RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/consent solicitation statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. You should also read and consider the other information in this proxy statement/prospectus/consent solicitation statement, including the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/consent solicitation statement.

Risks Related to the Merger

The formula for determining the number of shares to be issued in the Merger to Brooklyn members is not adjustable based on the market price of NTN’s common stock, so the number of shares of NTN common stock that may be issued in the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set the formula for determining the number of shares to be issued to Brooklyn’s members in the Merger, and the number of shares to be so issued is only adjustable upward or downward under certain circumstances as described in “The Merger—The Merger Consideration.” Any changes in the market price of NTN common stock before the completion of the Merger will not affect the number of shares of NTN common stock that Brooklyn members will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of NTN common stock declines from the market price on the date of the Merger Agreement, then Brooklyn members could receive merger consideration with substantially lower value for their equity interests in Brooklyn than the value of NTN common stock based on the market price on the date of the Merger Agreement. Similarly, if before the completion of the Merger the market price of NTN common stock increases from the market price on the date of the Merger Agreement, then Brooklyn members could receive merger consideration with substantially more value for their equity interests in Brooklyn than the value of NTN common stock based on the market price on the date of the Merger Agreement. Because the formula does not adjust as a result of changes in the value of NTN common stock, for each one percentage point that the market value of NTN common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Brooklyn members compared to the market price of the NTN common stock on the date of the Merger Agreement.

The formula for determining the number of shares to be issued in the Merger to Brooklyn members is subject to an upward adjustment to the extent that Brooklyn has more than $10.0 million in cash and cash equivalents at the closing of the Merger and to the extent that NTN’s net cash at the closing of the Merger is less than zero dollars, and as a result, NTN’s stockholders could own less, and Brooklyn members could own more, of the combined company.

As described in “The Merger—The Merger Consideration,” the number of shares to be issued in the Merger to Brooklyn members will increase to the extent that Brooklyn has more than $10.0 million in cash and cash equivalents at the closing of the Merger, and will further increase to the extent that NTN’s net cash at the closing of the Merger is less than zero dollars. The increase based on the amount of Brooklyn’s cash and cash equivalents at the closing of the Merger is subject to a $15.0 million cap, except that to the extent that NTN’s net cash is less than zero, the number of shares to be issued in the Merger to Brooklyn members will increase to the extent that Brooklyn has more than $15.0 million in cash and cash equivalents at the closing, up to the absolute amount of NTN’s net cash. Accordingly, NTN’s stockholders could own less, and Brooklyn members could own more, of the combined company depending on the amount of cash and cash equivalents Brooklyn has at the closing and on the extent to which NTN’s net cash at the closing is negative.

If the conditions to closing the Merger are not satisfied, the Merger may not occur.

Even if the Merger Share Issuance Proposal is approved by NTN’s stockholders and even if the beneficial holders of the Class A membership interests of Brooklyn approve the Merger and the Merger Agreement, other specified conditions must be satisfied or waived to complete the Merger. These conditions are set forth in the Merger Agreement and described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this proxy statement/prospectus/consent solicitation statement. No assurances can be given that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and NTN and Brooklyn each may lose some or all of the intended benefits of the Merger.

For example, one of the conditions to closing the Merger is that the deficit in NTN’s net cash not exceed $3.0 million. If the Asset Sale Proposal is approved by NTN’s stockholders and the Asset Sale closes, NTN expects that it will satisfy this closing condition. However, NTN has limited cash on hand and its cash flow from operations has suffered as result of the COVID-19 pandemic, which we also refer to as the pandemic, and any delay in the closing of the Asset Sale and/or the Merger, will increase the risk that NTN will not satisfy this closing condition. See “—Risks Related to NTN Prior to the Merger,” below. Further, if the Asset Sale Proposal is not approved by NTN’s stockholders or if the Asset Sale does not close for any other reason, NTN will likely not satisfy this condition. Similarly, another of the conditions to closing the Merger is that Brooklyn have not more than $750,000 in indebtedness for borrowed money at the closing. Although no assurances can be given in this regard, Brooklyn expects that it will satisfy this closing condition. As of November 24, 2020, Brooklyn had approximately $720,000 in indebtedness for borrowed money, consisting of (i) assumed notes payable in the amount of $410,000 related to notes assumed in connection with the acquisition of IRX Therapeutics, and (ii) a loan in the amount of $309,905 under the Paycheck Protection Program.

