
(5,072,803
|
)
|
(108,770,160
|
)
|
2,144
|
%
|
||||||||
|
Series A convertible preferred stock dividend
|
(7,806
|
)
|
-
|
(7,806
|
)
|
N/A
|
||||||||||
|
Net loss attributable to common stockholders
|
$
|
(113,850,769
|
)
|
$
|
(5,072,803
|
)
|
$
|
(108,777,966
|
)
|
2,144
|
%
|
|||||
Revenues
We had no revenues for the three and nine months ended September 30, 2021 or 2020.
Research and Development Expenses
|
|
Three months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
Payroll-related
|
$
|
743,528
|
$
|
433,435
|
$
|
310,093
|
72
|
%
|
||||||||
|
Stock-based compensation
|
447,780
|
-
|
447,780
|
N/A
|
||||||||||||
|
Other expenses, net
|
275,344
|
490,094
|
(214,750
|
)
|
-44
|
%
|
||||||||||
|
Total research and development expense
|
$
|
1,466,652
|
$
|
923,529
|
$
|
543,123
|
59
|
%
|
||||||||
|
|
Nine months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
License fees
|
$
|
4,000,000
|
$
|
-
|
$
|
4,000,000
|
N/A
|
|||||||||
|
Payroll-related
|
1,797,317
|
1,291,038
|
506,279
|
39
|
%
|
|||||||||||
|
Stock-based compensation
|
1,018,428
|
-
|
1,018,428
|
N/A
|
||||||||||||
|
Other expenses, net
|
1,563,317
|
1,008,631
|
554,686
|
55
|
%
|
|||||||||||
|
Total research and development expense
|
$
|
8,379,062
|
$
|
2,299,669
|
$
|
6,079,393
|
264
|
%
|
||||||||
For the three months ended September 30, 2021, our research and development expenses increased primarily due to increased
headcount and stock-based compensation for the issuance of equity awards, offset by a decrease in other miscellaneous research and development expenses when compared to the same period in 2020. For the nine months ended September 30, 2021, our
research and development expenses increased due to upfront payments associated with licensed technology, increased clinical trial expenses, increased headcount and increased stock-based compensation when compared to the same period in 2020.
We expect research and development expenses to grow as we expand our gene-editing cell‑therapy research and clinical trial activities.
Acquired IPR&D
During the three and months ended September 30, 2021, we expensed the $80,537,551 fair value of the IPR&D acquired in the Acquisition
because there is no future alternative use for the IPR&D other than for its intended purpose.
General and Administrative Expenses
|
|
Three months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
Professional fees
|
$
|
1,587,573
|
$
|
779,119
|
$
|
808,454
|
104
|
%
|
||||||||
|
Stock-based compensation
|
1,280,524
|
22,734
|
1,257,790
|
5,533
|
%
|
|||||||||||
|
Payroll-related
|
540,769
|
28,513
|
512,256
|
1,797
|
%
|
|||||||||||
|
Insurance
|
366,986
|
39,709
|
327,277
|
824
|
%
|
|||||||||||
|
Other expenses, net
|
482,326
|
213,982
|
268,344
|
125
|
%
|
|||||||||||
|
Total general and administrative expense
|
$
|
4,258,178
|
$
|
1,084,057
|
$
|
3,174,121
|
293
|
%
|
||||||||
|
|
Nine months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
Professional fees
|
$
|
5,553,661
|
$
|
1,827,002
|
$
|
3,726,659
|
204
|
%
|
||||||||
|
Stock-based compensation
|
2,283,269
|
68,202
|
2,215,067
|
3,248
|
%
|
|||||||||||
|
Payroll-related
|
706,066
|
86,553
|
619,513
|
716
|
%
|
|||||||||||
|
Insurance
|
766,951
|
83,627
|
683,324
|
817
|
%
|
|||||||||||
|
Other expenses, net
|
1,205,141
|
676,268
|
528,873
|
78
|
%
|
|||||||||||
|
Total general and administrative expense
|
$
|
10,515,088
|
$
|
2,741,652
|
$
|
7,773,436
|
284
|
%
|
||||||||
The increase in general and administrative expense for the three and nine months ended September 30, 2021 was primarily related
to increased professional fees such as legal, accounting and consulting fees associated with merger and acquisition activity as well as costs associated with being a publicly traded company, increased stock-based compensation resulting from the
issuance of equity awards, increased payroll-related expense due to an increase in our headcount and increased insurance expenses when compared to the same periods in 2020.
