UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-K

(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2021

OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 1-11460


Brooklyn ImmunoTherapeutics, Inc.
(Exact name of registrant as specified in its charter)


Delaware
  
31-1103425
(State or Other Jurisdiction of
Incorporation or Organization)
  
(I.R.S. Employer
Identification No.)

10355 Science Center Drive, Suite 150, San Diego, California
  
92121
(Address of Principal Executive Offices)
  
(Zip Code)
 
(212) 582-1199
(Registrant’s telephone number, including Area Code)


Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
  
Trading Symbol(s)
  
Name of Each Exchange on Which Registered
Common Stock, $0.005 par value
  
BTX
  
The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐ No  ☒
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  ☐  No  ☒
 
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 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐
Accelerated filer  ☐
Non-accelerated filer  ☒
Smaller reporting company  ☒
  Emerging growth company  ☐
 
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒
 
The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2021), computed by reference to the closing sale price of the common stock on the Nasdaq Stock Market LLC (“Nasdaq”) on such date, was approximately $694 million. For purposes of this determination shares beneficially owned by executive officers, directors and ten percent stockholders have been excluded, which does not represent an admission by the registrant as to the affiliate status of such person.
 
As of April 12, 2022, the registrant had 57,451,937 shares of common stock outstanding.
 
Documents Incorporated by Reference.
 
Portions of the registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders are incorporated by reference in Items 10, 11, 12, 13, and 14 of Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2021.
 

TABLE OF CONTENTS

Item
Page

Part I
     
1.
1 
1A.
 28
1B.
 57
2.
57
3.
 57
4.
 59
   

Part II
     
5.
 60
6.
 60
7.
 60
7A.
 70
8.
 70
9.
 70
9A.
 70
9B.
 71
9C.
 71
     

Part III
     
10.
 72
11.
 72
12.
 72
13.
 72
14.
 72
     

Part IV
     
15.
 73
16.
 75

76

F-1

i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Annual Report on Form 10-K contains “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements related to future events, results, performance, prospects and opportunities, including statements related to our strategic plans and targets, revenue generation, product availability and offerings, capital needs, capital expenditures, industry trends and our financial position. Forward-looking statements are based on information currently available to us, on our current expectations, estimates, forecasts, and projections about the industries in which we operate and on the beliefs and assumptions of management. Forward looking statements often contain words such as “expects,” “anticipates,” “could,” “targets,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would,” and similar expressions. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances, are forward-looking statements. 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 statements. For us, particular factors that might cause or contribute to such differences include those identified in the “Summary of Principal Risk Factors” below and the other risks and uncertainties described in Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K and described in other documents we file from time to time with the Securities and Exchange Commission, or SEC, including our Quarterly Reports on Form 10-Q.
 
Readers are urged not to place undue reliance on the forward-looking statements in this Annual Report on Form 10-K, which speak only as of the date of this Annual Report on Form 10-K. We are including this cautionary note to make applicable, and take advantage of, the safe harbor provisions of the PSLRA. 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.
 
We believe that the expectations reflected in forward-looking statements in this Annual Report on Form 10-K are based upon reasonable assumptions at the time made. However, given the risks and uncertainties, you should not rely on any forward- looking statements as a prediction of actual results, developments or other outcomes. You should read these forward-looking statements with the understanding that we may be unable to achieve projected results, developments or other outcomes and that actual results, developments or other outcomes may be materially different from what we expect.
 
Unless otherwise indicated in this Annual Report on Form 10-K, “Brooklyn” refers to Brooklyn ImmunoTherapeutics, Inc., a Delaware corporation (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.

SUMMARY OF PRINCIPAL RISK FACTORS
 
You should carefully consider the summary of principal risk factors below, together with the more detailed risk factors related to our business and industry described under “Risk Factors” contained in Item 1A of this Annual Report on Form 10-K. The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows, which could result in a decline in the market price of our common stock.
 

 •
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

•
We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

•
We will require substantial additional capital to fund our operations, and if we fail to obtain the necessary financing, we may not be able to complete the development and commercialization of any of our product candidates.

ii

 •
We face business disruption and related risks resulting from the pandemic of the novel coronavirus (COVID-19), which could have a material adverse effect on our business plan.

•
Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

•
We are substantially dependent on the success of our internal development programs and our product pipeline candidates may not successfully complete clinical trials, receive regulatory approval or be successfully commercialized.

•
Our current or future product candidates may cause undesirable side effects or have other properties when used alone or in combination with other approved products or investigational new drugs that could halt their clinical development, prevent their marketing approval, limit their commercial potential or result in significant negative consequences.

•
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

•
We face significant competition and if our competitors develop and market products that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

•
We rely, and expect to continue to rely, on third parties to conduct our clinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.

•
If we are unable to obtain and maintain patent and other intellectual property protection for our products and product candidates, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products and product candidates may be adversely affected.
 
iii
PART I
 
ITEM 1.
Business

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:


 •
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

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

On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.

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

Our principal executive offices are located at 10355 Science Center Drive, Suite 150, San Diego, CA 92121 and our phone number is (212) 582-1199. We maintain a website at www.brooklynitx.com. Information contained on, or accessible through, our website is not a part of and is not incorporated by reference into this Annual Report on Form 10-K.

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. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing and cell therapy technology through a license with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021, which we refer to as the Acquisition.

IRX-2

IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines. Together, these cytokines are believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.

1
While IRX-2 is a cytokine mixture, one of its active components is IL2, a cytokine-signaling molecule with pleiotropic effects on the immune system. IL2 is a protein that regulates the activities of white blood cells (leukocytes, including lymphocytes) that are responsible for immunity. IL2 is part of the body’s natural response to microbial infection, and in discriminating between foreign, or non-self and “self,” IL2 mediates its effects by binding to IL2 receptors, which are expressed by lymphocytes. The major sources of IL2 are activated CD4+ T lymphocytes and activated CD8+ T lymphocytes.

Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells. We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies.

Regarding IRX-2 development, our strategy is:


 •
Advance our product candidate IRX-2 through clinical development. IRX-2 is a human blood cell-derived cytokine therapy being studied for multiple types of cancer, including squamous cell cancer of the head and neck. Enrollment in the ongoing Phase 2b INSPIRE trial, or the INSPIRE trial, has been completed, with top-line data estimated to be available by the third quarter of 2022.


•
Advance additional studies. 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, see “—Clinical Program” below, with multiple data read-outs anticipated in 2022 and later.


•
Pursue partnerships to advance the IRX-2 clinical program. We are pursuing partnership opportunities with certain leading biopharmaceutical companies for the development and commercialization of IRX-2.


•
Regulatory strategy. We believe that our assets may present opportunities for potential breakthroughs in the treatment of cancer and other indications. We will endeavor to seek breakthrough therapy designation with regulatory agencies for IRX-2 for one or more indications.


•
Intellectual Property. We continue to pursue additional intellectual property based on data from our IRX-2 clinical studies.

Pre-Clinical Results

Our findings to date from our nonclinical studies of IRX-2 include murine acute toxicology as well as acute and chronic toxicology in non-human primates. These studies detected circulating associated cytokines yet were associated with benign toxicological findings.

Clinical Program

IRX2 currently remains under development and has not yet been approved for marketing authorization in any jurisdiction. The ongoing company sponsored development program is investigating use of IRX2 as an immunotherapeutic neoadjuvant (pre-surgical) and adjuvant (post-operative) treatment for advanced head and neck squamous cell carcinoma, or (“HNSCC”).  Studies in other indications and combinations are being pursued in the investigator sponsored study program.

HNSCC

The HNSCC development program is being conducted under U.S. Food and Drug Administration (“FDA”)  Investigational New Drug (IND) 11137 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.

2
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 trial involving 105 patients with HNSCC. Details of this trial can be found at clinicaltrials.gov (NCT02609386). The trial study schema can be found below.

Historical Background of the Inspire Study

The IRX-2 regimen has been studied in patients HNSCC in two previous open-label, multi-center studies. Also, a phase 1 trial evaluated the IRX-2 regimen as a therapy for advanced disease, which reported that the IRX-2 regimen was well tolerated.

In 2011, results were reported for a Phase 2a trial of IRX-2. This trial was an open-label study involving 27 patients, 26 of whom completed the study. The primary endpoint of the study was to further evaluate the safety and efficacy of the immunotherapy regimen including IRX-2 in the neoadjuvant setting in previously untreated patients with advanced (Stage II to IVa) HNSCC. The primary study objective was to demonstrate the safety of this immunotherapy regimen based on adverse events (“AEs”), changes in clinical laboratory measures (hematology, chemistry, and urinalysis), vital signs, and physical examinations. Secondary objectives were clinical, pathologic, and radiographic tumor response; and patient disease-free survival (“DFS”) and overall survival (“OS”).

Most recombinant cytokines, such as IL-2, are tested in the same manner as traditional oncology drugs, where the maximum tolerated dose is sought. Typical cytokine therapies in cancer treatment use extremely high doses, in the millions of units per administration. Thus, AEs such as fever, hypotension, malaise, anemia, leukopenia, and hepatic and renal dysfunction are commonly reported, and often lead to discontinuation of the treatment. IV administration of cytokines is frequently associated with an acute phase reaction characterized by rigors, fever, an increase in neutrophils, a decrease in lymphocytes, and changes in hormone levels. By contrast, the IRX-2 regimen, which contains physiologic quantities of cytokines, showed greatly improved tolerability over typical recombinant cytokine therapies.

The results of the Phase 2a study were published in December 2011 in the journal Head and Neck. The article reported that IRX-2 showed an immunologically mediated antitumor effect, suggested by pronounced lymphocytic infiltration. Lymphocytic infiltration was measured by a 100-mm Visual Analog Scale (“VAS”) score, in which 100 mm signified lymphocyte infiltration of the entire primary tumor section and 0 mm signified no lymphocyte infiltration in the tumor specimen. The mean VAS score for all 24 patients was 22.6 mm on the samples obtained at surgery. Patients were grouped into a low VAS score (below the overall mean) and high VAS score (above the overall mean) cohorts. There were 14 patients in the low VAS score cohort with scores between 2 and 21 (median of 9.5), and there were 10 patients in the high VAS score cohort with scores between 27 and 66 (median of 37.0). Patients in the high-LI group included fewer oral cavity patients (50% in high LI vs 60% in low LI) but were similar with respect to tumor sites. Seventy percent of high-LI patients were stage IV, whereas only 60% of low LI were stage IV. The LI score was used to determine whether the degree of LI correlated with survival. Patients with a high-LI score had an improved survival trend compared to those with low LI, and superior to the survival rate for the combined overall group. (See below.)

3

graphic

Interestingly, LI in resected tumor specimens was considered high in 40% of the patients. The 10 patients with a high-LI score showed an improved survival trend in comparison to the low-LI group (n = 15) and to the entire study population (n = 26). It is difficult to directly compare these subgroups, because there was some imbalance, with a slightly higher per-centage of oral cavity patients in the low-LI group. However, in the absence of a randomized control, it is impossible to directly attribute the LI to the immuno-therapy regimen. In addition, tumor reductions were observed at the end of the 21-day regimen in 11 patients, and a 75% reduction of glycolytic activity in the tumor and lymph nodes on posttreatment PET scans in one patient.

With regard to the primary endpoint, eight serious adverse events (SAEs) were reported during treatment and the 30-day postoperative period in 7 patients, including 3 patients with aspiration pneumonia, 1 patient with asthma exacerbation secondary to upper respiratory infection, 1 patient with a postoperative wound infection, 1 patient with a neck abscess, and 1 patient with an episode of alcohol withdrawal. Only 1 case of aspiration pneumonia was deemed life threatening (grade 4). None of the SAEs was considered related to treatment except for the postoperative wound infection, which was considered possibly related. Other minor (grade 1 or 2) AEs included headache (30%), injection-site pain (22%), nausea (22%), constipation (15%), dizziness (15%), fatigue (11%), and myalgia (7%).

After over more than 36 months of follow-up, 11 of the 27 patients enrolled in the Phase 2a study had experienced tumor relapse (n = 1) or death (n = 10). The pattern of first HNSCC relapse included 3 patients with primary site recurrence, 2 with recurrences in the neck, and 2 with distant metastases. Of the 10 patients who died, 6 died of cancer (1 from a new primary) and 4 died of other causes. The 1-year, 2-year, and 3-year DFS probabilities after surgery were 72%, 64%, and 62%, respectively. Of the 26 patients whose primary tumor was resected surgically, 2 patients died during the first year and 5 patients died during the second year after surgery. The probability of surviving after surgery was 92% the first year, 73% the second year, and 69% the third year, which was considered to be an encouraging survival rate compared to historical norms in patients with HNSCC.

A second finding of the study was that some tumors showed some decrease in overall size after the immunotherapy regimen. Overall tumor shrinkage was modest, although in 4 patients, independent, objective imaging documented a greater than 10% decrease in tumor size. This was unexpected and encouraging after only 3 weeks of presurgical neoadjuvant immunotherapy. No patient achieved a true partial response by modified Response Evaluation Criteria in Solid Tumors (RECIST) criteria. Increases in tumor measurements were also seen in some patients, but most patients showed negligible change in tumor dimensions. We believe that these findings suggest the safety of the neoadjuvant regimen, although final decisions on whether a drug product is safe and effective can only be made by the FDA.

4
The phase 2a trial did not include a randomized control cohort. However, the manuscript published in Head & Neck in December 2011 stated the authors’ belief that the safety results and feasibility of this immunotherapy regimen were intriguing enough to warrant further study and appropriate comparison in a randomized trial.

graphic

The INSPIRE study is an open label, randomized, multi-center, multi-national Phase 2b clinical trial intended for patients with Stage II, III or IVA untreated SCC of the oral cavity who are candidates for resection with curative intent. Subjects were randomized 2:1 to either Regimen 1 or Regimen 2 and treated for 21 days prior to surgery and then postoperatively with a booster regimen given every three months for one year (a total of four times.)


 •
Regimen 1: IRX-2 Regimen with cyclophosphamide, indomethacin, zinc-containing multivitamins, omeprazole and IRX-2 as neoadjuvant and adjuvant therapy.

•
Regimen 2: Regimen 1 with cyclophosphamide, indomethacin, zinc-containing multivitamins, omeprazole but without IRX-2 as neoadjuvant and adjuvant therapy.

Treatments were allocated to study subjects using minimization with a stochastic algorithm based on the range method. Minimization will account for the major prognostic factors for SCC of the oral cavity (T and N stage) and study center to avoid imbalances in treatment allocation within centers.

Postoperatively, subjects first received standard adjuvant radiation or chemoradiation therapy as determined by the investigators per NCCN guidelines, and then also received Booster Regimen 1 or 2 as determined in the prior randomization.

Subjects will be followed for the Primary, Secondary and Exploratory endpoints. Protocol mandated follow-up will end four years after randomization of the last patient.

The Neoadjuvant IRX-2 Regimen is a 21-day pre-operative regimen of cyclophosphamide on Day 1, indomethacin, zinc-containing multivitamins and omeprazole on Days 1-21, and subcutaneous IRX-2 injections in bilateral mastoid insertion regions for 10 days between Days 4 and 21, as shown in the table below:

5
Agent
Dose
Route of Administration
Treatment Days
Cyclophosphamide
300 mg/m2
IV
1
IRX-2
230 units daily (Bilateral injections of 115 units)
Subcutaneous at or near the mastoid insertion of both sternocleidomastoid muscles
Any 10 days between Days 4 and 21
Indomethacin
25 mg TID
Oral
1-21
Zinc-Containing Multivitamins
1 tablet containing 15-30 mg of zinc
Oral
1-21
Omeprazole
20 mg
Oral
1-21

The Booster IRX-2 Regimen is given at 3, 6, 9 and 12 months (-14 to +28 days) after surgical resection. It is a 10- day post-operative regimen of cyclophosphamide on Day 1, indomethacin, zinc-containing multivitamins and omeprazole on Days 1-10 and subcutaneous IRX-2 injections in bilateral deltoid regions for 5 days between Days 4 and 10 as shown in the table below:

Agent
Dose
Route of Administration
Treatment Days
Cyclophosphamide
300 mg/m2
IV
1
Every 3 months.
IRX-2
230 units daily (Bilateral injections of 115 units)
Subcutaneous into bilateral deltoid regions
Any 5 days between Days 4 and 10
Every 3 months.
Indomethacin
25 mg TID
Oral
Days 1-10
Every 3 months.
Zinc-Containing Multivitamins
1 tablet containing 15-30 mg of zinc
Oral
Days 1-10
Every 3 months.
Omeprazole
20 mg daily
Oral
Days 1-10

Regimen 2, the control arm of the study, is identical, except that subjects will not receive IRX-2.

The primary objective of the study is to determine if the event-free survival (EFS) of subjects treated with Regimen 1 is longer than for subjects treated with Regimen 2. The secondary objections of the study are (i) to determine if OS of subjects treated with Regimen 1 is longer than for subjects treated with Regimen 2, (ii) to compare the safety of each Regimen, and (iii) to compare the feasibility of each booster regimen.

Other Indications

Other than the phase 2b INSPIRE trial, all clinical studies using IRX-2 are investigator-sponsored studies for which we are providing IRX‑2 as the study drug and financial support to conduct the trial. These studies include:

Monotherapy studies:


 •
BR-101 - A study involving 16 patients with neoadjuvant breast cancer performed at the Providence Portland Medical Center. Details of this trial can be found at clinicaltrials.gov (NCT02950259).


•
CIN-201 - An open label single arm Phase 2 trial of the IRX‑2 regimen in women with cervical squamous intraepithelial neoplasia 3 or squamous vulvar intraepithelial neoplasia 3. Details of this trial can be found at clinicaltrials.gov (NCT03267680).

6
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).


•
HCC-107 - A study involving 28 patients with metastatic hepatocellular carcinoma, or HCC, being held at City of Hope Medical Center, HonorHealth Research Institute, and Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Opdivo®, a cancer treatment marketed by Bristol-Myers Squibb Company. Details of this trial can be found at clinicaltrials.gov (NCT03655002).


•
GI-106 - A study involving 20 patients with metastatic gastric and gastroesophageal junction cancers (GI) being held at City of Hope Medical Center, HonorHealth Research Institute, and Texas Oncology at Baylor Charles A. Simmons Cancer Center using IRX‑2 in conjunction with Keytruda® (Pembrolizumab), an immunotherapy cancer treatment marketed by Merck. Details of this trial can be found at clinicaltrials.gov (NCT03918499).


•
MHN-102 - A study involving 15 patients with metastatic head and neck cancer being held at the H. Lee Moffitt Cancer Center and Research Institute and University of Michigan Health System using IRX‑2 in conjunction with Imfinzi (Durvalumab), a cancer treatment marketed by AstraZeneca plc. Details of this trial can be found at clinicaltrials.gov (NCT03381183).


•
BR-202 - A study involving 30 patients with neoadjuvant triple negative breast cancer, held at the Providence Portland Medical Center using IRX‑2 in conjunction with a programmed cell death protein 1, or PD1, and chemotherapy treatments. Details of this trial can be found at clinicaltrials.gov (NCT04373031).

Impact of COVID-19 Pandemic

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our development plans, and on the ability to conduct our clinical trials. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted.

The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical trials. While our INSPIRE trial in patients with squamous cell carcinoma of the oral cavity is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result of the pandemic.

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Engineered Cellular and Genetic Medicines

We are advancing our gene-editing and cell therapy technology in oncology, blood disorders and monogenic disorders through a license with Factor and through the Acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021. We expect that the first generation product candidates resulting from the Acquisition will be derived from unedited (that is, not gene modified), induced pluripotent stem cells (“iPSC”)-derived allogeneic mesenchymal stem cells (“iMSC”). We expect to begin preclinical development of iMSC for clinical indications for which inhibiting inflammation and/or supporting recovery of bone marrow stromal cells is required. The prior work of Novellus and NoveCite with iMSC shows evidence for preclinical efficacy in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS). Interactions with the FDA provided guidance on Chemistry, Manufacturing and Controls (“CMC”), and manufacturing plans, which will be undertaken in a similar manner for additional iMSC applications. We expect that second generation iMSC products will involve gene editing, for which we anticipate using the stepwise addition of genes provided by the in-licensed Factor Bioscience gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations. Development of processes to advance CMC and manufacturing will follow the experience from first generation iMSC products. We expect clinical indications for gene-modified iMSC will include solid tumors and other conditions associated with episodic and/or chronic inflammation.  We are also exploring opportunities to advance in vivo gene therapies for monogenic and other diseases by combining the NoveSlice gene editing technology in combination with ToRNAdoTM, the in-licensed lipid nanoparticle (or “LNP”) technology.

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 create “off-the-shelf” iMSC products in clinical indications that harness their anti-inflammatory and tumor homing properties.  Further, gene editing of 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 and Inflammatory Diseases

Brooklyn is exploring the use of iMSC to address primary graft failure or poor graft function after bone marrow or hematopoietic stem cell transplantation, or BM/HSCT in addition to potential applications in the prevention and/or treatment of graft vs host disease.  Preclinical studies will be conducted to demonstrate the ability of iMSC to target the bone marrow and influence the microenvironment. In addition, we have assembled an advisory board of world class experts in BM/HSCT 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 navigate 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, which then can be used to generate iMSC that express both IL-7 and IL-15.  Following systemic delivery of the gene edited iMSC, we believe that migration and homing to tumor sites 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.

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Precision In vivo Genetic Medicines

We believe that  the ability to engineer target 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 and Allogeneic Cell Therapy

Cellular reprogramming refers to the process of generating pluripotent stem cells from non-pluripotent somatic cells (e.g., dermal fibroblasts obtained through a skin biopsy) by the forced expression of key genes and factors important for maintaining the defining properties of pluripotent cells.  We believe 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 because it eliminates the chance of DNA integration and potential for creating mutations in genomic DNA. Also, our 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 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. We expect that 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). In addition, we have the potential to generate off-the-shelf (allogeneic) iPSC derived cell therapies for truly personalized cell therapy application in patients with genetic diseases.

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.”

PIPE Transaction

On March 6, 2022, we entered into a Securities Purchase Agreement with an investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of approximately 6,857,000 units (the “Units”), each of  which consisted of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) one warrant (the “Common Warrants”) to purchase one share of common stock, for an aggregate purchase price of approximately $12.0 million. The PIPE Transaction closed on March 9, 2022.

Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.

Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires five-and-one-half years from the date of issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.

In connection with the PIPE Transaction, we and the PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which we agreed to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. We agreed to use our best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved.

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Purchase Agreements

On April 26, 2021, we and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed a purchase agreement, or the First Purchase Agreement. Pursuant to the First Purchase Agreement, we had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of our common stock. Sales of common stock by us were subject to certain limitations, and could occur from time to time, at our sole discretion. In consideration for Lincoln Park’s entry into the First Purchase Agreement, we issued Lincoln Park approximately 56,000 shares of common stock. As of December 31, 2021, we had issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, we and Lincoln Park executed a second purchase agreement, or the Second Purchase Agreement, and together with the First Purchase Agreement, the Purchase Agreements. Pursuant to the Second Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40.0 million of shares of our common stock. Sales of common stock by us are subject to certain limitations, and may occur from time to time, at our sole discretion. In consideration of Lincoln Park’s entry into the Second Purchase Agreement, we issued to Lincoln Park 50,000 shares of common stock.

Under the Second Purchase Agreement, we may direct Lincoln Park to purchase up to 60,000 shares of common stock on any business day, which we refer to as a Regular Purchase, which amount may be increased up to 120,000 shares based on the closing price of the common stock, provided that Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $2.0 million. The purchase price per share for each such Regular Purchase is based off of the common stock’s market immediately preceding the time of sale.

The Second Purchase Agreement also prohibits us 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. We have 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 us from time to time, including, among others, market conditions, the trading price of the common stock and determinations by us as to the appropriate sources of funding for us and our operations.

As of December 31, 2021, we had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of $34.1 million.  Pursuant to the securities purchase agreement in respect of the PIPE Transaction, we are prohibited from issuing additional shares under the Second Purchase Agreement for a period of one -year immediately following the closing of the PIPE Transaction.

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 Acquisition closed contemporaneously with the execution and delivery of the Acquisition Agreement.

We delivered consideration for the Acquisition totaling approximately $124.0 million, which consisted of (a) $22.8 million in cash and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.

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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. The completion of the Acquisition 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.

License and Royalty Agreements

Cell and Gene Therapy

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 pay the Licensors a total of $4.0 million in connection with the execution of the License Agreement, all of which has been paid. Brooklyn LLC was obligated to pay to the Licensors additional fees of $5.0 million in October 2021 and $7.0 million in October 2022.

The completion of our July 16, 2021 acquisition of Novellus, Inc., the sole equity holder of Novellus, Ltd., 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 $2.5 million in October 2021, which has been paid, and $3.5 million 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 or expressed gene-editing proteins to treat genetic and rare diseases. It may also be used to reprogram human non-pluripotent cells into induced pluripotent stem cells )(iPSC). The iPSC may then be differentiated into populations of varying therapeutic cell types. The reprogramming technology offers a rapid and patient specific therapy using the engineered stem cells created from iPSC that may avoid the cost, complexity and safety issues associated with viral vector gene editing approaches.

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Novellus, Ltd. also has licenses from Factor to use over 70 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 60 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.

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

IRX-2

Unless otherwise stated below, each royalty to be paid under these license and royalty agreements is payable until the last patent for IRX-2 expires and runs in perpetuity unless earlier terminated pursuant to the terms described below. There are no milestone payments due under any of these agreements.

License Agreement with the University of South Florida Research Association

On June 28, 2000, IRX Therapeutics, a predecessor of Brooklyn LLC, entered into a series of License Agreements (collectively, the “USF License Agreement”) with the University of South Florida Research Association, Inc. (“Research Association”). Pursuant to the USF License Agreement, as amended, the Research Association licensed to IRX Therapeutics the exclusive worldwide rights to certain patents on IRX-2 in exchange for royalties equal to 7% of the gross product sales of IRX-2 (as defined in the USF License Agreement). The USF License Agreement was assigned to Brooklyn LLC in connection with the sale of the assets of IRX Therapeutics to Brooklyn in November 2018. The Research Association has the right to terminate the USF License Agreement (i) upon Brooklyn LLC’s entering into bankruptcy or insolvency on a voluntary or involuntary basis, (ii) upon the failure to pay royalties due and payable upon thirty days’ notice, or (iii) upon a material breach or default of the Agreement by Brooklyn LLC, unless such breach or default is cured within a thirty-day notice period. Brooklyn may terminate the USF License Agreement for any reason upon six months’ notice to the Research Association.

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 Therapeutics. Pursuant to the IRX Investor Royalty Agreement, if and when Brooklyn LLC becomes obligated to pay royalties to the Research Association under the USF License Agreement, 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.

Collaborator License Agreement

Effective June 28, 2018, IRX Therapeutics terminated its Research, Development and Option Facilitation Agreement (the “Termination Agreement”) and its Options Agreement with a collaborative partner (the “Collaborator”), pursuant to a Termination Agreement. In connection with the Termination Agreement, all of the rights granted to the Collaborator under the RDO and Option Agreements were terminated, and IRX Therapeutics had no obligation to refund any payments received from the Collaborator. The Termination Agreement was assigned to Brooklyn LLC in connection with the sale of the assets of IRX Therapeutics to Brooklyn in November 2018.

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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, all as more particularly set forth in the Termination Agreement. Each party under the Termination Agreement may terminate the agreement (i) upon a material breach of the Termination Agreement by the other party that is not cured within sixty days (or thirty days if such breach is due to Brooklyn LLC’s non-payment of royalties), or (ii) upon the other party entering into bankruptcy on a voluntary or involuntary basis where such petition is not dismissed, discharged, bonded or stayed within ninety days.

Investor Royalty Agreement

On November 6, 2018, Brooklyn LLC entered into a royalty agreement (the “Brooklyn Investor Royalty Agreement”) with Brooklyn Immunotherapeutics Investors LP (“Investors LP”) and Brooklyn Immunotherapeutics Investors GP (“Investors GP”), which entities provided the financing required by Brooklyn LLC in connection with Brooklyn LLC’s acquisition of the assets of IRX Therapeutics. Under the Brooklyn Investor Royalty Agreement, Brooklyn LLC is required to pay compensatory royalties equal to 4% of gross sales of IRX-2 on an annual basis, 3% of which is to be paid to Investors LP and 1% of which is to be paid to Investors GP (all as more particularly set forth in the Royalty Agreement). This royalty continues in perpetuity.

In anticipation of the Merger, on March 22, 2021, Brooklyn LLC entered into an Amended and Restated Royalty Agreement and Distribution Agreement, or the Amended Royalty Agreement, with Investors GP, Investors LP, and certain beneficial holders of GP and LP. Pursuant to the Amended Royalty Agreement, among other things, we are required to pay compensatory royalties equal to 4% of net revenues of IRX-2, on an annual basis, of which 3% is to be paid to certain beneficial holders of LP and 1% is to be paid to certain beneficial holders of GP. The royalty continues in perpetuity.

The Royalty Agreement specifies royalty payments to certain beneficial holders, including:


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Charles Cherington, one of our directors and stockholders has a right to receive 4.20% of the Specified Royalty;
 

 •
entities affiliated with George P. Denny III (Denny Family Partners II, LLC, the George P. Denny Trust, and the R. Breck Denny Trust), a former director and current stockholder have a right to receive a total of 4.39% of the Specified Royalty;
 

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an entity affiliated with Nicholas J. Singer (PCI BI LLC), a former director and current stockholder, has a right to receive a total of 2.10% of the Specified Royalty


•
entities affiliated with Yiannis Monovoukas (The Yiannis Monovoukas Family 2013 Revocable Trust FBO Alexi Monovoukas, The Yiannis Monovoukas Family 2013 Revocable Trust FBO Aresti Monovoukas, and The Yiannis Monovoukas Family 2013 Revocable Trust FBO Christian Monovoukas), a former director and stockholder have a right to receive a total of 1.40% of the Specified Royalty; and;
 

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an entity affiliated with John D. Halpern (The John D. Halpern Revocable Trust), one of our stockholders, has a right to receive 3.50% of the Specified Royalty.
 
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Patent Portfolio

As of April 12, 2022, we owned or controlled approximately 9 patent families filed in the United States and other major markets worldwide, including 99 granted, 10 pending and 11 published patent applications, directed to novel compounds, formulations, methods of treatments and platform technologies. Patent protection for IRX-2 includes:

 
Summary Description of Patent or Patent Application
United States or Foreign
Jurisdiction
Earliest Effective Date
of Patent Application





IRX-2 Modified Manufacturing Process
Granted: US (No. 8,470,562), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL, SW), AU, CA, JP, MX, TR
US: 4/14/2009
 
EP: 4/14/2009
         
Method of Reversing Immune Suppression of Langerhans Cells
Granted: US (Nos. 9,333,238 and 9,931,378), EP (BE, CH, DE, DK, ES, FI, FR, GB, LI, NL), AU, CA
 
Published: CN, HK
US: 6/8/2012 (No. 9,333,238), 4/13/2016 (No. 9,931,378)
 
EP: 12/8/2010
         
Method of Increasing Immunological Effect
Granted: US (Nos. 7,993,660 and 8,591,956), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL), AU, CA, JP
 
Published: HK
US: 8/9/2011 (No. 7,993,660), 11/26/2013 (No. 8,591,956)
 
EP: 11/26/2008
         
Vaccine Immunotherapy
Granted: US (Nos. 6,162,778, 9,492,517, 9,492,519, 9,539,320 and 9,566,331), EP (BE, CH, DE, DK, ES, FI, FR, GB, IT, LI, NL), AU, CA, HK, JP
US: 7/24/2007 (No. 6,162,778), 10/8/2009 (No. 9,492,517), 11/15/2011 (No. 9,539,230), 2/20/2013 (No. 9,566,331), 7/12/2013 (No. 9,492,519)
 
EP: 5/17/2010
         
Immunotherapy for Reversing Immune Suppression
  
Granted: US (No. 7,731,945), AU
  
US: 10/26/2002
         
Vaccine Immunotherapy for Immune Suppressed Patients
Granted: US (Patent Nos.  6,977,072, 7,153,499, 8,784,796, 9,789,172 and 9,789,173), CA, JP
US: 10/26/2001 (No. 6,977,072), 5/5/2003 (No. 7,153,499), 7/12/2013 (No. 8,784,796), 6/4/2014 (Nos. 9,789,172 and 9,789,173)
         
Immunotherapy for Immune Suppressed Patients
Granted: EP (BE, CH, DE, ES, FR, GB, IT, NL, LI)
EP:  3/9/2007
         
Composition for the Treatment of Advanced Prostate Cancer
Granted: CA
 
Published: EP, HK

         
Uses of PD-1/PD-L1 Inhibitors and/or CTLA-4 Inhibitors with a Biologic Containing Multiple Cytokine Components
Pending: AU, CA, EP, IL, JP, KR, NZ, PH, SG, US
 
Published: BR, CN, EA, IN, MX, ZA


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US – United States of America
EP – European Patent Convention
BE – Belgium
CH – Switzerland
DE – Germany
DK – Denmark
ES – Spain
FI – Finland
GB – Great Britain
IT – Italy
LI – Lichtenstein
NL – Netherlands
SW – Sweden
AU – Australia
BR - Brazil
CA – Canada
CN – Peoples’ Republic of China
EA – Eurasian Patent Organization
HK – Hong Kong
IL – Israel
IN - India
JP – Japan
KR – Republic of Korea (South Korea)
MX – Mexico
PH – Philippines
SG - Singapore
TR – Turkey
ZA – South Africa




Patent Families

Descriptions of our patent families with issued patents in the United States or European Union are as follows:

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IRX-2 Modified Manufacturing Process - A method of making a primary cell derived biologic, including the steps of: (a) removing contaminating cells from mononuclear cells (“MNCs”) by loading leukocytes onto lymphocyte separation medium (“LSM”), and washing and centrifuging the medium with an automated cell processing and washing system; (b) storing the MNCs overnight in a closed sterile bag system; (c) stimulating the MNCs with a mitogen and ciprofloxacin in a disposable cell culture system to produce cytokines; (d) removing the mitogen from the mononuclear cells by filtering; (e) incubating the filtered MNCs in a culture medium; (f) producing a clarified supernatant by filtering the MNCs from the culture medium; (g) producing a chromatographed supernatant by removing DNA from the clarified supernatant by anion exchange chromatography; and (h) removing viruses from the chromatographed supernatant by filtering with dual 15 nanometer filters in series, thereby producing a primary cell derived biologic, wherein the primary cell derived biologic comprises IL-1.beta., IL-2, and IFN-.gamma.

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Method of Reversing Immune Suppression of Langerhans Cells - A method of treating human papillomavirus (“HPV”), by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV and inducing an immune response to HPV. A method of overcoming HPV-induced immune suppression of Langerhans cells (“LC”), by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV and activating LC. A method of increasing LC migration towards lymph nodes, by administering a therapeutically effective amount of a primary cell-derived biologic to a patient infected with HPV, activating LC, and inducing LC migration towards lymph nodes. A method of generating immunity against HPV, by administering an effective amount of a primary cell derived biologic to a patient infected with HPV, generating immunity against HPV, and preventing new lesions from developing.

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Method of Increasing Immunological Effect - A method of increasing immunological effect in a patient by administering an effective amount of a primary cell derived biologic to the patient, inducing immune production, blocking immune destruction, and increasing immunological effect in the patient. Methods of treating an immune target, treating a tumor, immune prophylaxis, and preventing tumor escape.

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Vaccine Immunotherapy/Composition for the Treatment of Advanced Prostate Cancer – A method providing compositions and methods of immunotherapy to treat cancer or other antigen-producing diseases or lesions. According to one embodiment of the invention, a composition is provided for eliciting an immune response to at least one antigen in a patient having an antigen-producing disease or lesion, the composition comprising an effective amount of a cytokine mixture, preferably comprising IL-1, IL-2, IL-6, IL-8, IFN-gamma. (gamma) and TNF- alpha (alpha). The cytokine mixture acts as an adjuvant with the antigen associated with the antigen-producing disease or lesion to enhance the immune response of the patient to the antigen. Methods are therefore also provided for eliciting an immune response to at least one antigen in a patient having an antigen-producing disease or lesion utilizing the cytokine mixture of the invention. The compositions and methods are useful in the treatment of antigen-producing diseases such as cancer, infectious diseases or persistent lesions.

Immunotherapy for Reversing Immune Suppression - A method for overcoming immune suppression including the steps of inducing production of naïve T-cells and restoring T cell immunity.  A method of vaccine immunotherapy includes the steps of inducing production of naïve T cells and exposing the naïve T cells to endogenous or exogenous antigens at an appropriate site.  Additionally, a method for unblocking immunization at a regional lymph node includes the steps of promoting differentiation and maturation of immature dendritic cells, thus, for example, exposing tumor peptides to T cells to gain immunization of the T cells.  Further, a method of treating cancer and other persistent lesions includes the steps of administering an effective amount of a natural cytokine mixtures an adjuvant to endogenous or exogenous administered antigen to the cancer or other persistent lesions; preferably the natural cytokine mixture is administered with thymosin.


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Vaccine Immunotherapy for Immune Suppressed Patients - A method for overcoming mild to moderate immune suppression includes the steps of inducing production of naive T-cells and restoring T-cell immunity. A method of vaccine immunotherapy includes the steps of inducing production of naive T-cells and exposing the naive T-cells to endogenous or exogenous antigens at an appropriate site. Additionally, a method for unblocking immunization at a regional lymph node includes the steps of promoting differentiation and maturation of immature dendritic cells at a regional lymph node and allowing presentation of processed peptides by resulting mature dendritic cells, thus, for example, exposing tumor peptides to T-cells to gain immunization of the T-cells. Further, a method of treating cancer and other persistent lesions includes the steps of administering an effective amount of a natural cytokine mixture as an adjuvant to endogenous or exogenous administered antigen to the cancer or other persistent lesions.


•
Immunotherapy for Immune Suppressed Patients – A method providing compositions of a natural cytokine mixture (“NCM”) for treating a cellular immunodeficiency characterized by T lymphocytopenia, one or more dendritic cell functional defects such as those associated with lymph node sinus histiocytosis, and/or one or more monocyte functional defects such as those associated with a negative skin test to NCM. The invention includes methods of treating these cellular immunodeficiences using the NCM of the invention. The compositions and methods are useful in the treatment of diseases associated with cellular immunodeficiencies such as cancer. Also provided are compositions and methods for reversing tumor-induced immune suppression comprising a chemical inhibitor and a non-steroidal anti-inflammatory drug (“NSAID”). The invention also provides a diagnostic skin test comprising NCM for predicting treatment outcome in cancer patients.

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Patent Term and Term Extensions

Individual patents have terms for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, utility patents issued for applications filed in the United States and the European Union are granted a term of 20 years from the earliest effective filing date of a non-provisional patent application. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office, or the USPTO, delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the restoration period cannot extend the patent term beyond 14 years from FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically are also 20 years from the earliest effective filing date. All taxes or annuities for a patent, as required by the USPTO and various foreign jurisdictions, must be timely paid in order for the patent to remain in force during this period of time.

The actual protection afforded by a patent may vary on a product-by-product basis, from country to country, and can depend upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Our patents and patent applications may be subject to procedural or legal challenges by others. We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For more information, see the section titled “Risk Factors-Risks Related to Our Intellectual Property.”

Supply and Manufacturing

Brooklyn has considerable experience in manufacturing the investigational active pharmaceutical ingredient (“API”) currently in the clinic. In recent years, we maintained internal API manufacturing capabilities. We are currently investigating the option of outsourcing API manufacturing to an experienced contract manufacturing organization (“CMO”), as we had historically done, to mitigate the overhead costs of internal manufacturing and leverage process development expertise to streamline and eliminate some of the more manual processes, thereby reducing risk of product microbial contamination.  The CMO selected will have the capability to produce high quality product to meet both the investigational and anticipated commercial demands. There will be technology transfer and process validation costs, which will be carefully considered in any decision.  We have established long-standing contract manufacturing relationships for fill/finish and packaging of the clinical supplies of IRX-2.  As with any supply program, obtaining raw materials of the correct quality, and the performance of our contract manufacturing sites cannot be guaranteed.  Due to the current demand for CMO services and supply chain issues in the COVID-19 pandemic environment we cannot ensure that we will be successful in obtaining such raw materials on terms acceptable to us, if at all.

We expect to similarly rely on contract manufacturing relationships for any products that we may in-license or acquire in the future. However, there can be no assurance that we will be able to successfully contract with such manufacturers on terms acceptable to us, or at all.

Contract manufacturers are subject to ongoing periodic and unannounced inspections by the FDA, the Drug Enforcement Administration (“DEA”) and corresponding state agencies to ensure strict compliance with current good manufacturing practices (“cGMPs”) and other state and federal regulations. Our contractors, if any, in Europe face similar challenges from the numerous European Union and member state regulatory agencies and authorized bodies. We do not have control over third-party manufacturers’ compliance with these regulations and standards, other than through contractual obligations. If our contractors are deemed out of compliance with cGMPs, product recalls could result, inventory could be destroyed, production could be stopped, and supplies could be delayed or otherwise disrupted, which could have a materially adverse effect on our business.

If we need to change manufacturers after commercialization, the FDA and corresponding foreign regulatory agencies must approve these new manufacturers in advance, which will involve testing and additional inspections and associated regulatory submissions to ensure compliance with FDA regulations and standards, which collectively may result in significant lead times, delay and cost. Furthermore, switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly or on terms acceptable to us, or at all.

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Regulatory Matters

Government regulation and product approval

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, record-keeping, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Drugs and biologics must be approved by the FDA through the New Drug Application, (NDA) process or the Biologic License Application (BLA) process before they may be legally marketed in the United States. Henceforth, we will use the term “marketing application” or MA to apply to both.

There are two centers within the FDA that are responsible for the review and approval of drug marketing applications and general regulatory oversight: the Center for Drug Evaluation and Research, or CDER, and the Center for Biologics Evaluation and Research, or CBER. While all conventional drug products are regulated by CDER, biologic products can be regulated by either CDER or CBER, depending on the product’s classification.

The majority of BLA submissions are assigned to CBER; however, BLAs for certain biologic product categories are reviewed by CDER. These product categories include monoclonal antibodies for in vivo use, most proteins for therapeutic use, and categories such as cytokines, enzymes, and other novel proteins. Based on this, it is likely that a BLA submission for IRX-2 would fall under the jurisdiction of CDER. Regardless of the category, NDAs for all drug products fall under the jurisdiction of CDER.

In the United States, drugs are subject to rigorous regulation by the FDA under the federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, and biologics under the FDCA, the Public Health Services Act (PHSA), and their implementing regulations. Additionally, drugs and biologics are subject to other federal and state statutes. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug or biologics may be marketed in the United States generally involves the following:

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completion of pre-clinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations;
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submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin and which must include approval by an institutional review board, or IRB, at each clinical site before the trials are initiated;
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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice, or GCP, an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors;
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submission to, and acceptance by, the FDA of a MA;
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satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
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potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and
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FDA review and approval of the MA.

The testing and approval process require substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.

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United States drug development process

Once a pharmaceutical candidate is identified for development it enters the pre-clinical testing stage. Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Prior to beginning human clinical trials, a sponsor must submit an Investigational New Drug Application (“IND”) to the FDA, which includes the results of the pre-clinical tests, together with manufacturing information and analytical data. Some pre-clinical or non-clinical testing may continue even after the IND is submitted. In addition to including the results of the pre-clinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the trial lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of one or more qualified investigators in accordance with federal regulations and GCP.

Clinical trials must be conducted under protocols detailing the objectives of the trial and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, an Institutional Review Board, or IRB, affiliated with each institution participating in the clinical trial must review and approve each protocol before any clinical trial commences at that institution. All research subjects must provide informed consent, and informed consent information must be submitted to the IRB for approval prior to initiation of the trial. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if adverse events or other certain types of other changes occur.

Human clinical trials are typically conducted in three phases. A fourth, or post-approval, phase may include additional clinical studies. These phases generally include the following, and may be sequential, or may overlap or be combined:

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Phase 1 clinical trials involve the initial introduction of the drug or biologic into human subjects. These studies are designed to determine the safety of usually single doses of the compound and determine any dose limiting intolerance, as well as evidence of the metabolism and pharmacokinetics of the drug in humans. For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product is indicated.
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Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and efficacy of the drug or biologic for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks.
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In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical efficacy, optimal dosage and safety within an expanded population which may involve geographically diverse clinical trial sites. Generally, but not always, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a marketing application.
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Phase 4 clinical trials are studies required of or agreed to by a sponsor that are conducted after the FDA has approved a product for marketing. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement. Failure to promptly conduct Phase 4 clinical trials where necessary could result in withdrawal of approval for products approved under accelerated approval regulations.

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While Phase 1, Phase 2, and Phase 3 studies are generally required for approval of a marketing application, certain drugs and biologics may not require one or more steps in the process depending on other testing and the situation involved. Additionally, the FDA, an IRB, or the sponsor may stop testing at any time if results show patients being exposed to unnecessary health risks or overly dangerous side effects.  Prior to the initiation of a clinical trial or at any time during the conduct of studies with human subjects, the FDA may place a study on clinical hold where patients may not be enrolled until questions around potential safety issues with investigational products are addressed.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the mechanism of action and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other requirements, the manufacturer must develop methods for testing the identity, strength, quality, potency, and purity of the final product. Additionally, appropriate packaging must be selected and validated, and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life.

United States drug review and approval process

Following completion of clinical studies, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA or BLA in order to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may require additional testing or information, may require that the product labeling be modified, may impose a post-approval study and other commitments or reporting requirements or other restrictions on product distribution, or may deny the application.  The timing of final FDA review and action varies greatly but can take years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States may commence only when an NDA or BLA is approved.

FDA approval of a marketing application is required before marketing of the product may begin in the United States. The MA must include the results of product development, pre-clinical studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and controls utilized in manufacture of the product. In addition, a MA must also demonstrate purity, specifically in terms of showing that the final product does not contain extraneous material. The FDA has 60 days from its receipt of the MA to review the application to ensure that it is sufficiently complete for substantive review before accepting it for filing. The FDA may request additional information rather than accept an MA for filing. In this event, the MA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The submission of an MA is also subject to the payment of a substantial application fee (for FDA fiscal year 2022 this fee may exceed 3 million dollars, although a waiver of such fee may be obtained under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought). Further, the sponsor of an approved MA is subject to an annual program fee, which for FDA fiscal year 2022 is $369,413 per prescription drug product. User fees typically increase annually. The approval process is lengthy and complex, and the FDA may refuse to approve an MA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. The FDA reviews an application to determine, among other things, whether a product is safe and effective for its intended use. Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability.

If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter. The complete response letter outlines the deficiencies in the submission and often requires additional testing or information in order for the FDA to reconsider the application. Even after submitting this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. With limited exceptions, the FDA may withhold approval of a MA regardless of prior advice it may have provided or commitments it may have made to the sponsor.

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Once an MA is approved, changes to the conditions of approval, including additional indications, are made by the submission of a supplement to the MA The supplemental NDA, or sNDA, or the supplemental BLA, or sBLA must contain all of the information necessary to support the change. In the case of a new indication, that information usually consists of at least one clinical trial, and often more. Like an MA, FDA determines whether the supplemental application is sufficiently complete to permit review before it is filed. FDA then reviews the supplemental application. The FDA can either approve or issue a complete response letter outlining the deficiencies.

Manufacturing Readiness

As part of the approval process, the FDA must inspect and approve each manufacturing facility. Among the conditions of approval is the requirement that a manufacturer’s quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure continued compliance, and the FDA conducts periodic inspections to verify compliance.  If we, or our contract manufacturers, fail to comply or cannot remedy regulator identified deficiencies, then we may be prohibited from marketing product.

If the FDA grants approval, the approval will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated through clinical studies. Further, a product may be marketed only in those dosage forms and for those indications approved in the MA. Certain changes to an approved MA, including, with certain exceptions, any significant changes to labeling, require approval of a supplemental application before the drug may be marketed as changed. Any products that we manufacture or distribute pursuant to FDA approvals are subject to continuing monitoring and regulation by the FDA, including compliance with cGMP and the reporting of adverse experiences with the drugs. The nature of marketing claims that the FDA will permit us to make in the labeling and advertising of our products will generally be limited to those specified in FDA approved labeling, and the advertising of our products will be subject to comprehensive monitoring and regulation by the FDA. Products whose review was accelerated may carry additional restrictions on marketing activities, including the requirement that all promotional materials are pre-submitted to the FDA. Claims exceeding those contained in approved labeling will constitute a violation of the FDCA. Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing and sale following approval may result in agency enforcement actions, including corrective advertising, cessation of violative promotion, withdrawal of approval, recall, seizure of products, warning letters, injunctions, fines and/or civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.

Failure to comply with applicable federal, state and foreign laws and regulations would likely have a material adverse effect on our business. In addition, federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.

Post-approval requirements and consideration

Once a MA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs and biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. As a condition of MA approval, the FDA may also require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug or biologic outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements to Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug or biologic.

Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new MA supplement before the change can be implemented. An MA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing MA supplements as it does in reviewing MAs.

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Adverse event reporting and submission of periodic reports is required following FDA approval of an MA. The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Foreign regulatory requirements

In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory agency is satisfied that we have presented adequate evidence of safety, quality and efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries. The regulatory approval and oversight process in other countries includes all of the risks associated with regulation by the FDA and certain state regulatory agencies as described above.

Under the European Union regulatory system, applications for drug approval may be submitted either in a centralized or decentralized manner. Under the centralized procedure, a single application to the European Medicines Agency may lead to an approval granted by the European Commission which permits marketing of the product throughout the European Union. The decentralized procedure provides for mutual recognition of nationally approved decisions and is used for products that do not comply with requirements for the centralized procedure. Under the decentralized procedure, the holders of national marketing authorization in one of the countries within the European Union may submit further applications to other countries within the European Union, who will be requested to recognize the original authorization based on an assessment report provided by the country in which marketing authorization is held.

Pharmaceutical pricing and reimbursement

In both United States and foreign markets, our ability to commercialize our products successfully, and to attract commercialization partners for our products, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as Medicare and Medicaid, managed care organizations, private commercial health insurers and pharmacy benefit managers, or PBMs. Third party payors are increasingly challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic or other studies in order to further demonstrate the value of our products. Even with the availability of such studies, our products may be considered less safe, less effective or less cost-effective than alternative products, and third-party payors may not provide coverage and reimbursement for our product candidates, in whole or in part.

Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our business, including the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”).

We anticipate that in the United States, Congress, state legislatures, and private sector entities will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs. These cost containment measures could include:

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controls on government-funded reimbursement for drugs;
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mandatory rebates or additional charges to manufacturers for their products to be covered on Medicare Part D formularies;
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controls on healthcare providers;
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controls on pricing of pharmaceutical products, including the possible reference of the pricing of United States drugs to non-United States drug pricing for the same product;
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challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through other means;
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reform of drug importation laws;
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entering into contractual agreements with payors; and
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expansion of use of managed-care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person

We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business. Any cost containment measures, including those listed above, or other healthcare system reforms that are adopted may have a material adverse effect on our business prospects.

Further, the pricing of pharmaceutical products generally, and particularly the pricing of orphan drugs, has recently received scrutiny from the press and from members of Congress in both parties. Some members of the medical community have also made statements in the press on the pricing of orphan drugs. The impact of this scrutiny on the pricing of orphan drugs and other pharmaceutical products generally cannot be determined with any certainty at this time.

The Biologics Price Competition and Innovation Act of 2009, which was included in the Affordable Care Act, authorized the FDA to approve similar versions of innovative biologics, commonly known as biosimilars. Under the Affordable Care Act, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biologic product or “reference product.” Manufacturers may not submit an application for a biosimilar to the FDA until four years following approval of the reference product, and the FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if IRX-2 or any other biologic product we may acquire or in-license, if approved, are deemed to be reference products eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.

Orphan Drug Exclusivity

Some jurisdictions, including the United States and Europe, may designate drugs or biologic products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983 (ODA), the FDA may grant orphan drug designation to drugs or biologic products intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. In the United States, orphan drug designation must be requested before submitting an application for marketing approval. An orphan drug designation does not shorten the duration of the regulatory review and approval process. The grant of an orphan drug designation request does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and efficacy of a product candidate must be established through adequate and well-controlled studies. If a product which has been granted orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to an orphan drug exclusivity period, which means the FDA may not approve any other application to market the same drug for the same disease or condition for a period of seven years, except in limited circumstances, such as where an alternative product demonstrates clinical superiority to the product with orphan exclusivity. In addition, holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug.

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The orphan drug exclusivity contained in the ODA has been the subject of recent scrutiny from the press, from some members of Congress and from some in the medical community. There can be no assurance that the exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our products.

The European Orphan Drug Regulation is considered for drugs intended to diagnose, prevent or treat a life-threatening or very serious condition afflicting five or fewer per 10,000 people in the EU, including compounds that for serious and chronic conditions would likely not be marketed without incentives due to low market return on the sponsor’s development investment. The medicinal product considered should be of significant benefit to those affected by the condition. Benefits of being granted Orphan Medicinal Product Designation are significant, including ten years of marketing exclusivity and a potential two-year extension. The EU Community and Member States may not accept or grant for ten years a new marketing authorization or application for another drug for the same therapeutic indication as the orphan drug, although the ten-year period can be reduced to six years if, after the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of the marketing exclusivity. A supplementary protection certificate may extend the protection six months beyond patent expiration if that is later than the orphan drug exclusivity period. To apply for the supplementary protection, a pediatric investigation plan, or PIP, must be included in the market application. In Europe all drugs now seeking marketing authorization need to have a PIP agreed with the European Medicines Agency (EMA) before it can be approved, even if it is a drug being developed specifically for a pediatric indication. If a product is developed solely for use in the pediatric population, then a Pediatric Use Marketing Authorization, or PUMA, may provide eight years of data exclusivity and ten years of marketing exclusivity.

Fast Track Designation and Accelerated Approval

The FDA is required to facilitate the development, and expedite the review, of drugs or biologics that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast-track program, the sponsor of a new product candidate may request that FDA designate the product candidate for a specific indication as a fast-track drug concurrent with, or after, the filing of the IND for the product candidate. FDA must determine if the product qualifies for fast-track designation within 60 days of receipt of the sponsor’s request.

Under the fast track program and FDA’s accelerated approval regulations, FDA may approve a product for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the product from the market on an expedited basis. All promotional materials for products approved under accelerated regulations are subject to prior review by FDA.

In addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent interactions with FDA, FDA may initiate review of sections of a fast-track drug’s MA before the application is complete. This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin until the last section of the MA is submitted. Additionally, the fast-track designation may be withdrawn by the FDA if they believe that the designation is no longer supported by data emerging in the clinical trial process.

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Priority Review

Under FDA policies, a product candidate is eligible for priority review, or review within a six to eight-month time frame from the time a complete MA is submitted, if the product candidate is intended for the treatment, diagnosis, or prevention of a serious or life-threatening condition, demonstrates the potential to address an unmet medical need, or provides a significant improvement compared to marketed drugs.

Disclosure of clinical trial information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. Finally, there can be no assurance that fast track designation will result in a faster review process.

Anti-Kickback, False Claims Laws, Stark Law & the Prescription Drug Marketing Act

In addition to FDA restrictions on marketing of pharmaceutical products, other state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback prohibition, statutes and false claims statutes. The federal healthcare program Anti-Kickback Statute, or Anti-Kickback Statute, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and patients, prescribers, purchasers and formulary managers on the other. Violations of the Anti-Kickback Statute are punishable by imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the Anti-Kickback Statute and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

Federal law includes a provision commonly known as the “Stark Law.” This law prohibits a physician (defined to include a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor) from referring Medicare and Medicaid patients to certain types of entities with which the physician or any of the physician’s immediate family members have a financial relationship, unless an exception to the law’s prohibition is met. Subject to adherence to their respective criteria requirements, the self-referral prohibition contains a number of exceptions, including exceptions covering employment or independent contractor arrangements, space and equipment leases, and recruitment agreements.  Sanctions within the Stark Law include significant civil penalties including over $25,000 for each violation, over $169,000 for schemes to circumvent the Stark Law restrictions, and up to $10,000 for each day an entity fails to report required information and exclusion from the federal healthcare programs.  Violations of the Stark Law may also result in payment denials, false claim recoveries, civil monetary penalties, and/or federal program exclusion.  Further, several states have enacted statutes similar in scope and purpose to the Stark Law. These state laws may mirror the federal Stark Law or may be different in scope. The available guidance and enforcement activity associated with such state laws varies considerably.

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The Physician Payments Sunshine Act, created under the ACA, and its implementing regulations require manufacturers of approved prescription drugs, devices, biologics, and medical supplies, for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually collect and report information on payments or transfers of value to physicians and teaching hospitals, as well as investment interests held by physicians and their immediate family members. The information reported each year is made publicly available on a searchable website. Failure to submit required information may result in civil monetary penalties.

In addition, several states now require prescription drug companies to report expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual physicians in these states. Other states prohibit various other marketing-related activities. Still other states require the posting of information relating to clinical studies and their outcomes. In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the United States Prescription Drug Marketing Act, or PDMA, a part of the FDCA. In addition, Title II of the Federal Drug Quality and Security Act of 2013, known as the Drug Supply Chain Security Act, or DSCSA, has imposed new “track and trace” requirements on the distribution of prescription drug products by manufacturers, distributors, and other entities in the drug supply chain. The DSCSA requires product identifiers (i.e., serialization) on prescription drug products in order to eventually establish an electronic interoperable prescription product system to identify and trace certain prescription drugs distributed in the United States and preempts existing state drug pedigree laws and regulations on this topic. The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers. The FDA is the process of finalizing regulations addressing wholesale distributors and third-party logistics providers. We serialize our product at both the package and homogeneous case level, pass serialization and required transaction information to our customers, and believe that we comply with all such requirements.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, sets standards governing the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information that is stored or transmitted electronically.  These include standards for common healthcare transactions, such as: claims information, plan eligibility, payment information and the use of electronic signatures; unique identifiers for providers, employers, health plans and individuals; and security, privacy, breach notification and enforcement.  HIPAA transaction regulations establish form, format and data content requirements for most electronic healthcare transactions, such as healthcare claims that are submitted electronically. The HIPAA privacy regulations establish comprehensive requirements relating to the use and disclosure of protected health information. The HIPAA security regulations establish minimum standards for the protection of protected health information that is stored or transmitted electronically. The HIPAA breach notification regulations establish the applicable requirements for notifying individuals, the HHS, and the media in the event of a data breach affecting protected health information. Violations of the privacy, security and breach notification regulations are punishable by civil and criminal penalties.

In addition to the federal HIPAA regulations, most states also have laws that regulate the collection, storage, use, retention, security, disclosure, transfer and other processing of health information and other confidential, sensitive and personal data. Certain of these laws grant individuals rights with respect to their information, and we may be required to expend significant resources to comply with these laws. For example, various states, such as California and Massachusetts, have implemented privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of personally identifiable information, including protected health information. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies.

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Competition

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. Some of these companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or marketing approval or discovering, developing and commercializing products in our field before we do.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, such as traditional chemotherapy, as well as novel immunotherapies. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain FDA, European Medicines Agency (“EMA”) or other marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if the product candidates we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness.

Human Capital Resources

Employees

We perform in a highly competitive industry and recognize that our continued success relies upon our ability to attract, develop and retain a diverse team of talented individuals. We place high value on the satisfaction and well-being of our employees and operate with fair labor standards and industry-competitive compensation and benefits. As of April 12, 2022, we have ten full-time employees, which includes five research and development positions and five administrative positions. None of our employees are covered by collective bargaining agreements.

Compensation, Benefits and Development

Our approach to employee compensation and benefits is designed to deliver cash, equity and benefit programs that are competitive with those offered by leading companies in the biotechnology and pharmaceutical industries to attract, motivate and retain talent with a focus on encouraging performance, promoting accountability and adherence to our values and alignment with the interests of our stockholders.

Our base pay program aims to compensate staff members relative to the value of the contributions of their role, which takes into account the skills, knowledge and abilities required to perform each position, as well as the experience brought to the job. We may also provide our employees with opportunities to earn cash and equity incentive compensation to reward the achievement of company-wide goals that are established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our company. Our employees are also eligible for the grant of equity awards under our long-term incentive program that are designed to align interests of our employees with that of our stockholders.  All employees also participate in a regular performance measurement process through which staff receive performance and development feedback, which is taken into account in determining annual compensation.

Our benefit programs are generally broad-based, promote health and overall well-being and emphasize saving for retirement. All employees are eligible to participate in the same health and retirement savings plans.

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Code of Business Conduct and Ethics

We are committed to conducting business in accordance with the highest ethical standards. Our Code of Conduct and Ethics emphasizes the importance of integrity, honesty, forthrightness, respect and fairness.  Our Code of Conduct and Ethics applies to all our employees, including those who are integrated into the Company through acquisitions.

Health, Safety and Well-Being

We actively promote the safety, health and well-being of our employees. We have continued to focus on employee safety throughout the COVID-19 pandemic by implementing extensive safety measures, including without limitation, on-site COVID-19 testing protocols and flexible remote working options for most of our employees.

ITEM 1A.
Risk Factors
 
Our business, financial condition and operating results can be affected by many factors, whether currently known or unknown, many of which are not exclusively within our control, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our financial condition and operating results to differ materially from historical or anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price. We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to Ownership of our Common Stock

We have a limited operating history and have never generated any product revenue.

We are a clinical-stage biopharmaceutical company with a limited operating history. We were formed on September 27, 2018, for the purpose of consummating a business combination with IRX Therapeutics, Inc., which business combination was consummated on November 6, 2018. Since inception, we have incurred significant net losses. As of December 31, 2021, we had an accumulated deficit of approximately $159.7 million. Since inception, we have financed our operations with capital contributions from the former beneficial holders of Brooklyn LLC’s Class A membership interests, as well as through the sale of our securities under the Purchase Agreements with Lincoln Capital and in connection with the PIPE Transaction.

Our ability to generate product revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the necessary regulatory approvals for, our product candidates in development, including IRX-2. We have never been profitable, have no products approved for commercial sale, and have not generated any product revenue. It is possible that none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory approvals, may adversely affect the successful commercialization of any drugs or biologics that Brooklyn or its partners develop, may impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain, and/or may adversely affect our receipt of revenues or royalties.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Neither will we be able to predict the state of market competition which would adversely affect our potential revenues from product sales. Our expenses could increase beyond expectations if we are required by the FDA or comparable non-U.S. regulatory authorities to perform studies or clinical trials in addition to those that we currently anticipate. Even if any of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with their commercial launch. If we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be negatively impacted.

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Furthermore, we sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, the receipt of marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions, which may cause the timing of achievement of the milestones to vary considerably from our estimates. If we fail to achieve milestones in the timeframes we expect, the commercialization of our product candidates may be delayed, we may not be entitled to receive certain contractual payments, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

We may not be successful in our efforts to identify and acquire or in-license additional product candidates, or to enter into collaborations or strategic alliances for the development and commercialization of any such future product candidates.

We may seek to identify and acquire or in-license novel product candidates. The process by which we identify them may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

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potential product candidates may, upon further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance;
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potential product candidates may not be effective in treating their targeted diseases; or
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the acquisition or in-licensing transactions can entail numerous operational and functional risks, including exposure to unknown liabilities, disruption of our business, or incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected acquisition or integration costs.

We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. We also cannot be certain that, following an acquisition or in-licensing transaction, we will achieve the revenue or specific net income that justifies such transaction. Further, time and resources spent identifying, acquiring and developing potential product candidates may distract management’s attention from our primary business or other development programs. Additional product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development. If we are unable to identify and acquire suitable product candidates for clinical development, this would adversely impact our business strategy, financial position and share price.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in terms of both their potential for marketing approval and commercialization, and there can be no assurance that the products we focus on will succeed. Because we must decide where to focus our resources, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may later prove to have greater commercial potential.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

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International expansion of our business exposes us to business, legal, regulatory, political, operational, financial and economic risks associated with conducting business outside of the United States.

Part of our business strategy involves potential expansion internationally with third-party collaborators to seek regulatory approval for our product candidates outside the United States. Doing business internationally involves a number of risks, including but not limited to:

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multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses;
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failure by us or our collaborators to obtain appropriate licenses or regulatory approvals for the sale or use of IRX-2 or any other product candidate we may acquire or in license;
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difficulties in managing foreign operations;
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complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;
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financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;
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reduced protection for intellectual property rights;
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natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and
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failure to comply with the United States Foreign Corrupt Practices Act, or FCPA, including its books and records provisions and its anti-bribery provisions, the United Kingdom Bribery Act 2010, or U.K. Bribery Act, and similar anti-bribery and anti-corruption laws in other jurisdictions, for example by failing to maintain accurate information and control over sales or distributors’ activities.

Any of these risks, if encountered, could significantly harm our future international expansion and operations and consequently, negatively impact its financial condition, results of operations and cash flows.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon the ability to attract highly qualified managerial, scientific and medical personnel. In order to induce valuable employees to remain with us, we intend to provide employees with stock options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in the price of the common stock that it will not be able to control and may at any time be insufficient to counteract more lucrative offers from other companies.

Our management team has expertise in many different aspects of drug development. However, we will need to hire additional personnel as we continue to develop our product candidates. Competition for skilled personnel in the pharmaceutical industry is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. Other pharmaceutical companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what Brooklyn has to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates would be limited.

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Risks Related to our Financial Position and Capital Requirements
 
We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or fail to become commercially viable. We have never generated any product revenue, and we cannot estimate with precision the extent of our future losses. We do not currently have any products that are available for commercial sale, and we may never generate product revenue or achieve profitability.

We expect that our research and development expenses in connection with our development programs for product candidates will continue to be significant. In addition, as we prepare for and if we obtain regulatory approval for any of our product candidates, we expect to incur increased sales, marketing and manufacturing expenses. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have harmed and will continue to harm our results of operations, financial position and working capital.

There can be no assurance that we will be profitable even if we successfully commercialize IRX - 2 or any other product candidate we may acquire or in-license (including any products that may be developed from the licensed technology with Factor and Novellus, Ltd.). If we do successfully obtain regulatory approval to market any of our product candidates, our revenue will be dependent upon, in part and among other things, the size of the markets in the territories for which we gain regulatory approval, the number of competitors in such markets, the accepted price for any such product candidate and whether we own the commercial rights for those territories. If the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of any of our product candidates, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely impact the market price of the common stock and our ability to raise capital and continue operations.
 
We own only a 25% interest in NoveCite, Inc., and that interest may be diluted unless we invest additional funds.
 
In July 2021, we acquired 25% of the outstanding common stock of NoveCite, Inc. As a result, we will only be entitled to a portion of any benefits that flow from the development by NoveCite, Inc. of any product candidates. In the event that NoveCite, Inc. issues additional equity securities in the future, our percentage ownership would be diluted unless we were to invest additional funds. Dilution of our equity ownership would decrease our portion of any benefit that might be derived from a NoveCite, Inc. product candidate’s successful development. If we were to determine that it would be in the best interests of our company and stockholders to invest additional amounts in NoveCite, Inc. to prevent dilution of our interests, the required funds may not be available to us on reasonable terms, or at all.
 
We may not generate the expected benefits of our Acquisition and it could disrupt our ongoing business, distract our management and increase our expenses.

We entered into the Acquisition Agreement to acquire all 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.

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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 during 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.

We may acquire businesses, assets or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses, assets or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new acquisition. Difficulties may prevent us from realizing its expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.

We will require substantial additional capital to fund our operations, and if we fail to obtain the necessary financing, we may not be able to complete the development and commercialization of any of our product candidates.

Brooklyn expects to spend substantial capital to complete the development of, seek regulatory approvals for and commercialize IRX-2, perhaps with development partners, as well as any of other product candidate it may develop. We will require additional capital to complete the development and potential commercialization of our product candidates. Because the length of time and activities associated with successful development of our product candidates are highly uncertain, we are unable to estimate with certainty the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

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the timing, progress, costs and results of our INSPIRE trial for the treatment of squamous cell cancer of the head and neck;
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the costs of any other clinical trials we may initiate, including the costs to conduct the study and to produce the supply of product that may be required for our own studies or for investigator-sponsored studies;
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the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
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the cost of filing, prosecuting, defending and enforcing its patent claims and other intellectual property rights;
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the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against it or any of its current or future product candidates;
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the effect of competing market developments;
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the cost and timing of completion of commercial-scale manufacturing activities;
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the cost of establishing sales, marketing and distribution capabilities for our products in regions where we choose to commercialize our products on our own; and
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the initiation, progress, timing and results of the commercialization of our product candidates, if approved for commercial sale.

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Based on currently available information and our ongoing operations, we believe that our existing cash, inclusive of the funding committed by certain beneficial holders of Brooklyn LLC’s Class A membership interests and received under the Purchase Agreements with Lincoln Capital and in connection with the PIPE Transactions, will not be sufficient for us to fund our operating expenses and capital expenditure requirements through the twelve-month period subsequent to the issuance date of this report.  We intend to raise additional sources of capital, which could be in the form of debt, grants or equity.  We cannot be certain that additional capital will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of any product candidate, or potentially discontinue operations altogether. In addition, attempting to secure additional capital may divert the time and attention of our management from day-to-day activities and harm its product candidate development efforts. Because of the numerous risks and uncertainties associated with the development and potential commercialization of its product candidates, we are unable to estimate the amounts of increased capital outlays, operating expenditures and capital requirements associated with its current product development programs.

Raising additional funds by issuing equity securities may cause dilution to existing holders, raising additional funds through debt financings may involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.

We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances and license and development agreements or other collaborations. To the extent that we raise additional capital by issuing equity securities, existing stockholder ownership may experience substantial dilution, and the securities may include preferred shares with liquidation or other preferences that could harm the rights of a common stockholder.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate its product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market themselves.

Risks Related to our Business and Industry
 
We face business disruption and related risks resulting from the pandemic of the novel coronavirus (COVID-19), which could have a material adverse effect on our business plan.

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our development plans, and on the ability to conduct our clinical trials. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted.

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Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.

Our computer systems, as well as those of various third parties on which it relies, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development and other programs. For example, the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of any product candidate could be delayed.

We are substantially dependent on the success of our internal development programs and our product pipeline candidates may not successfully complete clinical trials, receive regulatory approval or be successfully commercialized.

Our future success will depend heavily on the success of our development of IRX-2, successful clinical development of our in-licensed cell and gene therapy technologies and any other products we may acquire, license or develop (including any products that may be developed from the licensed technology if Brooklyn exercises its option to license certain technology from Novellus). We expect to continue our efforts and expenditures related to the continued clinical evaluation of our lead product candidate, IRX-2, and the monotherapy and combination studies related thereto. We expect to continue our efforts towards the commercialization of such product candidates following regulatory approval, if received. Additionally, we expect to devote substantial resources and efforts to the preclinical and clinical evaluation of new cell and gene therapy product platforms that we may acquire or in-license (including any products that may be developed from the licensed technology with Factor and Novellus, Ltd.). Accordingly, our business currently depends heavily on the successful completion of our clinical trials for its product candidates and subsequent regulatory approval and commercialization of such product candidates. Our ability to successfully commercialize IRX-2 and any other product we may acquire, license or develop, will depend on, among other things, our ability to:


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successfully complete pre-clinical studies and clinical trials deemed adequate by regulatory authorities and obtain and maintain regulatory approval for the marketing of our product candidates;

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receive regulatory approvals from the FDA, the EMA and other similar regulatory authorities;

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establish and maintain collaborations with third parties for the development and/or commercialization of our product candidates, or otherwise build and maintain strong development, sales, distribution and marketing capabilities that are sufficient to develop products and launch commercial sales of any approved products, including establishing sales, marketing and distribution systems for our product candidates;

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obtain coverage and adequate reimbursement from payors such as government health care systems, pharmacy benefit managers, and insurance companies and achieve commercially attractive levels of pricing;

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secure acceptance of our product candidates from physicians, health care payors, patients and the medical community;

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produce, through a validated process, in manufacturing facilities inspected and approved by regulatory authorities, including the FDA, sufficiently large quantities of our product candidates to permit successful commercialization;

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manage our spending as expenses increase due to government mandated post-approval clinical trials and commercialization;

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obtain and enforce sufficient intellectual property rights for any approved products and product candidates, maintain, expand and protect our intellectual property portfolio;

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add operational, financial, and management information systems; personnel, including personnel to support its clinical, manufacturing and planned future commercialization efforts and operations as a public company;

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conduct internal or contract manufacturing meeting specifications and in compliance with applicable cGMPs; and

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initiate and continue relationships with third-party suppliers and manufacturers or continue to further develop our own manufacturing capabilities and have commercial quantities of our product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA and other regulatory requirements.

Conducting pre-clinical studies in animals and clinical studies in humans is a lengthy, time-consuming, and expensive process. In order to obtain FDA approval to market a new pharmaceutical product, we must demonstrate proof of safety and efficacy of the product. We cannot be certain that our clinical trials for our product candidates will be successful or that any of our product candidates will receive approval from the FDA, the EMA or any other comparable regulatory authority.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are, and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and in other countries that each have differing regulations. While we have submitted an IND in the United States and comparable drug approval filings with certain foreign regulatory authorities, the timing of the filing for marketing approval in the United States or comparable filing in other nations is unknown. We must provide these regulatory authorities with data from preclinical studies and clinical trials that demonstrate our product candidates are safe and effective for specific indications before they can be approved for commercial distribution. Securing regulatory approval requires the submission of extensive preclinical, nonclinical and clinical data and other supporting information for each proposed therapeutic indication, in order to establish the product’s safety and efficacy for each intended use. In the case of biologics the data must also include potency and purity for each product.  There are risks associated with this process that may include:


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preclinical studies and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays;

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we cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all;

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it may take several years and require significant expenditures to complete the preclinical studies and clinical trials necessary to commercialize a product candidate, and delays or failure are inherently unpredictable and can occur at any stage.

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we may also be required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we contemplate, which may lead to us incurring additional unplanned costs or result in delays in clinical development;

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we may be required to redesign or otherwise modify our plans with respect to an ongoing or planned clinical trial and changing the design of a clinical trial can be expensive and time consuming; and

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an unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. It may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

In order to obtain FDA approval to market a new pharmaceutical product, we must demonstrate proof of safety and efficacy of the product in humans. To meet these requirements, we must conduct “adequate and well controlled” clinical studies.  The length of time to complete these studies may vary substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more per study. We cannot be certain that our clinical trials for our product candidates will be successful or that any of our product candidates will receive approval from the FDA, the EMA or any other comparable regulatory authority. Of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the submission of a new drug marketing application to the FDA and even fewer are approved for commercialization. The FDA or other foreign regulatory authorities may delay, limit or deny approval of any of our product candidates for many reasons, including:

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We may not be able to demonstrate that any product candidate is safe or effective as a treatment for any of our currently or future targeted indications to the satisfaction of the FDA or other relevant regulatory authorities.
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The relevant regulatory authorities may require additional pre-approval studies or clinical trials which would increase our costs and prolong development timelines or could grant conditional approval with a requirement to perform additional studies at a significant cost.

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The results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or other relevant regulatory authorities for marketing approval.
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The FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials, including the design of its future pivotal Phase 3 clinical trials.
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Contract Research Organizations (“CROs”) that we may retain to conduct clinical trials may take actions outside of our control, or otherwise commit errors or violations of protocols, that adversely impact our clinical trials and ability to obtain market approvals.
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The FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient to demonstrate that the clinical and other benefits of these products outweigh their safety risks.
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The FDA or other relevant regulatory authorities may disagree with our interpretation of data or significance of results from the nonclinical studies and clinical trials of IRX - 2 or any other product candidate we may acquire or in-license or may require that it conduct additional studies.
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The FDA or other relevant regulatory authorities may not accept data generated from our clinical trial sites.
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If our MA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory authority, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of such application or may recommend that the FDA or other relevant regulatory authority require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions.
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The FDA or other relevant regulatory authorities may require development of a REMS, or its equivalent, as a condition of approval.
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The FDA or other relevant regulatory authorities may require additional post-marketing studies and/or a patient registry, which would be costly.
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The FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to support the quality of IRX - 2 or any other product candidate we may acquire or in-license.
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The FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturer or our own manufacturing processes or facilities.
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The FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.

Many of the factors that cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for our product candidates. The FDA, EMA or any other comparable regulatory authority may disagree with our clinical trial design and our interpretation of data from clinical trials or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials. In connection with clinical trials of our product candidates, we face a number of risks, including risks that:


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a product candidate is ineffective or inferior to existing approved products for the same indications;

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patients may die or suffer adverse effects for reasons that may or may not be related to the product candidate being tested;

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a product candidate causes or is associated with unacceptable toxicity or has unacceptable side effects;

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the results may not confirm the positive results of earlier trials;

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we are unable to manufacture sufficient quantities of stable and qualified materials under cGMP for use in clinical studies;

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we fail to recruit a sufficient number of patients or we have slower than expected rates of patient recruitment;

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modification of clinical study protocols is necessary;

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there may be changes in regulatory requirements for clinical studies;

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there is a lack of effectiveness during clinical studies;

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there is an emergence of unforeseen safety issues;

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there may be delays, suspension, or termination of the clinical studies due to the IRB responsible for overseeing the study at a particular study site;

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there could be government or regulatory delays or “clinical holds” requiring suspension or termination of the studies; and

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our collaborators may be unable or unwilling to perform under their contracts.

Delays associated with products for which we are directly conducting clinical studies may cause us to incur additional operating expenses.  An unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. It may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

Furthermore, even if we do receive regulatory approval to market our product candidates, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the product.

The failure of clinical studies to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical studies would delay the filing of its marketing application with the FDA and, ultimately, our ability to commercialize its product candidates and generate product revenues. Any change in, or termination of, our clinical studies could materially harm our business, financial condition, and results of operations. Any of these events could harm our business and operations and could negatively impact the price of our common stock.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in the results of completed clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. For example, results from the INSPIRE trial of IRX-2 may not be positive or replicated at clinical trial sites in a later stage clinical trial conducted by us or our collaborators. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support marketing approval.

Preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

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Clinical studies required for our product candidates may involve combination with other products which may result in unpredictable outcomes

In some cases, IRX-2 and any other product we may acquire or in-license (including any products that may be developed from the licensed technology if Brooklyn exercises its option to exclusively license certain technology from Novellus) may be expected to be used in combination with approved therapies that may have significant adverse event profiles. During the course of treatment, these patients could suffer adverse medical events or die for reasons that may or may not be related to our product candidates. We cannot ensure that safety issues will not arise with respect to our product candidates in clinical development. In addition, several of our IRX-2 studies focus on IRX-2 in conjunction with current preferred treatments for certain types of cancer, including head and neck cancers. If the drugs being studied in conjunction with IRX-2 are found to be faulty in any way, or if they fall out of favor as a preferred treatment, our clinical studies may be adversely effected, as we may have to restart such studies with the newer, preferred treatment in conjunction with IRX-2. Any delay in obtaining or failure to obtain required approvals could negatively impact our ability to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact the price of our common stock.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on our ability to recruit patients to participate as well as the completion of required follow-up periods. Patients may be unwilling to participate in our clinical trials because of negative publicity from adverse events related to novel therapeutic approaches, competitive clinical trials for similar patient populations, the existence of current treatments or for other reasons. Enrollment risks are heightened with respect to certain indications that we may target for one or more of our product candidates that may be rare diseases, which may limit the pool of patients that may be enrolled in our planned clinical trials. The timeline for recruiting patients, conducting trials and obtaining regulatory approval of our product candidates may be delayed, including as a result of the ongoing effects of the COVID-19 pandemic, which could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with the required or desired characteristics, to complete our clinical trials in a timely manner. For example, due to the nature of the indications that we are initially targeting, patients with advanced disease progression may not be suitable candidates for treatment with our product candidates and may be ineligible for enrollment in our clinical trials. Therefore, early diagnosis in patients with our target diseases is critical to our success. Patient enrollment and trial completion is affected by factors including the:

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size of the patient population and process for identifying subjects;
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design of the trial protocol;
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eligibility and exclusion criteria;
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safety profile, to date, of the product candidate under study;
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perceived risks and benefits of the product candidate under study;
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perceived risks and benefits of our approach to treatment of diseases;
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availability of competing therapies and clinical trials;
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severity of the disease under investigation;
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degree of progression of the subject’s disease at the time of enrollment;
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proximity and availability of clinical trial sites for prospective subjects;
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ability to obtain and maintain subject consent;
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risks that enrolled patients will drop out before completion of the trial;
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patient referral services of physicians; and
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ability to monitor subjects adequately during and after treatment.

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize our product candidates. For example, we may be sued if any product we develop or any materials that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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decreased demand for our product candidates;
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injury to our reputation;
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withdrawal of clinical trial participants;
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costs to defend the related litigation;
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a diversion of management’s time and its resources;
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substantial monetary awards to trial participants or patients;
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product recalls, withdrawals or labeling, marketing or promotional restrictions;
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the inability to commercialize our product candidates; and
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a decline in the value of the common stock.