We expect general and administrative expenses to increase in future periods as we increase our business activities and incur costs associated with being a publicly traded
company.
Transaction Costs
There were no transaction costs for the three months ended September 30, 2021. For the nine months ended September 30, 2021,
the $5,765,407 in transaction costs related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger.
Change in Fair Value of Contingent Consideration
For the three and nine months ended September 30, 2021, the change in fair value of the contingent consideration was an increase to the liability of $70,000 and a decrease to
the liability of $750,000, respectively, based on our quarterly valuation analyses. There were no changes to the fair value of contingent consideration for the three and months ended September 30, 2020.
Loss on Sales of NTN Assets
The $9,648,173 loss on the sale of NTN assets for the nine months ended September 30, 2021 was incurred when we completed the
Disposition.
Other Income (Expense), Net
| |
Three months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
Income from Brooklyn PPP Loan forgiveness
|
$
|
309,905
|
$
|
-
|
$
|
309,905
|
N/A
|
|||||||||
|
Interest expense, net
|
(20,210
|
)
|
(12,559
|
)
|
(7,651
|
)
|
61
|
%
|
||||||||
|
Other expenses, net
|
(12,626
|
)
|
-
|
(12,626
|
)
|
N/A
|
||||||||||
|
Total other income (expense), net
|
$
|
277,069
|
$
|
(12,559
|
)
|
$
|
289,628
|
-2,306
|
%
|
|||||||
|
|
Nine months ended September 30,
|
|||||||||||||||
|
|
2021
|
2020
|
Change
|
% Change
|
||||||||||||
|
Income from Brooklyn PPP Loan forgiveness
|
$
|
309,905
|
$
|
-
|
$
|
309,905
|
N/A
|
|||||||||
|
Interest expense, net
|
(55,974
|
)
|
(31,482
|
)
|
(24,492
|
)
|
78
|
%
|
||||||||
|
Other expenses, net
|
(1,613
|
)
|
-
|
(1,613
|
)
|
N/A
|
||||||||||
|
Total other income (expense), net
|
$
|
252,318
|
$
|
(31,482
|
)
|
$
|
283,800
|
-901
|
%
|
|||||||
For the three and nine months ended September 30, 2021, we recognized an increase in other income, net of expense primarily
as a result of the forgiveness of our PPP Loan, which was primarily offset by interest accrued on notes payable of that we assumed as part of the acquisition of the assets of IRX Therapeutics, LLC in 2018. The notes bear interest at the rate of
14% and were due on December 31, 2019. On January 27, 2020, the notes were amended to extend the maturity date to the earlier of (i) a change of control and (ii) December 31, 2021, whichever comes first.
Liquidity and Capital Resources
At September 30, 2021, we had cash and cash equivalents of $24,381,831. During the second quarter of 2021, we entered into the First Purchase Agreement and Second Purchase
Agreement with Lincoln Park, pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60,000,000 in shares of our common stock. Future sales of common
stock by us, if any, are subject to certain limitations, and may occur from time to time, at our sole discretion. As of November 9, 2021, we had issued and sold 3,551,990 shares of common stock for total gross proceeds of $54.1 million and net
proceeds of $52.0 million. For further information, see “—Recent Developments—Purchase Agreements.”
We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our drug development programs and operate as a publicly traded
company. We anticipate using current cash on hand and our net proceeds from sales of common stock under the Second Purchase Agreement to finance these activities. It will likely be some years before we obtain the necessary regulatory approvals to
commercialize one or more of our drug candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we have sufficient funds to fund our operations for the next twelve months from the
filing of these financial statements. There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other drug candidate we may acquire, or that we will obtain any additional financing that we require in the future or,
even if such financing is available, that it will obtainable on terms acceptable to us.
In that regard, our future funding requirements will depend on many factors, including:
• the scope, rate of progress and cost of our clinical trials and other product development activities;
• future clinical trial results;
• the terms and timing of any collaborative, licensing and other agreements that we may establish;
• the cost and timing of regulatory approvals;
• the cost and delays in product development as a result of any changes in regulatory oversight applicable to
our products;
• the cost and timing of establishing sales, marketing and distribution capabilities;
• the effect of competition and market developments; and
• the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights.