Any inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We intend to obtain product liability insurance covering our clinical trials. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed its coverage limitations or that are not covered by its insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Our current or future product candidates may cause undesirable side effects or have other properties when used alone or in combination with other approved products or investigational new drugs that could halt their clinical development, prevent their marketing approval, limit their commercial potential or result in significant negative consequences.

Undesirable or clinically unmanageable side effects could occur and cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.

If unacceptable side effects arise in the development of our product candidates, we, the FDA or comparable foreign regulatory authorities, IRBs, or independent ethics committees at the institutions in which our studies are conducted, or the Data Safety Monitoring Board, or DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We may be required to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may harm our business, financial condition and prospects significantly.

Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following consequences could occur:

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regulatory authorities may withdraw their approval of the product or seize the product;
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we, or any collaborators, may need to recall the product, or be required to change the way the product is administered or conduct additional clinical trials;
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additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the  product;
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we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
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regulatory authorities may require the addition of labeling statements, such as a boxed warning or a contraindication;
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we, or any collaborators, may be required to create a medication guide outlining the risks of the previously unidentified side effects for distribution to patients;
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we, or any collaborators, could be sued and held liable for harm caused to patients;
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the product may become less competitive; and
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our reputation may suffer.

Risks Related to New, Cutting Edge Technologies

Because our gene-editing and cell therapy product candidates are based on novel technologies, we cannot assure that we will be successful, or predict the related cost and time we will spend, in initiating, conducting and completing clinical development, and obtaining the necessary regulatory and reimbursement approvals, required for commercialization.
 
Cellular immunotherapies, stem cell therapies, gene-edited, and iPSC-derived cell therapies represent relatively new therapeutic areas, and the FDA has cautioned consumers about potential safety risks associated with them. To date, there are relatively few approved cell therapies. As a result, the regulatory approval process for a gene-editing or cellular therapy product candidates are uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies and therapeutic approaches. For example, there are no new FDA approved products with a label designation that supports the use of a product to treat and reduce the severity of ARDS in patients with COVID-19, which makes it difficult to determine the clinical endpoints and data required to support an application or regulatory approval, and the time and cost required to obtain regulatory approval in the United States for our product candidate.
 
Cell reprogramming technology and cell therapy products using allogenic MSCs derived from iPSCs represent novel therapeutic approaches, and to our knowledge no iPSC-derived cell products are currently approved for commercial sale anywhere in the world. As such, it is difficult to accurately predict the type and scope of challenges that we will incur during development of our respective product candidates. We thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of product candidates. In addition, because the iPSC-derived cell product candidates are in the pre-clinical stage, no human data are yet available to assess the effects of treatment. Animal models and assays may not accurately predict the safety and efficacy of our product candidates in our target patient populations, and appropriate models and assays may need to be developed for demonstrating the safety, efficacy and purity of the product candidates, as required by the FDA and other regulatory authorities for ongoing clinical development and regulatory approval.
 
Regulatory processes in the United States governing cell therapy products have changed frequently and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for approval of these product candidates. For example, within the FDA, the Center for Biologics Evaluation and Research, CBER, restructured and created a new Office of Tissues and Advanced Therapies, OTAT, to better align its oversight activities with FDA Centers for Drugs and Medical Devices. It is possible that over time new or different divisions may be established or be granted the authority for regulating cell and/or gene therapy products, including iPSC-derived cell products. As a result, we may be required to change regulatory strategies or to modify applications for regulatory approval, which could delay and impair our ability to complete the pre-clinical and clinical development and manufacture of, and obtain regulatory approval for, our product candidates. Changes in regulatory authorities and advisory groups, or any new requirements or guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of the product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with the FDA and other regulatory authorities, and our product candidates will likely be reviewed by an FDA advisory committee. We also must comply with applicable requirements, and if we fail to do so, we may be required to delay or discontinue development of our product candidates. Delays or unexpected costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring the product candidates to market could impair our ability to generate sufficient product revenues to maintain our respective businesses.
 
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The pre-clinical and clinical development, manufacture, and regulatory requirements for approval of the product candidates may be more expensive and take longer than for other more well-known or extensively studied pharmaceutical or biopharmaceutical product candidates, due to a lack of prior experiences on the side of both developers and regulatory agencies. Additionally,  we may be required to modify or change pre-clinical and clinical development plans or manufacturing activities and plans or be required to meet stricter regulatory requirements for approval. Any such modifications or changes could delay or prevent our ability to develop, manufacture, obtain regulatory approval or commercialize the product candidates, which would adversely affect our business, financial condition and results of operations.
 
Gene editing product candidates we may develop based on our license agreements with Factor and Novellus are based on new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if we are able to obtain such approval.

Gene editing product candidates we may develop based on our license agreements with Factor and Novellus are based on new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if we are able to obtain such approval. Gene editing technology is relatively new, and no products based on such technology have been approved in the U.S. or the E.U. to date, and only a limited number of clinical trials of product candidates based on gene-editing technologies have been commenced. As such, it is difficult to accurately predict the developmental challenges we may incur if we exclusively license the technology from Factor, as we proceed through product discovery or identification, preclinical studies and clinical trials. There may be long-term effects from treatment with any such product candidates that we may develop that we cannot predict at this time. Any product candidates we may develop may interact with genetic material (RNA/DNA) and because animal genetic materials differ from human genetic material, past testing of any such product candidates in animal models may not be predictive of results in human clinical trials for safety or efficacy. As a result of these factors, it is more difficult to predict the time and cost of such product candidate development, and we cannot predict whether the application of gene editing technology, or other similar or competitive gene editing technologies, will result in the identification, development and regulatory approval of any products. There can be no assurance that any development problems we may experience related to such gene editing technology or any of our research programs that use such technology will not cause significant delays or anticipated costs, or that such development problems can be solved. Any of these factors may prevent us from completing preclinical studies or clinical trials based on such technology or from commercializing any such product candidates on a timely or profitable basis, if at all.
 
The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidate. No products based on gene-editing technologies have been approved by regulators to date. As a result, the regulatory approval process for product candidates using such technology is uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for product candidates using this technology in either the United States or the E.U. or how long it will take to commercialize any product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects may be harmed.

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Regulatory requirements in the United States and in other jurisdictions governing gene therapy products have changed frequently and may continue to change in the future. In January 2020, the FDA issued several new guidance documents on gene therapy products. The FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research to consolidate the review of gene therapy and related products, and established the Cellular, Tissue and Gene Therapies Advisory Committee to advise this review. In addition to the government regulators, the IBC and IRB of each institution at which we conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, the EMA governs the development of gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines. These regulatory review agencies and committees and the new requirements or guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of any product candidates we may develop if we exercise our option agreements with Novellus or lead to significant post-approval limitations or restrictions. As we advance any such product candidates, we will be required to consult with these regulatory agencies and committees and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

Risks Related to Regulatory Requirements

We are subject to extensive and costly government regulation.

Product candidates employing medical technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective foreign equivalents. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. Even if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. For example, regulatory agencies may approve a product candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. Regulators may approve a product candidate for a smaller patient population, a different drug formulation or a different manufacturing process, than we are seeking. If we are unable to obtain necessary regulatory approvals, or more limited regulatory approvals than we expect, our business, prospects, financial condition and results of operations may suffer.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

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Changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. Varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product commercially unviable.

Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and wastes generated in our manufacturing facility. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from the use of hazardous materials, we could be held liable for any resulting damages, and the amount of the liability could exceed our resources. We could also incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

If we, our collaborators, or our contract manufacturing organizations fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.

Any fast-track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify for priority review vouchers.

Our product candidate, IRX-2, has received fast track designation in head and neck cancers. If a drug or biologic is intended for the treatment of a serious or life-threatening condition and the drug or biologic demonstrates the potential to address unmet medical needs for this condition, the drug or biologic sponsor may apply for FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for a priority review. The FDA has broad discretion to grant these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant them. We may also seek fast track designation for IRX-2 in the other indications or for future products we may seek to develop. Even if we are granted fast track designation or priority review, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may also withdraw fast track designation if it believes that the designation is no longer supported by data from Brooklyn’s clinical development program.

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Orphan Drug Designation and Fast Track Designation may not actually lead to a faster review process.

Under the Prescription Drug User Fee Act, the FDA has a goal of responding to NDAs or BLAs for new molecular entities within 10 months of the date that it is filed for standard review, but the timeframe is also often extended. We have in the past sought and we may in the future seek approval of IRX-2 or any other product candidate we may acquire or license under programs designed to accelerate the FDA’s review and approval of NDAs or BLAs. For example, fast track designation is a process designed to facilitate the development and expedite the review of drugs and biologics to treat serious conditions that fill an unmet clinical need. The purpose is to get important new drugs and biologics to the patient earlier. In our case, IRX-2 has been granted fast track designation for the treatment of head and neck cancer. In the future, we may request fast track designation from the FDA for other diseases or for other products we may acquire or in-license, but we cannot assure that we will obtain such designations. Further, even if we obtain fast track designation, the designation does not guarantee FDA approval of any NDA or BLA that we file, that the development program or review timeline will ultimately be shorter than if we had not obtained the designations, or that the FDA will not request additional information, including requesting additional clinical studies (although potentially a post-marketing requirement), during its review. Any request for additional information or clinical data could delay the FDA’s timely review of any NDA or BLA that we submit.

Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not mean that we will be successful in obtaining marketing approval of our current and future product candidates in other jurisdictions.

Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction, while a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval. We do not have experience in obtaining reimbursement or pricing approvals in international markets. Further, pricing obtained in other jurisdictions may impact pricing realized in the United States and in other jurisdictions where the product is approved.

Obtaining marketing approvals and compliance with regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries outside of the United States. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Healthcare legislative reform measures and constraints on national budget social security systems may have a material adverse effect on our business and results of operations.

Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated or complex methods of controlling healthcare costs and those methods are not always specifically adapted for new technologies such as those we are developing. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in the United States, the Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars; addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increases the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extends the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjects manufacturers to new annual fees and taxes for certain branded prescription drugs; and provides incentives to programs that increase the federal government’s comparative effectiveness research.

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In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.5 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and due to subsequent legislative amendments, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The CARES Act, the Consolidated Appropriations Act of 2021, and the Act to Prevent Across-the-Board Direct Spending Cuts suspended the 2% sequestration mandated by the Budget Control Act of 2011 and the American Relief Act of 2011 through December 31, 2021. In December 2021, Congress extended the suspension of the automatic 2% reduction through March 2022 and reduced the sequestration adjustment to 1% beginning on April 1, 2022 through June 30, 2022, with the full 2% reduction for sequestration resuming thereafter. In January 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We cannot anticipate whether Congress will further extend the sequestration and when the sequestration reimbursement will return.

Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, in November 2018, CMS issued a proposed rule for comment that would, among other things, provide Medicare prescription drug plans under Part D more transparency in pricing and greater flexibility to negotiate discounts for, and in certain circumstances exclude, drugs in the six “protected” formulary classes and allow Medicare Advantage plans to use certain drug management tools such as step therapy for physician-administered drugs. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Biden administration has each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of these governments and other payors to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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the demand for our product candidates, if we obtain regulatory approval;
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our ability to set a price that we believe is fair for our products;
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our ability to generate revenue and achieve or maintain profitability;
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the level of taxes that we are required to pay; and
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the availability of capital.

Any denial in coverage or reduction in reimbursement from Medicare or any other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.

Risks Related to the Commercialization of Brooklyn’s Product Candidates

We may be unable to successfully scale up manufacturing of IRX-2 or newer gene editing or cellular products in sufficient quality and quantity, which may delay or prevent us from commercializing the product even if approved for marketing by the FDA or other regulatory agencies.

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In order to commercialize IRX -2 or any other product candidate we may acquire or in-license (including any products that may be developed from the licensed technology from Factor or via the Novellus acquisition), we will need to manufacture them in large quantities. We would need to scale up the manufacturing process to enable production of commercial quantities of IRX-2, likely at a qualified contract manufacturer, if approved, and we are currently exploring options for implementing scale-up activities in anticipation of study completion and submitting applications for marketing approval, if supported by study data. However, we may be unable to successfully increase manufacturing capability in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities.

Further, in order to release and demonstrate stability of product candidates for future commercial use, our analytical methods must be validated in accordance with regulatory guidelines. We may not be able to successfully validate or maintain validation of analytical methods during scale-up or demonstrate adequate purity, stability or comparability of the biological product candidates in a timely or cost-effective manner, or at all. Even if we believe our manufacturing processes meet all the regulatory manufacturing requirements, the FDA will review those processes and the manufacturing facility as part of the review of any future MA for IRX-2, if submitted after completion of the INSPIRE trial. If we are unable to successfully scale up the manufacture of IRX-2 in sufficient quality and quantity, or if we encounter validation issues, the development, testing, and clinical trials of future product candidates, may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product, including IRX-2, may be delayed or may not be successfully achieved.

Even if we are able to commercialize any product candidate that we may develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives that could harm our business.

The commercial success of our current or future product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of its product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our products. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish and maintain pricing sufficient to realize a meaningful return on our investment.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues it is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to successfully commercialize our product candidate will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

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There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable non-U.S. regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we may commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

If we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates.

We currently have no marketing, sales or distribution capabilities and have limited sales or marketing experience within our organization. If one or more of our product candidates is approved, we intend either to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize that product candidate, or to outsource this function to a third party. There are risks involved with either establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.

Recruiting and training an internal commercial organization is expensive and time consuming and could delay any product launch. Some or all of these costs may be incurred in advance of any approval of any of our product candidates. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire a sales force in the United States or other target market that is sufficient in size or has adequate expertise in the medical markets that we intend to target.

Factors that may inhibit our efforts to commercialize our product candidates on our own include:

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the inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future product that we may develop;
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the lack of complementary treatments to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability to us from these revenue streams is likely to be lower than if we were to market and sell any product candidates that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we may not be successful in commercializing our product candidates.

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The market opportunities for any current or future product candidate we develop, if and when approved, may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and therefore may be small.

Cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only for third-line use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy, immunotherapy or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not effective. We may initially seek approval of IRX-2 and any other product candidates we develop as a therapy for patients who have received one or more prior treatments. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is no guarantee that product candidates we develop, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

The number of patients who have the cancers we are targeting may turn out to be lower than we expect or may change as we develop the product candidate (e.g., lower rates of smoking around the globe may lead to lower incidence levels of head and neck cancer at the time of approval). Additionally, the potentially addressable patient population for our current programs or future product candidates, if and when approved, may be limited. Even if we obtain significant market share for any product candidate, if and when approved, if the potential target populations are small, we may never achieve profitability without obtaining marketing approval for additional indications, including use as first- or second-line therapy.

We face significant competition and if our competitors develop and market products that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

The life sciences industry is highly competitive. We are currently developing therapeutics that will compete, if approved, with other products and therapies that currently exist, are being developed or will in the future be developed, some of which we may not currently be aware. Competitors who are developing products in the same fields or that target the same indications as us with products that have a similar mechanism of action may experience problems with its products that could identify problems that would potentially harm our business.

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or marketing approval or discovering, developing and commercializing products in our field before we do.

There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, such as traditional chemotherapy, as well as novel immunotherapies. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain FDA, EMA or other marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if the product candidate we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness.

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Smaller and other early-stage companies may also prove to be significant competitors. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. In addition, the biopharmaceutical industry is characterized by rapid technological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our product candidates obsolete, less competitive or not economical.

If we fail to maintain orphan drug exclusivity for IRX-2 or we fail to obtain or maintain such exclusivity for any future product candidate we may license, our competitors may sell products to treat the same conditions, and our revenues would be significantly adversely affected.

In July 2005 the FDA granted orphan drug designation for IRX-2 for head or neck cancer. In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. The company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the stated disease or condition for a period of seven years, with an additional six months if for a pediatric indication. Orphan drug exclusive marketing rights may be lost if the FDA later determines that the request for designation was materially defective, a subsequent product is deemed clinically superior, or if the manufacturer is unable to deliver sufficient quantity of the drug.

In the E.U., the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU Community and for which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the medicinal product. An EU orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

Because the extent and scope of patent protection for IRX-2 may be particularly limited, orphan drug designation is especially important. We plan to rely on the orphan exclusivity period to maintain a competitive position. However, if we cannot maintain orphan exclusivity for our IRX-2, our competitors may then sell the same drug to treat the same condition and our revenues will be reduced. Also, without strong patent protection, competitors may sell a generic version upon the expiration of orphan exclusivity, if our patent position is not upheld.

Even if we obtain orphan drug designation for our future product candidates, we may not fulfill the criteria for exclusivity, or we may not be the first to obtain marketing approval for any orphan indication. Further, even if we obtain orphan drug exclusivity for a particular product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. The FDA can discontinue Orphan Drug exclusivity after it has been granted if the orphan drug cannot be manufactured in sufficient quantities to meet demand.

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The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, payors and others in the medical community.

We have never commercialized a product, and even if we obtain any regulatory approval for our product candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and payors accepting our product candidates as effective, safe and cost-effective. Any product that we bring to the market may not gain market acceptance by physicians, patients, payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.

The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the potential efficacy and potential advantages over alternative treatments;
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the frequency and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;
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the frequency and severity of any side effects resulting from follow-up requirements for the administration of our product candidates;
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the relative convenience and ease of administration;
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
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the strength of marketing and distribution support and timing of market introduction of competitive products;
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formulary acceptance;
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publicity concerning our products or competing products and treatments; and
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sufficient third-party insurance coverage and adequate reimbursement.

Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product, if approved for commercial sale, will not be known until after it is commercially launched. Our efforts to educate the medical community and payors on the benefits of our product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.

Risks Related to Brooklyn’s Dependence on Third Parties

We or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors or potential collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could harm the results of our operations.

We are exposed to the risk that our employees or affiliates’ employees and contractors, including any prospective or current principal investigators, CROs, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA or other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing and the FDA’s GCP or cGMP standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

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Activities subject to these laws also involve the improper use or misrepresentation of information obtained during clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in data being eliminated from the final analysis of studies, regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting them from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person, including any person who may have engaged in any fraud or misconduct, or government agency could allege such fraud or other misconduct, even if none occurred. Furthermore, we rely on our CROs and clinical trial sites to adequately report data from ongoing clinical trials. Any failure by such parties to adequately report safety events to us in a timely manner from any such trials may also affect the approvability of our product candidates or cause delays and disruptions for the approval of any of our product candidates, if at all. If we or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors are alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar agreement and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, suspension or delay in Brooklyn’s clinical trials, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs or formulary and pharmacy benefit management programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings, and additional reporting requirements and oversight, any of which could harm our ability to operate our business and results of operations.

We rely, and expect to continue to rely, on third parties to conduct our clinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.

Outside of the INSPIRE trial, each of the trials involving IRX-2 that are currently being performed are investigator-sponsored trials. Outside our providing study drug and financial support for these studies, we have less involvement and less control of these studies than we would if these were our studies. Negative results from these studies could have material adverse effects on our business despite our lack of control.

We may seek to enter into collaborations with third parties for the development and commercialization of our product candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able to capitalize on the market potential of IRX-2 or any other product we may acquire or in-license.

We may seek third-party collaborators for development and commercialization of IRX-2 or any other product we may acquire or in-license. Our likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, non-profit organizations, government agencies, and biotechnology companies. We will face significant competition in seeking appropriate collaborators. We may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because such product candidates may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. We are currently party to a limited number of such arrangements and have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. If and when we collaborate with a third party for development and commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Collaborations involving our product candidates currently pose, and will continue to pose, the following risks to it:

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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;
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collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on preclinical or clinical study results, changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

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collaborators may delay clinical studies, provide insufficient funding for a clinical study program, stop a clinical study or abandon a product candidate, repeat or conduct new clinical studies or require a new formulation of a product candidate for clinical testing;
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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
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collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;
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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate its intellectual property or proprietary information or expose it to potential litigation;
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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and
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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on its product development or commercialization program could be delayed, diminished or terminated.

Risks Relating to Brooklyn’s Intellectual Property

If we are unable to obtain and maintain patent and other intellectual property protection for our products and product candidates, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products and product candidates may be adversely affected.

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We rely on research, manufacturing and other know-how, patents, trade secrets, license agreements and contractual provisions to establish our intellectual property rights and protect our products and product candidates. These legal means, however, afford only limited protection and may not adequately protect our rights. As of April 12, 2022, our intellectual property portfolio included 16 patents in the United States and an additional 92 patents around the world.

In certain situations, and as considered appropriate, we have sought, and we intend to continue to seek to protect our proprietary position by filing patent applications in the United States and, in at least some cases, one or more countries outside the United States relating to current and future products and product candidates that are important to our business. However, we cannot predict whether the patent applications currently being pursued will issue as patents, or whether the claims of any resulting patents will provide us with a competitive advantage or whether we will be able to successfully pursue patent applications in the future relating to our current or future products and product candidates. Moreover, the patent application and approval processes are expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to seek additional patent protection. It is possible that defects of form in the preparation or filing of patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.

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Even if they are unchallenged, our patents and patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to one or more of our product candidates but that falls outside the scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected.

Other parties, many of whom have substantially greater resources and have made significant investments in competing technologies, have developed or may develop technologies that may be related or competitive with our approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with our patent applications, either by claiming the same compositions, formulations or methods or by claiming subject matter that could dominate our patent position. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. As a result, any patents we may obtain in the future may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to our products and product candidates.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs or ABLAs to the FDA in which they claim that our patents are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

In addition to patent protection, we expect to rely heavily on trade secrets, know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available, or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Issued patents covering our products and product candidates could be found invalid or unenforceable if challenged in court or in administrative proceedings. We may not be able to protect our trade secrets in court.

If we initiate legal proceedings against a third-party to enforce a patent covering one of our products or product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non- enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re- examination, post grant review, inter partes review and equivalent proceedings in foreign jurisdictions. An adverse determination in any of the foregoing proceedings could result in the revocation or cancellation of, or amendment to, our patents in such a way that they no longer cover our products or product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and we were unaware during prosecution. If a defendant or third party were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our products and product candidates. Such a loss of patent protection could have a material adverse impact on our business.

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In addition, our trade secrets may otherwise become known or be independently discovered by competitors. Competitors and other third parties could purchase our products and product candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe, misappropriate or otherwise violate our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If our trade secrets are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be adversely affected, as could our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non- compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications are required to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedurals, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which non- compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. The terms of one or more licenses that we enter into the future may not provide us with the ability to maintain or prosecute patents in the portfolio and must therefore rely on third parties to do so. If we fail to obtain and maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as our product candidates, which could have a material adverse effect on our business.

If we do not obtain patent term extension and data exclusivity for our products and product candidates, our business may be materially harmed.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

In the future, if we obtain an issued patent covering one of our present or future product candidates, depending upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. A patent may only be extended once and only based on a single approved product. However, we may not be granted an extension because of, for example, failure to obtain a granted patent before approval of a product candidate, failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise our failure to satisfy applicable requirements. A patent licensed to us by a third party may not be available for patent term extension. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

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Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products and product candidates.

Changes in either the patent laws or the interpretation of the patent laws in the United States or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. When implemented, the Leahy-Smith Act included several significant changes to U.S. patent law that impacted how patent rights could be prosecuted, enforced and defended. In particular, the Leahy-Smith Act also included provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allowed third- party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures governing the administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the U.S. Court of Appeals for the Federal Circuit and the U.S. Supreme Court have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, maintaining, defending and enforcing patents on products and product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products. There can be no assurance that we will obtain or maintain patent rights in or outside the United States under any future license agreements. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from utilizing our inventions in all countries outside the United States, even in jurisdictions where we pursue patent protection, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Proceedings to enforce our patent rights, even if obtained, in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. While we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.

Many of our current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees may be subject to proprietary rights, non-disclosure and non- competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. In addition, our patents may become, involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive and time-consuming, and our adversaries may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both.

In an infringement proceeding, a court may decide that a patent is invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating intellectual property rights we own or control. An adverse result in any litigation proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Further, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

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Even if resolved in our favor, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities.

We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, with the USPTO and with comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.
 
ITEM 1B.
Unresolved Staff Comments
 
We do not have any unresolved comments issued by the SEC Staff.
 
ITEM 2.
Properties
 
We currently lease approximately 9,000 square feet of office and laboratory space in New York,  Massachusetts and California. The terms of our leases expire from December 2026 through June 2028. We believe that our leased property meets our current needs.
 
ITEM 3.
Legal Proceedings

From time to time, we become involved in litigation and arbitrations in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, we assess the need to record a liability for litigation and contingencies. We reserve for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

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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 LLC. These actions asserted claims alleging violations of Sections 14(a) and 20(a) of the Exchange Act and 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 Registration Statement on Form S-4 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 such Registration Statement on 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 Registration Statement on 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 render 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. As of the date of this Annual Report on Form 10-K all ten actions have 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 contented 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 alleges that Brooklyn LLC and certain of its officers engaged in 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 June 6, 2021, defendants 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. The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021. By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn LLC.  Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No. 01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on February 3, 2022.  In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against the Company and Cherington based on the breach of these same promises and a claim for quantum meruit against the Brooklyn LLC.  In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be determined at the hearing.  Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a three-member arbitration panel. At this stage in the litigation, the Company is not able to predict the probability of a favorable or unfavorable outcome.

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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 its 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. 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 the parties. Thereafter, on or about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of fees and expenses for the purported benefit that Carlson contended was received by stockholders as a result of his action. 

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 a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), 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, including 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 following the Merger 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 entered into among the parties, including certain additional stockholders who have subsequent joined as parties to such agreement.  In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and former directors of the Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty.  Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor on behalf of individual stockholders whom counsel represents in addition to Emerald; and the Company has agreed to respond to Emerald’s counsel by April 22, 2022.  The Company can provide no assurance that such pre-suit early resolution discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed.  The Company intends to defend itself vigorously against any and all claims.  Additionally, on April 7, 2022, the Company received a demand for indemnification from its financial advisor as it relates to the aforementioned potential lawsuit.

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 (collectively, “Defendants”).  Brooklyn acquired Novellus, Inc. on July 16, 2021.  Mr. 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 are essentially assuming the defense of and paying the fees associated with defending against these claims.  To that end, on September 10, 2021, Morgan Lewis accepted service on behalf of all defendants. On December 24, 2021, Westman dismissed the case without prejudice so the parties could mediate the matter. The parties’ February 2022 mediation was unsuccessful, but Mr. Westman has not refiled suit.
 
ITEM 4.
Mine Safety Disclosures
 
Not Applicable.

59
PART II
 
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Our common stock is listed on The Nasdaq Global Market under the symbol “BTX.”
 
As of April 12, 2022, there were approximately 421 stockholders of record based on the actual number of holders registered on our books at such date.
 
We have 156,112 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or in shares of our common stock. In 2021, we paid approximately $8,000 in cash dividends and issued 202 shares of common stock in stock dividends to the holders of our Series A Preferred Stock.  We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms, though we may elect to pay the dividend in shares of our common stock in the future.
 
We have not declared or paid any cash dividends on our common stock. No cash dividends have been previously paid on our common stock and none are anticipated in 2022.
 
ITEM 6.
[Reserved]
 
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Exchange Act, about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements reflect our views only as of the date they are made.

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. We also are exploring opportunities to advance oncology, blood disorder, and monogenic disease therapies using gene-editing and cell therapy technology through a license with Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021, or the Acquisition.

Recent Developments

Acquisition of Novellus

On July 16, 2021, we acquired Novellus, Inc. and Novellus, Inc.’s wholly owned subsidiary, Novellus, Ltd. Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc.  Total consideration was $124.0 million, which consisted of (a) $22.8 million in cash and approximately and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102.0 million, based on a price of $14.5253 per share.

60
Merger with NTN Buzztime, Inc.

On March 25, 2021, we completed the Merger with NTN Buzztime, Inc. In accordance with the Merger Agreement, on March 25, 2021, Brooklyn amended its restated certificate of incorporation in order to effect:


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

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

On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC, or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.

The Merger has been accounted for as a reverse acquisition in accordance with U.S. generally accepted accounting principles, or GAAP. Under this method of accounting, Brooklyn LLC was deemed the “acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the Merger are those of Brooklyn LLC, and the historical financial statements of Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.

Impact of COVID-19 Pandemic

The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. While the constraints of the pandemic are being lifted, we are still assessing the longer-term impact of the COVID-19 pandemic on our development plans, and on the ability to conduct our clinical trials. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted.

The patients in our clinical trials have conditions that make them especially vulnerable to COVID-19, and as a result we have seen slowdowns in enrollment in our clinical trials. While our INSPIRE trial in patients with squamous cell carcinoma of the oral cavity  is fully populated, our other clinical studies are likely to continue to encounter delays in enrollment as a result of the pandemic.

61
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 product candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.

Research and Development Expenses

We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended. In-Process Research and Development (“IPR&D”) that is acquired through an asset acquisition and has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.

The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product development efforts.

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

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs.

62
Comparison of the Years Ended December 31, 2021 and 2020

 
Years Ended December 31,
      
Change
        
% Change
   
 
  
2021
    
2020
    
Operating expenses:
                        
Research and development
   $
12,705,000
     $
3,951,000
     $
8,754,000
     $
222
%
Acquired in-process research and development
    
80,538,000
      
-
      
80,538,000
      
N/A
  
General and administrative
    
14,724,000
      
3,297,000
      
11,427,000
      
347
%
Transaction costs
    
5,765,000
      
-
      
5,765,000
      
N/A
  
Change in fair value of contingent consideration
    
(180,000
)
    
19,240,000
      
(19,420,000
)
    
-101
%
Total operating expenses
    
113,552,000
      
26,488,000
      
87,064,000
      
329
%
 
                                
Loss from operations
    
(113,552,000
)
    
(26,488,000
)
    
(87,064,000
)
    
329
%
 
                                
Other expenses:
                                
Loss on sale of NTN assets
    
(9,648,000
)
    
-
      
(9,648,000
)
    
N/A
  
Other income (expense), net
    
899,000
      
(43,000
)
    
942,000
      
-2191
%
Total other expense
    
(8,749,000
)
    
(43,000
)
    
(8,706,000
)
    
20247
%
Loss before income taxes
    
(122,301,000
)
    
(26,531,000
)
    
(95,770,000
)
    
361
%
Provision for income taxes
    
(5,000
)
    
-
      
(5,000
)
    
N/A
  
 
                                
Net loss
    
(122,306,000
)
    
(26,531,000
)
    
(95,775,000
)
    
361
%
 
                                
Series A preferred stock dividend
    
(16,000
)
    
-
      
(16,000
)
    
N/A
  
 
                                
Net loss attributable to common stockholders
  
$
(122,322,000
)
  
$
(26,531,000
)
  
$
(95,791,000
)
    
361
%

Research and Development Expenses

 
  
Years Ended December 31
  
 
  
2021
    
2020
    
Change
    
% Change
  
License fees
  
$
6,500,000
    
$
-
    
$
6,500,000
      
N/A
  
Stock-based compensation
    
1,597,000
      
-
      
1,597,000
      
N/A
  
Clinical trials
    
1,292,000
      
412,000
      
880,000
      
214
%
Payroll-related
    
2,342,000
      
1,985,000
      
357,000
      
18
%
Other expenses, net
    
974,000
      
1,554,000
      
(580,000
)
    
-37
%
Total research and development expenses
  
$
12,705,000
    
$
3,951,000
    
$
8,754,000
      
222
%

For the year ended December 31, 2021, our research and development expenses increased by approximately $8.75 million from the year ended December 31, 2020 due to upfront payments associated with licensed technology, which were expensed because there is no future alternative use for the licensed technology other than for the intended purpose, increased clinical trial expenses, increased headcount and increased stock-based compensation when compared to 2020.

Acquired IPR&D

During the year ended December 31, 2021, we expensed the approximately $80.5 million fair value of the IPR&D acquired in the Acquisition because there is no future alternative use for the IPR&D other than for its intended purpose.

General and Administrative Expenses

 
  
Years Ended December 31
  
 
  
2021
    
2020
    
Change
    
% Change
  
Professional fees
  
$
7,351,000
    
$
2,352,000
    
$
4,999,000
      
213
%
Stock-based compensation
    
3,638,000
      
91,000
      
3,547,000
      
3898
%
Payroll-related
    
1,299,000
      
(98,000
)
    
1,397,000
      
-1426
%
Insurance
    
1,134,000
      
122,000
      
1,012,000
      
830
%
Other expenses, net
    
1,302,000
      
830,000
      
472,000
      
57
%
Total general and administrative expenses
  
$
14,724,000
    
$
3,297,000
    
$
11,427,000
      
347
%

63
The $11.42 million increase in general and administrative expense for the year ended December 31, 2021 from the year ended December 31, 2020 was primarily related to increased professional fees such as legal, accounting and consulting fees associated with merger and acquisition activity, including the Merger and the Acquisition, as well as costs associated with becoming a publicly traded company, increased stock-based compensation resulting from the issuance of equity awards, increased payroll-related expense due to an increase in our headcount and increased insurance expenses when compared to 2020.

Transaction Costs

For the year ended December 31, 2021, we incurred approximately $5.8 million in transaction costs related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger, and there were no comparable transaction costs for the year ended December 31, 2020.

Change in Fair Value of Contingent Consideration

As of December 31, 2020, our contingent consideration liability was approximately $20.1 million and  related to royalties we would be obligated to pay under certain IRX-2 license agreements based on future revenues from any future IRX-2 product sales. During the year ended December 31, 2021, the change in fair value of the contingent consideration was a decrease to the liability of $180,000, based on our third-party valuation analysis.

Loss on Sales of NTN Assets

The approximately $9.6 million loss on the sale of NTN assets during the year ended December 31, 2021 was incurred upon completion of the Disposition, and there was no comparable loss on sale for the year ended December 31, 2020.

Other Income (Expense), Net

 
Years Ended December 31
  
 
  
2021
    
2020
    
Change
    
% Change
  
Employer retention tax credit
  
$
664,000
          
$
664,000
      
N/A
  
Income from Brooklyn PPP loan forgiveness
    
310,000
      
-
      
310,000
      
N/A
  
Other expenses, net
    
(1,000
)
    
-
      
(1,000
)
    
N/A
  
Interest expense, net
    
(74,000
)
    
(43,000
)
    
(31,000
)
    
72
%
Total other income (expense), net
  
$
899,000
    
$
(43,000
)
  
$
942,000
      
-2191
%

During the year ended December 31, 2021, we recognized an increase in other income, net of expense of $899,000, as compared to other expense of $43,000 for the year ended December 31, 2020, primarily as a result of a withholding tax refund related to the employer retention tax credit under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration, or the CARES Act, and the forgiveness of Brooklyn LLC’s Paycheck Protection Program loan, or the PPP Loan, which was primarily offset by interest accrued on notes payable that we assumed as part of the acquisition of the assets of IRX Therapeutics, LLC in 2018. Such notes bore interest at the rate of 14% and matured on December 31, 2021, on which date the Company repaid such notes in full, including all accrued and unpaid interest thereon.

Provision for Income Taxes

Our income tax provision is for state income tax related to our U.S. operations.  At December 31, 2021 and 2020 we had available net operating loss (“NOL”) carryforwards of approximately $20,679,000 and $0 for federal income tax purposes, respectively, of which $20,679,000 can be carried forward indefinitely. We have available $1,397,000 and $747,000 state NOLs for the years ended December 31, 2021 and 2020, respectively.  We also have foreign NOL carryforwards of $4,759,000 and $0 for the years ended December 31, 2021 and 2020, respectively, which carry forward indefinitely. Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards.  We continue to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. We have also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.
 
64
Liquidity and Capital Resources

At December 31, 2021, we had cash and cash equivalents of approximately $17.0 million. During the second quarter of 2021, we entered into Purchase Agreements with Lincoln Park, pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to an aggregate of $60.0 million in shares of our common stock. 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 April 12, 2022, we had issued and sold approximately 3,552,000 shares of common stock for total gross proceeds of $54.1 million and net proceeds of $52.0 million. For further information, see “—Recent Developments—Purchase Agreements.” On March 9, 2022, we consummated the PIPE Transaction, resulting in net proceeds of approximately $11 million. see “—Recent Developments—PIPE Transaction.”   Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity under the Purchase Agreements for a period of one-year following consummation of the PIPE Transaction.

We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our product development programs and operate as a publicly traded company.  Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. It will likely be some years before we obtain the necessary regulatory approvals to commercialize one or more of our product candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Annual Report on Form 10-K. There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other product candidate we may acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.

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 (to the extent we are permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means. We may also seek governmental grants to support our clinical trials and preclinical trials. Further, we may seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned operations. 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.

65
Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay the commercialize of our products, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our business.

Sources of Funds

Equity Securities

On March 6, 2022, we entered into a Securities Purchase Agreement with the PIPE Investor providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of approximately 6,857,000 Units, each of which consisted of (i) one share of our common stock (or, in lieu thereof, one Pre-Funded Warrant) and (ii) one Common Warrant, resulting in net proceeds of approximately $11 million. The PIPE Transaction closed on March 9, 2022. see “—Recent Developments—PIPE Transaction.”

On April 26, 2021, we and Lincoln Park Capital Fund, LLC, or Lincoln Park, executed the First Purchase Agreement, pursuant to which we had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $20.0 million of shares of Brooklyn’s common stock, subject to certain limitations. In consideration for Lincoln Park’s entry into the First Purchase Agreement, we issued Lincoln Park approximately 56,000 shares of common stock. As of December 31, 2021, we issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement for gross proceeds of $20.0 million, and no further shares may be sold to Lincoln Park under the First Purchase Agreement.

On May 26, 2021, we and Lincoln Park executed the Second Purchase Agreement, pursuant to which we have the right from time to time, but not the obligation, to sell to Lincoln Park, and Lincoln Park would be obligated to purchase, up to $40.0 million of shares of Brooklyn’s common stock, subject to certain limitations. In consideration of Lincoln Park’s entry into the Second Purchase Agreement, we issued to Lincoln Park 50,000 shares of common stock. As of December 31, 2021, Brooklyn had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of $34.1 million.   Pursuant to the Securities Purchase Agreement in respect of the PIPE Transaction, we may not effect transactions under the Second Purchase Agreement for a period of one year immediately following closing of the PIPE Transaction.

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

As a condition to the closing of the Merger, Brooklyn LLC was required to have at least $10.0 million in cash and cash equivalents at the effective time of the Merger. In furtherance of, and prior to, the Merger, certain of its members entered into agreements pursuant to which those members purchased additional units of Brooklyn LLC for an aggregate purchase price of $10.5 million.

Disposition.

On March 26, 2021, we completed the Disposition, in which we sold to eGames.com our rights, title and interest in and to the assets relating to the business we operated prior to the Merger under the name “NTN Buzztime, Inc.” in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business.

Brooklyn LLC PPP Loan.

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $310,000 to Silicon Valley Bank evidencing the loan, or the Brooklyn LLC PPP Loan, Brooklyn LLC received under the Paycheck Protection Program, or PPP, of the CARES Act administered by the U.S. Small Business Administration. Brooklyn LLC PPP Loan had an interest rate of 1.0% per annum.

66
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 had approved the forgiveness of 100% of the outstanding principal and interest of the Brooklyn LLC PPP Loan. As of December 31, 2021, there was no outstanding principal balance under the Brooklyn LLC PPP Loan.

Uses of Funds

Net Cash Used in Operating Activities.

Our operations used $23.5 million during the year ended December 31, 2021. Our cash use for operating activities is influenced by the level of our net loss and the amount of cash we invest in personnel and technology development to support anticipated growth in our business.

License Obligations.

We are obligated to pay certain amounts to Factor pursuant to the license agreement we entered into in April 2021, including $2.5 million in October 2021, which was paid, and $3.5 million in October 2022.  The license agreement also provides for milestone payments and royalties on the net sale of product developed under the license agreement.

Lease Obligations.

We are obligated to pay approximately $750,000 per year for our facilities leases, subject to annual increases and to a sharing of common area expenses with other tenants in the building. The leases expire at varying times between December 2026 and June 2028.

Acquisition.

On July 16, 2021, we used approximately $22,882,000 of cash as partial consideration for the Acquisition, and we issued common stock valued at a total of $102.0 million, based on a price of $14.5253 per share, for the remaining portion of the Acquisition’s purchase price.

Brooklyn PPP Loan.

On April 18, 2020, Brooklyn (then known as NTN Buzztime, Inc.) was granted a loan, which we refer to as the Brooklyn PPP Loan, in the aggregate amount of $1,625,000, pursuant to the PPP under the CARES Act. Under the terms of the PPP, certain amounts of the Brooklyn PPP Loan could be forgiven if they were used for qualifying expenses as described in the CARES Act. In October 2020 the U.S. Small Business Administration approved the forgiveness of $1,093,000 of the $1,625,000 principal amount of the Brooklyn PPP Loan, leaving a principal balance of approximately $532,000, all of which, plus accrued and unpaid interest, was due and, in accordance with the terms of the Merger Agreement, paid by Brooklyn upon the closing of the Merger.

Critical Accounting Estimates
 
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue and expenses during the reporting periods. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

67
Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities; (b) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; (c) the reported amounts of revenues and expenses during the reporting period and (d) the reported amount of the fair value of assets acquired in connection with business combinations. Actual results could differ from those estimates. Our significant estimates and assumptions include the recoverability and useful lives of long-lived assets and the contingent consideration liability.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018 (the “IRX Acquisition”), which was accounted for as a business combination. Goodwill is not amortized but is tested for impairment annually, or if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Since management evaluates Brooklyn as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the entity is less than its carrying value. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events.  If the entity does not pass the qualitative assessment, then the entity’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the entity exceeds its fair value.

Impairment of Long-Lived Assets

We review long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. An impairment exists when the carrying value of the long-lived asset is not recoverable and exceeds its fair value.

68
Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants. 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 carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivable, prepaid assets and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities. The carrying value of loans payable approximates its fair market value because the effective yield on this debt, which includes contractual interest rates as well as other finance charges, is comparable to rates of returns for instruments of similar credit risk.

Commitment and Contingencies

We follow ASC No.450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Stock-Based Compensation
 
The Company recognizes stock-based compensation expense for equity awards granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for share-based payment awards is recognized using the straight-line single-option method.

Recent Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 (January 1, 2022 for us) and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of this update to have a significant impact on our financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842) – Lessors - Certain Leases with Variable Lease Payments, which amends the lessor classification guidance to introduce additional criteria when classifying leases with variable lease payments that do not depend on a reference index or a rate. This guidance is effective for annual periods beginning after December 15, 2021 (January 1, 2022 for us), with early adoption permitted. We do not expect the adoption of this update to have a significant impact on its financial statements.

69
ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk
 
Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information otherwise required by this item.

ITEM 8.
Financial Statements and Supplementary Data
 
See “Index to Consolidated Financial Statements” on page F-1 for a listing of the Consolidated Financial Statements filed with this Annual Report on Form 10-K.
 
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.
 
ITEM 9A.
Controls and Procedures
 
Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act 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 Annual Report on Form 10-K 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.
 
Based on that evaluation, our Chief Executive Officer and Vice President of Finance concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Annual Report on Form 10-K in providing reasonable assurance of achieving the desired control objectives due primarily to a material weakness discussed below.
 
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President of Finance, we conduct an annual evaluation of the effectiveness of our internal control over financial reporting based on the guidelines established by the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. If management identifies any material weakness in the course of that evaluation, management cannot conclude that our internal controls over financial reporting are effective.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
 
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 December 31, 2021, our disclosure controls and procedures were not effective and did not provide reasonable assurance of achieving the desired control objectives.

70
Management’s Plan for Material Weakness in Internal Control over Financial Reporting

Management plans to implement measures designed to ensure that the deficiencies contributing to the ineffectiveness of our disclosure controls and procedures are promptly remediated, such that the controls and procedures are designed, implemented and operating effectively. The remediation actions planned include:

  •
hiring 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 hired a full-time controller at the beginning of 2022. Also, during the fourth quarter of 2021, we engaged a third-party consulting firm with expertise in implementing the framework for internal controls over financial reporting, and we currently developing this framework. 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 most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B.
Other Information
 
Not Applicable.
 
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 
Not Applicable.

71
PART III

The information required in Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), and Item 14 (Principal Accounting Fees and Services) is incorporated by reference to the Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, 2021.

72
PART IV
 
ITEM 15.
Exhibits, Financial Statement Schedules
 
(a) The following documents are filed as a part of this Annual Report on Form 10-K:
 
(1)          Consolidated Financial Statements. The consolidated financial statements of the Company and its consolidated subsidiaries are set forth in the “Index to Consolidated Financial Statements” on page F-1.
 
(2)          Financial Statement Schedules. None
 
(3)          Exhibits. The following exhibits are submitted with this Annual Report on Form 10-K or, where indicated, incorporated by reference to other filings.
 
Exhibit
  
Description
Incorporated By Reference
 
Agreement and Plan of Merger and Reorganization, dated August 12, 2020, among NTN Buzztime, Inc., BIT Merger Sub, Inc. and Brooklyn Immunotherapeutics LLC
 
  
Annex A to the proxy statement/prospectus/consent solicitation statement forming a part of the S-4 Registration Statement filed on January 20, 2021
 
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.
Exhibit to Form 8-K filed on July 19, 2021
 
Restated Certificate of Incorporation
Exhibit to Form 10-Q filed on August 14, 2013
 
Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split)
Exhibit to Form 8-K filed on June 17, 2016
 
Certificate of Decrease of the Series A Convertible Preferred Stock
Exhibit to Form 8-K filed on April 12, 2017
 
Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock)
Exhibit to Form 8-K filed on June 9, 2017
 
Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Reverse Stock Split)
Exhibit to Form 8-K filed on March 31, 2021
 
Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Authorized Share Increase)
Exhibit to Form 8-K filed on March 31, 2021
 
Certificate of Amendment to Restated Certificate of Amendment, dated March 25, 2021 (Name Change)
Exhibit to Form 8-K filed on March 31, 2021
 
Certificate of Validation of Brooklyn ImmunoTherapeutics, Inc., as filed with the Secretary of State of the State of Delaware on September 3, 2021
Exhibit to Form 8-K filed on September 13, 2021
 
Amended and Restated Bylaws of Brooklyn ImmunoTherapeutics, Inc.
Exhibit to Form 8-K filed on September 23, 2021
 
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
  
Filed herewith
 
Registration Rights Agreement, dated as of April 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC
Exhibit to Form 8-K filed on April 30, 2021
 
Registration Rights Agreement, dated as of May 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC
  
Exhibit to Form 8-K filed on May 26, 2021
 
Registration Rights Agreement, dated as of July 16, 2021, by and among Brooklyn ImmunoTherapeutics, Inc. and the individuals and entities named therein.
Exhibit to Form 8-K filed on July 19, 2021
 
Amended and Restated Royalty Agreement and Distribution Agreement, dated March 22, 2021.
Exhibit to Form 8-K filed on March 31, 2021
10.5(a)
  
Assignment and Assumption of Employment Agreement dated March 30, 2021 among Brooklyn ImmunoTherapeutics, LLC, Brooklyn ImmunoTherapeutics, Inc. and Ronald Guido.
Exhibit to Form 8-K filed on March 31, 2021

73
10.6(a)
Assignment and Assumption of Employment Agreement dated March 30, 2021 among Brooklyn ImmunoTherapeutics, LLC, Brooklyn ImmunoTherapeutics, Inc. and Lynn Sadowski Mason.
Exhibit to Form 8-K filed on March 31, 2021
10.7(a)
Executive Employment Agreement, dated as of April 1, 2021 and effective as of April 16, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Howard J. Federoff.
Exhibit to Form 8-K filed on April 7, 2021
10.8(a)
Executive Employment Agreement, dated as of June 5, 2021 and effective as of June 28, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Kevin D’Amour.
Exhibit to Form 8-K filed on June 10, 2021
10.9(a)
Executive Employment Agreement, dated as of June 16, 2021 and effective as of June 21, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Sandra Gurrola.
Exhibit to Form 8-K filed on June 21, 2021

Executive Employment Agreement, dated as of July 6, 2021 and effective as of July 15, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Jay Sial.
Exhibit to Form 8-K filed on July 19, 2021

Executive Employment Agreement, effective as of September 20, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Roger Sidhu.
Exhibit to Form 8-K filed on September 23, 2021

Form of Indemnification Agreement
Exhibit to Form 8-K filed on April 16, 2021

Purchase Agreement, dated as of April 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC
Exhibit to Form 8-K filed on April 30, 2021

Purchase Agreement, dated as of May 26, 2021, between Brooklyn ImmunoTherapeutics, Inc. and Lincoln Park Capital Fund, LLC
Exhibit to Form 8-K filed on May 26, 2021

Exclusive License Agreement, dated as of April 26, 2021, between Factor Bioscience Limited, Novellus Therapeutics Limited and Brooklyn ImmunoTherapeutics LLC
Exhibit to Form 8-K filed on April 30, 2021

Brooklyn ImmunoTherapeutics, Inc. 2021 Inducement Stock Incentive Plan
Exhibit to Form 8-K filed on May 26, 2021

Brooklyn ImmunoTherapeutics, Inc. Restated 2020 Stock Incentive Plan
Exhibit to Form 8-K filed on September 13, 2021

Lease Agreement, made as of September 28, 2015, between Biobat, Inc. and IRX Therapeutics, LLC
Exhibit to Form S-4/A filed on November 25, 2020

First Amendment to Lease Agreement, dated September 28, 2015
Exhibit to Form S-4/A filed on November 25, 2020
 
Assignment and Assumption of Lease, made by and between IRX Therapeutics, LLC and Brooklyn, and consented to by Biobat, Inc., as landlord
  
Exhibit to Form S-4/A filed on November 25, 2020
 
Second Amendment to Lease Agreement, dated July 24, 2019
  
Exhibit to Form S-4/A filed on November 25, 2020
 
Sublease Agreement, dated April 18, 2019, between Brooklyn and Nezu Asia Capital Management, LLC
  
Exhibit to Form S-4/A filed on November 25, 2020
 
Consent to Sublease and Agreement, dated as of May 18, 2019, among 654 Madison Avenue Associates LP, Brooklyn, and Nezu Asia Capital Management, LLC
  
Exhibit to Form S-4/A filed on November 25, 2020
 
Commencement Date Confirmation Agreement, made as of June 27, 2019, among Brooklyn and Nezu Asia Capital Management, LLC.
  
Exhibit to Form S-4/A filed on November 25, 2020
 
Lease Agreement dated June 15, 2021 between Brooklyn ImmunoTherapeutics, Inc. and Fairlane Columbia, LLC
  
Filed herewith
 
Subsidiaries of the Company.
  
Filed herewith.
 
Consent of the Independent Registered Accounting Firm.
  
Filed herewith

74
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished herewith

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished herewith
101.INS
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).
Filed herewith
101.SCH
Inline XBRL Taxonomy Extension Schema Document
Filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
Filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
Filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


(a)
Indicates management contract or compensatory plan.

(b)
Pursuant to Item 601(b)(2) of Regulation S-K, portions of this exhibit have been omitted because the Company customarily and actually treats the omitted portions as private or confidential, and such portions are not material and would likely cause competitive harm to the Company if publicly disclosed. The Company will supplementally provide a copy of an unredacted copy of this exhibit to the U.S. Securities and Exchange Commission or its staff upon request.
(c)
Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

ITEM 16.
Form 10-K Summary
 
None.

75
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
BROOKLYN IMMUNOTHERAPEUTICS, INC.
     
Date: April 15, 2022
By:
 /s/ Howard J. Federoff
   
Howard J. Federoff
   
Chief Executive Officer and President
(Principal Executive Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name
  
Title
  
Date
         
/s/ Howard J. Federoff  
 Chief Executive Officer, President and Member of the Board (Principal Executive Officer)
  
April 15, 2022
Howard J. Federoff
        
         
/s/ Sandra Gurrola  
 Vice President of Finance (Principal Financial and Accounting Officer)
  
April 15, 2022
Sandra Gurrola
        
         
/s/ Charles Cherington  
 Chairman of the Board
  
April 15, 2022
Charles Cherington
        
         
/s/ Dennis H. Langer  
 Member of the Board
  
April 15, 2022
Dennis H. Langer
        
         
/s/ Erich Mohr  
 Member of the Board
  
April 15, 2022
Erich Mohr
        
         
/s/ Heather B. Redman  
 Member of the Board
  
April 15, 2022
Heather B. Redman
        
         
/s/ Erin S. Enright  
 Member of the Board
  
April 15, 2022
Erin S. Enright
        

76

BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
F-2
   
Consolidated Financial Statements:
  
 
  
F-3
 
  
F-4
 
  
F-5
   
F-6
   
F-7

F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Members and Board of Directors of
Brooklyn ImmunoTherapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Brooklyn ImmunoTherapeutics, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ and members’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Change in Accounting Principle

As discussed in Notes 3 and 7 to the financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of the guidance in ASC Topic 842, Leases (“Topic 842”).

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

F-2
Fair Value of Contingent Consideration

Description of the Matter

As discussed in Note 5 to the financial statements, contingent consideration is recorded at fair value at the transaction date and subsequently revalued each reporting period, with changes in the fair value recognized within the statement of operations. As of and for the year ended December 31, 2021, management recorded a contingent consideration liability of $19.9 million and change in fair value of $0.2 million.  Management utilized a third-party valuation specialist to assist in estimating the contingent consideration fair value using the income approach, and the discounted cash flows were used to estimate the expected royalty payments to third parties.

Auditing management’s estimated fair value of contingent consideration is highly subjective and judgmental as the assumptions used in the fair value measurement, including the discount rate, the amount and timing of cash flows, and the forecast of future product sales, are all based on significant inputs not observable in the market.  This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures related to the fair value of contingent consideration and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

How we Addressed the Matter in Our Audit

With the assistance of our valuation specialists, our audit procedures included, amongst others:

•
We obtained an understanding of management’s process in regards to the methodology used and the factors considered around the inputs, sources of data used and assumptions and estimates made in determining the fair value of contingent consideration, including those over management’s review of its third-party specialist valuation report.
•
We tested the completeness and accuracy of the data used in the discounted cash flow model.
•
We evaluated the appropriateness of the discounted cash flow model.
•
We performed a sensitivity analysis on the discount rate used in the discounted cash flow model to determine the impact rate changes could have on the fair value.

/s/ Marcum llp

Marcum LLP

We are uncertain as to the year we began serving consecutively as the auditor of the Company’s financial statements; however, we are aware that we have been the Company’s auditor consecutively since at least 2013.

New York, NY
April 15, 2022

F-2
BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amount)

   
December 31,
2021
    
December 31,
2020
  
ASSETS
            
Current assets:
            
Cash
  
$
16,985
    
$
1,630
  
Accounts receivable
    
684
      
-
  
Prepaid expenses and other current assets
    
1,097
      
102
  
Total current assets
    
18,766
      
1,732
  
Property and equipment, net
    
670
      
594
  
Right-of-use assets - operating leases
    
2,567
      
2,093
  
Goodwill
    
2,044
      
2,044
  
In-process research and development
    
6,860
      
6,860
  
Investment in minority interest
    
1,000
      
-
  
Security deposits and other assets
    
522
      
453
  
Total assets
  
$
32,429
    
$
13,776
  
                 
LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)
                
Current liabilities:
                
Accounts payable
  
$
1,755
    
$
1,275
  
Accrued expenses
    
1,249
      
1,051
  
Loans payable
    
-
      
410
  
PPP loan, current
    
-
      
116
  
Operating lease liabilities, current
    
426
      
273
  
Other current liabilities
    
247
      
-
  
Total current liabilities
    
3,677
      
3,125
  
Contingent consideration
    
19,930
      
20,110
  
Operating lease liabilities, non-current
    
2,297
      
1,905
  
PPP loan, non-current
    
-
      
194
  
Other liabilities
    
23
      
23
  
Total liabilities
    
25,927
      
25,357
  
                 
Stockholders’ and members’ equity (deficit):
                
Class A membership units
    
-
      
23,202
  
Class B membership units
    
-
      
1,400
  
Class C membership units
    
-
      
1,000
  
Common units
    
-
      
198
  
Series A preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at December 31, 2021; no shares issued and outstanding at December 31, 2020.
    
1
      
-
  
Common stock, $0.005 par value, 100,000 shares authorized, 52,021 issued and outstanding at December 31, 2021; no shares issued and outstanding at December 31, 2020.
    
260
      
-
  
Additional paid-in capital
    
165,944
      
-
  
Accumulated deficit
    
(159,703
)
    
(37,381
)
Total stockholders’ and members’ equity (deficit)
    
6,502
      
(11,581
)
Total liabilities and stockholders’ and members’ equity (deficit)
  
$
32,429
    
$
13,776
  

The accompanying notes are an integral part of these consolidated financial statements.

F-3
BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

   
Years ended December 31,
  
   
2021
    
2020
  
Operating expenses:
            
Research and development
  
$
12,705
    
$
3,951
  
Acquired in-process research and development
    
80,538
      
-
  
General and administrative
    
14,724
      
3,297
  
Transaction costs
    
5,765
      
-
  
Change in fair value of contingent consideration
    
(180
)
    
19,240
  
Total operating expenses
    
113,552
      
26,488
  
Loss from operations
    
(113,552
)
    
(26,488
)
Other expenses:
                
Loss on sale of NTN assets
    
(9,648
)
    
-
  
Other income (expense), net
    
899
      
(43
)
Total other expenses, net
    
(8,749
)
    
(43
)
Loss before income taxes
    (122,301 )     (26,531 )
Provision for income taxes
    (5 )     -  
Net loss
    
(122,306
)
    
(26,531
)
Series A preferred stock dividend
    
(16
)
    
-
  
Net loss attributable to common stockholders
  
$
(122,322
)
  
$
(26,531
)
                 
Net loss per common share - basic and diluted
  
$
(2.82
)
  
$
(1.51
)
Weighted average shares outstanding - basic and diluted
    
43,306
      
17,588
  

The accompanying notes are an integral part of these consolidated financial statements.

F-4
BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)
For the years ended December 31, 2021 and 2020
(In thousands)

   
Membership Equity
    
Common Stock
    
Series A
Preferred Stock
    
Additional
Paid-in
    
Accumulated
        
   
Class A
    
Class B
    
Class C
    
Common
    
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
    
Total
  
                                                                   
Balances at January 1, 2021
  
$
23,202
    
$
1,400
    
$
1,000
    
$
198
      
-
    
$
-
      
-
    
$
-
    
$
-
    
$
(37,381
)
  
$
(11,581
)
Brooklyn rights offerings membership units
    
10,500
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
10,500
  
Elimination of Brooklyn’s historical members’ equity
    
(33,702
)
    
(1,400
)
    
(1,000
)
    
(198
)
    
-
      
-
      
-
      
-
      
36,300
      
-
      
-
  
Common stock to be retained by NTN stockholders
    
-
      
-
      
-
      
-
      
1,514
      
8
      
-
      
-
      
8,170
      
-
      
8,178
  
Issuance of Series A preferred stock retained
by NTN stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
156
      
1
      
(1
)
    
-
      
-
  
Issuance of common stock to Brooklyn members
    
-
      
-
      
-
      
-
      
38,924
      
195
      
-
      
-
      
(195
)
    
-
      
-
  
Issuance of common stock to Financial Advisor upon
consummation of merger
    
-
      
-
      
-
      
-
      
1,068
      
5
      
-
      
-
      
5,760
      
-
      
5,765
  
Issuance of common stock from the exercise of
stock options
    
-
      
-
      
-
      
-
      
1
      
-
      
-
      
-
      
10
      
-
      
10
  
Issuance of common stock related to stock purchase
agreement with Lincoln Park Capital Fund, LLC, net
    
-
      
-
      
-
      
-
      
3,552
      
17
      
-
      
-
      
52,008
      
-
      
52,025
  
Issuance of common stock in connection with
the acquisition of Novellus, Inc.
    
-
      
-
      
-
      
-
      
7,022
      
35
      
-
      
-
      
58,649
      
-
      
58,684
  
Cash dividends to Series A preferred stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(8
)
    
(8
)
Issuance of common stock in lieu of cash
dividend to Series A preferred stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
8
      
(8
)
    
-
  
Forfeiture of unvested restricted stock
    
-
      
-
      
-
      
-
      
(60
)
    
-
      
-
      
-
      
-
      
-
      
-
  
Stock based compensation
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
5,235
      
-
      
5,235
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(122,306
)
    
(122,306
)
Balances at December 31, 2021
  
$
-
    
$
-
    
$
-
    
$
-
      
52,021
    
$
260
      
156
    
$
1
    
$
165,944
    
$
(159,703
)
  
$
6,502
  

   
Membership Equity
    
Accumulated
        
   
Class A
    
Class B
    
Class C
    
Common
    
Deficit
    
Total
  
                                     
Balances at January 1, 2020
  
$
18,178
    
$
1,400
    
$
1,000
    
$
107
    
$
(10,942
)
  
$
9,743
  
Implementation of new accounting principle
    
-
      
-
      
-
      
-
      
92
      
92
  
Stock based compensation
    
-
      
-
      
-
      
91
      
-
      
91
  
Sale of members’ equity
    
5,024
      
-
      
-
      
-
      
-
      
5,024
  
Net loss
    
-
      
-
      
-
      
-
      
(26,531
)
    
(26,531
)
Balances at December 31, 2020
  
$
23,202
    
$
1,400
    
$
1,000
    
$
198
    
$
(37,381
)
  
$
(11,581
)

The accompanying notes are an integral part of these consolidated financial statements.

F-5
BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

   
For years ended
December 31,
  
   
2021
    
2020
  
Cash flows used in operating activities:
            
Net loss
  
$
(122,306
)
  
$
(26,531
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
    
117
      
98
  
Stock-based compensation
    
5,235
      
91
  
Amortization of right-to-use asset
    
342
      
-
  
Transaction costs - shares to Financial Advisor
    
5,765
      
-
  
Loss on sale of NTN assets
    
9,648
      
-
  
Loss on disposal of fixed assets
    
13
      
-
  
Gain on forgiveness of PPP loan
    
(310
)
    
-
  
Acquired in-process research and development
    
80,538
      
-
  
Change in fair value of contingent consideration
    
(180
)
    
19,240
  
Changes in operating assets and liabilities:
                
Account receivable
    
(659
)
    
-
  
Prepaid expenses and other current assets
    
(850
)
    
(16
)
Security deposits and other non-current assets
    
(34
)
    
(90
)
Accounts payable and accrued expenses
    
(485
)
    
(930
)
Operating lease liability
    
(322
)
    
12
  
Other liabilities
    
-
      
25
  
Net cash used in operating activities
    
(23,488
)
    
(8,101
)
Cash flows used in investing activities:
                
Purchase of property and equipment
    
(154
)
    
(39
)
Purchase of NTN, net of cash acquired
    
147
      
-
  
Purchase of Novellus, net of common stock issued and cash acquired
    
(22,854
)
    
-
  
Proceeds from the sale of NTN assets, net of cash disposed
    
119
      
-
  
Net cash used in investing activities
    
(22,742
)
    
(39
)
Cash flows provided by financing activities:
                
Net proceeds of common stock issued to Lincoln Park
    
52,025
      
-
  
Proceeds from sale of members’ equity
    
10,500
      
4,359
  
Proceeds from the exercise of stock options
    
10
      
-
  
Proceeds from loans payable
    
-
      
310
  
Repayment of NTN’s PPP loan
    
(532
)
    
-
  
Principal payments on notes payable
    
(410
)
    
-
  
Dividends paid to Series A preferred shareholders
    
(8
)
    
-
  
Net cash provided by financing activities
    
61,585
      
4,669
  
Net increase (decrease) in cash and cash equivalents
    
15,355
      
(3,471
)
Cash and cash equivalents at beginning of period
    
1,630
      
5,101
  
Cash and cash equivalents at end of period
  
$
16,985
    
$
1,630
  
                 
Supplemental disclosures of cash flow information:
                
Cash paid during the period for:
                
Interest
  
$
225
    
$
-
  
Income taxes
  
$
1
    
$
-
  
                 
Supplemental disclosure of non-cash investing and financing activities:
                
Issuance of common stock for Series A preferred stock dividend
  
$
8
    
$
-
  
Issuance of common stock for business combination
  
$
8,178
    
$
-
  
Issuance of common Stock for Novellus acquisition
  
$
58,684
    
$
-
  
Forfeiture of unvested restricted stock
  
$
-
    
$
-
  
Preferred shares issued in connection with reverse merger
  
$
1
    
$
-
  
Initial measurement of ROU assets, net of tenant improvement allowance
  
$
816
    
$
-
  
Initial measurement of operating lease liabilities
  
$
866
    
$
-
  
Investor deposits for sale of members’ equity
  
$
-
    
$
666
  
Right of use assets obtained in exchange for new operating lease liabilities
  
$
-
    
$
2,093
  

The accompanying notes are an integral part of these consolidated financial statements.

F-6
BROOKLYN IMMUNOTHERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020

1)
Organization and Description of Business Operations

Brooklyn ImmunoTherapeutics Inc., a Delaware corporation (“Brooklyn” or the “Company”), together with its subsidiaries including Brooklyn ImmunoTherapeutics LLC (“Brooklyn LLC”), Novellus, Inc. (“Novellus”) and Novellus Therapeutics, Ltd. (“Novellus, Ltd.”), 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 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, in which Brooklyn LLC was 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 operated under the name “NTN Buzztime, Inc.” prior to the Merger 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 4.)


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 (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 (the “Acquisition”), pursuant to which Brooklyn acquired Novellus and its subsidiary, Novellus, Ltd. 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 4.)

2)
Liquidity and Capital Resources

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 December 31, 2021, the Company had a cash balance of approximately $16,985,000 and an accumulated deficit of approximately $159,703,000. For the year ended December 31, 2021, the Company incurred a net loss of $122,306,000 and the Company used cash in operating activities of $23,488,000 (inclusive of $80,538,000 IPR&D expense related to the Acquisition, $9,648,000 related to the loss on sale of assets in the Disposition and $180,000 related to the change in fair value of contingent consideration).

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 December 31, 2021, Brooklyn had issued and sold an aggregate of approximately 1,128,000 shares of common stock to Lincoln Park pursuant to the First Purchase Agreement, resulting in gross proceeds of $20,000,000.

F-7
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 December 31, 2021, Brooklyn had issued and sold an aggregate of approximately 2,424,000 shares of common stock to Lincoln Park pursuant to the Second Purchase Agreement, resulting in gross proceeds of approximately $34,106,000.

On July 16, 2021, Brooklyn used approximately $22,854,000 of cash, net of cash acquired, as part of the purchase price of the Acquisition. Brooklyn issued common stock as the remaining portion of the purchase price of the Acquisition.


On March 9, 2022, we consummated a private placement of equity resulting in net proceeds of approximately $11 million. See Note 17 for details.

In connection with preparing its financial statements as of and for the year ended December 31, 2021, the Company’s management concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern because it does not expect to have sufficient cash or working capital resources to fund operations for the twelve-month period subsequent to the issuance date of these financial statements.  The Company will need to raise additional capital, which could be through the remaining availability under the Second Purchase Agreement (to the extent the Company is permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means. The Company may also seek governmental grants to support our clinical trials and preclinical trials..  The Company currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital when needed, on acceptable terms, or at all. 

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

3)
Basis of Accounting Presentation and Summary of Significant Accounting Policies


Basis of Accounting Presentation

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). All significant intercompany balances and transactions have been eliminated in consolidation.

As described above, the Merger closed on March 25, 2021. The Merger was accounted for as a reverse acquisition, in which Brooklyn LLC was 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 2-to-1 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 value from its originally intended purpose and was therefore expensed in the period the cost was incurred.

F-7

Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities; (b) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; (c) the reported amounts of revenues and expenses during the reporting period and (d) the reported amount of the fair value of assets acquired in connection with business combinations. Actual results could differ from those estimates. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets and the contingent consideration liability.

Cash and Cash Equivalents

The Company classifies highly liquid investments with a remaining contractual maturity at date of purchase of three months or less as cash equivalents. The Company had no cash equivalents as of December 31, 2021 or 2020.

Property and Equipment

Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the straight-line method. Laboratory and manufacturing equipment are depreciated over an estimated useful life of seven years. Leasehold improvements are depreciated over the shorter of their estimated useful life, or the lease term. Computer equipment are depreciated over an estimated useful life of three years. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation of these assets are removed from the accounts and the resulting gain or losses are reflected in the results of operations. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018 (the “IRX Acquisition”), which was accounted for as a business combination. Goodwill is not amortized but is tested for impairment annually, or if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Because management evaluates the Company as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the entity is less than its carrying value. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events.  If the entity does not pass the qualitative assessment, then the entity’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the entity exceeds its fair value.

IPR&D

IPR&D assets represent the fair value assigned to technologies that were acquired in connection with the IRX Acquisition, which have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite lived until the completion or abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives beginning at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.

F-8
Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. An impairment exists when the carrying value of the long-lived asset is not recoverable and exceeds its fair value. For the years ended December 31, 2021 and 2020, there were no qualitative factors that indicated it was more likely than not that the fair value of the long-lived assets exceeded the carrying value.

Research and Development

The Company expenses its research and development costs as incurred. 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 (as opposed to a business combination) 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, expensed IPR&D, 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, the Company contracts 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. The Company anticipates paying significant portions of a study’s or trial’s cost before they begin and incurring additional expenditures as the study or trial progresses and reaches certain milestones.

Income Taxes
 
The Company records deferred tax liabilities and assets based on the differences between the consolidated financial statements carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse and established a valuation allowance when it was more likely than not that some portion or all of the deferred tax assets would not be realized. Income tax expense consists of the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Tax benefits from uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company has no material uncertain tax positions for any of the reporting periods presented.

Earnings Per Share
 
Basic and diluted loss per common share have been computed by dividing the losses applicable to common stock by the weighted average number of common shares outstanding. The Company’s basic and fully diluted earnings per share (“EPS”) calculation are the same since the increased number of shares that would be included in the diluted calculation from assumed exercise of common stock equivalents would be anti-dilutive to the net loss in each of the years shown in the consolidated financial statements.

F-9
Segment Reporting
 
In accordance with ASC No. 280, Segment Reporting, the Company has determined that it operates as one operating segment. Decisions regarding the Company’s overall operating performance and allocation of its resources are assessed on a consolidated basis.

Concentration of Credit Risk

The Company maintains its cash balances in financial institutions located in the United States. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At times, the Company’s cash balances may be uninsured for deposit accounts that exceed the FDIC insurance limit.

In the Company’s business, vendor concentrations could be indicative of vulnerabilities in the Company’s supply chain, which could ultimately impact the Company’s ability to continue its research and development activities. For the years ended December 31, 2021 and 2020, there was no vendor concentration related to the Company’s research and development activities.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants. 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 carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivable, prepaid assets and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities. The carrying value of loans payable approximates its fair market value because the effective yield on this debt, which includes contractual interest rates as well as other finance charges, is comparable to rates of returns for instruments of similar credit risk.

Leases

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. If the interest rate implicit in the lease is not readily determinable, the Company uses the 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.

Commitment and Contingencies

The Company follows ASC No.450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

F-10
Stock-Based Compensation

The Company recognizes stock-based compensation expense for equity awards granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for share-based payment awards is recognized using the straight-line single-option method.

Recent Accounting Standards

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.

4)
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, in which Brooklyn LLC was 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 that (i) Brooklyn LLC members, 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 were designated by Brooklyn LLC under the terms of the Merger Agreement and (iii) existing members of Brooklyn LLC’s management became 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 approximately 39,992,000 shares of common stock, of which 1,068,000 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 $8,178,000, which represents the consideration transferred in the Merger to stockholders of Brooklyn immediately before the Merger, was calculated based on the closing price of $5.40 per share for approximately 1,514,000 shares 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.

F-12
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 is equal to the difference of approximately $8,589,000, which 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
  
$
148,000
    
$
-
    
$
148,000
  
Accounts receivable
    
103,000
      
-
      
103,000
  
Prepaid expense and other current assets
    
329,000
      
-
      
329,000
  
Property and equipment, net
    
1,015,000
      
-
      
1,015,000
  
Software development costs
    
1,296,000
      
(368,000
)
    
928,000
  
Customers
    
-
      
548,000
      
548,000
  
Trade name
    
-
      
299,000
      
299,000
  
Accounts payable, accrued liabilities and other current liabilities
    
(3,781,000
)
    
-
      
(3,781,000
)
Net assets acquired, excluding goodwill
  
$
(890,000
)
  
$
479,000
    
$
(411,000
)
                         
Total consideration
  
$
8,178,000
                  
Net assets acquired, excluding goodwill
    
(411,000
)
                
Goodwill
  
$
8,589,000
                  

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 its Class A unit holders an additional 5% rights offering for an additional $500,000 to be raised by a rights offering. Brooklyn received funds from the rights offering 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 (under the name NTN Buzztime, Inc.) 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:

F-13
Proceeds from sale:
      
Cash
  
$
132,000
  
Escrow
    
50,000
  
Assume advance/loans
    
1,700,000
  
Interest on advance/loans
    
68,000
  
         
Carrying value of assets sold:
        
Cash and cash equivalents
    
(14,000
)
Accounts receivable
    
(75,000
)
Prepaids and other current assets
    
(124,000
)
Property and equipment, net
    
(1,014,000
)
Software development costs
    
(927,000
)
Customers
    
(548,000
)
Trade name
    
(299,000
)
Goodwill
    
(8,589,000
)
Other assets
    
(103,000
)
         
Liabilities transferred upon sale:
        
Accounts payable and accrued expenses
    
113,000
  
Obligations under finance leases
    
17,000
  
Lease liability
    
26,000
  
Deferred revenue
    
55,000
  
Other current liabilities
    
149,000
  
         
Transaction costs
    
(265,000
)
         
Total loss on sale of assets
  
$
(9,648,000
)

Unaudited Pro Forma Disclosure


The following unaudited pro forma financial information summarizes the results of operations for the years months ended December 31, 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.


   
Years ended December 31,
  
   
2021
    
2020
  
Net loss attributable to common stockholders
  
$
(122,306,000
)
  
$
(26,547,000
)
                 
Basic and diluted net loss per share attributable to common stockholders
  
$
(2.82
)
  
$
(1.51
)


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; and


•     Brooklyn acquired 25.0% of the total outstanding equity interests of NoveCite.

F-14
Brooklyn delivered consideration for the Acquisition totaling approximately $124,000,000, which consisted of (a) approximately $22,854,000 in cash, net of cash acquired, and (b) approximately 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement were valued at a total of $102,000,000, based on a price of $14.5253 per share.


The Acquisition Agreement contained customary representations, warranties and certain indemnification provisions. Approximately 741,000 of the shares issued as consideration were 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 certain non-competition and non-solicitation provisions pursuant to which Novellus LLC 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 approximately 3,378,000 of the shares of common stock received in the Acquisition, and Brooklyn’s Chairman 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 Nasdaq 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 11). 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 $22,854,000 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 approximately 7,022,000 shares of the Company’s common stock, of which approximately 3,644,000 shares are unrestricted and 3,378,000 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:

   
Fair Value of
Consideration
  
Cash paid
  
$
22,882,000
  
Cash acquired
    
(28,000
)
Unrestricted shares
    
36,628,000
  
Restricted shares
    
22,056,000
  
Total fair value of consideration paid
    
81,538,000
  
Less amount of cash paid for NoveCite investment
    
(1,000,000
)
Fair value of IPR&D acquired
  
$
80,538,000
  

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 $80,538,000.

F-15
Investment in NoveCite

As a result of the Acquisition, Brooklyn acquired and currently owns 25% of NoveCite and Citius Pharmaceuticals, 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. 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. Citrus’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% of NoveCite, 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. As of December 31, 2021, there were no observable transactions for identical or similar equity securities of NoveCite to provide an indication of fair value, nor were there any indications of impairment of the investment.

5)
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 December 31, 2021 and 2020:

   
As of December 31, 2021
  
Description
  
Level 1
    
Level 2
    
Level 3
  
Liabilities:
                  
Contingent consideration
    
-
      
-
    
$
19,930,000
  
Total
  
$
-
    
$
-
    
$
19,930,000
  

   
As of December 31, 2020
  
Description
  
Level 1
    
Level 2
    
Level 3
  
Liabilities:
                  
Contingent consideration
    
-
      
-
    
$
20,110,000
  
Total
  
$
-
    
$
-
    
$
20,110,000
  

F-16
The contingent consideration is related to an asset purchase agreement entered into between Brooklyn LLC and IRX Therapeutics (“IRX”) in connection with the IRX Acquisition, 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 for the IRX Acquisition 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 December 31, 2021, the Company adjusted the carrying amount of its contingent consideration liabilities as follows:

   
Year ended
December 31, 2021
 
Balance as of beginning of period
  
$
20,110,000
  
Fair value adjustments included in operating expenses
    
(180,000
)
Balance as of end of period
  
$
19,930,000
  

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.

6)
Property and Equipment

Property and equipment consist of the following:

F-17
   
December 31,
  
   
2021
    
2020
  
Laboratory and manufacturing equipment
  
$
258,000
    
$
300,000
  
Leasehold improvements
    
464,000
      
414,000
  
Computer equipment
    
154,000
      
-
  
     
877,000
      
714,000
  
Less: accumulated depreciation and amortization
    
(207,000
)
    
(120,000
)
Property and equipment, net
  
$
670,000
    
$
594,000
  

Depreciation expense totaled $117,000 and $98,000 for the years ended December 31, 2021 and 2020, respectively. No depreciation expense is recorded on fixed assets in process until such time as the assets are completed and are placed into service.

7)
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 this lease agreement, the Company paid a lease deposit of approximately $25,000. The Cambridge, Massachusetts lease expires in June 2028. See Note 17 for subsequent event information regarding the Company’s leases.

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 years ended December 31, 2021 and 2020, the net operating lease expenses were as follows:

F-18
   
Years ended December 31,
  
   
2021
    
2020
  
Operating lease expense
  
$
688,000
    
$
591,000
  
Sublease income
    
(84,000
)
    
(77,000
)
Variable lease expense
    
19,000
      
21,000
  
Total lease expense
  
$
623,000
    
$
535,000
  

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 December 31, 2021, including the changes during the period.

   
Operating Lease
ROU Assets
  
       
Operating lease ROU assets at January 1, 2021
  
$
2,093,000
  
Amortization of operating lease ROU assets
    
(342,000
)
Addition of operating lease ROU assets
    
816,000
  
Operating lease ROU assets at December 31, 2021
  
$
2,567,000
  

   
Operating Lease
Liabilities
  
Operating lease liabilities at January 1, 2021
  
$
2,178,000
  
Principal payments on operating lease liabilities
    
(321,000
)
Addition of operating lease liabilities
    
866,000
  
Operating lease liabilities at December 31, 2021
    
2,723,000
  
Less non-current portion
    
2,297,000
  
Current portion at December 31, 2021
  
$
426,000
  

As of December 31, 2021, the Company’s operating leases had a weighted-average remaining life of 4.9 years with a weighted-average discount rate of 12.76%. The maturities of the operating lease liabilities are as follows:

   
As of
December 31
  
2022
  
$
750,000
  
2023
    
767,000
  
2024
    
785,000
  
2025
    
802,000
  
2026
    
267,000
  
Thereafter
    
246,000
  
Total payments
    
3,617,000
  
Less imputed interest
    
(894,000
)
Total operating lease liabilities
  
$
2,723,000
  

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 commencing on May 15, 2019. The term of this 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.

F-19
   
As of
December 31,
2021
  
2022
  
$
82,000
  
2023
    
84,000
  
2024
    
86,000
  
2025
    
88,000
  
2026
    
75,000
  
   
$
415,000
  

The Company received sublease payments of approximately $83,000 and $79,000 during the years ended December 31, 2021 and 2020, respectively. 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.

8)
Goodwill and In-Process Research & Development

The Company recorded goodwill and IPR&D in the amount of $2,044,000 and $6,860,000, respectively, in connection with the IRX Acquisition in the year ended December 31, 2018. 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, the Company expensed the fair value of the IPR&D it acquired in the amount of $80,538,000, as the Company determined there were no future alternative uses or separate economic values from its original intended purpose. (See Note 4.)

9)
Accrued Expenses

Accrued expenses consisted of the following:

   
As of December 31,
  
   
2021
    
2020
  
Accrued compensation
  
$
656,000
    
$
294,000
  
Accrued research and development expenses
    
222,000
      
207,000
  
Accrued general and administrative expenses
    
371,000
      
400,000
  
Accrued interest
    
-
      
150,000
  
Total accrued expenses
  
$
1,249,000
    
$
1,051,000
  

10)
Debt

Loans Payable

In connection with the IRX Acquisition 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 in the IRX Notes, and (ii) December 31, 2021. On December 31, 2021, the Company paid the outstanding $410,000 in principal plus accrued and unpaid interest of approximately $210,000 under the IRX Notes, and the Company has no further obligations thereunder.

Payment Protection Program Loan

Brooklyn LLC PPP Loan.
F-20

On May 4, 2020, Brooklyn LLC issued a note in the principal amount of approximately $310,000 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 incurred 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 of the Brooklyn LLC PPP Loan. As of December 31, 2021, there was no outstanding principal balance of the Brooklyn LLC PPP Loan.

11)
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 contented to be conferred on Brooklyn’s stockholders as a result of the supplemental disclosures.