We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase
Agreement, public or private equity offerings, debt financings, corporate collaborations or other means. We may also seek governmental grants to support our clinical trials and preclinical trials. Further, we may seek to raise capital to fund
additional product development efforts even if we have sufficient funds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There can be no assurance that any
such required additional funding will be available to us at all or available on terms acceptable to us.
Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses
on terms that are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our
business.
Sources of Funds
Equity Securities
During the second quarter, we entered into the First Purchase Agreement and the Second Purchase Agreement with Lincoln Park,
pursuant to which, subject to specified terms and conditions, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60.0 million in shares of our common stock. As of
November 9, 2021, we had issued and sold 3,551,990 shares of common stock for total gross proceeds of $54.1 million and net proceeds of $52.0 million and a total of $5.9 million of common stock remained available for sale under the Second Purchase
Agreement. For further information, see “—Recent Developments—Purchase Agreements.”
As a condition to the closing of the Merger, Brooklyn LLC was required to have at least $10.0 million in cash and cash
equivalents at the effective time of the Merger. In furtherance of, and prior to, the Merger, certain of its members entered into agreements pursuant to which those members purchased additional units of Brooklyn LLC for an aggregate purchase price
of $10.5 million.
Disposition.
On March 26, 2021, we completed the Disposition, in which we sold to eGames.com our rights, title and interest in and to the
assets relating to the business we operated prior to the Merger under the name “NTN Buzztime, Inc.” in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger
business.
Brooklyn LLC PPP Loan.
On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $309,905 to Silicon Valley Bank
evidencing the loan, or the Brooklyn LLC PPP Loan, Brooklyn LLC received under the Paycheck Protection Program, or PPP, of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration, or the CARES
Act. Brooklyn LLC PPP Loan had an interest rate of 1.0% per annum.
Under the terms of the CARES Act, certain amounts of the Brooklyn LLC PPP Loan could be forgiven if they were used for
qualifying expenses as described in the CARES Act. In June 2020, Brooklyn LLC submitted its loan forgiveness application for the Brooklyn LLC PPP Loan, and in September 2020, the lender informed Brooklyn LLC that the U.S Small Business
Administration approved the forgiveness of 100% of the outstanding principal and interest. As of September 30, 2021, there was no outstanding principal balance of the Brooklyn LLC PPP Loan.
Uses of Funds
Net Cash Used in Operating Activities.
Our operations used $16.7 million during the nine months ended September 30, 2021. Our cash use for operating activities is influenced by the level of our net loss and the
amount of cash we invest in personnel and technology development to support anticipated growth in our business.
Lease Obligations.
We are obligated to pay approximately $660,000 per year for our facilities leases, subject to annual increases and to a sharing of common area expenses with other tenants in
the building. The leases expire at varying times between December 2025 and June 2028.
Acquisition.
On July 16, 2021, we used $22,882,181 of cash towards the purchase of the Acquisition. The remaining purchase price of
the Acquisition was completed through the issuance of common stock.
Brooklyn PPP Loan.
On April 18, 2020, Brooklyn (then known as NTN Buzztime, Inc.) was granted a loan, which we refer to as the Brooklyn PPP Loan, in the aggregate amount of $1,625,000, pursuant
to the PPP under the CARES Act. Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act. In October 2020 the U.S. Small Business Administration
approved the forgiveness of $1,093,000 of the $1,625,000 principal amount of the Brooklyn PPP Loan, leaving a principal balance of approximately $532,000, all of which, plus accrued and unpaid interest, was due and, in accordance with the terms of
the Merger Agreement, paid by Brooklyn upon the closing of the Merger.
Recent Accounting Pronouncements
A discussion of recent accounting pronouncements is included in Note 12 to the condensed consolidated financial statements included in this report.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial
condition, expenses, results of operations, liquidity, capital expenditures or capital resources.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk.
|
Under the rules and regulations of the Securities and Exchange Commission or SEC, as a smaller reporting company we are not required to provide
the information otherwise required by this item.
| Item 4. |
Controls and Procedures.
|
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, designed to ensure that
information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 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 President (who serves as our principal executive officer) and our Vice President of Finance (who serves as
our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.