F-21
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 alleges that Brooklyn LLC and certain of its officers and directors (“defendants”) engaged in 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 June 6, 2021, defendants 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. The Court heard oral argument on the motion to compel arbitration and/or dismiss and the motion to seal on October 13, 2021. By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause of his consulting agreement with Brooklyn LLC.  Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No. 01-21-0017-9417, on December 15, 2021 against the same defendants, and served it on defendants’ counsel on February 3, 2022.  In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to issue Govender 7% of the equity of Brooklyn LLC and to employ Govender at a $500,000 annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against Brooklyn LLC and Cherington based on the breach of these same promises and a claim for quantum meruit against the Brooklyn LLC.  In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be determined at the hearing.  Defendants filed an answering statement to the Demand on February 28, 2022 and the parties are in the process of conferring on the selection of a three-member arbitration panel. Defendants intend to vigorously defend themselves against these claims. 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 its 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. 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 the parties. Thereafter, on or about November 12, 2022, the parties resolved plaintiff’s counsel’s request for an award of fees and expenses for the purported benefit that Carlson contended was received by stockholders as a result of his action. 

F-22
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 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 advised that the claims set forth in his demand letter were moot. The parties thereafter resolved Garfield’s counsel’s request for an award of attorney’s fees and expenses for the purported benefit that Garfield contented was received by stockholders as a result of the stockholder ratification.

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 a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), 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, including 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 following the Merger 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 entered into among the parties, including certain additional stockholders who have subsequently joined as parties to such agreement (including Truell noted above).  In October 2021, Emerald requested that Brooklyn produce additional information related to the authority, purpose and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which request Brooklyn agreed to produce certain additional information and emails relating to these topics.

On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and former directors of the Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims for breach of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty.  Emerald’s counsel has expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor on behalf of individual stockholders whom counsel represents in addition to Emerald; and the Company has agreed to respond to Emerald’s counsel by April 22, 2022.  The Company can provide no assurance that such pre-suit early resolution discussions will be successful or that suit will not ultimately be filed against the Company, nor can the Company currently predict the outcome of any such suit, if filed.  The Company intends to defend itself vigorously against any and all claims.  Additionally, on April 7, 2022, the Company received a demand for indemnification from its financial advisor as it relates to the aforementioned potential lawsuit.

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 (collectively, “Defendants”).  Brooklyn acquired Novellus, Inc. on July 16, 2021.  Mr. 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 are essentially assuming the defense of and paying the fees associated with defending against these claims.  To that end, on September 10, 2021, Morgan Lewis accepted service on behalf of all defendants. On December 24, 2021, Westman dismissed the case without prejudice so the parties could mediate the matter. The parties’ February 2022 mediation was unsuccessful, but Mr. Westman has not refiled suit.

F-23
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 $4,000,000 (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 $4,000,000 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 70 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 60 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.

 
F-24
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.

F-25
12)
Basic and Diluted Earnings per Common Share
 
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of potential common shares.  Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding plus potential common shares.  Stock options, restricted stock units (“RSUs”), and other convertible securities are considered potential common shares and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. The following table shows the amount of stock options, RSUs and convertible preferred stock that were excluded from the computation of diluted net loss per common share for the year ended December 31, 2021, as their effect was anti-dilutive:
 
Year ended
December 31, 2021
 
Stock options
 
  
3,988,000
 
RSUs
 
 
240,000
 
Preferred stock converted into common stock
 
 
42,000
 
Total potential common shares excluded from computation
 
  
4,270,000
 

There were no stock options, RSUs or convertible preferred stock outstanding prior to the Merger to exclude from diluted net loss per common share for the year ended December 31, 2020.

13)
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 approximately 3,369,000 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 Restated 2020 Plan by 5,116,000 to 8,485,000 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 (the “Annual Evergreen Shares”). No other provision of the 2020 Plan were amended.  Based on the number of shares of common stock outstanding on December 31, 2021, the maximum increase to the number of Annual Evergreen Shares of common stock that can be issued under the Restated 2020 Plan in 2022 is approximately 2,601,000 shares.

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, and are exercisable at a price per share not less than the fair market value on the date of grant.  As of December 31, 2021, there were approximately 320,000 stock options and 18,000 RSUs 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 December 31, 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 December 31, 2021, there were approximately 443,000 nonqualified stock options and 222,000 RSUs outstanding under the 2021 Inducement Plan.

F-26
Equity Awards


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.   Forfeitures are recognized as incurred.

There were no stock options outstanding or granted during the year ended December 31, 2020. The following weighted-average assumptions were used for stock options granted during the year ended December 31, 2021:

   
Year ended
December 31, 2021
 
Weighted average risk-free rate
    
1.09
%
Weighted average volatility
    
134.64
%
Dividend yield
    
0
%
Expected term
   6.10 years
 

The following table summarizes stock option activity for the year ended December 31, 2021:

   
Outstanding
Options
    
Weighted
Average
Exercise
Price per Share
    
Weighted
Average
Remaining
Contractual
Life (in years)
    
Aggregate
Intrinsic
Value
  
Outstanding January 1, 2021
    
-
    
$
-
      
-
    
$
-
  
Granted
    
3,988,000
      
8.40
      
9.38
      
-
  
Outstanding December 31, 2021
    
3,988,000
    
$
8.40
      
9.38
    
$
-
  
                                 
Options vested and exercisable at December 31, 2021
    
-
    
$
-
      
-
    
$
-
  

The per-share weighted average grant-date fair value of stock options granted during the year ended December 31, 2021 was $7.57.
 
As of December 31, 2021, the unamortized stock-based compensation expense related to outstanding unvested options was approximately $21,915,000 with a weighted average remaining requisite service period of 3.30 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options.

Included in the 3,988,000 stock options granted during the year ended December 31, 2021, the Company issued two stock option grants to Howard J. Federoff, M.D., Ph.D. upon his appointment as the Company’s Chief Executive Officer and President.

F-27
Dr. Federoff was granted a nonqualified stock option covering approximately 2,628,000 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 approximately 597,000 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 the Company’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 the Company. 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 the Company. 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.


During the year ended December 31, 2021, there were 1,300 options exercised for total cash proceeds of $10,202.  The options exercised had a total intrinsic value of $47,010.  There were no options exercised during the year ended December 31, 2020.

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.

There were no RSUs outstanding or granted during the year ended December 31, 2020. The following table summarizes RSU activity for the years ended December 31, 2021:

   
Outstanding
Restricted
Stock Units
    
Weighted
Average Fair
Value per Share
  
January 1, 2021
    
-
    
$
-
  
Granted
    
240,000
      
13.80
  
December 31, 2021
    
240,000
    
$
13.80
  
                 
Balance expected to vest at December 31, 2021
    
-
          

No RSUs vested during the year ended December 31, 2021.


The Company recognizes the intrinsic value of RSUs granted as expense on a straight-line basis over the requisite service period. As of December 31, 2021, the unamortized stock-based compensation expense related to outstanding RSUs was approximately $2,935,000 with a weighted average remaining requisite service period of 3.51 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options.

F-28
Restricted Stock


Pursuant to the Merger, Brooklyn LLC’s approximately 3,000 outstanding restricted common units were exchanged for approximately 630,000 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 $250,000 was recognized in the statement of operations for year ended December 31, 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

Total stock-based compensation expense for the years ended December 31, 2021 and 2020 was approximately $5,235,000 and $91,000, respectively.  Stock-based compensation is recorded in general and administrative expense and research and development expense in the statement of operations.

14)
Stockholders’ and Members’ Equity (Deficit)

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 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 approximately 56,000 shares of common shares as consideration for Lincoln Park’s commitment to purchase up to $20,000,000 in shares of common stock. As of December 31, 2021, Brooklyn issued and sold to Lincoln Park approximately 1,128,000 shares of common stock under the First Purchase Agreement 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 are subject to certain limitations, and may occur from time to time, at Brooklyn’s sole discretion. In consideration of Lincoln Park’s entry into the Second Purchase Agreement, Brooklyn issued to Lincoln Park 50,000 shares of common stock.

Under the Second Purchase Agreement, the Company may direct Lincoln Park to purchase up to 60,000 shares of common stock on any business day (the “Regular Purchase”), which amount may be increased up to 120,000 shares based on the closing price of the common stock, provided that Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $2.0 million. The purchase price per share for each such Regular Purchase is based off of the common stock’s market immediately preceding the time of sale.

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

F-29
As of December 31, 2021, Brooklyn had issued and sold approximately 2,424,000 shares of common stock under the Second Purchase Agreement for total gross proceeds of approximately $34,106,000. As of December 31, 2021, there were approximately 446,000 shares remaining to be sold under the Second Purchase Agreement. Pursuant to the securities purchase agreement in respect of the PIPE Transaction, the Company is prohibited from issuing additional shares under the Section Purchase Agreement for a period of one-year immediately following the closing of the PIPE Transaction.

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 two shares 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 approximately 1,514,000 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 4), on March 25, 2021, Brooklyn issued shares of common stock to the equity holders of Brooklyn LLC. The 87,000 Class A units of Brooklyn LLC were converted into approximately 22,275,000 shares of common stock; the 15,000,000 Class B units were converted into approximately 2,515,000 shares of common stock; the 10,000,000 Class C units were converted into approximately 1,676,000 shares of common stock; approximately 630,000 shares of common units were converted into approximately 630,000 shares of common stock, and 10,500,000 rights options were converted into approximately 11,828,000 shares of common stock.  Brooklyn also issued approximately 1,068,000 shares of common stock to the Financial Advisor pursuant to the Merger Agreement.

Acquisition

Under the terms of the Acquisition (see Notes 1 and 4), on July 16, 2021, Brooklyn issued approximately 7,022,000 shares of common stock, of which approximately 3,644,000 shares are unrestricted and approximately 3,378,000 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.

Cumulative Convertible Preferred Stock
 
As a result of the Merger, the Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, 2021.

 
The Series A Preferred Stock provides for a cumulative annual dividend of $0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock.  The Company paid approximately $8,000 in cash and issued approximately 202 shares of common stock for payment of dividends during the year ended December 31, 2021.

 
The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate.  At December 31, 2021, the conversion rate was 3.7016 and, based on that conversion rate, one share of Series A Convertible Preferred Stock would have converted into approximately 0.27 shares of common stock, and all the outstanding shares of the Series A Convertible Preferred Stock would have converted into approximately 42,000 shares of common stock in the aggregate. There were no conversions during the year ended December 31, 2021. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock. The conversion rate will adjust under the following circumstances:

F-30

 1.
If the Company (a) pays a dividend or makes a distribution in shares of its common stock, (b) subdivides its outstanding shares of common stock into a greater number of shares, (c) combines its outstanding shares of common stock into a smaller number of shares, or (d) issues by reclassification of its shares of common stock any shares of its common stock (other than a change in par value, or from par value to no par value, or from no par value to par value), then the conversion rate in effect immediately prior to the applicable event will be adjusted so that the holders of the Series A Convertible Preferred Stock will be entitled to receive the number of shares of common stock which they would have owned or have been entitled to receive immediately following the happening of the event, had the Series A Convertible Preferred Stock been converted immediately prior to the record or effective date of the applicable event.


2.
If the outstanding shares of the Company’s common stock are reclassified (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or if the Company consolidates with or merge into another corporation and the Company is not the surviving entity, or if the Company sells all or substantially all of its property, assets, business and goodwill, then the holders of the Series A Convertible Preferred Stock will thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such holders upon such reclassification, consolidation, merger or sale, if the Series A Convertible Preferred Stock had been converted immediately prior thereto.


3.
If the Company issues common stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount (as defined below), then the Equivalent Preference Amount will immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of common stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance, by (B) the total number of shares of common stock outstanding immediately after such issuance. The “Equivalent Preference Amount” is the value that results when the liquidation preference of one share of Series A Convertible Preferred Stock (which is $1.00) is multiplied by the conversion rate in effect at that time; thus the conversion rate applicable after the adjustment in the Equivalent Preference Amount as described herein will be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Convertible Preferred Stock.

15)
Income Taxes
 
Loss before income taxes consist of the following:

 
  
Years ended December 31,
  
 
  
2021
    
2020
  
Domestic
  
$
(122,296,000
)
  
$
(26,531,000
)
Foreign
    
(5,000
)
    
-
  
Total tax provision for income taxes
  
$
(122,301,000
)
  
$
(26,531,000
)

For each of the years ended December 31, 2021 and 2020, current tax provisions and current deferred tax provisions were recorded as follows:

   
Years ended December 31,
  
   
2021
    
2020
  
Current Tax Provision
            
Federal
  
$
-
    
$
-
  
State
    
5,000
      
-
  
Foreign
    -       -  
      5,000       -  
Deferred Tax Provision
                
Federal
    
(5,836,000
)
    
-
  
State
     (1,433,000 )    
(322,000
)
Foreign
    (1,000 )    
-
  
      (7,270,000 )     (322,000 )
Change in valuation allowance
     7,270,000      
322,000
  
Total tax provision for income taxes
  
$
5,000
    
$
-
  

F-31
Deferred tax assets and liabilities consist of the effects of temporary differences as shown in the table below. Deferred tax assets have been fully reserved by a valuation allowance since it is more likely than not that such tax benefits will not be realized.

 
  
As of December 31,
  
 
  
2021
    
2020
  
Deferred Tax Assets:
            
Net operating losses
    
5,454,000
      
747,000
  
Foreign net operating losses
    
595,000
      
-
  
R&D credit carryforwards
    
288,000
      
-
  
Stock compensation
    
1,312,000
      
-
  
Vacation accrual
    
30,000
      
-
  
Contingent consideration
    
5,171,000
      
-
  
Deferred rent
    
40,000
      
-
  
Total gross deferred tax assets
    
12,890,000
      
747,000
  
Valuation allowance
    
(12,610,000
)
    
(747,000
)
Net deferred tax assets
    
280,000
      
-
  
 
                
Deferred Tax Liabilities:
                
Fixed assets
    
(168,000
)
    
-
  
Intangibles - goodwill
    
(112,000
)
    
-
  
Total deferred tax liabilities
    
(280,000
)
    
-
  
Net deferred taxes
  
$
-
    
$
-
  

The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 21% as follows:
 
   
As of December 31,
  
     2021      2020  
Tax at federal income tax rate
    
21.00
%
     21.00 %
State income tax, net of federal tax
    
1.17
    -  
Non-deductible expenses/excludable items
    
(16.33
)
     -  
Pass-through loss
    -       (19.79 )
Change in valuation allowance
    
(5.94
)
     (1.21 )
Credits
    
0.24
    -  
Other
    
(0.14
)
     -  
Provision for income taxes
    
0.00
 %
    0.00 %
 
The net increase in the total valuation allowance for the year ended December 31, 2021 was an increase of $11,863,000 of which $7,270,000 relates to the current year deferred expense and $4,593,000 relates to the purchase accounting related to the 2021 business combinations. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary difference become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and planning strategies in making this assessment.  Based on the level of historical operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the deferred taxes assets will not be utilized. Accordingly, the Company has recorded a full valuation allowance.
 
F-32
At December 31, 2021 and 2020 the Company has available net operating loss (“NOL”) carryforwards of approximately $20,679,000 and $0 for federal income tax purposes, respectively, of which $20,679,000 can be carried forward indefinitely. The Company has available $1,397,000 and $747,000 state NOLs for the years ended December 31, 2021 and 2020, respectively.  The Company also has foreign NOL carryforwards of $4,759,000 and $0 for the years ended December 31, 2021 and 2020, respectively, which carry forward indefinitely. Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards.  The Company continues to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets.
 
At December 31, 2021 and 2020 the Company has federal and state income tax credit carryforwards of approximately $288,000 and $0, respectively. The credits begin to expire in 2041.

In accordance with authoritative guidance, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company has no uncertain tax positions as of December 31, 2021 or December 31, 2020.

The Company recognizes interest and penalties related to unrecognized tax positions within the income tax expense line in the accompanying consolidated statements of operations. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2021 or December 31, 2020.

The Company is subject to U.S. federal, state, and foreign income tax. Tthe Company’s income tax returns are subject to examination by the relevant taxing authorities. As of December 31, 2021, the 2018 – 2021 tax years remain subject to examination in the U.S. federal tax, various state, and foreign tax jurisdictions. The Company is not currently under examination by federal state, or foreign jurisdictions.

16)
Retirement Savings Plan
 
The Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees to defer up to 90% of their pay on a pre-tax basis. The Company does not contribute a match to the employees’ contribution.
 
17)
Subsequent Events
 
Private Placement of Equity

On March 6, 2022, the Company entered into a certain Securities Purchase Agreement (the “Purchase Agreement”) with an investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to a private investor (the “PIPE Investor”) of approximately 6,857,000 units (collectively, the “Units”), each Unit consisting of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) one warrant (the “Common Warrants”) to purchase one share of common stock, for an aggregate gross purchase price of approximately $12.0 million. The PIPE Transaction closed on March 9, 2022.
Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.
Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, and expires five-and-one-half years from the date of issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder.

F-33
In connection with the PIPE Transaction, the Company and the PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which the Company agreed to prepare and file a registration statement with the SEC no later than 15 days following the filing date of this Annual Report on Form 10-K to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. The Company agreed to use its best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved.

Reduction in Force

On January 3, 2022, the Company completed a reduction in force (the “Reduction”), comprising eight employees (53% of our workforce at that time), effective January 3, 2022, which was the date on which the Company notified such employees of their termination. The Company believes the Reduction, which was approved by its Board of Directors, will enable the Company to better align its workforce with the needs of its business and focus more of its capital resources on the Company’s cell therapy and gene editing platform, as it continues to sustain its investment in the prosecution of IRX-2 through the end of the INSPIRE Phase 2B study. In connection with the Reduction, the Company estimates that it will incur approximately $500,000 for severance and termination-related costs, which the Company will record during the first quarter of 2022. The Company may also incur additional costs and non-cash charges that are not currently contemplated or determinable, which may occur as a result of the Reduction.

Lease Assignment

On March 5, 2022, the Company entered into an Agreement to Assign Space Lease with RegenLab USA LLC (“Regen”) pursuant to which the Company agreed to assign its Brooklyn, NY lease (the “Brooklyn Lease”) to Regen. The effective date of the assignment would be contingent upon, among other things, a consent from BioBat, Inc. (the “Landlord”) to assign the Brooklyn Lease. Additionally, Regen agreed to purchase certain equipment from the Company for $50,000, partly reimburse the Company $50,000 toward certain existing unamortized leasehold improvements, and to reimburse the Company for the existing security deposit the Company had under the Brooklyn Lease of approximately $63,000.
On March 25, 2022, the Company entered into an Assignment and Assumption of Lease Agreement (the “Assignment Agreement”) with Regen, the consent of which was provided by the Landlord in the Assignment Agreement. The effective date of the assignment was March 28, 2022. Under the Assignment Agreement, Regen (i) accepts the assignment of the Brooklyn Lease; (ii) assumes all of the obligations, liabilities, covenants and conditions of the Company’s as tenant under the Brooklyn Lease; (iii) assumes and agrees to perform and observe all of the obligations, terms, requirements, covenants and conditions to be performed or observed by the Company under the Brooklyn Lease; and (iv) makes all of the representations and warranties binding under the Brooklyn Lease with the same force and effect as if Regens had executed the Brooklyn Lease originally as the tenant.
Notwithstanding the above assumptions above by Regen, the Company shall be and remain liable and responsible for the due keeping, and full performance and observance, of all the provisions of the Brooklyn Lease on the part of the tenant to be kept, performed and observed. As a result of the Assignment Agreement, the Company will write off the remaining ROU asset balance and the corresponding lease liability as of March 25, 2022, and it will record any resulting gain or loss on the termination of the Brooklyn lease in its statement of operations.  The Company does not expect to recognize a contingent liability for its ongoing obligation to remain liable and responsible for all the provisions of the Brooklyn Lease, as the Company has determined that it is not probable it will recognize a loss under the Assignment Agreement.

New Lease Agreement

On March 31, 2022, the Company entered into the Torrey Pines Science Center Lease in San Diego, California (the “San Diego Lease”) with Torrey Pines Science Center Limited Partnership for approximately 5,200 square feet of lab and office space. The term of the San Diego Lease is 62 months and the lease commencement date begins on the earlier to occur of (i) the date the Company first commences to conduct business in the premises or (ii) the possession date, which is anticipated to be August 1, 2022 (or earlier if the current tenant terminates its lease early). The lease commencement date was April 15, 2022.

Base rent is $6.35 per square foot in the first year of the San Diego Lease, with a rent abatement for the second and third full months of the first year. The base rent will increase by approximately 3% on each anniversary of the lease commencement date. The Company is also required to pay its share of operating expenses and property taxes. The San Diego Lease provides for a one-time option to extend the lease term for an additional five years at the then fair rental value.


F-34
Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED
PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
 
General
 
As of the end of the period covered by the most recent Annual Report on Form 10-K of Brooklyn ImmunoTherapeutics, Inc. (the “registrant”), the common stock, par value $0.005 per share, of the registrant (“common stock”) was registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless the context otherwise requires, all references herein to “we,” “our,” “ours,” “Company” and “us” refer to Brooklyn ImmunoTherapeutics, Inc.
 
The following description of the common stock is a summary and does not purport to be complete and is qualified in its entirety by reference to the terms and provisions contained in our restated certificate of incorporation, including the amendments thereto, which we refer to as our certificate of incorporation, and our amended and restated bylaws, which we refer to as our bylaws, which are incorporated by reference as exhibits to our most recently filed Annual Report on Form 10-K, of which this exhibit forms a part.
 
Our common stock and the rights of the holders of our common stock are subject to the applicable provisions of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, our certificate of incorporation and our bylaws. The description below of our common stock and provisions of our certificate of incorporation and our bylaws are summaries and are qualified by reference to our certificate of incorporation and our bylaws, as applicable, and by the applicable provisions of the DGCL. We encourage you to read that law and those documents carefully.
 
Common Stock

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.005 per share, and 1,000,000 shares of preferred stock, par value $0.005 per share (the “preferred stock”). A total of 156,112 shares of preferred stock have been designated as Series A Convertible Preferred Stock. As of April 12, 2022, 51,951,937 shares of common stock were outstanding and 156,112 shares of Series A Convertible Preferred Stock were outstanding.

Voting Rights

Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Votes may be cast in person or by proxy. Stockholders do not have cumulative voting rights with respect to election of directors.

Dividends

The holders of Series A convertible preferred stock are entitled to receive cumulative dividends of $0.10 per share per annum, payable semiannually in equal installments of $0.05 per share on June 1 and December 1 of each year. After the requirements with respect to the preferential dividends of the preferred stock have been met, holders of common stock are entitled to receive proportionately any dividends as may be declared and paid on common stock from funds lawfully available therefor as and when determined by the board of directors, subject to any preferential dividend rights of outstanding preferred stock.

Liquidation and Dissolution

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock.

Other Rights

Holders of common stock have no preemptive, subscription, redemption or conversion rights and there are no sinking fund provisions with respect to our common stock. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock. All of the shares of the common stock currently issued and outstanding are fully-paid and nonassessable.

Provisions of Our Certificate of Incorporation and Bylaws and Delaware General Corporation Law may have Anti-Takeover Effects

Our certificate of incorporation and bylaws and the DGCL contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids and are designed in part to encourage persons seeking to acquire control of us to first negotiate with the board of directors.

Number of Directors; Vacancies

Our certificate of incorporation provides that the number of directors is established by the board of directors, which may delay the ability of stockholders to change the composition of a majority of the board. The board has the exclusive right to elect a director to fill any vacancy or newly created directorship.

Removal of Directors

A director may be removed only by the affirmative vote of the holders of at least 80% of the voting power of all shares entitled to vote generally in the election of directors, voting together as a single class.

Stockholder Action by Written Consent; Special Meetings

Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Our certificate of incorporation and bylaws also provide that, except as otherwise required by law, special meetings of our stockholders can only be called by the board of directors. These provisions may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.

Advance Notice Requirements for Stockholder Proposals

Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting may consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board or by a stockholder of record on the record date for the meeting who is entitled to vote at the meeting and who has delivered timely written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities.

Delaware Business Combination Statute

We are a Delaware corporation subject to Section 203 of the DGCL. Under Section 203, certain “business combinations” between a Delaware corporation whose stock is listed on a national securities exchange or held of record by more than 2,000 stockholders and an “interested stockholder” are prohibited for a three-year period following the date that such stockholder became an interested stockholder, unless:


 •
the corporation has elected in its certificate of incorporation not to be governed by Section 203;


•
the business combination or the transaction which resulted in the stockholder becoming an interested stockholder was approved by the board of directors of the corporation before the date of the business combination or the date such stockholder became an interested stockholder, as applicable;


•
upon consummation of the transaction that made such stockholder an interested stockholder, the interested stockholder owned at least 85% of the “voting stock” (as defined in Section 203) of the corporation outstanding at the commencement of the transaction excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender stock held by the plan in a tender or exchange offer; or


•
the business combination is approved by the board of directors and by the stockholders (acting at a meeting and not by written consent) by the affirmative vote of at least 66-2/3% of the outstanding voting stock which is not “owned” (as defined in Section 203) by the interested stockholder.

The three-year prohibition also does not apply to some business combinations proposed by an interested stockholder following the announcement or notification of an extraordinary transaction involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s directors. The term “business combination” is defined generally to include mergers or consolidations between a Delaware corporation and an interested stockholder, transactions with an interested stockholder involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested stockholder’s percentage ownership of stock, or other transaction resulting in a financial benefit to the interested stockholder. The term “interested stockholder” is defined generally as those stockholders who become beneficial owners of 15% or more of a Delaware corporation’s voting stock, together with the affiliates or associates of that stockholder.

Certificate of Incorporation or Bylaws

Any provision of our certificate of incorporation may be amended, altered, changed or repealed in any manner prescribed by law; provided, that (a) the affirmative vote of the holders of at least 80% of the voting power of all shares entitled to vote generally in the election of directors, voting together as a single class, is required to alter, amend, or repeal, or adopt any provision inconsistent with Article X of the certificate of incorporation, which contains the prohibition on stockholder action by written consent and the requirement that special meetings be called only by the board of directors, and (b) Article XI of the certificate of incorporation, provides that, subject to certain exceptions, no purchase by or from any Controlling Person (as defined below) of shares of our stock owned by such Controlling Person shall be made at a price exceeding the average price paid by such Controlling Person for all shares of our stock acquired by such Controlling Person during the two-year period preceding the date of such proposed purchase unless such purchase is approved by the affirmative vote of not less than a majority of the voting power of the shares of our stock entitled to vote held by Disinterested Stockholders (as defined below), may not be amended without the affirmative vote of not less than a majority of the our stock entitled to vote thereon, provided that if, at the time of such vote, there shall be one or more Controlling Persons, such affirmative vote shall include the affirmative vote in favor of such amendment of not less than a majority of the voting power of the shares of our stock entitled to vote thereon held by Disinterested Stockholders. “Controlling Person” means any individual, corporation, partnership, trust, association or other organization or entity (including any group formed for the purpose of acquiring, voting or holding our securities) which either directly, or indirectly through one or more intermediaries, owns, beneficially or of record, or controls by agreement, voting trust or otherwise, at least 10% of the voting power of stock, and such term also includes any corporation, partnership, trust, association or other organization or entity in which one or more Controlling Persons have the power, through the ownership of voting securities, by contract, or otherwise, to influence significantly any of the management, activities or policies of such corporation, partnership, trust, association, other organization or entity. “Disinterested Stockholders” means those holders of stock entitled to vote on any matter, none of which is a Controlling Person.

The board may, by majority vote, amend or repeal our bylaws and may adopt new bylaws.

Our stockholders may not adopt, amend, or repeal our bylaws or adopt new bylaws except by the vote or written consent of at least 66-2/3% of the voting power of our company.
 
Exclusive Forum Selection

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the a state court located in the State of Delaware (or if no state court has jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or stockholders, (c) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or amended and restated bylaws, or (d) any action asserting a claim against us governed by the internal affairs doctrine. Although our bylaws contain the choice of forum provision described above, it is possible that a court could rule that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.

Authorized but Unissued Shares

Our authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing requirements of The Nasdaq Global Market. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Listing on The Nasdaq Global Market

The common stock is listed on The Nasdaq Global Market under the symbol “BTX.”

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Computershare Trust Company, N.A.
 
Exhibit 10.26
 
TENANT: BROOKLYN IMMUNOTHERAPEUTICS, INC.

LEASE
 
LEASE dated as of the 15th day of June 2021, in which the Landlord and the Tenant are the parties hereinafter named, and which relates to the Premises, as defined below, within a building located at 1035 Cambridge Street, Cambridge, Massachusetts (the “Building”). The undersigned parties do hereby covenant and agree with each other as follows:
 
ARTICLE I

1.1
DEFINITIONS
 
Additional Rent: Escalation Charges and other charges due to Landlord from Tenant pursuant to the provisions of this Lease.

Address for Rent Payments:
Fairlane Columbia, LLC
P.O. Box 844033
Boston, MA 02284-4033

Approved Subtenants: None

Base Rent: $151,984.00 per annum; $12,665.33 per month ($56.00/RSF) for the first Lease Year and increasing as of July 1 of each Lease Year by the year-over-year increase of the Consumer Price Index (CPI) multiplied times the prior year’s Base Rent.

Base Condominium Fees: Condominium Fees paid, payable or incurred by Landlord in Calendar Year 2021 for the Unit.

Base Taxes: Real estate taxes assessed by the City of Cambridge against the Unit for the 2021 Fiscal Year ending June 30, 2019.

Broker: None

Building: 1035 Cambridge Street, Cambridge, Massachusetts 02141

Business Days: Monday through Friday excepting legal holidays in Massachusetts as provided in Exhibit F attached hereto.

Business Hours: 8:00 AM to 5:00 PM

Commencement Date: June 15, 2021

Common Areas: Hallways, entryways, stairs, bathrooms, lobby, service areas, driveway, Parking Lot, loading dock, freight elevator and all other areas and facilities in the Building and Property which are provided and designated from time to time by the Condominium for the nonexclusive use and convenience of Tenant with other tenants of the Building and their respective employees, invitees, licensees or other visitors.

Condominium: The 432 Columbia Street Condominium, consisting of the land and buildings located at the Property, created by the Master Deed.

Condominium Documents: Master Deed, Condominium Trust, By-Laws, and Rules and Regulations of the Condominium, as they may be modified from time to time.

Condominium Fees: Fees charged to the Unit by the Condominium Trust and paid by the Landlord to the Condominium Trust for various expenses of the Condominium, as specified in Section 9.2 of the Lease.

Condominium Telephone Closet: Telephone closet located on the Building’s Lower Level within Suite 9.

Condominium Trust: The 432 Columbia Street Condominium Trust, dated January 22, 1988 and recorded at Book 18837, Page 158, including the By-Laws incorporated therein, as the same may be amended from time to time, and the Rules and Regulations incorporated therein, as the same may be amended by the Condominium Trustees from time to time.

Condominium Trustees: The elected representatives of the Condominium Trust.

Conference Center: The conference room, designated as Suite 5, located in the Building’s Lower Level.

Consumer Price Index (CPI): The CPI for Urban Wage Earners and Clerical Workers (“CPI-W”) as provided by the U.S. Bureau of Labor Statistics (“USBLS”). In the event that USBLS no longer compiles the CPI-W or the USBLS ceases to exist, then Landlord shall use the Consumer Price Index for All Urban Consumers (“CPI-U”) or any other CPI compiled by any agency of the United States Government as reasonably selected by Landlord.

Default by Landlord: As determined in accordance with Section 13.2 of this Lease.

Default by Tenant: As determined in accordance with Section 13.1 of this Lease.

Escalation Percentage: 100% of the Unit
 
Escalation Charges: The amounts charged to Tenant for Real Estate Tax Payments and Condominium Fee Payments pursuant to Articles VIII and IX.

Expiration Date: June 30, 2028.

Fair Market Rent: Based on Landlord’s reasonable analysis of monthly parking charges of garages and parking lots within a one (1) mile radius of the Building.
 
Landlord: Fairlane Columbia, LLC

Landlord’s Address: c/o Fairlane Properties, Inc., 1035 Cambridge Street, Cambridge, MA 02141

Landlord’s Numbers: Telephone-(617) 725-1000

Landlord’s Agent: LPC Commercial Services, Inc. d/b/a Lincoln Property Company

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Landlord’s Agent’s Address: 1 Van de Graaf Drive, Burlington, MA 01803

Landlord’s Agent’s Numbers: Telephone-(781) 238-4488; Fax-(781) 272-8493

Landlord’s Work: As provided in Exhibit C.

Lease Year: The period commencing on the Commencement Date and ending at the end of a calendar month at least twelve (12) months from the Commencement Date and the next six (6) twelve (12) month period for the first, second, third, fourth, fifth, sixth and seventh Lease Years, respectively.

Master Deed: The document by which the Condominium was created, dated January 22, 1988 and recorded with the Middlesex (South District) Registry of Deeds (“Registry”) in Book 18837, Page 122, as amended and restated in its entirety by Master Deed dated April 8, 1988 recorded with said Deeds in Book 1898 0, Page 227, as further amended by Amendment to Condominium Master Deed dated April 28, 1988 recorded with said Deeds in Book 19019, Page 382, as further amended by Second Amendment to Condominium Master Deed dated October 3, 1988 recorded with said Deeds in Book 19389, Page 332, as further amended by Amendment to Second Amendment to Master Deed dated April 25, 2000 recorded in said Deeds in Book 31369, page 323, as further amended by Amendment to Master Deed dated August 17, 2006 recorded in said Deeds as 45886, Page 24 (collectively, the “Master Deed”).

Operating Year: Each calendar year in which any part of the Term shall fall after the Commencement Date.

Parking: Tenant shall have three (3) Parking Spaces in the Parking Lot, designated as of the Commencement Date as Parking Spaces 21, 95 and 96. Landlord may change the location of the spaces from time to time at its sole discretion. Landlord may also choose to provide Tenant with parking permits for the Parking Lot which must be displayed in authorized vehicles.

Parking Lot: The areas in the rear, side and front of the building with access from Columbia and Windsor Streets as shown on the attached Exhibit G.

Parking Rent: For each Parking Space, Tenant shall pay $210.00 per space monthly or $2,520.00 annually for the first Lease Year and Fair Market Rent for second, third, fourth, fifth, sixth and seventh Lease Years which may be adjusted annually.

Parking Space: A designated area in the Parking Lot where Tenant shall have the exclusive  use to park a vehicle and for no other purpose.

Permitted Uses: General offices, research and development and laboratories, and, to the extent permitted by applicable law, typical uses ancillary to general office use, research and development and laboratories, including limited manufacturing as provided by the City of Cambridge Zoning Ordinance. The Premises may be used for other uses only with the prior written consent of the Landlord.

Premises: 2,714 rentable square feet located in Suite 18A comprising the entirety of the Unit on the First Floor of the Building as shown on the attached Exhibit B.

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Property: The Building and Parking Lot and the parcels of real property on which they are located which are described in Exhibit A of this Lease, also known from time to time as 432 Columbia Street Condominium Trust.

Rent: Base Rent, Parking Rent, Additional Rent, Utility Costs, and all sums due hereunder from Tenant to Landlord.

RSF: Rentable square feet

Rules and Regulations: Attached as Exhibit D, originally recorded with the Condominium Trust dated January 22, 1988, record at the Registry at Book 18837, Page 158, as amended and recorded at the Registry, Book 25255, Page 604 on March 2, 1995 and as amended as of May 1, 2006, October 16, 2008, July 31, 2009, October 28, 2011, December 3, 2014, December 2, 2015, December 7, 2016, December 6, 2017, December 5, 2018 and August 7, 2020 by votes of the Trustees of the Condominium Trust.

Security Deposit: $25,330.66
 
Tax Year: Each fiscal year, for the period ending June 301 in which any part of the Term shall fall after the Commencement Date.

Taxes: Real estate taxes and any other municipal tax charge or betterment  assessed  with respect to the Unit for any Tax Year as determined in accordance with Section 8.1 and as specified in Section 1.1 of this Lease.

Tenant: Brooklyn Immunotherapeutics, Inc.

Tenant’s Address:
Prior to Commencement Date: 1040 First Ave.# 361, New York, NY 10022
 
 
 
As of Commencement Date: 1035 Cambridge Street, Suite 18A, Cambridge, MA 02141
 
Tenant’s Early Access: Subject to receipt by Landlord of certificates of insurance required by Section 10.2 of the Lease and Section 8 of Exhibit C of the Lease prior to Tenant’s access, Tenant shall be given access to the Premises and other portions of the Building without payment of Rent in order to install furniture, fixtures, and equipment. Such access may be provided by Landlord before completion of Landlord’s Work.

Tenant’s Insurance: Insurance as specified in Section l0.2 of this Lease, including commercial general liability and property damage liability with a combined single occurrence limit of not less than $2,000,000 and workers’ compensation insurance with a minimum statutory limit of $100,000 for each accident, $500,000 policy limit and $100,000 for each employee.

Tenant’s Removable Property: As defined in Section 5.2 of this Lease.

Term: Period commencing on the Commencement Date and expiring at 5 p.m. on the Expiration Date.

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Unit: Unit 18A.

Utility Costs: For the cost of natural gas and  electricity for the HVAC unit currently servicing the Premises, $3,392.50 per annum; $282.71 per month ($1.25/RSF) for the first Lease Year, increasing 3% per annum for the second, third, fourth, fifth, sixth and seventh Lease Years.

1.2
EXTENT OF AGREEMENT

This Lease, together with Exhibits A, B, C, D, E, F and G and the Condominium Documents, contains the complete agreement of the parties concerning the subject matter hereof, and there are no oral or written understandings, representations, or agreements pertaining thereto which have not been incorporated herein. This Lease supersedes and replaces all prior understandings, representations, warranties or agreements between the parties and shall be the only agreement between the parties with respect to the Premises.
 
ARTICLE II
 
2.1
LEASED PREMISES
 
Landlord hereby demises and leases the Premises and Tenant hereby accepts the Premises for the Term, subject to and with the benefit of the terms, covenants, conditions and other provisions of this Lease.
 
2.2
APPURTENANT RIGHTS AND OBLIGATIONS
 
Tenant, its employees, invitees, licensees and other visitors shall have general nonexclusive use of Common Areas of the Building as is necessary for the use and enjoyment of the Premises. The Condominium Trust has established Rules and Regulations concerning the maintenance, management, use and operation of the Common Areas as described in Section 1 4.6.
 
ARTICLE III
 
3.1
RENT
 
Tenant agrees to pay the Rent due hereunder to Landlord, or as directed by Landlord (except as otherwise set forth herein), without notice or demand, without deduction or offset, and without abatement or reduction. Base Rent shall be payable in equal monthly installments, in advance, on the first day of each and every calendar month during the Term, but in no event shall more than one month’s Base Rent be paid in advance. Additional Rent shall be payable on the first day of each and every calendar month during the Term. All other payments due hereunder shall be due with the next due payment of Rent or, after the termination of this Lease, on the first day of the month after such payment is due. All payments shall be paid by check in lawful money of the United States to the order of the Landlord at the Address for Rent Payments listed in Section 1.1. The first full month’s Base Rent, Parking Rent and Utility Costs shall be due at Landlord’s Address upon Lease execution. If the Commencement Date is on any date other than the first day of the month, the second month’s Base Rent, Parking Rent and Utility Costs shall be prorated  and due  on the first day of the second month of the Term.

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3.2
LATE RECEIPT OF RENT

If Landlord elects, in its sole discretion and without waiving any other rights under the terms and conditions of this Lease, to accept Rent after the tenth (10th) day of the month, Landlord may, at Landlord’s sole discretion, either charge Tenant the lower of (i) a late payment fee of $50, or (ii) interest on Rent at the rate of 1.5% per month, or any part thereof, (18% per annum) for all sums which are in excess of ten (10) days overdue after notice until such time as Rent is paid in full. Such additional payments shall be due and payable with the Rent.

ARTICLE IV
 
4.1
CONDITION OF PREMISES

(a) Tenant acknowledges that it has inspected the Building and the Premises and that the Premises are being leased and the Building is being accepted in their “as is” condition, except for latent defects and, for the Premises as described in Exhibit C, “Landlord’s Work”. Tenant acknowledges that a central security alarm system is not present at the Premises or the Building. With the keys to the Premises and Building passcards, Tenant shall have 24 hour per day access and seven (7) day per week access to the Premises at all times during the Term, except as provided in Sections 12.2 and 12.3. Tenant may install a security system for its Premises and upon installation Tenant shall provide the security system code(s) to Landlord and Landlord’s Agent. Any doors in the Premises which are rekeyed by the Tenant at anytime during the Term shall be on Landlord’s master key system. Five (5) building passcards, with the Tenant providing names for employees using said passcards, shall be provided to Tenant at the Commencement Date. Tenant may request additional or misplaced passcards from Landlord’s Agent at a cost of $25 for each card.
 