Upon completion of the Merger in March 2021 and the resulting change in our business model and strategy, we experienced a complete turnover of our employees, including all of
the members of our executive management team, which resulted in, among other things, our having insufficient accounting staff available to enable and ensure adequate segregation of duties and our lacking appropriate and complete documentation of
policies and procedures critical to the accomplishment of financial reporting objectives. The accounting personnel and documentation deficiencies each increase the risk that a material misstatement of our financial statements will not be prevented
or detected on a timely basis. Based on this evaluation, our Chief Executive Officer and President and our Vice President of Finance concluded that, as of September 30, 2021, our disclosure controls and procedures were not effective and did not
provide reasonable assurance of achieving the desired control objectives.
Management plans to implement measures designed to ensure that the deficiencies contributing to the ineffectiveness of our disclosure controls and procedures are remediated,
such that the controls and procedures are designed, implemented and operating effectively. The remediation actions planned include:
| • |
hiring and employing additional accounting personnel in a number, and with experience, to allow for proper segregation of duties; and
|
| • |
developing and implementing, and then monitoring the effectiveness of, written policies and procedures required to achieve our financial reporting objectives in a timely manner,
including policies and procedures relating to internal control over financial reporting.
|
We are committed to developing a strong internal control environment, and we believe the remediation efforts that we will
implement will result in significant improvements in our control environment. We hired our Vice President of Finance in the second quarter of 2021 to oversee all accounting and financial reporting matters, including implementing a framework for
internal controls over financial reporting, and we expect to hire a full-time controller at the beginning of 2022. Also, beginning during the fourth quarter of 2021, we are engaging a
third-party consulting firm with expertise in implementing the framework for internal controls over financial reporting. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness
of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary.
Changes in Internal Control Over Financial Reporting
Other than described above, there was no change in our internal control over financial reporting during the three months ended September 30, 2021 that materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting. We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to
time make changes to enhance their effectiveness and ensure that our systems evolve with our business.
PART II — OTHER INFORMATION
| Item 1. |
Legal Proceedings.
|
This information is set forth under “Note 9—Commitments and Contingencies—Legal Matters” to the condensed consolidated financial statements included in this report and is
incorporated in this Item 1 by reference.
From time to time we may become involved in legal proceedings arising in the ordinary course of business. Except as described above, we do not believe there is any litigation
pending that could have, individually or in the aggregate, a material adverse effect on our results of operations, financial condition or cash flows.
| Item 1A. |
Risk Factors.
|
An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties
described below and in the “Risk Factors” section of our Current Report on Form 8-K filed with the SEC on May 11, 2021, and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 13, 2021,
together with all other information contained or incorporated by reference in this report. If any of the risks described in this report or in such Current Report or Quarterly Report occur, our business, financial condition, results of operations
and future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of common stock could decline, and you may lose all or part of your investment.
We can provide no assurance that claims will not be made to challenge the validity of the ratification
of the filing and effectiveness of the certificate of amendment to our restated certificate of incorporation filed with the Secretary of State of the State of Delaware on March 25, 2021 with respect to the increase in the number of authorized
shares of common stock pursuant to Section 204 of the Delaware General Corporation Law.
On September 3, 2021, our stockholders approved the
ratification, which we refer to as the Share Increase Ratification, of the amendment to our restated certificate of incorporation filed with the Secretary of State of the State of Delaware on March 25, 2021, which effected an increase
in the number of authorized shares of common stock by 85,000,000, from 15,000,000 shares to 100,000,000 shares, and which we refer to as the Share Increase Amendment. We subsequently filed a certificate of validation with respect to the Share
Increase Amendment with the Secretary of State of the State of Delaware, which we refer to as the Certificate of Validation, on September 3, 2021.
Even though we filed the Certificate of Validation, any claim that (i) the
increase in the number of authorized shares of common stock and related issuance of such shares ratified pursuant to the Share Increase Ratification is void or voidable due to a failure of authorization, or (ii) the Delaware Court of Chancery
should declare in its discretion that the Share Increase Ratification not be effective or be effective only on certain conditions, which we refer to collectively as the Subsequent Claims, may still be brought within 120 days from the time that
the filing of the Certificate of Validation with the Secretary of State of the State of Delaware becomes effective in accordance with the DGCL.
We can provide no assurance that Subsequent Claims will not be made within the available time period for making such claims
or what the resolution of such Subsequent Claims would be. If Subsequent Claims are made, it could have a material adverse effect on our liquidity, which could result in our filing for bankruptcy or an involuntary petition for bankruptcy being
filed against us.