(b) Within six (6) weeks of the execution of the Lease, Landlord shall include Tenant in its Building directories and First Floor directory and on the front door to the Premises, saying “Brooklyn Immunotherapeutics, Suite 18A”. The Building directories shall list “Brooklyn Immunotherapeutics, Suite 18 A”. Within seven (7) business days of Tenant’s receipt of notice of substantial completion of “Landlord’s Work”, as defined in Exhibit C, Landlord and Tenant shall conduct a walk-through of the Premises to determine compliance with Exhibit C. Tenant shall provide Landlord with a “Punch List” which shall include items, if any, requiring further work on the part of Landlord to be completed in accordance with Exhibit C. Unless otherwise agreed  by the parties, all Punch List items shall be completed within (30) days of the date of the Punch List.
 
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(c) Tenant’s telecommunications vendors shall have access to the Premises after the Commencement Date for installation of telecommunications wiring and shall coordinate said installation with Landlord so to avoid additional costs by Landlord and delay of completion of Landlord’s Work. Tenant’s vendors shall be responsible for any repairs or repainting required after completion of the installation of telecommunications wiring. Prior to arranging for any wiring for telecommunications from the Condominium Telephone Closet to the Premises, Tenant must receive Landlord’s approval for the routing of such wiring prior to installation. Tenant shall be responsible for the installation and cost of all telecommunications and data wiring. Tenant’s telecommunication’s vendor shall provide a Certificate of Insurance with Certificate Holder and Additional Insureds as provided in Section 10.2 of this Lease and minimum coverage for such vendor as provided in said section. Tenant agrees to place tags on such wires identifying the Tenant and its wiring. Telecommunications outlets shall be at the height of electrical outlets in the space. Any use of wiremold for enclosing telecommunications wiring, loose wiring hung from walls or ceilings or laid on the floor in the Premises will require the approval of Landlord. Land lord must approve in writing all telecommunication service providers, not currently servicing the Building or Premises, which require installations or wiring within the Building or Premises. Tenant’s telecommunications vendor shall receive an electrical permit if necessary prior to any electrical work necessary for installation of Tenant’s telecommunications equipment. In the event that a telecommunication service provider (“Provider”) requires installation of equipment in the Building’s basement, common areas, or roof, Landlord may withhold its approval of Provider unless appropriate license agreements have been fully executed between Landlord and Provider. In the event that a Provider requires no equipment in the Building’s basement, common areas, or roof, then such approval shall not be unreasonably delayed or withheld. Tenant shall remove any wall mounted or floor mounted telecommunications equipment at the expiration of the Lease.
 
(d) In the event that Tenant requests Landlord to coordinate tenant improvements in the Premises, other than those listed in Exhibit C, using Landlord’s vendors prior to the Commencement Date or at any time during the Term (“Additional Improvements “), Tenant shall pay for the Additional Improvements within fifteen (15) days of receipt of an invoice from Landlord. As compensation to Landlord for providing construction management services to Tenant for the Additional Improvements and for other items listed on Exhibit C completed  by  Landlord  and  paid  for by Tenant, Landlord or an affiliate of Landlord shall charge Tenant a fee of 5% of the total of construction and engineering costs. Upon request, Landlord will provide copies of all third-party invoices to Tenant. Failure to pay the abovementioned invoice from Landlord within fifteen (15) days shall have the same consequences as a failure to pay Base Rent, pursuant to Section 13.1. In the event that  either  change  orders  requested  by  Tenant  to  Landlord’s  Work,  Additional Improvements, or other improvements coordinated by Tenant delay completion of Landlord’s Work past the Commencement Date, then the Commencement Date shall be that date by which Landlord reasonably determines that Landlord’s Work would have been completed but for the change orders to Landlord’s Work or the Additional Improvements.

ARTICLE V
 
5.1
PERMITTED USE OF PREMISES

(a)  Tenant agrees that the Premises shall be used and occupied by Tenant only for Permitted Uses, and only in accordance with the terms, conditions and restrictions contained in the Condominium Documents, and for no other purpose.

(b)  Tenant shall be solely responsible for obtaining any and all permits, licenses or other consents required to operate its business at the Premises and shall be entirely responsible for all costs in connection therewith and shall operate its business in compliance with all applicable laws, rules, regulations and ordinances.
 
(c)  Landlord makes no warranties or representations that the premises are fit for a particular use or purpose, including without limitation the use as specified herein, except as otherwise required by law.

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5.2
ALTERATIONS BY TENANT
 
(a) Tenant shall make no alterations, additions or improvements to the Premises or Condominium without Landlord’s prior written consent, not to be unreasonably withheld  or delayed. Any such alterations, additions or improvements shall (i) be performed in a good and workmanlike manner and in compliance with all applicable laws, rules, regulations and ordinances, specifically including City of Cambridge Inspectional Services requirements, (ii) be made at Tenant’s sole cost and expense, (iii) become part of the Premises and the property of Landlord, if permanently affixed to the Premises at the end of the Term.
 
(b) All articles of personal property and all business fixtures, machinery, equipment (including telecommunications equipment affixed to the Premises) and furniture owned or installed in the Premises by Tenant at its expense (“Tenant’s Removable Property”) shall remain the Property of Tenant and may be removed by Tenant at any time prior to the expiration of this Lease, provided that Tenant, at its expense, shall repair any damage to the Building caused by such removal.
 
(c)  Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic’s or other lien for any such labor or material shall attach to or affect the interest of Landlord in and to the Premises or the Building. In the event any such lien is filed against the Property based upon any act or interest of Tenant or of anyone claiming through Tenant, Tenant shall immediately take such action by  bonding, deposit or payment as is necessary to remove or satisfy the lien and hereby indemnifies Landlord and holds it harmless from any and all loss, cost, damages, expense or liability arising there from.
 
ARTICLE VI

6.1
PROHIBITION AGAINST ASSIGNMENT AND SUBLETTING
 
(a) Tenant shall not assign, sublet, mortgage, pledge, encumber or otherwise transfer all or any portion of its interest in the Premises, nor shall Tenant permit the Premises to be used or occupied by anyone other than Tenant in whole or in part without the prior written consent of Landlord in each instance which consent shall not be unreasonably conditioned, withheld or delayed.

(b)  If this Lease is assigned, or if the Premises or any part thereof is sublet or occupied by anyone other than Tenant, Landlord or Landlord’s Agent may, at any time and from time to time, collect Rent and other charges from the assignee, subtenant or occupant, and apply the amount collected to Rent or other charges herein reserved. No such assignment, subletting, occupancy or collection shall be deemed a waiver of the covenant against subletting or assignment, or the acceptance  of the assignee, subtenant or occupant as a tenant or a release of Tenant from the further performance by Tenant of its obligations hereunder. At all times Tenant shall remain liable for the payment of all Base Rent, Escalation Charges and other charges due hereunder, and for the full performance of the covenants and conditions of this Lease, regardless of whether Premises are occupied by Tenant, vacant during the Term of this Lease or occupied pursuant to an assignment or sublease to which the Landlord has consented.
 
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(i) Tenant’s request for Landlord’s consent to subletting or assigning any portion of the Premises shall be submitted in writing. Such written request shall state the following information regarding prospective subtenants or assignees: name of individual(s), name of company, occupation or type of business, prior business address. Landlord may request, either verbally or in writing, additional reasonable information regarding prospective subtenants. Landlord shall have seven (7) business days after all requested information has been provided to consent to such sublease or assignment. If Landlord has not responded within fourteen (14) business days after all requested information has been provided for such consent, it is therefore understood that Landlord has consented. Landlord hereby consents to the Approved Subtenants occupying less than the entire Premises listed in Section 1.1 of this Lease. No prior Landlord approval of assigning or subletting shall be required if such assigning or subletting is to any parent company or wholly- owned subsidiary of Tenant.
 
(ii) Tenant’s request for Landlord’s consent to subletting or assigning the entire Premises shall be submitted in writing. Such written request shall state the following information regarding prospective assignees or subtenants: name of individual(s), name of company, occupation or type of business, prior business address. Landlord may re quest, either verbally or in writing, additional information regarding prospective assignees or subtenants. Landlord’s consent shall be granted only if the assignee or subtenant shall agree to pay Landlord Rent, including Additional Rent at 100% of that reserved in this Lease. It shall not be deemed unreasonable for Landlord to withhold consent to Tenant’s request to sublet or assign the entire Premises if (y) Landlord is actively negotiating with a prospective assignee or subtenant for another space in the Building or (z) the prospective assignee or subtenant is at such time a tenant in the Building. Landlord shall have thirty (30) days after all requested information has been provided to consent to such assignment or sublease. No prior Landlord approval of assigning or subletting shall be required if such assigning or subletting is to any parent company, any subsidiary of any parent company, or wholly-owned subsidiary of Tenant or parent company.
 
(c) If Landlord consents to such assignment or subletting of the Premises, it is understood and agreed that fifty percent (50%) of all amounts, less Tenant’s reasonable subleasing costs (which shall include, but not be limited to attorney fees, brokerage commissions, tenant improvements, and free rent), including any lump sum or installment payments paid to Tenant in excess of the Base Rent, Escalation Charges and other charges due to Landlord hereunder shall also be paid to Landlord.
 
(d) If Landlord consents to such assignment or subletting, Tenant will pay to Landlord all costs associated with signage, parking permits, or any other costs associated with Tenant’s subtenant or assignee. Such costs shall be due as specified in Section 3.l.
 
(e) Notwithstanding anything contained herein to the contrary and without limiting the generality of Paragraph 6.1 (a), it shall not be deemed unreasonable for Landlord to withhold its consent if the Tenant is or has been in default beyond applicable cure periods under the terms of this Lease, has not provided to Landlord information requested by Landlord pursuant to Section 6.1(c), is proposing to assign or sublet to any assignee or subtenant or other occupant who is an existing tenant at the Property or is in discussions with Landlord regarding space in the Property being offered by the Landlord for rent to the market, or is proposing to assign or sublet to any assignee or subtenant or other occupant whose financial status, character, method of doing business and/or proposed use or occupancy of the Premises or any other part of the Building would adversely affect the character or value of the Building, and, in the event of subleasing or assigning the entire Premises, whose financial status is not substantially the same as, or better than, that of the Tenant.

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ARTICLE VII
 
7.1
LANDLORD’S REPAIRS AND MAINTENANCE
 
Landlord shall not be responsible to make any improvements or repairs to the Premises, except for repairs to structural, roof, mechanical, plumbing, life safety and electrical systems located within and serving the Premises, including exterior windows, and those specified in  Exhibit C “Landlord’s Work.” Tenant shall be conclusively deemed to have agreed that Landlord has performed all of its obligations under Exhibit C unless not later thirty (30) days after the Commencement Date Tenant shall give Landlord written notice specifying the respects in which Landlord has not performed any such obligation.
 
7.2
TENANT’S REPAIR AND MAINTENANCE
 
(a)  Tenant shall keep the Premises neat and clean and maintain the Premises together with all electrical and mechanical fixtures, fittings and appurtenances therein in good order, condition and repair (including, without limitation, tenant entry doors, interior window glass and every part thereof, but excepting Landlord’s responsibilities under Section 7.1), except as a result of reasonable wear and tear of the Premises, damage by fire or other casualty or as a consequence of eminent domain. Tenant acknowledges that, subject to the completion of the improvements and repairs specified in Exhibit C “Landlord’s Work” for the Premises, the Premises are now in good order and the glass whole. Tenant shall maintain and use the Premises in accordance with all applicable laws, rules, regulations and ordinances and shall, at Tenant’s expense, obtain all permits, licenses and the like required by applicable law in connection with such maintenance and use. Tenant shall be responsible for the cost of any repairs made necessary  by reason of damage  to the Building by Tenant or Tenant’s independent contractors. Tenant shall be responsible for the cost of materials and labor for any repairs pursuant to this Section 7.2 performed by Landlord at the request of Tenant. Tenant shall be responsible for the cost of routine repair of lighting fixtures located within and exclusively serving the Premises, including ballasts and bulbs, (the “Lighting Fixtures”) after six (6) months following the Commencement Date. All Lighting Fixtures shall be working at the Expiration Date. All such costs due from Tenant shall be due and paid  by Tenant as Rent.
 
(b) If repairs are required to be made by Tenant pursuant to this Lease, Landlord may require that Tenant make such repairs immediately and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable diligence after such demand, Landlord shall have the right but not the obligation to make or cause such repairs to be made at Tenant’s expense and shall not be responsible to Tenant for any loss or damage that may accrue to Tenant’s property or business by reason thereof. Any cost or expense reasonably incurred by Landlord in connection with such repairs shall become part of the Rent and shall  be due and payable in full with the next payment of Rent.

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7.3
TENANT’S EQUIPMENT
 
Tenant shall not place any fixtures, machinery, equipment or the like (“Tenant’s Equipment”) upon any floor in the Premises exceeding the floor load per square of area which the floor was designed to carry and which is permitted by applicable law. Landlord reserves the right to approve the weight or position of any such items so as to properly distribute the weight. Business machines and equipment shall be placed and maintained in such settings as are sufficient, in Landlord’s reasonable judgment, to absorb and prevent vibration, noise and annoyance. Tenant shall provide safety cabinets for any hazardous materials located in the Premises. Any hazardous materials must be delivered to the loading dock of the Building and be immediately delivered to the Premises. Pallet movers are not allowed in the Common Areas and pallets must be broken down in the loading dock.
 
Within thirty (30) days of the final sign-off of the City of Cambridge Inspectional Services building inspector for the completion of improvements in the Premises, Tenant shall provide Landlord with a list of the items installed by Tenant with equipment specified by  manufacturer, tonnage or BTU’s, model number, serial number, location in the Premises or on Building’s roof and year installed. Tenant shall provide Landlord with updated equipment lists throughout the Term as additional HYAC equipment is installed, upgraded or replaced with equipment specified by manufacturer, tonnage or BTU’s, model number, serial number, location in the Premises or on Building’s roof and year installed.
 
7.4
UTILITIES AND BUILDING SERVICES

(a)
UTILITIES.
 
(i)  Utilities for the Premises. For the Premises, Tenant shall pay, as they become due, all bills for electricity (whether used for air conditioning, heat, lights, outlets or other purposes) that are furnished to the Premises and separately metered. Tenant agrees to contact the provider of electrical services to the Premises’ previous tenant or to Landlord immediately after the Commencement Date and to place the electric meter and its account into the Tenant’s name. In the event that Tenant fails to transfer the meter to Tenant, then Landlord may transfer the account into the Tenant’s name or should such transfer by Landlord be unsuccessful, Landlord may place Tenant in default under Section 13.1 (ii) of this Lease. Landlord may determine, in its sole discretion, to transfer any or all utilities, including those utilities paid for by Tenant, to other public or private vendors of utilities and if such transfer is made, Landlord shall provide advance written notice thereof.
 
(ii)  Landlord may determine, in its reasonable discretion, to transfer any or all utilities, including those utilities paid for by Tenant, to other public or private vendors of utilities and if such transfer is made, Landlord shall provide advance written notice thereof.
 
(b) COMMON AREAS. Tenant shall have 24 hours per day, seven days per week and 52 weeks per year access to the Premises, and appropriate common areas of the Building, Condominium and Property.
 
(c) HEATING AND OTHER SERVICES. Landlord agrees to provide reasonable heat and air conditioning to the Premises during Business Hours on Business Days of the heating and air conditioning seasons of each year with the existing 7.5-ton rooftop unit. Land lord shall have no obligation to provide utilities or equipment other than the utilities and equipment within the Premises or serving the Premises as of the Commencement Date. The installation of additional heating and air conditioning equipment powered by electricity or gas after the Commencement Date and the maintenance of such equipment located and used wholly within the Premises shall be Tenant’s sole obligation, provided that such installation shall be subject to the written consent of Landlord, which shall not be unreasonably delayed or withheld.

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ARTICLE VIII
 
8.1
REAL ESTATE TAX PAYMENTS
 
In the event Taxes shall be greater during any Tax Year than Base Taxes, Tenant shall pay to Landlord, as an Escalation Charge, an amount equal to (i) the excess of Taxes over Base Taxes, multiplied by (ii) the Escalation Percentage (“Real Estate Tax Payments”). Amounts payable by Tenant according to this section will be payable as Rent, without deduction or offset. If Tenant fails to pay any amounts due according to this section, Landlord will have all rights and remedies available to it on account of Tenant’s failure to pay Base Rent. In the event that the Term has expired and Landlord reasonably expects that Tenant shall be required to pay Real Estate Tax Payments applicable to the term in excess of Estimated Real Estate Payments, then Landlord may retain that portion of the Security Deposit which Landlord reasonably expects shall be equal to Real Estate Tax Payments for the last Lease Year and upon final reconciliation, Landlord shall release any Security Deposit not required for Real Estate Tax Payments. Notwithstanding the previous sentence, Tenant shall remain liable for unpaid Real Estate Tax Payments applicable  to the term after the Expiration Date.
 
8.2
ABATEMENT
 
If Landlord shall receive any tax refund or reimbursement of taxes or sum in lieu thereof with respect to any Tax Year, then, out of any balance remaining after deduction for Landlord’s reasonable expenses incurred in obtaining such abatement, Landlord shall pay to Tenant, provided there does not exist an uncured Default of Tenant, an amount equal to such sum (exclusive of any interest paid on the abatement) multiplied by the Escalation Percentage. In no event shall Tenant be entitled to receive more than the payments made by Tenant on account of real estate taxes for such Tax Year pursuant to Section 8.1, or to receive any payment or abatement of Base Rent if Taxes for any year are less than Base Taxes or Base Taxes are abated.
 
8.3
ESTIMATED REAL ESTATE TAX PAYMENTS
 
Landlord may, from time to time, reasonably estimate Tenant’s Real Estate Tax Payments with respect to any Tax Year or portion thereof and Tenant shall pay periodically as Land lord may determine, but not more frequently than monthly, the amount of Landlord’s estimate as Rent. Not later than 120 days after the end of each calendar year, Landlord will deliver to Tenant a statement of amounts payable under Section 8.1 for such calendar year and any amount due from Tenant or any credit due to Tenant hereunder. Payment by Tenant of any amount due shall be made as Rent with Tenant’s next payment of Base Rent. Landlord shall credit the amount of any overpayment against subsequent obligations of Tenant. If the Term has expired and Tenant was not in default, Landlord will refund the overpayment to Tenant.

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ARTICLE IX
 
9.1
CONDOMINIUM FEE PAYMENTS

In the event Condominium Fees shall be greater during any Operating Year than Base Condominium Fees, Tenant shall pay to Landlord, as an Escalation Charge, an amount equal to (i) the excess of Condominium Fees over Base Condominium Fees, multiplied by (ii) the Escalation Percentage (“Condominium Fee Payments”). Amounts payable by Tenant according to this section will be payable as Rent, without deduction or offset. If Tenant fails to pay any amounts due according to this section, Landlord will have all rights and remedies available to it on account of Tenant’s failure to pay Base Rent. In the event that the Term has expired and Landlord reasonably expects that Tenant shall be required to pay Condominium Fee Payments in excess of Estimated Condominium Fee Payments, then Landlord may retain that portion of the Security Deposit which Landlord reasonably expects shall be equal to Condominium Fee Payments for the last Lease Year and upon final reconciliation, Landlord shall release any Security Deposit not required for Condominium Fee Payments. Notwithstanding the previous sentence, Tenant shall remain liable for Condominium Fee Payments applicable to the Term after the Expiration Date. No Condominium Fee Payments shall be due for lease periods prior to the Commencement Date.
 
9.2
CONDOMINIUM FEES
 
Condominium Fees for purposes of this Lease means: all reasonable costs of management, operation and maintenance of the Building, including without limitation: a) wages, salaries, and other compensation (including “fringe” benefits) of employees; b) consulting (including tax abatement assistance), accounting, and legal costs incurred in the operation and management  of the Building and Condominium; c) services obtained for the benefit of the Building and Condominium such as window washing, trash removal, snow removal, janitorial, maintenance, security, and service contracts with independent contractors for any of the foregoing (including fire protection and HVAC); d) management fees (charged  by Landlord,  an affiliate of Landlord, or any other entity managing the Building or Condominium); e) utilities to the extent the same are not separately metered and charged to tenants in the Building and Condominium including lighting, heating and hot water for Common Areas, and sewer and water charges; f) materials and supplies, maintenance and repairs, and environmental remediation; g) insurance including building insurance, liability insurance, directors and officers insurance, rent loss insurance, umbrella insurance and workers ’ compensation insurance; h) alterations and improvements to the Building and Condominium made by reason of the laws and requirements of any public authorities promulgated after the Commencement Date, such costs amortized according to the Internal Revenue Code schedules; and i) other costs and expenses which under generally accepted accounting principles would be regarded as maintenance and operating expenses. Condominium Fees will not include depreciation, costs of tenant improvements, and leasing commissions, capital expenditures of any kind or nature (except as otherwise hereinabove permitted in subsection (h) above, debt service and other financing costs, expenses which are subject to reimbursement by Tenant or other tenants, and marketing and advertising expenses.

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9.3
ESTIMATED CONDOMINIUM FEE PAYMENTS
 
Landlord may, from time to time, reasonably estimate Tenant’s Condominium Fee Payments with respect to any calendar year or portion thereof and Tenant shall pay periodically as Landlord may determine, but not more frequently than monthly, the amount of Landlord’s estimate as Rent. Not later than 120 days after the end of each calendar year, Landlord will deliver to Tenant a statement of Condominium Fees and any amounts payable under Section 9.1 for such calendar year and any amount due from Tenant or any credit due to Tenant hereunder. Payment by Tenant of any amount due shall be made as Rent with Tenant’s next payment of Base Rent. Landlord shall credit the amount of any overpayment against subsequent obligations of Tenant. If the Term has expired and Tenant has no uncured defaults, Landlord will refund the overpayment to Tenant.
 
ARTICLE X
 
10.1
TENANT’S AND LANDLORD’S INDEMNITY
 
(a) To the maximum extent permitted by law, Tenant agrees to indemnify  and  hold  the Condominium Trustees, Landlord and Land lord’s Agent harmless from and against all claims of whatever nature arising after the earlier  to occur  of  the Commencement  Date or the date on  which the Tenant first takes occupancy of any part of the Premises  until the end of the Term  and  thereafter so long as Tenant is in occupancy of any part of the Premises: (i) on account of or based upon any injury to any person, or loss  of or damage  to  property  sustained  or  occurring  or  emanating  from the Premises on account of or based upon the act, omission, fault,  negligence, or misconduct arising out of the  use or occupancy of the  Building, Condominium or Premises by the Tenant or by any person claiming by, through  or under Tenant,  except  where  caused  by the negligence,  fault, or misconduct of Landlord, Landlord’s Agent, their employees, agents, and independent contractors, or (ii) on account of or based upon any injury to any person, or loss of or damage to property, sustained or occurring elsewhere in or about the Building or Condominium arising out of the use or occupancy of the Building, Condominium or Premises by the Tenant or by any person claiming by, through or under Tenant, except where caused by the negligence, fault, or misconduct of Landlord, Landlord’s Agent, their employees, agents, and independent  contractors;  and  in  addition to and not in  limitation of either the foregoing subsections (i) and (ii); (iii) on account of or based upon  work or thing whatsoever  done on the Premises; except where caused by the negligence, fault, or misconduct of Landlord, Landlord’s Agent, their employees, agents, and independent contractors; and in respect of any of the  foregoing, from and against all costs, expenses (including reasonable attorney’s fees), and liabilities incurred in or in connection with any such claim, or any action or proceedings; and in the case any action or proceeding is brought against Landlord by reason of any claim, Tenant upon notice from  Landlord  shall at Tenant’s expense resist or defend such action or proceeding and employ counsel reasonably satisfactory to Landlord.
 
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(b) To the maximum extent permitted by law, Landlord agrees to indemnify and hold Tenant harmless from and against all claims of whatever nature arising after the earlier to occur of the Commencement Date or the date on which the Tenant first takes occupancy of any part of the Premises until the end of the Term and thereafter so long as Tenant is in occupancy of any part of the Premises: (i) on account of or based upon any injury to any person, or loss of or damage to property sustained or occurring or emanating from the Premises on account of or based upon the act, omission, fault, negligence, or misconduct arising out of the use or occupancy of the Building, Condominium or Premises by any person claiming by, through or under Landlord, except where caused by the negligence, fault, or misconduct of Tenant or Tenant’s employees, agents, and independent contractors, or (ii) on account of or based upon any injury to any person, or loss of or damage to property, sustained or occurring elsewhere in or about the Building arising out of the use or occupancy of the Building, Condominium or Premises by any person claiming by, through or under Landlord, except where caused by the negligence, fault, or misconduct of Tenant, its employees, agents, and independent contractors; and in addition to and not in limitation of either the foregoing subsections (i)and (ii); (iii) on account of or based upon work or thing whatsoever done on the Premises; except where caused by the negligence, fault, or misconduct of Tenant, its employees, agents, and independent contractors; and in respect of any of the foregoing, from and against all costs, expenses (including reasonable attorney’s fees), and liabilities incurred in or in connection with any such claim, or any action or proceedings; and in the case any action or proceeding is brought against Tenant by reason of any claim, Landlord upon notice from Tenant shall at Landlord’s expense resist or defend such action or proceeding and employ counsel reasonably satisfactory to Tenant.
 
10.2
TENANT’S INSURANCE
 
Tenant agrees to maintain in full force and effect from the date upon which Tenant first enters the Premises for any reason, throughout the Term, and thereafter so long as Tenant is in occupancy of any part of the Premises, policies of commercial general liability, property damage liability insurance and workers’ compensation insurance. Such insurance shall be from responsible companies with an A.M. Best rating of A- VIII or better and qualified to do business in Massachusetts and in good standing  therein in at least the Tenant’s Insurance amounts specified in Section 1.1 under which Landlord is the Certificate Holder, and 432 Columbia Street Condominium Trust, Landlord and Landlord’s Agent are named as additional insureds, and under which the insurer agrees to indemnify and hold Landlord and Landlord’s Agent harmless from and against all cost, expense and/or liability arising out of or based upon any claims, accidents, injuries and damages set forth in Section l0.1. Such workers’ compensation coverage must satisfy Tenant’s obligations and liabilities under the Commonwealth of Massachusetts  workers’  compensation laws. All policies shall be non-cancelable and non-amendable without thirty (30) days prior written notice to Landlord and Landlord’s mortgagees and a certificate of insurance shall be delivered to Landlord or Landlord’s Agent prior to the Commencement Date and on or prior to each anniversary date of this Lease.
 
10.3
TENANT’S RISK
 
To the maximum extent permitted by law, Tenant agrees to use and occupy Premises and such other portions of the Property or Condominium, as Tenant has right to use, at Tenant’s own risk. The Condominium Trustees, Landlord and Landlord’s Agent shall have no liability or responsibility for any loss of or damage to Tenant’s Removable Property. This Section 10.3 shall be applicable from and after the execution of this Lease, and during any further period during which Tenant may use or be in occupancy of any part of the Premises. Tenant shall purchase and maintain insurance in an amount adequate to repair or replace its personal property and other Tenant’s Removable Prope1ty.

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10.4
INJURY CAUSED BY THIRD PARTIES
 
To the maximum extent permitted by law, Tenant and Landlord each agree that neither party nor its agents, employees, invitees, or independent contractors shall not be responsible or liable to the other, or those claiming by, through or under either, for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Premises or any part of the Property or otherwise, except where caused by the gross negligence, or willful misconduct of Landlord, Landlord’s Agents, their employees, agents and independent contractors or the Tenant, its employees, agents and independent contractors.

ARTICLE XI
 
11.1
LANDLORD’S RIGHT OF ACCESS

Landlord and Landlord’s Agent shall have the right to enter the Premises upon reasonable oral notice (except in the case of emergency for which no notice shall be required) for the purposes of inspecting the Premises and making repairs to the same. Upon reasonable notice, Landlord and Landlord’s Agent shall also have the right to make access available at all reasonable hours to prospective or existing mortgagees, purchasers or tenants of any part of the Property provided, however, that no such entry shall materially interfere with or materially obstruct the Tenant’s use of the Premises or the conduct of its business from the Premises. Landlord and Landlord’s Agent will at all times have and retain keys with which to unlock all of the doors in the Premises (excluding Tenant’s vaults, safes, and similar areas designated in writing by Tenant in advance).
 
ARTICLE XII
 
12.1
ABATEMENT OF RENT
 
If the Premises shall be damaged by fire or casualty, Base Rent and Escalation  Charges payable by Tenant shall abate proportionately for the period in which, by reason of such damage, there is substantial interference with Tenant’s use of the Premises, having regard to the extent to which Tenant may be required to discontinue Tenant’s use of all or a portion of the Premises, but such abatement or reduction shall end if when Landlord shall have substantially restored the Premises  to the condition in which they were prior to such damage. If the Premises shall be affected by any exercise of eminent domain, Base Rent and Escalation Charges payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant.
 
12.2
RIGHT TO TERMlNATE
 
(a)   If the Premises or Tenant’s access to the Premises, or the Building arc substantially damaged by fire or other casualty to the extent that such Premises or Building cannot, in the ordinary course, reasonably be expected to be repaired within ninety (90) days from the time of such fire or casualty, or if any part of the Building is taken by the exercise of eminent domain, then Landlord may, at Landlord’s option terminate this Lease by giving written notice to Tenant within sixty (60) days following the occurrence of such fire or other casualty or the effective date of such taking, whereupon this Lease shall terminate thirty (30) days after the date of such notice.

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(b)   In addition to subsection (a) of this Section 12.2, if the Premises or Tenant’s access to the Premises, are substantially damaged by fire or casualty to the extent that such damage cannot for any reason, in the ordinary course, be substantially repaired within ninety (90) days from the time of fire or casualty, or if any substantial portion of the Premises is taken by the exercise of eminent domain, Tenant shall have the right to terminate this Lease by giving written notice to Landlord within sixty (60) days following the occurrence of such fire or other casualty or the effective date of such taking, whereupon this Lease shall terminate thirty (30) days after the date of such notice.
 
12.3
RESTORATION
 
If this lease is not terminated pursuant to Section 12.2, Landlord shall use reasonable diligence to restore the Premises to proper condition for Tenant’s use provided that Landlord’s obligation shall be limited to the amow1t of insurance proceeds available to Landlord for such restoration. If, for any reason, such restoration shall not be substantially completed, or the Premises is not substantially restored to proper condition for Tenant’s use as it was prior to such damage, within six (6) months subject to any extension for such periods of time as Landlord is prevented from completing such restoration due to any cause beyond Landlord’s reasonable control after the expiration of the ninety (90) day period referred to in Section 12.2, Tenant shall have the right to terminate this Lease by giving written notice to Landlord within thirty (30) days after the termination of such period (as such as may have been extended above). Upon the giving of such notice, this Lease shall terminate on the thirtieth (30th) day following Landlord’s receipt  of Tenant’s notice without further liability or obligation on the part of either party unless, within such thirty (30) day period, Landlord substantially completes such restoration. Such right of termination shall be Tenant’s sole and exclusive remedy for Landlord’s failure to complete restoration.
 
12.4
AWARD
 
Landlord hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Property and the Landlord’s interest in the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of taking, damage or destruction and by way of confirming the foregoing, Tenant hereby grants and assigns, and covenants with Landlord to grant and assign to Landlord, all rights to such damages or compensation. Nothing contained herein shall be construed to prevent Tenant from prosecuting in any condemnation proceedings a claim for the value of any of Tenant’s Removable Property installed in Premises by Tenant at Tenant’s expense and for relocation expenses, provided that such action shall not affect the amount of compensation otherwise recoverable by Landlord from the taking authority. The provisions of this Section 12.4 shall not apply to any rights of Tenant to recover for damages or compensation relating to Tenant’s Removable Property.

ARTICLE XIII
 
13.1
TENANT’S DEFAULT
 
(a)
If during the Term of this Lease any of the following events shall occur:
 
(i)  Tenant shall fail to pay Base Rent, Escalation Charges or other charges hereunder when due, and shall have failed to cure such deficiency within ten (10) days of the date that Landlord shall have sent written notice to Tenant via in -hand delivery, receipt from Federal Express (or other express mail service) or the receipt of certified mail of such failure. Notwithstanding the foregoing, if Landlord shall have sent to Tenant a notice of any such failure three times during any twelve month period, and even though such failures may have been cured during the ten (10) day cure period, any subsequent failure to make payment during such a twelve month period shall be deemed to be a default without any notice from Landlord, and for which the Landlord shall not be required to recognize any period during which such failure may be cured; or

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(ii)  Tenant shall neglect or fail to perform or observe any other covenant contained in this Lease and Tenant shall fail to remedy the same within thirty (30) days after receipt of a written notice to Tenant via Federal Express (or other express mail service) or by certified mail specifying such neglect or failure, or if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly, within such 30 day period, to remedy the same and to prosecute such remedy to completion with diligence and continuity, provided that such cure shall be completed in any event within ninety (90) days of written notice, unless such period is extended in writing by Landlord; or
 
(iii) Tenant’s leasehold interest in the Premises shall be taken on execution or by other process of law directed against Tenant; or
 
(iv)  Tenant shall make an assignment for the benefit of creditors; or shall file a voluntary petition in bankruptcy; or shall be adjudicated bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future Federal, State or other statute, law or regulation for relief of debtors; or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or a substantial part of its properties; or Tenant shall admit in writing its inability to pay its debts generally as they become due; or
 
(v)  a petition shall be filed against Tenant in bankruptcy or under any other law seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future Federal, State or other statute, law or regulation and shall remain undismissed or unstayed for an aggregate of sixty (60) days; or if any debtor in possession, trustee receiver or liquidator of Tenant or of all or a substantial part of its properties or of the Premises shall be appointed without the consent or acquiescence of Tenant, and such appointment shall remain unvacated or unstayed for an aggregate of sixty (60) days;
 
then in any such case:
 
(1) If such Default by Tenant, other than subsection (vi), shall occur prior to the Commencement Date, Landlord may, without further act on the part of Landlord, terminate this Lease by written notice to Tenant, and
 
(2) If such Default by Tenant shall occur after the Commencement Date, Landlord may terminate this Lease by written notice as provided to Tenant and this Lease shall come to an end on the date specified therein and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided.
 
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(b) If this Lease is terminated as provided in this Lease, or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the Premises shall be taken or occupied by someone other than Tenant, then Landlord may, thereafter, without notice, re-enter the Premises, either by summary proceedings, ejectment or otherwise, and remove and dispossess Tenant and all other persons and any and all property from the same, as if this lease had not been made and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end.
 
(c) In the event of any termination for Default by Tenant, Tenant shall remain responsible for the Base Rent, Escalation Charges and other charges payable hereunder, up to the date of the termination, and thereafter Tenant, until the end of what would have been the end of the Term in the absence of such termination whether or not the Premises shall have been re-let, shall be liable to Landlord for and shall pay to Landlord, as liquidated current damages, the Base Rent, Escalation Charges and other charges which would be payable hereunder if such termination had not occurred, less the net proceeds, if any, of any re-letting of the Premises, after deducting all expenses in connection with such re-letting, including, without limitation, all repossession costs, including attorney fees incurred in seeking possession or unpaid charges, brokerage commissions, legal expenses, reasonable alteration costs and expenses of preparation for re-letting Tenant shall pay such Base Rent, Escalation Charges and other charges to Landlord monthly on the days on which the Base Rent would have been payable hereunder if this Lease had not been terminated.
 
(d) At any time after such termination, whether or not Landlord shall have collected any post termination charges, as liquidated final damages and in lieu of all damages beyond the date of such demand, at Landlord’s election, Tenant shall pay to Landlord an amount equal to the excess, if any, of the present value (at a discount rate of 10%) of the Base Rent, Escalation Charges and other charges as herein before provided which would be payable hereunder from the date of such demand (assuming that, for the purposes of this paragraph, annual payments by Tenant on account of Taxes and Operating Expenses would be the same as the payments required for the immediately preceding Operating Year or Tax Year) for what would be the then unexpired Term of this Lease  if the same remained in effect, over the present value (at a discount rate of 10%) of the then fair net rental value of the Premises for the same period. In no event shall Tenant be obligated to pay any more pursuant to this subparagraph (d) than Tenant would have been required to pay under this Lease absent such default.
 
(e) In the case of any Default by Tenant, re-entry, expiration and dispossession of Tenant by summary proceedings or otherwise, Landlord may:

(i)  re-let the Premises or any part thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord’s option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term of this Lease and may grant concessions of free rent to the extent that Landlord considers reasonably advisable and necessary to re-let the Premises; and
 
(ii)  may make such reasonable alterations, repairs and decorations in the Premises as Landlord in its reasonable judgment deems advisable and necessary for the re-letting of the Premises. Any such repairs, decorations or alterations shall not operate nor be construed to release Tenant from any liability under this lease.

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Landlord will use best efforts to, but in no event be liable in any way for failure to re-let the Premises, or, in the event that the Premises are re-let, for failure to collect the rent under such re-letting. Tenant expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease.
 
(f) The specified remedies to which Landlord may resort are not intended to be exclusive of any remedies or means or redress to which Landlord may at any time be entitled lawfully, and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for.
 
(g) Upon Default by Tenant, or the expiration or termination of this Lease, Landlord shall have the right of summary process under any applicable statutes and such other rights to recover possession as permitted by law. Tenant and Landlord each hereby waive any and all rights under the law of any state to the right, if any, to trial by jury.
 
(h) All costs and expenses incurred by or on behalf of Landlord (including reasonable attorneys’ fees and expenses) in enforcing its rights under this Lease or occasioned by any Default by Tenant shall be paid by Tenant.
 
13.2
LANDLORD’S DEFAULT
 
Landlord shall in no event be in default in the performance of any of Landlord’s obligations hereunder unless and until Landlord shall have failed to perform such obligations within a reasonable time (given the nature of the obligation and the time reasonably required to correct such default) after written notice by Tenant to Landlord specifying wherein Landlord has failed to perform any such obligations.
 
ARTICLE XIV
 
14.1
WAIVER
 
(a)  Failure on the part of Landlord or Tenant to complain of any action or non-action on the part of the other, no matter how long the same may continue, shall never be a waiver by Tenant or Landlord, respectively, of any of the other’s rights hereunder. Further, no express waiver at any time of any of the provisions thereof by Landlord or Tenant shall be construed as a waiver of any of the other provisions hereof nor shall it be construed as a waiver at any subsequent time of the same provisions. The consent or approval of Landlord or Tenant to or of any action by the other requiring consent or approval shall not be construed to waive or render unnecessary Landlord’s or Tenant’s consent or approval to or of any subsequent similar act by the other.
 
(b) No payment by Tenant, or acceptance by Landlord, of a lesser amount than shall be due from Tenant to Landlord shall be treated otherwise than as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant.

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14.2
COVENANT OF QUIET ENJOYMENT
 
Tenant, subject to the terms of this Lease, of payment of the Base Rent, Escalation Charges and other charges due hereunder and observing, keeping and performing all of the other terms and provisions of this Lease on Tenant’s part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises during the Term, without hindrance or ejection by any persons lawfully claiming to have title to the Premises superior to Tenant. This covenant of Quiet Enjoyment is given in lieu of any other covenant, express or implied.
 
14.3
LANDLORD’S LIABILITY

(a)  With respect to the Landlord’s obligations under this Lease, Tenant specifically agrees to look solely to Landlord’s interest in the Property at the time of award of any judgment, for recovery of any such judgment against Landlord. It is specifically understood and agreed that neither Landlord nor any Manager or Member thereof shall ever be personally liable for any such judgment, or for the payment of any such monetary obligation to Tenant. This provision is not intended to, and shall not, limit any right Tenant might otherwise have to obtain injunctive relief against Landlord or Landlord’s successors in interest, or to take any action not involving the personal liability of Landlord.
 
(b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war, civil disturbance, or other emergency, or for any cause beyond the reasonable control of Landlord, or for any other cause due to any act or neglect of Tenant or Tenant’s servants, agents, employees, licensees or any person claiming by, through or under the Tenant.
 
14.4
TRANSFER OF TITLE
 
A sale, conveyance or assignment of the Property will operate to release Landlord from liability from and after the effective date of such sale, conveyance or assignment upon all of the covenants, terms and conditions of this Lease, express or imp lied, except those liabilities which arose prior to such effective date, and, after the effective date of such sale, conveyance or assignment, Tenant will look solely to Landlord’s successor in interest in and to this Lease.
 