We may not generate the expected benefits of the Acquisition and the Acquisition could disrupt our ongoing
business, distract our management and increase our expenses.
We entered into the Acquisition Agreement to acquire all of the outstanding equity interests of Novellus, Inc. and Novellus,
Ltd., which we collectively refer to as Novellus, with the expectation that the Acquisition will result in various benefits, including accelerating our research and development efforts in the gene editing and mRNA spaces. Achieving the anticipated
benefits of the Acquisition is subject to a number of uncertainties, including whether our business and the business of Novellus can be integrated in an efficient and effective manner. We cannot assure you that we will be able to accurately
forecast the performance or ultimate impact of the Acquisition.
It is possible that the integration process following the Acquisition could take longer than anticipated and could result in
unforeseen expenses, the disruption of our ongoing business, processes and systems, or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect our ability to achieve
the anticipated benefits of the Acquisition. There may be increased risk due to integrating financial reporting and internal control systems. The integration process is subject to a number of uncertainties, and no assurance can be given that the
anticipated benefits, expense savings and synergies of the Acquisition will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of
expected revenues and could adversely affect our future business, financial condition, operating results and prospects.
We have incurred and will continue to incur non-recurring expenses in connection with the Acquisition, including legal,
accounting and other expenses. Additional unanticipated costs may be incurred following consummation of the Acquisition in the course of the integration of the business of Novellus into our business. We cannot be certain that the realization of
efficiencies related to the integration of Novellus will offset in the near term, or at all, the transaction and integration costs of the Acquisition and any losses from undiscovered liabilities not covered by indemnification provisions from the
sellers of Novellus under the Acquisition Agreement or otherwise.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Set forth below is information regarding shares of common stock issued by us during the three months ended September 30, 2021 that were not registered under the Securities Act
of 1933. Included is the consideration, if any, we received for such shares and information relating to the section of the Securities Act of 1933, or the rule of the SEC, under which exemption from registration was claimed.
Under the Second Purchase Agreement with Lincoln Park pursuant to which we issued to Lincoln Park an aggregate of 340,048
shares of common stock from September 19, 2021 through September 20, 2021 for an aggregate purchase price of $3.6 million. We intend to us the net proceeds from these transactions for general corporate purposes, including working capital.
On July 16, 2021, we entered into the Acquisition Agreement to acquire all of the outstanding equity interests of Novellus,
Inc., which became our wholly owned subsidiary, and Novellus, Ltd. became our indirectly owned subsidiary. We also acquired 25% of the total outstanding equity interests of NoveCite. We delivered consideration that included 7,022,230 shares of
common stock, which under the terms of the Acquisition Agreement were valued at a total of $102,000,000, based on a price of $14.5253 per share. The closing of the transaction, including the issuance of the common stock, was held contemporaneously
with the execution and delivery of the Acquisition Agreement.
The securities described in this Item 2 were issued to investors in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as set forth
in Section 4(a)(2) under the Securities Act of 1933 and/or Regulation D promulgated thereunder relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required. The recipients
of securities in the transactions described above represented that they were accredited investors and were acquiring the securities for their own account for investment purposes only and not with a view to, or for sale in connection with, any
distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the instruments representing such securities issued in such
transactions.
| Item 6. |
Exhibits.
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Exhibit
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Description
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Incorporated By Reference
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Restated Certificate of Incorporation
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Exhibit to Form 10-Q filed on August 14, 2013
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Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split)
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Exhibit to Form 8-K filed on June 17, 2016
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Certificate of Decrease of the Series A Convertible Preferred Stock
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Exhibit to Form 8-K filed on April 12, 2017
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Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock)
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Exhibit to Form 8-K filed on June 9, 2017
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Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Reverse Stock Split)
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Exhibit to Form 8-K filed on March 31, 2021
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Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Authorized Share Increase)
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Exhibit to Form 8-K filed on March 31, 2021
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Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Name Change)
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Exhibit to Form 8-K filed on March 31, 2021
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(q) Certificate of Validation of Brooklyn ImmunoTherapeutics, Inc., as filed with the Secretary of State of the State of Delaware on
September 3, 2021
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Exhibit to Form 8-K filed on September 13, 2021
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Amended and Restated Bylaws of Brooklyn ImmunoTherapeutics, Inc.
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Exhibit to Form 8-K filed on September 23, 2021
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||
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Agreement and Plan of Acquisition, dated as of July 16, 2021, by and among Brooklyn ImmunoTherapeutics, Inc., Brooklyn Acquisition Sub,
Inc., Novellus LLC, Novellus, Inc., and the Sellers’ Representative.
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Exhibit to Form 8-K filed on July 19, 2021
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||
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Registration Rights Agreement, dated as of July 16, 2021, by and among Brooklyn ImmunoTherapeutics, Inc. and the individuals and entities
named therein.
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Exhibit to Form 8-K filed on July 19, 2021
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||
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Executive Employment Agreement, dated as of July 6, 2021 and effective as of July 15, 2021, between Brooklyn ImmunoTherapeutics, Inc. and
Jay Sial.
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Exhibit to Form 8-K filed on July 19, 2021
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Executive Employment Agreement, effective as of September 20, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Roger Sidhu
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Exhibit to Form 8-K filed on September 23, 2021
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||
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Form of Indemnification Agreement
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Exhibit to Form 8-K filed on April 16, 2021
|
||
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Schedule identifying agreements substantially identical to the form of indemnification agreement filed as Exhibit 10.4(a)
|
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Filed herewith
|
||
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Brooklyn ImmunoTherapeutics, Inc. Restated 2020 Stock Incentive Plan
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Exhibit to Form 8-K filed on September 13, 2021
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|||
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Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed herewith
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Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed herewith
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Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Furnished herewith
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Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Furnished herewith
|
||
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101.INS
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document).
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Filed herewith
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101.SCH
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Inline XBRL Taxonomy Extension Schema Document
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Filed herewith
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101.CAL
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith
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101.DEF
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Inline XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith
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101.LAB
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Inline XBRL Taxonomy Extension Label Linkbase Document
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Filed herewith
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101.PRE
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Inline XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith
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104
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
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| * |
Certain information redacted and replaced with “[***]”.
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| + |
Indicates management contract or compensatory plan.
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| † |
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Brooklyn ImmunoTherapeutics, Inc. hereby undertakes to furnish supplementally copies of any of the omitted schedules and
exhibits upon request by the Securities and Exchange Commission.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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BROOKLYN IMMUNOTHERAPEUTICS, INC.
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Date: November 12, 2021
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By:
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/s/ Howard J. Federoff
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Howard J. Federoff
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Chief Executive Officer and President
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38
Exhibit 10.4(b)
Schedule identifying agreements substantially identical to the form of indemnification agreement files as Exhibit 10.4(a) hereto
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Indemnitee
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Date of Agreement
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Charles Cherington
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April 14, 2021
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Kevin D’Amour
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September 23, 2021
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George P. Denny III
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April 14, 2021
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Howard J. Federoff
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April 20, 2021
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Luba Greenwood
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April 14, 2021
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Ronal Guido
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April 14, 2021
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Sandra Gurrola
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June 21, 2021
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Lynn Sadowski Mason
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April 15, 2021
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Erich Mohr
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May 7, 2021
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Yiannis Monovoukas
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April 14, 2021
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Ajay Sial
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September 23, 2021
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Roger Sidhu
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September 23, 2021
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Nicholas Singer
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April 14, 2021
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Howard J. Federoff, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors:
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
|
Date: November 12, 2021
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/s/ Howard J. Federoff
|
|
Howard J. Federoff
|
|
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Chief Executive Officer and President
|
|
|
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(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sandra Gurrola, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors:
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
|
Date: November 12, 2021
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/s/ Sandra Gurrola
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|
Sandra Gurrola
|
|
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Vice President of Finance
|
|
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(Principal Financial Officer)
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc. for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge on the date hereof:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Brooklyn ImmunoTherapeutics, Inc. for the period presented therein.
|
Date: November 12, 2021
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/s/ Howard J. Federoff
|
|
Howard J. Federoff
|
|
|
Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc. for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge on the date hereof:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Brooklyn ImmunoTherapeutics, Inc. for the period presented therein.
|
Date: November 12, 2021
|
/s/ Sandra Gurrola
|
|
Sandra Gurrola
|
|
|
Vice President of Finance
|
|
|
(Principal Financial Officer)
|
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.