14.5
RULES AND REGULATIONS
 
In addition to the Rules and Regulations of the Condominium Trust listed in Exhibit F, Tenant shall abide by rules and regulations reasonably established from time to time by Landlord and Landlord’s Agent, it being agreed that such rules and regulations will be established  and applied by Landlord and Landlord’s Agent in a non-discriminatory fashion, such that all rules and regulations shall be generally applicable to other Tenants of similar nature to Tenant, and do not materially interfere with Tenant’s use. Landlord and Landlord’s Agent agrees to use reasonable efforts to ensure that any such rules and regulations are uniformly enforced, but Landlord and Landlord’s Agent shall not be liable to Tenant for violation of the same by any other Tenant or occupant of the Building, or persons having business with them. Initial rules and regulations are attached as Exhibit D, “Rules and Regulations for Fairlane Columbia, LLC.”

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14.6
ADDITIONAL CHARGES
 
If Tenant shall fail to pay when due any sums under this Lease, Landlord shall have the same rights and remedies as Landlord has hereunder for failure to pay Base Rent.
 
14.7
SEVERABILITY
 
If any term of this Lease, or the application thereof to any person or circumstance shall, to the extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby, and each terms and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
 
14.8
BINDING NATURE
 
Except as set forth  herein  to the contrary, the terms of this Lease shall be binding upon and shall inure to the benefit of the successor and assigns, respectively, of Landlord and Tenant and, if Tenant shall be an individual, upon and to his heirs, executors, administrators, successors and assigns. Each term to be performed by Tenant shall be construed as both a covenant and a condition. The reference contained herein to successors and assigns of Tenant is not intended to constitute a consent to assignment by Tenant, but has reference only to those instances in which Landlord may later give consent to a particular assignment  as required by the provisions of Article VI.
 
14.9
NOTICES
 
Whenever, by the terms of this Lease, notices shall or may be given either to Landlord, Landlord’s Agent or Tenant, such notice shall be in writing and shall be sent by Federal Express (or other similar express mail service), registered or certified mail postage to Landlord at the Landlord’s Address, Landlord’s Agent at Landlord’s Agent’s address, or to Tenant at Tenant’s Address, as the case may be. All such notices shall be effective upon the mailing thereof.
 
14.10
COMPLETE AGREEMENT AND AMENDMENT
 
All understandings between Landlord and Tenant are incorporated herein and this Lease expressly supersedes any proposals or other written documents relating hereto. This Lease may be modified or amended only by written agreement between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof.
 
14.11
SUBORDINATION
 
This Lease shall be subordinate to Massachusetts General Laws Chapter 183A, the Condominium Documents and any mortgage, or other instrument in the nature of a mortgage, from time to time encumbering the Premises or the Condominium, whether executed and delivered prior to or subsequent to the date of this Lease, if the holder of such mortgage shall so elect. Tenant agrees to execute such instruments of subordination and provide to Landlord within ten (10) business days of Landlord’s written request to Tenant in confirmation of the foregoing agreement as the holder of such mortgage may request, and Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact to execute such subordination agreement upon default of Tenant in complying with the holder of such mortgage’s request.
 
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14.12
ESTOPPEL CERTIFICATES
 
Tenant, on the request of Landlord made from time to time, will execute and deliver to Landlord within ten (10) business days of Landlord’s written request to Tenant, a statement certifying to the status of any matter pertaining to this Lease, including, without limitation, and if true, (i) that this Lease is unmodified and in full force and effect or, if there have been modifications, (ii) that this Lease is in full force and effect as modified, and stating the date and nature of such modifications, (iii) the date, if any, to which Rent and other sums payable under this Lease have been paid, and (iv) such other similar matters as may be reasonably requested by Landlord. Tenant agrees to cooperate fully with and to provide such certification to any information requested by Landlord or its lenders in a timely fashion.

14.13
LANDLORD’S RIGHT TO CURE DEFAULTS
 
Landlord shall have the right, but shall not be required, to pay such sums or do any act which requires the expenditure of moneys which may be necessary or appropriate by reason of the failure or neglect of Tenant to perform any of the provisions of this Lease (after any applicable notice and cure periods provided in this Lease), and in the event of the exercise of such right by Landlord, Tenant agrees to pay to Landlord forthwith upon demand all such sums, together with interest thereon at a rate equal to 2% over the Prime Rate in effect and announced from time to time at Bank of America or successor bank at its principal offices located at 100 Federal Street, Boston, Massachusetts, or any subsequent location of its principal offices in Massachusetts, as an additional charge here under. Any payment of Base Rent, Escalation charges or other sums payable hereunder not paid when due shall, at the option of Landlord, bear interest at the Default Rate from the due date thereof and shall be payable forthwith on demand by Landlord as an additional charge hereunder.
 
14.14
HOLDOVER
 
Any holding over by Tenant after the Expiration Date, or after any earlier termination under Article XIII herein, shall be treated as a daily tenancy at sufferance at a rate equal to two hundred (200%) percent of the Base Rent plus Escalation Charges and other charges due hereunder and shall othe1wisc be on the terms and conditions set forth in this Lease.
 
14.15
WAIVER OF SUBROGATION
 
Insofar as, and to the extent that, this provision may be effective without invalidating or making it impossible to secure insurance coverage obtainable from recognized insurance companies doing business in the City of Cambridge, Landlord and Tenant mutually agree that, with respect to any hazard, the loss from which is covered by insurance then being carried by them, respectively, the one carrying such insurance and suffering such loss releases the other of and from any and all claims with respect to such loss to the extent of the insurance proceeds paid with respect thereto and that their respective insurance companies shall have no right of subrogation against the other on account thereof.
 
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14.16
YIELD UP
 
As of the Expiration Date, Termination Date, or earlier termination of the Term of this Lease, Tenant shall peaceably quit and surrender to Landlord the Premises in neat and clean  condition and in good order, condition and repair, together with all alterations, additions and improvements which may have been made or installed in on or to the Premises prior to or during the Term, excepting only ordinary wear and tear and use and damage by fire or other casualty or by eminent domain for which, under other provisions of this Lease, Tenant has no responsibility of repair or restoration. Tenant shall remove all of Tenant’s Removable Property and, to the extent specified by Landlord at the time they are approved, all alterations and additions made by Tenant and all partitions erected by Tenant wholly within the Premises. For the purposes of this section, telecommunications wiring, but not telephone equipment (including PBX boxes, splice boxes, racks, and other telephone system equipment) shall be excluded from the definition of Tenant’s Removable Property. Tenant shall repair any damages to the Premises or the Building caused by such removal. Any of Tenant’s Removable Property which shall remain in the Building or on the Premises after the Expiration Date, Termination Date, or earlier termination of the Term of this Lease shall be deemed conclusively to have been abandoned, and either may be retained by Landlord as its property or may be disposed of in such manner as Landlord may determine, at Tenant’s sole cost and expense.
 
Notwithstanding anything to the contrary in the Lease, all of the following items shall remain in the Premises or on the exterior of the Building serving the Premises at the expiration or termination of the Term:
 
(a) All HVAC equipment including ductwork, exhaust fans, heat exchanges and the like;
 
(b) Al1 plumbing for natural gas or water and associated fixtures, sinks, chip tanks and the like; and
 
(c) All rooftop equipment including electrical generators.
 
14.17
BROKERAGE
 
Tenant and Landlord each warrant and represent to the other they have dealt with no broker in connection with the consummation of this Lease other than the Broker as set forth in Section 1.1. Landlord shall pay the brokerage commission, under terms of a separate agreement to Broker. In the event of any brokerage claims against Landlord (other than the Broker) predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim. In the event of any brokerage claims against Tenant, predicated upon prior dealings with Landlord, Landlord agrees to defend the same and indemnify Tenant against any such claim.
 
14.18
CONSTRUCTION
 
The Condominium Trustees, Landlord and the owners of other units of the Condominium shall have the right to make improvements to other premises or spaces in the Condominium. All parties making improvements are required to use reasonable effo11s to minimize any disturbance caused by the construction of such improvements.
 
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14.19
INTENTIONALLY DELETED
 
14.20
SECURITY DEPOSIT
 
Tenant agrees that the Security Deposit specified in Section 1.1 shall be paid by check in lawful money  of the United States to the order of the Landlord  at Landlord’s  Address  listed  in Section 1.1 upon execution and delivery of this Lease. Landlord shall hold the Security Deposit, throughout the Term of this Lease as security for the performance by Tenant of all obligations on the part of Tenant hereunder. Landlord shall have the right, from time to time, without prejudice to any other remedy Landlord may have on account thereof, to apply such Security Deposit, or any part thereof, to Landlord’s damages arising from any uncured Default of Tenant. Provided that there is no uncured Default of Tenant, Landlord shall return the Security Deposit, or so much thereof as shall not have theretofore been applied in accordance with the terms of Section 14.20, to Tenant within thirty (30) days of the expiration or earlier termination of the Term and surrender of possession of the Premises by Tenant to Landlord together with an itemized list of deductions, subject to Sections 8.1, 9.1 and 14.16 of the Lease. While Landlord holds the Security Deposit, Landlord shall have no obligation to pay interest on the same and shall have the right to commingle the Security Deposit with Landlord’s other funds. If any part of the Security Deposit is applied as herein provided, Tenant shall replace same within thirty (30) days of receiving written notice from the Landlord or Landlord’s Agent. Landlord shall deliver the Security Deposit, or any part hereof not previously applied, to the purchaser of the Building in the event the Building is sold, whereupon Tenant agrees to look solely to such successor in interest for proper application and return in accordance with the terms of this Section 14.20. The Security Deposit shall not be used by Tenant as a payment of Rent due for the last month or any month of the Term.
 
14.21
PARTIAL INVALIDITY
 
The invalidity of one or more phrases, sentences, clauses, or articles shall not affect the remaining portions of this Lease, and if any part of this Lease should be declared invalid by the final order, decree or judgment of a court of competent jurisdiction, this Lease shall be construed as if such invalid phrases, sentences, clauses, or articles had not been inserted.
 
14.22
GOVERNING LAW
 
This Lease shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Massachusetts.
 
14.23
FINANCIAL STATEMENTS
 
In the event that Tenant or any entity purchasing or merging with Tenant is no longer a public company, Tenant shall provide Landlord with annual financial statements of Tenant or any entity purchasing or merging with Tenant within ninety (90) days after the close of Tenant’s fiscal year.

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14.24
SATELLITE DISH/ANTENNA
 
Landlord agrees  that  Tenant  may  install  a  satellite  dish/antenna  and  associated  wiring  (the “Equipment”) on the Building’s roof and in the Building’s risers meeting the specifications set forth below, subject to the approval of the Condominium Trustees. The Equipment, which shall be included as Tenant’s Removable Property, shall be installed, at Tenant’s sole cost and expense, by a contractor providing satisfactory insurance certificates to Landlord and Landlord’s Agent in a location approved in advance by Landlord. Tenant shall obtain all governmental approval and permits required for the installation and operation of the Equipment and otherwise perform all work in a good, workmanlike manner and operate the Equipment in compliance with all applicable Federal, state and  local  laws,  ordinances,  statutes,  codes  and  regulations,  including  without limitation, the rules and regulations of the Federal Communications Commission. Upon commencement of installation, Tenant shall pay an additional $200.00 per month for the remaining Term for the use of the roof, risers and other Building areas. No satellite dish shall exceed twenty-four (24) inches in diameter. The location of a satellite dish/antenna on the roof and location of wiring on the roof, risers and other Building areas are subject to Landlord’s approval. Tenant acknowledges that Landlord may have provided licenses to telecommunication companies for satellite dishes and antennas and approval to other tenants for rooftop satellite dishes. A satellite dish used by Tenant must not interfere with the placement or use of satellite dishes/antenna for the aforesaid telecommunication companies or tenants. In the event that roof maintenance, repair or replacement requires the relocation or movement of a satellite dish/antenna or temporary loss of reception, Tenant agrees to cooperate with Landlord and Landlord’s vendors during the period of such maintenance, repair or replacement.
 
14.25
COMPLIANCE WITH CONDOMINIUM DOCUMENTS
 
This Lease is subject to all provisions of the Condominium Documents and Rules and Regulations and Tenant agrees to observe and be bound by all such provisions. Tenant agrees to execute any further instruments which may be required of Tenant under the Condominium Documents. The Condominium Trust Rules and Regulations require the following notice to be included in this Lease:

“IMPORTANT CLAUSE

THE BUILDING IN WHICH THE UNIT OR PART OF A UNIT IS BEING LEASED IS LOCATED IS A CONDOMINIUM BUILDING - NOT A RENTAL BUILDING. THE BUILDING MAY BE OCCUPIED BY A COMBINATION OF UNIT OWNERS AND TENANTS OR LICENSEES. BY SIGNING THIS LEASE, LICENSE OR OCCUPANCY AGREEMENT, THE TENANT OR LICENSEE ACKNOWLEDGES THAT HE OR SHE HAS BEEN FURNISHED WITH A COPY OF THE MASTER DEED OF THE COND OMINIUM, THE DECLARATION OF TRUST OF THE CONDOMINIUM AND THE BY-LAWS AND RULES AND REGULATIONS THERETO AND THAT HE OR SHE HAS READ THEM AND UNDERSTANDS THEM AND THAT HE OR SHE WILL COMPLY IN ALL RESPECTS WITH TH E SAME. THE TENANT OR LICENSEE ALSO UNDERSTANDS TBAT IN THE EVENT THAT HE OR SHE FAILS TO COMPLY, THE TENANT OR LICENSEE MAY BE EVICTED BY THE TRUSTEES OF THE CONDOMINIUM TRUST (WHO ARE ELECTED BY THE UNIT OWNERS). THE PROVISIONS OF THIS CLAUSE TAKE PRECEDENCE OVER ANY OTHER PROVISION OF THIS LEASE, LICENSE OR OCCUPANCY AGREEMENT.

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Any failure by the Tenant to comply in all respects with the provisions of the Master Deed of the Condominium, the Declaration of Trust and the By-Laws and Rules and Regulations thereto shall constitute a material default in this lease, license, or occupancy agreement, and in the event of such default (“Default”), the Trustees of the Condominium Trust shall have the following rights and remedies against both the Unit Owner and the Tenant, in addition to all other rights and remedies that Trustees and the Unit Owners (other than the owner of the affected Unit) have or may in the future have, against both the owner of the affected Unit and the tenant, all rights and remedies of the Trustees and the Unit Owners (other than the owner of the affected Unit) being deemed at all times to be cumulative and not exclusive. In addition,
 
(i)  The Trustees shall have the right to give written notice of the Default to both the Tenant and the Unit Owner. Said notice shall be deemed properly given if left in any part of the Unit, addressed to the Tenant, and mailed postage pre-paid, registered or certified mail, return receipt requested, addressed to the Unit Owner at such address as appears on the records of the Trustees, or by delivering said notice in hand, or be delivering said notice in any other manner permitted by law.
 
(ii)  If the Default continues for five days after the giving of said notice, then the Trustees shall have the right to levy fines against the Unit Owner in accordance with the By-Laws, and terminate the tenancy by giving notice in writing to quit to the Tenant in any manner permitted by the Trustees, or both. A copy of such notice shall be delivered or mailed to the Unit Owner in the manner set forth hereinabove. Thereafter, the Trustees may initiate and prosecute a summary process action against the Tenant under the provisions of Massachusetts General Laws, in the name of the Unit Owner or in the name of the Trustees, or both.
 
(iii) The Trustees shall be entitled to levy a fine or fines, or give a notice or notices to quit, followed by a summary process action or actions, and the Trustees’ election to pursue any of the foregoing remedies shall in no way prohibit them from pursuing all of the foregoing remedies, either at the same time, or in the event of any further default.
 
(iv) All of the expenses incurred by the Trustees in giving notices, and notices to quit and maintaining and pursuing summary process actions and appeals therefrom, shall be entirely at the expense of the Unit Owner of the affected unit. Such costs and expenses may be enforced and collected against the Unit Owner and Unit as if the same were common charges owed by the Unit Owner.

(v) The Unit Owner shall make reasonable efforts, at his or her expense and upon his or her initiative, to inform rental agents of the provisions of this section and shall, at his or her expense, and upon his or her initiative, furnish copies of the Condominium Documents to the Tenant and cause the lease or occupancy agreement to be prepared in conformity with the provisions of this section.

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(vi)  Any renewal or extension of any lease or occupancy agreement shall be subject to the prior written approval of the Trustees in every in stance. Such approval shall not limit any rights or remedies of the Trustees or Unit Owners in the event of a subsequent default.
 
(vii)  A true copy of every lease or occupancy agreement shall be delivered to the Trustees forthwith upon its execution.
 
(viii)  Notwithstanding anything to the contrary herein, and notwithstanding any custom, law or usage to the contrary, it is expressly understood and agreed that neither the Trustees, nor the Unit Owners shall ever bear any personal liability with respect to any lease or the use and occupancy of a unit by a Tenant.
 
(ix)   Every lease, license or occupancy agreement, shall have attached thereto, and incorporated therein by reference, a copy of this section 5.0 of the Rules and Regulations.”
 
The Condominium Trust Rules and Regulations also require that Landlord inform tenants that:
 
“If a tenant offers any of its employees parking in the Parking Lot, then the tenant has the option of charging such employee market rate for parking, or, alternatively, if the tenant charges any of its employees less than the current monthly market rate for parking, then the tenant will offer such employees an equivalent monthly payment to support the employee’s commute by walking, biking, transit or carpool. In the event that an employee chooses to use the equivalent monthly payment for transit, tenants will use best efforts to enroll in the MBTA pass grogram to provide an employee with the ability to purchase a pass using pre-tax wages. ‘Equivalent monthly payment’ means the remainder of the current monthly market rate for parking less the fee paid for parking by an employee. For example, if the current monthly market rate is $200 and an employee is being charged $50 per month by the employer, then the equivalent monthly payment equals $150 per month. Any tenant may charge certain employees for parking at market rate in the Parking Lot and other employees may be charged at less than the current monthly market rate for parking in the Parking Lot with the tenant providing such employees with the equivalent monthly benefit option.”
 
14.26
SUBMISSION NOT OFFER OR OPTION
 
The submission of this Lease for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises. This document shall become effective and binding only upon the execution and delivery by Landlord and by Tenant, and until such execution and delivery, Landlord shall not in any way be bound to enter into a lease with Tenant for the Premises.
 
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14.27
AUTHORITY AND ORGANIZATION OF TENANT
 
If Tenant is a corporation or a limited liability company, each person executing this Lease on behalf of the Tenant hereby covenants, represents and warrants that Tenant is a duly incorporated or duly qualified (if foreign) corporation or limited liability company and is authorized to do business in the Commonwealth of Massachusetts, a copy of evidence thereof to be supplied to Landlord upon execution of this Lease by Tenant; and that each person executing this Lease on behalf of Tenant is an officer or manager of Tenant and that he or she is duly authorized to execute, acknowledge and deliver this Lease to Landlord (if a corporation, a copy of a resolution to that effect to be supplied to Landlord upon lease execution  or amendment). If Tenant is a corporation or limited liability company, Tenant shall provide Landlord with a Certificate of Organization or other organizational documents required for doing business in the Commonwealth of Massachusetts from the Secretary of the Commonwealth (the “Secretary”) at the execution of the Lease and upon filing of an Annual Report with the Secretary shall also provide a copy to Landlord within thirty (30) days of said filing.
 
14.28
NO RECORDING
 
This Lease, any memorandum of this Lease or any short form of this Lease shall not be recorded.

14.29
ADDENDUM
 
All Exhibits attached hereto are incorporated herein by this reference.
 
14.30
TENANT’S APPROVALS
 
Tenant shall be responsible for any and all public and regulatory approvals regarding its use of hazardous materials (“Tenant’s Approvals”). The Commencement Date shall not be delayed due  to the failure of Tenant to receive Tenant’s Approvals.

14.31
SIGNATURES
 
Authorized signatories for Landlord and Tenant signing this Lease must either personally sign below or provide signatures using DocuSign. Leases signed personally by authorized signatories may be submitted via email using a PDF format or with paper copies of the complete document mailed (by USPS or express mail service) to the Landlord’s Address or Tenant’s Address.
 
14.32
NO PERSONAL LIABILITY
 
Landlord shall  look solely to Tenant  and its assets for the satisfaction of any claims hereunder, the performance of Tenant’s obligations hereunder, or the collection of any judgment (or other judicial process) or the enforcement of any injunctive  relief or specific performance  based thereon, and (i) no other property or assets of any employee, officer, director, shareholder, member, partner or beneficiary of Tenant shall be subject to levy, execution or other enforcement procedure for the satisfaction  of any such claim, obligation  or judgment (or other judicial  order or process), and (ii) no employee, officer, director, shareholder, member,  partner or  beneficiary of Tenant shall be personally liable for any such claim, obligation or judgment (or other judicial order or process).

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed, under seal, by persons hereunto duly authorized, in multiple copies, each to be considered an original hereof, as of the day and year first set forth above.

LANDLORD:
Fairlane Columbia, LLC
 
By:
 /s/ Michael S. Grill
Michael S. Grill, Manager and not individually

TENANT:
Brooklyn Immunotherapeutics, Inc.
 
By: /s/ Howard J. Federoff  
Howard J. Federoff, President and CEO and not individually

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EXHIBIT A

DESCRIPTION OF PROPERTY

Units B-1, 11, 13, 14, 15/16, 17A, 17B, 18A, 21 and 21A of the 432 Columbia Street
Condominium established by Master Deed dated January 22, 1988 and recorded with the
Middlesex County South Registry of Deeds in Book 18837 Page 122, as amended and in Book
70488, Page 149.

EXHIBITB

PLAN OF PREMISES

(See following page)


EXHIBIT C

LANDLORD’S WORK

The Premises is provided to Tenant on an ‘as-is’ basis, except that Landlord shall at its cost:

 
1)
install 1” horizontal window blinds for the exterior windows and remove all brown window blinds from the Premises; and

 
2)
move the 50-amp service providing power to the 7.5-ton HVAC unit servicing the Premises to another electrical panel outside of the Premises.

Landlord will provide a path for ductwork and gas or vent pipes from Suite 18A through the Building’s interior to the roof, with the amount of allowable noise from ductwork located in the Building’s common hallways and shafts subject to Landlord’s approval. Tenant shall be responsible for the cost of such ductwork and Building work to accommodate a path for such ductwork as well as providing room in the shaftway for potential future ductwork from the lower level. Tenant’s contractors shall use best efforts to minimize any nuisance or disturbance to nearby tenants from such work in the Building’s common areas and Landlord may limit certain work to hours outside the business hours of the Building.

In addition, Landlord shall provide a tenant allowance of $50,000.00 (the “Tenant Allowance”) as described in Section A below. Tenant may enter into a contract with a contractor (the “Tenant’s Contractor”), other than Key Construction, to construct the improvements.

In the event that any portion or all of the Premises is converted into biotech lab space during the Term, then Tenant shall comply with Sections B-K below for such construction:

 
A.
Landlord shall provide Tenant with a check, payable to both Tenant and Tenant’s Contractor, on a monthly basis up to the amount of the Tenant’s Allowance within fifteen (15) days of the receipt of invoices (sent by Tenant to Landlord) from Tenant’s Contractor. Said invoices, except for the final payment (“Final Payment”), must be accompanied by 1) partial lien waivers from Tenant’s Contractor and 2) a request by Tenant for payment with a calculation of payments in relation to the total Tenant’s Allowance. Tenant’s request for the Final Payment, which shall be in an amount of no less than $5,000.00 and shall also be Tenant’s final payment to Tenant’s Contractor, shall be accompanied by 1) a lien waiver from Tenant’s Contractor which will be conditional only upon the receipt of the Final Payment, and 2) a copy of the City of Cambridge building permit signed by the building inspector with his or her final sign-off.

 
B.
Plans and Approvals. Tenant shall provide Landlord with one (1) full-scale architectural and engineering sets of plans and one (1) copy of plans emailed to Landlord as a PDF (“Plans”) detailing the intended improvements to the Premises (“New Lab Tenant Improvements”) prepared by registered architects and engineers, prior to submission of said Plans to the City of Cambridge, for Landlord’s reasonable approval, which may not be unreasonably withheld, delayed or conditioned, within five (5) business days of the submission of the Plans to Landlord. Landlord shall notify Tenant of any objection to the Plans within the abovementioned five (5) business days. Should Landlord not notify Tenant of any objection to the Plans within the abovementioned five (5) business days, such Plans shall be deemed approved by Landlord. Should Landlord notify Tenant of any objection to the Plans within the abovementioned five (5) business days, Tenant shall make revisions and resubmit the plans for Landlord’s approval, whereupon the foregoing review and approval shall be repeated until the Plans are approved (or deemed approved) by Landlord in accordance with this Paragraph B. No review or approval by Landlord of the Plans shall constitute any representation or warranty as to the adequacy, correctness, efficiency or compliance with any laws, regulations or ordinances, or any other aspect of such drawings and specifications. The Plans shall be incorporated by reference into this Exhibit C and Tenant shall provide Landlord with a full-sized set and a PDF set of the City of Cambridge approved plans as well as any ‘ as-built’ plans issued by Tenant’s architect or Tenant’s contractor. Tenant shall be responsible for the application, payment and receipt of all governmental permits and approvals for the construction of New Lab Tenant Improvements, including a Certificate of Occupancy (“C of O”) that applies to the Premises. Tenant shall provide to Landlord a copy of C of O issued by the City of Cambridge within seven (7) days of the receipt of such C of O by Tenant or Tenant’s Contractor.
 
 
C
Tenant’s Oversight. Oversight of New Lab Tenant Improvements, which shall be made in a good and workmanlike manner and in compliance with all applicable laws and government regulations, shall be the responsibility of Tenant. Tenant shall perform New Lab Tenant Improvements in such a manner as not to interfere with the use and enjoyment of the remainder of the Building by any other tenant or any other construction then being performed by any other tenant or by Landlord. Tenant shall have access to the New Lab Premises as of the date of Lease execution after receipt by Landlord of Tenant’s and Tenant’s Contractor’s Insurance Coverage required under Section H below, provided, however, that Tenant assumes any risks attendant on its entry into the New Lab Premises prior to the completion of the New Lab Tenant Improvements. Tenant’s entry, as described above, shall not be deemed to be occupancy of the Premises. Tenant shall comply with all of the terms, covenants, and conditions of the Lease after the date of Lease execution.

 
D.
Tenant’s Consultants. Tenant shall separately contract with any consultants or engineers for laboratory-specific plumbing, heating, ventilation or air conditioning, or electrical items during construction or during planning of construction. Tenant shall provide Landlord with all specifications and studies provided to Tenant by Tenant’s Consultants.

 
E.
Landlord’s Oversight. Landlord and its agents may have unrestricted access at their own risk to the New Lab Premises during construction. Landlord shall provide a punch list containing specific detailed deficiencies to Tenant within thirty (30) days of the substantial completion of the New Lab Tenant Improvements to correct all said deficiencies noted by Landlord in the New Lab Tenant Improvements to the extent that the New Lab Tenant Improvements do not substantially conform to the approved Plans or if Building Common Areas require corrective action. Tenant shall complete such corrections within a reasonable time, but in no event later than thirty (30) days of the presentation of the punch list to Tenant. Landlord’s punchlist or supervision or approval shall not constitute a warranty that the New Lab Tenant Improvements were properly performed or designed or create any liability for payment for such work by Landlord.

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F.
Tenant’s Vendors. New Lab Tenant Improvements may be performed only by licensed contractors or subcontractors approved in advance by Landlord; such approval shall not be unreasonably withheld. Tenant shall provide its contract with its general contractor or construction manager prior to the submission of Plans to the City of Cambridge (the “Contract”). With respect to New Lab Tenant Improvements to the life safety system, Landlord reserves the right to require Tenant to use Landlord’s contractors (“Landlord’s Contractors”) to perform such Tenant Improvements, but in such event the charges of such contractors shall be competitive with the charges of other contractors performing similar work in similar office buildings (i.e. - Tenant’s Contractor’s subcontractors (the “subcontractors”)) in the City of Cambridge. In the event that the subcontractors provide pricing below that of Landlord’s Contractors, Tenant shall provide Landlord with the subcontractors’ bids so that Landlord and Tenant’s general contractor may negotiate competitive pricing from Landlord’s Contractors. Landlord’s Contractors will perform all work for Tenant’s Contractor and will not have any contract, oral or written, express or implied, with Landlord for work according to the Plans. Tenant’s vendors shall work with Landlord on the timing of work which may unreasonably disrupt tenants of space adjoining, above and below the New Lab Premises so long as access by such vendors is not unduly restricted and the performance of New Lab Tenant Improvements is not materially delayed.
 
 
G.
Use of the Building and Parking Lot. Prior to the Commencement Date and during construction of the New Lab Premises, Tenant’s Contractor, subcontractors, engineer and architect may park in Tenant’s Parking Spaces in the Parking Lot and in no other spaces. Tenant’s contractors, subcontractors, engineer and architect may not park in the Building’s visitor spaces. Construction dumpsters may be placed in designated areas of the Parking Lot or along Windsor Street. Dumpster pick-up, for dumpsters placed in the Parking Lot, must occur prior to 8AM on Business Days of the Property. Upon receipt of a Certificate of Insurance as provided in Section H below, Tenant’s Contractor shall be provided with a Building passcard which shall be returned to Landlord upon the later of the receipt of the C of O or completion of Landlord’s or Tenant’s punch list. Tenant’s Contractor must comply with all noise and time regulations of the City of Cambridge for construction including weekend or holiday work.
 
 
H.
Insurance and Liability. Tenant’s general contractor, engineer, consultants and architect shall provide Landlord with insurance certificates with coverages reasonably satisfactory to Landlord, with all certificates naming Landlord as certificate holder and additional insured and Fairlane Columbia, LLC, 432 Columbia Street Condominium Trust and LPC Commercial Services, Inc. as additional insureds (“Insurance Coverage”). In the event that Tenant chooses to use a construction manager instead of a general contractor, then all subcontractors shall provide Insurance Coverage to Landlord. Landlord shall have no liability for any loss or damage to any of Tenant’s fixtures or property installed or left in the Premises, unless such loss or damage is the result of a willful act or gross negligence of Landlord, Landlord’s Agent or Landlord’s vendors. Tenant shall hold harmless, indemnify and defend Landlord from and against any and all liabilities arising from or relating to the New Lab Tenant Improvements, unless such loss or damage is the result of a willful act or gross negligence of Landlord, Landlord’s Agent or Landlord’s vendors.
 
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I.
Tenant’s Cost. Tenant shall be responsible for all architectural, engineering and construction management fees.
 
 
J.
Landlord’s Contractors. Below is a list of Landlord’s Contractors mentioned in Section F above:
 
 
a)
Life Safety: Advanced Signal
 
 
b)
Sprinklers: Encore Fire Protection
 
 
K.
Telecommunications. Tenant shall be responsible for the installation and cost of all telecommunications and data wiring. Tenant’s telecommunication’s vendor shall provide a Certificate of Insurance with Fairlane Columbia, LLC as the certificate holder and Fairlane Columbia, LLC, 432 Columbia Street Condominium Trust and LPC Commercial Services, Inc. as additional insureds with minimum coverage as provided for Tenant in this Lease. Tenant’s telecommunications vendor shall receive an electrical permit from the City of Cambridge, if necessary, prior to any electrical work necessary for installation of Tenant’s telecommunications equipment.
 
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EXHIBIT D
 
RULES AND REGULATIONS
FOR FAIRLANE COLUMBIA, LLC
 
1. Tenant Conduct Tenant shall not carry on any practice which is contrary to any law or ordinance or which may damage the Premises or any other part of the Building. Tenant shall not cause any offensive odors, create any loud noise or nuisance to any other tenant or other persons in the Building. As determined by Landlord in its reasonable discretion, Tenant shall not overburden the common areas of the Building, including the hallways, elevator, loading dock and dumpster, with shipments and deliveries of goods. Tenant shall follow Landlord’s guidelines and instructions to avoid overburdening the common areas of the Building. No electric space heaters shall be used in the Premises or in the Building unless specifically approved by Landlord.
 
2. Smoking Smoking or carrying lighted cigars, pipes or cigarettes in the Premises, in the Building, or in front of any tenant’s entrance at the Property is not permitted. Smoking is permitted in the area designated in the Rules and Regulations of the 432 Columbia Street Condominium Trust. In the event that a Tenant or employee of Tenant is found to be the cause of a fire alarm at the Building because of smoking in the Building, such Tenant shall pay for all costs associated with said fire alarm. Tenant or its employees smoking outside of the Building shall dispose of cigarette or cigar butts in trash receptacles and not on the sidewalk or landscaped areas of the Property, in the Parking Lot or in catch basins of the Parking Lot.
 
3. Animals Animals or birds are not allowed in the Building, except for dogs used by the visually or hearing impaired, as except as permitted by Landlord on a case by case basis, in the sole and absolute discretion of Landlord.

4. Electronic Devices No televisions, phonographs, radios, compact disc players, or tape players shall be used such that they are heard or seen outside the Premises.
 
5. Advertising Tenant shall not distribute advertising or promotional materials in the Building or to other tenants and shall not admit into the Building individuals intending to canvas, solicit, or distribute advertising or promotional materials in the Building.
 
6. Electrical and HVAC Rooms Tenant shall not use any electrical room or closet in the Premises or in the Building for any additional purpose. Tenant shall not use any room or closet in which an air conditioning unit is located in the Premises or in the Building for any additional purpose, including the storage of any personal property or equipment, unless specifically permitted in writing by Landlord. Landlord may remove any of Tenant’s personal property or equipment from said rooms or closets without notice to Tenant at no liability to Landlord and may charge the expense incurred by such removal to Tenant. No trash or debris shall be placed in any electrical or air conditioning room or closet in the Premises or in Common Areas.
 
7. Toilets and Sinks Toilets and sinks shall not be used for any purposes other than those for which they were designed or constructed. No substances or materials other than those intended shall be placed in toilets and sinks, and the resulting expense of any stoppage, breakage, or damage shall be borne by Tenant who, or whose employees, agents, visitors, or invitees, shall have caused same.
 
8. Signs Tenant shall not place paper or other signs in Common Areas. Tenant shall not place any sign, symbol, advertisement or the like which may be visible to public view on the exterior of the Premises (including both interior and exterior surfaces of windows) or on any other part of the Building without the prior written consent of Landlord. In the event of a violation of the above rule regarding signs, symbols, advertising and the like by Tenant, Landlord may remove the material without any liability and may charge the expense incurred by such removal to Tenant.
 
9. Directories Tenant’s name will be listed on the main lobby directory by Landlord at Landlord’s expense. Additional names and names of subtenant of Tenant will be listed on the main lobby directory at Tenant’s request and expense by Landlord if space on the directory is available.
 
10. Interior Signs Interior signs displaying the Tenant’s name on Common Area doors or walls are subject to the Rules and Regulations of the 432 Columbia Street Condominium Trust and shall be at the expense of Tenant and shall be of a size, color and style acceptable to Landlord.
 
11. Locks Landlord shall furnish to Tenant a reasonable number of keys to the Building’s entrances and Tenant’s Premises. No additional locks, guards or bolts of any kind may be placed upon any of the doors or windows of Tenant, except with the prior written consent of Landlord. In the event of a violation of the above rule by Tenant, Landlord may remove the additional locks, guards or bolts without any liability and may charge the expense incurred by such removal and repair to Tenant, including the cost for materials and labor for a new door if the existing door is determined by Landlord to be damaged beyond repair. Each Tenant shall, within one day of the termination of its tenancy, return all keys, including bathroom keys to Landlord, whether furnished by Tenant or Landlord. All subtenants shall also return all keys to the Tenant or Landlord. In the event that Tenant does not return all its keys to Landlord or subtenant to Tenant, Tenant shall be responsible for the expense of rekeying the Premises.
 
12. Hazardous Materials Except for those items necessary for the cleaning, maintenance or operation of Tenant’s business, including office supplies which shall be properly stored to minimize the risk of fire and explosion, Tenant shall not bring or permit to be brought or kept in or on the Premises any inflammable, combustible or explosive fluid, chemical, or substance. In the event that any inflammable, combustible or explosive fluid, chemical, or substance is stored in the Premises, such materials shall be stored in its original shipping box or container or in a Tenant-supplied cabinet located in the Premises specifically manufactured for such materials.
 
13. Rules and Regulations of the 432 Columbia Street Condominium: Trust (the “Trust”) In the event that any of the above Rules and Regulations for Fairlane Columbia, LLC are in conflict with the Rules and Regulations of the Trust, the Rules and Regulations of the Trust shall prevail.
 
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EXHIBITE
LEGAL HOLIDAYS IN MASSACHUSETTS

*January 1
- New Year’s Day
   
Third Monday in January
- Martin Luther King, Jr. Day
   
Third Monday in February
- President’s Day
   
Third Monday in April
- Patriot’s Day
   
Last Monday in May
- Memorial Day
   
*July 4
- Independence Day
   
First Monday in September
- Labor Day
   
Second Monday in October
- Columbus Day
   
*November 11
- Veteran’s Day
   
Fourth Thursday in November
- Thanksgiving Day
   
*December 25
- Christmas Day

*Should any of these dates fall on a Sunday, the Holiday is observed on the following Monday.
 
EXHIBIT F

RULES AND REGULATIONS OF
432 COLUMBIA STREET CONDOMINIUM TRUST

(See following 14 pages)

RULES AND REGULATIONS OF
432 COLUMBIA STREET CONDOMINIUM TRUST

The following Rules and Regulations constitute an amendment of the Rules and Regulations adopted by the Trustees of the 432 Columbia Street Condominium Trust (the “Trust”), dated 2 March 1995 and recorded at the Middlesex South Registry of Deeds, Book 25255 Page 604.

These Rules and Regulations may, from time to time, be amended, modified, rescinded or otherwise changed by the Trustees. Other Rules and Regulations may be adopted by the Trustees. However, a Unit Owner shall not be bound by such amendment, modification, rescission, change or adoption of a new Rule or Regulation until said Unit Owner has notice or such change. For purposes of these Rules and Regulations, notice conspicuously posted upon the Building shall be deemed notice to all. Alternatively Rules and Regulations sent to Unit Owners by certified mail shall he deemed notice to specific Unit Owner.

1.0 Statement of Purpose:
 
These Rules and Regulations are adopted by the Trustees of the Trust for the benefit of the Unit Owners in order to maintain the Building and its grounds in a congenial, dignified and  professional manner.
 
2.0 Definitions:
 
Whenever the term Unit Owner is used in these Rules and Regulations it shall be read to mean the unit Owner, his or her employees, agents, servants, invitees, guests, licensees, customers or clients. tenants or subtenants as well as the employees, agents, servants, invitees, guests, licensees, customers or clients of a Unit Owner’s tenants and their tenants or subtenants, as may be appropriate. It shall also apply in the plural in the event that a Unit is owned by one or more persons or entities. Whenever the term Condominium Documents is used in these Rules and Regulations it shall be read to mean the Master Deed, Declaration of Trust, By-Laws and Rules and Regulations as may be amended from time to time. Whenever the term ‘Building’ is used in these Rules and Regulations it shall be read to mean the building itself: including the Common Areas, as well as grounds and any parking areas and is deemed to be interchangeable with and identical in meaning to the word ‘Condominium’. Whenever the term Managing Agent is used in these Rules and Regulations. it shall be read to mean the property manager or property management company for the Trust appointed by the Trustees.

3.0 No Obstruction of Common Areas and Facilities:

 
a.
The sidewalks, entrances, passages, public halls, vestibules, corridors and stairways to or appurtenant to the Building shall not be obstructed or used for any purpose other than ingress and egress from the Units. No vehicle belonging to a Unit Owner shall impede or prevent ready access to any entrance to, or exit from, the Building by any person or vehicle, without the prior consent of the Trustees.

 
b.
No bicycles, carts, wagons or any other items shall be allowed to stand in the public halls, passageways or other public areas of the Building. Delivery companies must not leave boxes for Unit Owners or tenants in public hall ways, passageways or other public areas of the Building including in front of suite doorways without first determining that the Unit Owner or tenant is not present.

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c.
No article (including but not limited to, garbage cans, bottles or mats) shall be placed or stored in any of the halls or on any of the staircases or landings of the Building, unless prior written permission is given by the Trustees. No fire exit of the Building shall be blocked in any manner. The Trustees, or their representatives, may remove any article stored in any of the halls, staircases or landings of the Building without notice to the owner of such article at no liability to the Trustees or their representatives.

 
d.
Unit Owners shall schedule deliveries to their units by vendors at such times, and in such times, and in such manner, as will reasonably minimize traffic congestion adjacent to the Building. Drivers of vehicles making deliveries to Unit Owners shall not Leave their vehicles unattended except when actually making such deliveries.

4.0 Disturbances:

 
a.
Except as is reasonably required to construct tenant improvements by Unit Owners, no Unit Owner, or tenant or subtenant, shall make, cause or permit any unusual, disturbing or objectionable noises, odors or vibrations to be produced upon or emanate from his or her Unit or any appurtenant limited common elements or areas or permit anything to be done therein that will interfere with the right. Comforts or conveniences of any other occupants of the Building. For the Construction of tenant improvements. Unit Owners performing such work shall make reasonable efforts to perform work which may create objectionable noise, odors or vibrations outside of business hours of adjacent Unit Owners or tenants. No televisions, photographs, radios, compact disc players or tape recorders shall be used such that they are heard or seen outside of a Unit Owner’s or tenant’s premises.

 
b.
No noxious or offensive activity shall be carried on in the Condominium, nor shall anything  be done therein which may be or become an annoyance or nuisance to the other Unit Owners or occupants. No Common Area shall be decorated or furnished by any Unit Owner, tenant or subtenant in any manner. Unit Owners and tenants shall not distribute advertising or promotional materials in the Building or to other Unit Owners or tenants of the Building, unless approved in each instance by the Trustees, and shall not admit into the Building individuals intending to canvas, solicit or otherwise distribute advertising or promotional  materials in the Building.

5.0 Leases:

Any Unit Owner may lease or rent his or her Unit, subject to the following conditions and any conditions contained in the Condominium Documents:

 
a.
All leases and occupancy agreements must expressly provide that the lease or occupancy agreement shall be subject to the Master Deed, Declaration of Trust, ByLaws and the Rules and Regulations of the Condominium, as most recently amended prior to the execution of the lease or occupancy agreement, and contain the following notice, in capital letters :

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‘‘IMPORTANT CLAUSE

HE BUILDING IN WHICH THIE UNIT OR PART OF A UNIT IS  BEING LEASED IS  LOCATED IS A CONDOMINIUM BUILDING - NOT A RENTAL BUILDING. THE BUILDING MAY BE OCCUPIED BY A COMBINATION OF UNIT OWNERS AND TENANTS OR LICENSEES. BY SIGNING THIS LEASE. LICENSE OR OCCUPANCY AGREEMENT, THE TENANT OR LICENSEE ACKNOWLEDGES THAT HE OR SHE HAS BEEN FURNISHED WITH A COPY OF THE MASTER DEED OF THE CONDOMINIUM, THE DECLARATION OF TRUST OF THE CONDOMINIUM AND THE BY-LAWS AND RULES AND REGULATIONS THERETO AND THAT HE OR SHE HAS READ THEM AND UNDERSTAND THEM AND THAT HE OR SHE WILL COMPLY IN ALL RESPECTS WITH THE SAME. THE TENANT OR LICENSEE ALSO UNDERSTANDS THAT IN THE EVENT THAT HE OR SHE FAILS TO COMPLY, THE TENANT OR LICENSEE MAY BE EVICTED BY THE TRUSTEES OF THE CONDOMINIUM TRUST (WHO ARE ELECTED BY THE UNIT OWNERS). THE PROVISIONS OF THIS CLAUSE TAKE PRECEDENCE OVER ANY OTHER PROVISION OF THIS LEASE LICENSE OR OCCUPANCY AGREEMENT.’’ 
 
And shall contain the following section in addition to the foregoing notice:

“Any failure by the Tenant to comply in all respects with the provisions of the Master Deed of the Condominium, the Declaration of Trust and the By-Laws and Rules and Regulations thereto shall constitute a material default in this lease, license, or occupancy agreement, and in the event or such default (“Default”), the Trusteed of the condominium Trust shall have the following rights and remedies against both the Unit Owner and the Tenant, in addition lo all other rights and remedies that Trustees and the Unit Owners (other than the owner of the affected Unit) have or may in the future have. against both the owner of the affected Unit and the tenant. all rights and remedies of the Trustees and the Unit Owners (other than the owner of the affected Unit) being deemed at all times to be cumulative and not exclusive. In addition,
 
i.
The Trustees shall have the right to give written notice of the Default to both the Tenant, and the Unit Owner. Said notice shall be deemed properly given if left in any part of the Unit, addressed to the Tenant, and mailed postage pre-paid, registered or certified mail. return receipt requested. addressed to the Unit Owner at such address as appears on the records of the Trustees, or by delivering said notice in hand, or be delivering said notice in any other manner permitted by law.
 
ii.
If the Default continues for five days after the giving of said notice, then the Trustees shall have the right to levy lines against the Unit Owner in accordance with the By-Laws, and terminate the tenancy by giving notice in writing to quit to the Tenant in any manner permitted by the Trustees, or both. A copy of such notice shall be delivered or mailed to the Unit Owner in the manner set forth here in above. Thereafter, the Trustees may initiate and prosecute a summary process action against the Tenant under the provisions of Massachusetts General Laws, in the name of the Unit Owner or in the name of the Trustees, or both.
 
iii.
The Trustees shall be entitled to levy a fine or fines, or give a notice or notices to quit, followed by a summary process action or actions, and the Trustees’ election to pursue any of the foregoing remedies shall in no way prohibit them from pursuing all of the foregoing remedies, either at the same time, or in the event of any further default.
 
iv.
All of the expenses incurred by the Trustees in giving notices. and notices to quit and maintaining and pursuing summary process actions and appeals therefrom. shall be entirely at the expense of the Unit Owner of the  affected unit. Such costs and expenses may be enforced and collected against the Unit Owner and Unit as if the same were common charges owed by the Unit Owner.

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v
The Unit Owner shall make reasonable efforts, at his or her expense and upon his or her initiative, to inform rental agents of the provisions of this section and shall, at his or her expense, and upon his or her initiative, furnish copies of the Condominium Documents to the Tenant and cause the lease or occupancy agreement to be prepared in conformity with the provisions of’ this section.
 
vi
Any renewal or extension of any lease or occupancy agreement shall be subject to the prior written approval of the Trustees in every instance. Such approval shall not limit any rights or remedies of the Trustees or Unit Owners in the event of a subsequent default.

vii.
A true copy of every lease or occupancy agreement shall be delivered to the Trustees forthwith upon its execution.

viii.
Notwithstanding anything to the contrary herein, and notwithstanding any custom, law or usage to the contrary, it is expressly understood and agreed that neither the Trustees, nor the Unit Owners shall ever bear any personal liability with respect to any lease or the use and occupancy of a unit by a Tenant.

ix.
Every lease, license or occupancy agreement, shall have attached thereto, and incorporated therein by reference, a copy of this section 5.0 of the Rules and Regulations.
 
b.
All leases. lease amendments and occupancy agreements must include the following revised and excerpted language from Section 8.0 (i) from these Rules and Regulations:
 
“If a tenant (or, in each case below, a unit owner) offers any of its employees parking in the Parking Lot, then the tenant has the option of charging such employee market rate for parking, or, alternatively, if the tenant charges any of its employees less than the current monthly market rate for parking, then the tenant will offer such employees an equivalent monthly  payment to support the employee’s commute  by walking, biking. transit or carpool. In the event that an employee chooses to use the equivalent monthly payment for transit, tenants will use best efforts to enroll in the MBTA pass program to provide an employee with the ability to purchase a pass using pre-tax wages. ‘Equivalent monthly payment’ means the remainder of the current monthly market rate for parking less the fee paid for parking  by an employee. For example, if the current monthly market rate is $200 and an employee is being charged $50 per month by the employer, then the equivalent monthly payment equals $150 per month. Any tenant may charge certain  employees  for parking at market rate in the Parking Lot and other employees may be charged at less than the current monthly market rate for parking in the Parking Lot with the tenant providing such employees with the equivalent monthly benefit option.”
 
6.0
Use of Premises:
 

 a.
No window guards, except as may be required by law, or other window decorations shall be used in or about any Unit, except as shall have been approved in writing by the Trustees.
Such approval shall not be unreasonably withheld or delayed. In no event shall any exterior glass surfaces of any windows at the Building be colored or painted.
 
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 b.
No radio or television aerial or other object shall be attached to or hung from the exterior of the Building. No sign, notice, advertisement or illumination (including, without limitation. “For Sale”, ‘‘For Lease” or “For Rent” signs) shall be inscribed or exposed on or at any window or other part of the Building by any unit Owner, tenant or subtenant except as such are permitted by the Condominium Documents or shall have been approved in writing by the Trustees. In the event of a violation of this rule regarding signs, the Trustees or their representatives may remove the material without any liability and may charge the expense incurred by such removal to the owner of such material. See Exhibit A regarding Common  Area Signage.
 

 c.
Nothing, including ventilation ductwork, shall be projected from any window of a Unit or attached to the facade of the Building. without similar approval and, in the case of ventilation ductwork, compliance with all applicable state regulations and approval by all applicable public agencies. In no event shall ductwork be visible from any window on the 1st and 2nd floors of the Building and in the instance of visibility from any Building penthouse. such ductwork shall be designed for minimal visual impact..


d.
Nothing shall be done in any Unit or in, on or to the Common Areas or Facilities which will impair the structural integrity of the Condominium.

 
c.
Nothing shall be done or kept within any Unit which will increase the rate of insurance on the Building, or the contents thereof; applicable for commercial office usage, without the prior written approval or the Trustees. No Unit Owner or tenant or subtenant. shall permit or allow anything to be done. or kept in his or her Unit, on in the Common Areas or facilities. which may result in the cancellation of insurance on the Building or the contents thereof or which may be in violation of any law or governmental regulation.
 

 r.
Damage by fire or accident affecting any Unit, Common Area, or liability of the Unit Owners of the Condominium Trust (or which may affect their liability) shall be promptly reported to the Trustees immediately following the occurrence or discovery thereof.
 

 g.
Any damage to the Building caused by a Unit Owner shall be repaired at the expense of the Unit Owner. The Condominium Trust. at its sole option. may cause the damage to be repaired or may order the Unit Owner to begin immediate repair of the damage. In the event that the Condominium Trust incurs any expense to repair the damage, the reasonable cost of the work to repair such damage plus a 5% construction management fee to the Condominium Trust shall constitute a lien upon the Unit in the event that the Unit Owner fails to pay the Condominium Trust within thirty (30) days of receiving an invoice.
 

 h.
Each Unit Owner is responsible to keep his or her Unit in a good state of repair, preservation, condition and cleanliness.
 

 i.
Unit Owners, tenants and subtenants, their employees, agents, servants, invitees, guests, licensees, customer or clients shall at no time enter upon, or attempt to enter upon, the roof of the Building except in an emergency.
 
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j.
The Trustees, the Superintendent and the agents of the Condominium Trust or of the Managing Agent, and any contractor or workman authorized by the Condominium Trust, or the Managing Agent, may enter into any Unit at any reasonable time for the purpose of inspecting such Unit for the presence or any vermin. insects or other pests and for purpose of taking such measures as may be necessary to control or exterminate any Such vermin, insects or other pests; however, such entry. inspection and extermination shall be done in a reasonable manner so as not to unreasonably interfere with the use of such Unit for its permitted purposes. The Trustees may mandate that a Unit Owner retain the services of a pest control firm until any infestation has been brought under control. No food shall be left accessible in the Condominium common areas or in specific units of the Condominium, i.e. not in sealed metal or plastic containers.


k.
The Trustees, or their designated agent, shall retain a passkey or access code to all Units for use in emergency situation or for access to repair or maintain Common Elements. No Unit Owner. tenant or subtenant, shall alter any lock or install a new lock on any door of a Unit without the prior written consent of the Trustees. If such approval is granted, the Unit Owner shall supply the Trustees with the key or keys to any altered or new lock.
 

 l.
All personal property of the Unit Owners, or any other occupant of a unit. whether in a unit, or in the Common Areas and facilities, or in the Parking Spaces. or elsewhere on the Condominium property, shall be kept therein at the sole risk and responsibility of the respective Unit Owner or occupant, and the Trustees shall have no responsibility therefore.


m.
All garbage and trash within every Unit must be placed in scalable or closeable receptacles designated for refuse collection, No garbage. trash, or recycled materials shall be placed elsewhere upon any of the Common Areas and facilities except by the trash compactor and with the approval of the Superintendent.
 
7.0
Late Fees:
 
 
a.
The monthly common area fee is due, in advance, as of the first day of the mon th. Any fee payable by a Unit Owner to the: Condominium Trust received after the I 5th clay of the month in which it is payable, or more than 15 days after it is payable, shall he subject to an additional fee. Such additional fee shall be deemed an unpaid common area charge. The additional fee payable shall be as follows:
 

 1.
In the event a payment, which is due as of the first of the month, is received after the 15th of the month but before the first day of the next month, an additional unpaid common area charge of $200 shall be due and payable. If payment is not received before the first day of the next month. an additional unpaid common area charge of.$200 shall be: due and payable for each calendar month that the amount, or any portion of the amount, remains outstanding.


2.
In the event a payment, which is due on some date other than the first of the month, is received after the 15th day from the date it was payable but before the 31st day from the date it was payable, an additional unpaid common area charge of $200 shall be due and payable. If payment is not received before the 31st day of the date on which it was payable, an additional unpaid common area charge of $200 shall be due and payable for each 30 day period, or any part thereof, during which the amount. or any portion of the amount remains outstanding.
 
 
b.
All payments received by the Condominium Trust will be applied first against the oldest amount due, including any additional fee charges, interest or collection fees (including attorney’s fees and legal costs) that may be due.

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8.0
Miscellaneous:
 
  a.
Superintendent: No Unit Owner shall attempt to direct. supervise, or in any manner attempt to control or request favors of the building superintendent retained by the Trust’s property management company or any employee of the Trust. No Unit Owner, tenant or subtenant shall send any employee of the Condominium Trust or of the Managing Agent out of the Building on any private business except as provided under Clause (i) below.
 

 b.
Moving: The Unit Owner must notify the Trust’s Managing Agent, at least five (5) business days prior to any unit occupant or tenant moving in or out of a Unit. of the date of the move. All moves must begin and be completed off-hours, before 8AM or after 5PM Monday to Friday except for Building Holidays and weekends. Movers shall put down Masonite boards in Common Area hallways before heavy dollies or carts are operated in Common Areas. Unit Owners must provide the Managing Agent a Certificate of Insurance. from the moving company listing 432 Columbia Street Condominium Trust as the Certificate Holder and the Unit Owner, the Condominium Trust and the Managing Agent as an additional insureds.
 

 c.
Moving Fee: The Unit Owner is responsible for paying a move in and move out fee to the Condominium, to be paid within thirty (30) days of the move in. The fee shall be the fee as then most currently set by the Trustees and is subject to change without notice. The fee is initially set at two hundred dollars ($200). The Trustees may, in their discretion, waive this fee.
 

 d.
Water Heaters: All new and replacement electric on-line water heaters shall be equipped with an automatic shutoff device (such as Wags valves by Taco) in case of leaks. Such installations shall be capable of automatically closing the water supply line in the event of heater failure or pipe leaks. Unit Owners shall provide to the Managing Agent, when requested, an inventory. including age, presence of an automatic shut-off valve or drain pan, and location of all hot water heaters in their Units. The Building Superintendent may enter the Units of the Building to inspect the Units for hot water heaters if Unit Owners do not provide such an inventory.
 

 e.
Wires and Cables: No unit owner or tenant may install telephone, data or any other wiring in another Unit without the express prior written approval of that Unit Owner. New connections from any Unit to the Building telephone closet located in Suite 9 of Unit B-1 shall be made only through a surface raceway from the telephone closet to the common areas adjacent to Units 15A, 15B and 17B and then to the common area sub-closets or the Unit the connections will serve. Wiring or cables shall be in a dark color and specifically, not white or yellow and shall be tied to other, wiring or cables following the same route. No wiring or cables shall be hung or intertwined with sprinkler piping or sprinkler heads. The Building Superintendent shall be present during the initial entry by any telecommunications provider into Suite 9. Any such installation shall be paid for by the Unit Owner requiring such service and only after specific details and routes have been submitted to and approved by the Trustees. The Trustees shall have the right, but not obligation. to direct Unit Owners failing to comply with this Rule to make and pay for a properly complying installation and/or correct any non-complying installation at the Unit Owner’s expense. Installation of new or changed service by any telecommunications provider shall be completed during normal business hours of the. Building Superintendent, which may be changed from time to time. For the purposes of this section, the hours of the Building Superintendent are 8AM to 4PM, Monday to Friday. except for Building Holidays.

7

 f.
Vehicles are to be parked only in the designated areas and shall only park in lined spaces for no more than the designated time frame. No more than one vehicle shall be parked in a single parking space. except for motorcycles and motor scooters but only in spaces designated by the Trustees. No Unit Owner, employee of any Unit owner or his or her tenant shall park at any time in a Visitor’s Parking Space. The Superintendent shall have standing instructions to have such vehicles towed at the Owner’s expense. Handicapped-designated spaces shall only be occupied by those vehicles with a handicapped designation visible on or in the vehicle. Vehicles shall not block staircases or the Building’s loading dock. No vehicles belonging to vendors servicing the Building, a Unit Owner, or a tenant of a Unit Owner shall park in a Visitor’s Parking Space. In the event of an anticipated snow storm with estimates of over four inches of snow, al I vehicles must be removed from all of the Building’s parking lots prior to 12AM on the evening of the anticipated storm.


g.
Loading Dock. Only conventional daily office trash shall be disposed of at the loading dock. Unit Owners and their tenants shall make their own arrangements for the disposal of extraordinary trash such as furniture, computers and electronic equipment, at the discretion of the Superintendent. Unit Owners and their tenants must not overburden the loading dock with deliveries or packages being picked up by overnight delivery services, such as the USPS. FedEx. UPS or DHL. Unit Owners, and their tenants must follow procedures provided by the Trustees and may be requested lo remove items from the loading dock if the Trustees determine that the loading dock is overburdened. Unit Owners and their tenants must not block access to the dumpster access panel in the loading dock by deliveries, packages being picked up, recycling materials or other trash. All deliveries that arrive on pallets must be broken down prior to leaving the loading dock. Pallet jacks arc not permitted in Common Area hallways. All pallets must return with delivery driver. Pallets left in the loading clock or elsewhere in the Building from a delivery will be removed by the Trust at the Unit Owner’s expense.
 

 h.
City of Cambridge Parking and Transportation Demand Management (PTDM) plan (2000 Requirements). To maintain compliance with a City Permit for additional parking spaces, a range of information on employee travel Mode Split, Carpooling, etc. and other information is required by the City on an annual basis, Failure of the Condominium to provide such information on a timely basis may result in withdrawal of the Permit, fines or other serious sanctions. All Unit Owners are obliged to provide the requested information on an urgent basis, on behalf of their or their tenants’ employees. The Condominium Trustees may seek any damages suffered by the Condominium as a result of failure in this regard from a Unit Owner who fails to provide accurate and timely information.
 

 i.
City of Cambridge Parking and Transportation Demand Management (PTDM) plan (2020 Requirements). If a tenant (or, in each case below. a unit owner) offers any of its employees parking in the Parking Lot, then the tenant has the option of charging such employee market rate for parking. or, alternatively, if the tenant charges any of its employees less than the current monthly market rate for parking, then the tenant will offer such employees an equivalent monthly payment to support the employee’s commute by walking, biking, transit or carpool. In the event that an employee chooses to use the equivalent monthly payment for transit,  tenants will use best efforts to enroll in the MBTA pass program to provide an employee with the ability to purchase a pass using pre-tax wages. ‘Equivalent monthly payment’ means the remainder of the current monthly market rate for parking less the fee paid for parking by an employee. For example, if the current monthly market rate is $200 and an employee is being charged $50 per month by the employer, then the equivalent monthly payment equals $150 per month. Any tenant may charge certain employees for parking at market rate in the Parking Lot and other employees may be charged at less than the current monthly market rate for parking in the Parking Lot with the tenant providing such employees with the equivalent monthly benefit option.
 
8

 j.
Superintendent. The Superintendent’s responsibilities are for the maintenance and operation of the Condominium as a whole. Unit Owners or their tenants may request extraordinary services form the Superintendent which he may undertake with the specific approval of the Trustees. Such work will not be commenced without completion of a Maintenance Request. and Work Order form, and shall be billed to the appropriate Owner or tenant  at hourly rates and material mark-ups as established from time to time by the Trustees. The Superintendent has a list of those work items deemed ‘extraordinary’.


k.
Access Cards. A fee established by the Trustees is levied for the issuance of access cards to employees at the Condominium.


l.
Space Heaters. No electric space heaters shall be used in the Building unless specifically approved by the Trustees.

 
m.
Smoking. Smoking or carrying lighted cigars. pipes. cigarettes. e-cigarettes, or marijuana or similar products anywhere in the Building or grounds of the Building is not permitted, except in designated smoking areas of the Building as described below or in parked vehicles with closed windows, except that marijuana or similar products may not be smoked in the designated smoking areas of the Building. In the event that a Unit Owner, tenant or employee of such Unit Owner or tenant is found to be the cause of a fire alarm at the Building because of smoking in the Building, such Unit Owner or tenant shall pay for all costs associated with said fire alarm. Unit Owners, tenants or employees of Unit Owners or tenants smoking outside of the Building shall not dispose of cigarette or cigar butts in the parking lot or landscaped areas of the Building. No smoking is permitted within 50 feet of any entrance or exit of the Building, any driveway entrance of the Building. or any window of the Building. The Trustees of the Condominium have designated the concrete areas designated on the attached plan dated December 2015 as the smoking areas of the Building.
 

 n.
Bicycles. Bicycles must be located in the concrete area designated on the attached plan as the location of the Building’s bicycle area and bicycle racks. No bicycle parking is permitted elsewhere in the parking lot, landscaped areas, sidewalks or attached to fences of the Building, except for the bicycle stands located at the Windsor Street entrance of the Building. Bicycles used by employees and guests of Unit Owners and tenants are permitted inside the Building, but must be lifted above the carpeted areas of the Common Areas of the Building.
 

 o.
Animals. Animals or birds are not allowed in the Building without the written permission of the Trustees of the Trust, except for dogs used by the visually or hearing impaired. See Exhibit B regarding Pet Visitation.
 

 p.
Motorcycles. The Rules and Regulations shall apply to motorcycles and motorized scooters in the same manner as other vehicles, except that motorized scooters may park in the hatched area adjacent to Parking Space 115 and two motorcycles may park in Parking Space 124. Prior to parking in the hatched area adjacent to Parking Space 115 and in Parking Space 124, Unit Owners and tenants with employees using motorized scooters and motorcycles must sign a license with the Condominium Trust allowing such parking. The Condominium Trust may charge a monthly fee for such parking. Motorcycles and motorized scooters must not park on any sidewalk of the Building and are subject to towing for failure to comply with this provision.

9
 
q.
Suite/Unit Door Signs: For any entrance door to a suite or unit abutting the Building’s Common Area, only one sign or no greater than 150 square inches shall be permitted on the entrance door or the walls adjacent to the entrance doors to a suite or unit, whether the entrance is comprised of single or double doors. Additional or larger signs may be approved by a vote of the Condominium Trustees. Temporary signs or additional entry equipment at the entrance door or a suite or unit shall be permitted only by the Managing Agent or by a vote of the Condominium Trustees.  See Exhibit A regarding Common Area Signage

 
r.
Handicapped Parking Spaces: Any employer of a person using a handicapped parking space in the Building’s parking lot on a regular basis must pay to the Trust the market rent for Trust parking spaces. The employer must enter into a license agreement with the Trust for such space.
 
 
s.
Vendor, Contractor or Subcontractor: Should a vendor, contractor or subcontractor of a unit Owner fail to follow the instructions of the Property Manager or Building Superintendent or the procedures of the Condominium Trust prescribed in the Rules & Regulations or engage in gross negligence or willful misconduct at the Building, the Condominium Trustees may inform the Unit Owner that the vendor, contractor or subcontractor may not perform any additional services at the Building. Any vendor, contractor or subcontractor performing fire alarm work or installation, mist coordinate with the Managing Agent, not the Building Superintendent, regarding testing and connecting to the Building’s main fire alarm panel.
 
 
t.
HVAC Units: Unit Owners installing new HVAC units must provide the Trust’s Managing Agent with the location on the roof or grounds, serial number and model number. Locations of new HVAC units must be approved by the Managing Agent to ensure that the proposed location does not prevent water from reaching roof drains or block emergency egress paths. Unit Owners must remove old HVAC units from the roof or grounds at the time of installing new units. Evidence or removal must be provided to the Managing Agent. All costs for installing new units and removing old units shall be borne by the Unit Owner installing or removing the units. All roof installations, whether for HVAC or telecommunication purposes must have rubber pads under wooden or plastic blocking.
 
 
u.
Windows: Unit Owners replacing exterior window frames and windows must use frames with the color ‘Hartford Green’ (or an exact match of a window frame manufacturer). matching Hartford Green sealant such as Dow Corning 790 “Blue Spruce”, Precora 864 Tremco Dymonic FC, and clear glass to match existing window frames and window glass. Prior to installation or sealant maintenance, window frames, sealant. and windows must be approved by the Trustees. The Trustees reserve the right to deny approval of window frames, sealant. and window glass even if said frames, sealant and glass have been purchased by Unit Owners. Unit Owners must replace windows with broken thermopane seals within six (6) months of notification by the Condominium Trustees or Managing Agent. In the event that the Unit Owner has not replaced such windows. the Trust may enter the Unit and replace the window. In the event that Unit Owner’s failure lo apply sealant or to replace a leaking window causes water damage to another Unit Owner’s Unit or the personal property of the other Unit Owner or its tenant, the Trust may enter the Unit with the failed window or failed sealant and replace the window or apply sealant. If a window or windows are replaced or sealant applied. the Trust will charge the Unit Owner for the cost of goods and services provided by the window installation company plus a 5% construction management fee and shall constitute a lien upon the Unit in the event that the Unit Owner fails to pay the Condominium Trust within thirty (30) days or receiving an invoice.

10
 
v.
Emergency Egress: Unless an emergency has occurred at the Property, occupants of the Property shall not use the exit doors on the first floor. second floor and penthouse which lead via metal staircases into an emergency egress alley located behind the adjacent Shell Station at 1001 Cambridge Street. Construction and telecommunications company personnel may use this emergency egress alley to remove debris from the Building, to service or install HVAC equipment, or to service or install telecommunications equipment with the approval of the Managing Agent.
 
 
w.
Skylights and Screens: All new skylights must have protective screens installed on the roof with such screens subject to the approval of the Managing Agent. In the event that a  Unit Owner fails to install a protective screen on the roof within sixty (60) days after receiving notice from the Managing Agent, the Trust may install the protective screen. If a protective screen is installed, the Trust will charge the Unit Owner for the cost of goods and services provided by the screen installation company plus a 5% construction management fee and shall constitute a lien upon the Unit in the event that the Unit Owner fails to pay the Condominium Trust within thirty (30) days of receiving an invoice.
 
 
x.
Building Permit: Any Unit Owner spending over $l0,000 for new construction in a Unit shall be required to receive a building permit from the Inspectional  Services  Department of the City of Cambridge. A copy of such permit shall be provided to the Managing upon receipt of the permit from the City of Cambridge.
 
 
y.
Deliveries at Common Area Mailboxes: Unit Owners, tenants and their employees shall not overburden the mailbox area in the Building’s lobby with personal deliveries. Unit Owners and tenants shall remove boxes from the mailbox area on a daily basis to ensure access to the Building’s mailboxes and to retain the professional appearance of the Building’s lobby.
 
 
z.
Trust’s Managing Agent: As of the date of these amendments to the Rules and Regulations, the Trust’s Managing Agent is Lincoln Properly Company, 1 Van de Graaff Drive, Lower Level, Burlington, MA 01803.
 
aa. 
 Within each Unit Owner’s Unit or each tenant’s premises, Unit Owners and tenants shall observe and comply with the public health guidelines of the United States Centers for Disease Control and any and all federal, state, and local authorities with jurisdiction over the Building, Units or a tenant’s premises (collectively, the ‘‘Public Health Guidelines”).

 
bb.
Within  all  areas of the Building outside the Units and tenant’s premises, Unit Owners and tenants shall monitor and cause compliance with Public Health Guidelines and with the Trust’s regulations and protocols (“Trust Protocols’’) to avoid transmission or COVID-19 and other contagious diseases by every person acting by. through, or on behalf of Unit Owners and tenants, provided that any such Trust Protocols shall have been communicated to Unit Owners and tenants in advance orally, by written correspondence, or by posted signage. Trust Protocols may include, but are not limited to, requiring that individuals wear face masks covering the mouth and nose; requiring that individuals maintain social distancing of at least 6 feet apart; limiting or prohibiting gatherings in common areas; and changing pedestrian traffic patterns in lobbies, stairwells, elevators, and other common areas.

11
 
cc.
The Managing Agent shall have the right. but not the obligation, to (a) screen any person seeking entrance to the Building for symptoms of contagious disease (including but not limited to COVID-19), which screening may include, without limitation, a temperature scan, and (b) deny entry lo the Building to any person exhibiting symptoms of contagious disease (including but not limited to COVTD-19), including those persons exhibiting an elevated body  temperature. All persons entering the Building shall cooperate with any such procedures.
 
 
dd.
Unit Owners and tenants shall immediately report to the Managing Agent (Lincoln Property Company as of the date of these Rules & Regulations) if Unit Owners and tenants becomes aware that any individual present in the Building visiting a Unit Owner or tenant within the last 7 days: (a) had a confirmed case of COVID-19. at the time of such visit. or (b) has since been diagnosed with COVID-19. In each such case. Unit Owners and tenants should use extreme care not to disclose the name or other identifying information of the individual in question. Unit owners and tenants shall cooperate with the Managing Agent and its representatives to identify any areas outside of the Unit or tenant’s premises that were accessed by such individual during such visit or visits to the Building. such as bathrooms. vending machines and Common Area seating areas.
 
 
ee.
City of Cambridge Parking and Transportation Demand Management (PTDM) plan (Additional 2020 Requirements). Unit owners are required to report to the Managing Agent annually by April 1st 1) the number of spaces owned, 2) the number of spaces used by  the Unit Owner, 3) the number of spaces leased to tenants of the Unit Owner, and 4) the number of spaces which Unit Owners lease from other Unit Owners.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

12
These amendments to the Rules and Regulations are hereby adopted by the consent of the Trustees of the 432 Columbia Street Condominium Trust this 7th day of August, 2020.
 
VOTE OF TRUSTEES
 
Reference is made to the 432 Columbia Street Condominium Trust dated 22 January 1988, recorded in the Middlesex County Registry of Deeds Book 18837, Page 158. Pursuant to Section 7 of the By-Laws of the Trust. the Trustees unanimously voted to adopt the above amended Rules and Regulations with Exhibits A and B. These Rules and Regulations shall be effective as of the latter of August 31, 2020 or the date a copy is actually received by a Unit Owner or posted in the Condominium.
 
IN WITNESS HEREOF the parties hereto have signed this vote of trustees this 7th of August. 2020,

/s/ Brain Bai

Brain Bai, Trustee
Witnessed:



/s/ Michael Grill

Michael Grill, Trustee
Witnessed:



/s/ Hillary Brown

Hillary Brown, Trustee
Witnessed:

13

EXHIBIT A
RULES AND REGULATIONS
432 COLUMBIA STREET CONDOMINIUM TRUST
 
COMMON AREA SIGNAGE
RULES & REGULATIONS
 

In addition to the rules regarding signage in the existing Rules and Regulations, the Trust prohibits posting signage in the Building common areas without prior written permission of the Trustees. The Trustees hereby provide authority to the Managing Agent to provide permission or denial to Unit Owners. tenant or subtenant for proposed signage. The following Common Area Signage Rules & Regulations are provided below to clarify this building policy.
 

 1.
All proposed signage must be presented to Trustees or Managing Agent for authorization 24-hours prior to the requested posting date and time.
 

 2.
Any and all signage must receive written authorization from Trustees and/or Managing Agent.
 
 
3.
Any and all signage must be printed, laminated and professional in appearance. Hand-written and/or non-laminated paper signage will not be authorized.
 

 4.
Overnight signage must be posted after 5:00pm and removed prior to 8:00am, Monday through Friday.
 

 5.
Weekend signage must be posted after 5:00pm on the appropriate Friday and removed prior to 8:00am on the following Monday.


6.
Any and all adhesive used to post signage must be completely and appropriately removed immediately upon removal of signage. Any and all damage caused by the installation or removal of signage is the whole responsibility of the corresponding Unit Owner to repair with in 24-hours of damage occurring, to Trustees satisfaction.
 

 7.
Signage posted on a floor stand or easel is strictly prohibited from impeding any emergency exit pathways or doorway at any time, for any reason. The Trust reserves the right to relocate floor stand signage at any time.
 

 8.
The Trust reserves the right to deny authorization of signage at any time for any reason.
 
 
9.
Signage authorization is given on a first come, first serve basis.

EXHIBIT B
RULES &  REGULATIONS OF
432 COLUMBlA STREET CONDOMINIUM TRUST

PET VISITATION
RULES & REGULATIONS

Section 8.0 (0) of the Rules and Regulations of the 432 Columbia Street Columbia Street Condominium Trust dated October 16, 2008 prohibits animals at 1035 Cambridge Street without written permission of the Trustees. The following Pet Visitation Rules & Regulations are provided below to clarify this building policy.

 
l
Any and all non-service dogs brought onto the property  must first receive written authorization from the Trustees or Managing Agent. Service dogs, those used by visually or hearing impaired, are permitted in the building.
 

 2.
Only service dogs will be permitted on the property. Any and all other pets or animals are prohibited.
 

 3.
Trustees or Managing Agent shall have the authority to revoke dog visitation privileges at the property at any time, with or without reason.


4.
Only one (1) dog authorization shall be provided PER TENANT SUITE.
 

 5.
Authorized dogs are allowed a maximum of (1) visit per business week.
 

 6.
Dogs must be kept contained or on a leash at all times while within any and all common areas including, but not limited to: parking lot, landscaping, common lobbies or common hallways.
 

 7.
Dogs are strictly prohibited from using building common areas including, but not limited to, parking lots and landscaped areas, for “restroom” purposes.
 

 8.
Each individual Unit Owner is wholly responsible for any and all liability related to the pet’s visitation.
 

 9.
Any and all incidents occurring because of or related to a dog involving additional costs (i.e,: cleaning, carpeting, legal fees) will be the full and complete responsibility of Unit Owner to repair to the satisfaction of the Trustees.

EXHIBIT G

PARKING LOT PLAN OF 1035 CAMBRIDGE STREET

(Sec following page)

INDEX TO LEASE

1.1
DEFINITIONS
1
1.2
EXTENT OF AGREEMENT
5
2.1
LEASED PREMISES
5
2.2
APPURTENANT RIGHTS AND OBLIGATIONS
5
3.1
RENT
5
3.2
LATE RECEIPT OF RENT
6
4.1
CONDITION OF PREMISES
6
5.1
PERMITTED USE OF PREMISES
7
5.2
ALTERATIONS BY TENANT
8
6.1
PROHIBITION AGAINST ASSIGNMENT AND SUBLETTING
8
7.1
LANDLORD’S REPAIRS AND MAINTENANCE
10
7.2
TENANT’S REPAIR AND MAINTENANCE
10
7.3
TENANT’S EQUIPMENT
10
7.4
UTILITIES AND BUILDING SERVICES
11
8.1
REAL ESTATE TAX PAYMENTS
12
8.2
ABATEMENT
12
8.3
ESTIMATED REAL ESTATE TAX PAYMENTS
12
9.1
CONDOMINIUM FEE PAYMENTS
13
9.2
CONDOMINIUM FEES
13
9.3
ESTIMATED CONDOMINIUM FEE PAYMENTS
14
10.1
TENANT’S AND LANDLORD’S INDEMNITY
14
10.2
TENANT’S INSURANCE
15
10.3
TENANT’S RISK
15
10.4
INJURY CAUSED BY THIRD PARTIES
16
l 1.1
LANDLORD’S RIGHT OF ACCESS
16
12.1
ABATEMENT OF RENT
16
12.2
RIGHT TO TERMINATE
16
12.3
RESTORATION
17
12.4
AWARD
17
13.1
TENANT’S DEFAULT
17
13.2
LANDLORD’S DEFAULT
20
14.1
WAIVER
20
14.2
COVENANT OF QUIET ENJOYMENT
21
14.3
LANDLORD’S LIABILITY
21
14.4
TRANSFER OF TITLE
21
14.5
RULES AND REGULATIONS
21
14.6
ADDITIONAL CHARGES
22
14.7
SEVERABILITY
22
14.8
BINDING NATURE
22
14.9
NOTICES
22
14.10
COMPLETE AGREEMENT AND AMENDMENT
22
14.11
SUBORDINATION
22
14.12
ESTOPPEL CERTIFICATES
23
14.13
LANDLORD’S RIGHT TO CURE DEFAULTS
23

14.14
HOLDOVER
23
14.15
WAIVER OF SUBROGATION
23
14.16
YIELD UP
24
14.17
BROKERAGE
24
14.18
CONSTRUCTION
24
14.19
INTENTIONALLY DELETED
25
14.20
SECURITY DEPOSIT
25
14.21
PARTIAL INVALIDITY
25
14.22
GOVERNING LAW
25
14.23
FINANCIAL STATEMENTS
25
14.24
SATELLITE DISH/ANTENNA
26
14.25
COMPLIANCE WITH CONDOMINIUM DOCUMENTS
26
14.26
SUBMISSION NOT OFFER OR OPTION
28
14.27
AUTHORITY AND ORGANIZATION OF TENANT
28
14.28
NO RECORDING
29
14.29
ADDENDUM
29
14.30
TENANT’S APPROVALS
29
14.31
SIGNATURES
29
14.32
NO PERSONAL LIABILITY
 29

EXHIBIT A
LEGAL DESCRIPTION OF LAND
EXHIBIT B
LEASE PLAN
EXHIBIT C
LANDLORD’S WORK
EXHIBIT D
RULES & REGULATIONS FOR FAIRLANE COLUMBIA, LLC
EXHIBIT E
LEGAL HOLIDAYS IN MASSACHUSETTS
EXHIBIT F
RULES AND REGULATIONS OF 432 COLUMBIA STREET CONDOMINIUM TRUST
EXHIBIT G
PARKING LOT PLAN OF 1035 CAMBRIDGE STREET


EXHIBIT 21.1
 
SUBSIDIARIES OF THE REGISTRANT

Subsidiary
  
State Or Country of Organization
Brooklyn ImmunoTherapeutics, LLC
  
Delaware

*Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of the registrant are omitted because, considered in the aggregate, they would not constitute a significant subsidiary as of the end of the year covered by this report.
EXHIBIT 23.1
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in the Registration Statement of Brooklyn ImmunoTherapeutics, Inc. on Form S-8 (File No. 333-260200; File No. 333-256760; and File No. 333-232141) of our report dated April 15, 2022, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of the consolidated financial statements of Brooklyn ImmunoTherapeutics, Inc. as of December 31, 2021 and 2020 and for each of the two years in the period ended December 31, 2021, which report is included in this Annual Report on Form 10-K of Brooklyn ImmunoTherapeutics, Inc. for the year ended December 31, 2021.

Our report on the consolidated financial statements refers to a change in the method of accounting for leases in 2020 due to the adoption of the guidance in ASC Topic 842, Leases (“Topic 842”).

/s/ Marcum llp

Marcum llp
New York, NY
April 15, 2022
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Howard J. Federoff, certify that:
 
1. I have reviewed this annual report on Form 10-K of Brooklyn ImmunoTherapeutics, Inc. (the “Company”);
 
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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
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 (or persons performing the equivalent functions):
 

 (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 control over financial reporting.
 
Dated: April 15, 2022
/s/ Howard J. Federoff


Howard J. Federoff,
Chief Executive Officer and President
Brooklyn ImmunoTherapeutics, Inc.


EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Sandra Gurrola, certify that:
 
1.  I have reviewed this annual report on Form 10-K of Brooklyn ImmunoTherapeutics, Inc. (the “Company”);
 
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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
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 (or persons performing the equivalent functions):
 

 (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 control over financial reporting.
 
Dated: April 15, 2022
/s/ Sandra Gurrola


Sandra Gurrola,
Vice President of Finance
Brooklyn ImmunoTherapeutics, Inc.


EXHIBIT 32.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 In connection with the Annual Report of Brooklyn ImmunoTherapeutics, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2021 (the “Report”), I, Howard J. Federoff, Chief Executive Officer and President of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
(1) the Report, as filed with the Securities and Exchange Commission, 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 the Registrant.

Dated: April 15, 2022
/s/ Howard J. Federoff


Howard J. Federoff,
Chief Executive Officer and President
Brooklyn ImmunoTherapeutics, Inc.


EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of Brooklyn ImmunoTherapeutics, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2021 (the “Report”), I, Sandra Gurrola, Vice President of Finance of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
(1) the Report, as filed with the Securities and Exchange Commission, 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 the Registrant.

Dated: April 15, 2022
/s/ Sandra Gurrola


Sandra Gurrola,
Vice President of Finance
Brooklyn ImmunoTherapeutics, Inc.