As another example, one of the conditions to closing the Merger is that, at the closing, Brooklyn have not less than $10 million in cash and cash equivalents on its balance sheet and have not more than $750,000 of indebtedness for borrowed money. As of November 24, 2020, Brooklyn’s indebtedness for borrowed money consisted of (i) assumed notes payable in the amount of $410,000 related to notes assumed in connection with the acquisition of IRX Therapeutics, and (ii) a loan in the amount of $309,905 under the Paycheck Protection Program. With respect to the cash balance sheet requirement, in order to help ensure that Brooklyn meets this condition, Brooklyn has previously engaged in a rights offering to the beneficial holders of its Class A membership interests pursuant to which such beneficial holders who exercised their rights have agreed to make additional contributions to Brooklyn. Such members will exchange the additional membership interests they receive for their contribution for a portion of the shares of NTN common stock issuable to members of Brooklyn in the Merger. Although Brooklyn expects to receive at least $10 million in proceeds from the rights offering, there can be no assurance that these members will contribute what they have contractually agreed to contribute. If these members do not make their committed contributions, Brooklyn may not be able to satisfy the closing condition that it have not less than $10 million in cash and cash equivalents on its balance sheet at the closing of the Merger. If this closing condition is not satisfied, and if NTN does not waive the condition, the Merger will not occur. See “Agreements Related to the Merger—Brooklyn Member Additional Contribution Agreements.”

Failure to complete the Merger may result in NTN or Brooklyn paying a termination fee to the other party and could significantly harm the market price of NTN’s common stock and negatively affect the future business and operations of both companies.

If the Merger is not completed and the Merger Agreement is terminated under certain circumstances, NTN or Brooklyn may be required to pay the other party a termination fee of $750,000, or reimburse the transaction expenses of the other party, up to a maximum of $250,000. Even if a termination fee is not payable or transaction expenses are not reimbursable in connection with a termination of the Merger Agreement, each of NTN and Brooklyn will have incurred significant legal, financial, advisory, accounting, audit and other general operating expenses, which must be paid whether or not the Merger is completed. Further, if the Merger is not completed, it could significantly harm the market price of NTN common stock and further increase the doubt as to its ability to continue as a going concern. In addition, if the Merger Agreement is terminated and the board of directors of NTN or the board of managers of Brooklyn determines to seek another business combination, there can be no assurance that either NTN or Brooklyn will be able to find a partner and close an alternative transaction on terms that are as or more favorable than the terms set forth in the Merger Agreement.

The Merger is subject to the approval by NTN’s stockholders of various proposals at the special meeting and approval by the beneficial holders of the Class A membership interests of Brooklyn of the Merger and the Merger Agreement. Failure to obtain these approvals would prevent the closing of the Merger.

Before the Merger can be completed, the stockholders of NTN must approve the Merger Share Issuance Proposal, the Reverse Stock Split Proposal, the Increase in Authorized Shares Proposal and the Series A Voting Rights Proposal, and the holders of a majority of the beneficial interests in the Class A membership interests of Brooklyn must approve the Merger and the Merger Agreement. The failure to obtain these approvals would result in the Merger not being completed unless, with respect to the Increase in Authorized Shares Proposal, such failure is waived by Brooklyn, and NTN has a sufficient number of shares of authorized common stock, including following the implementation of the Reverse Stock Split, to issue the number shares of NTN common stock required to be issued in the Merger.

Certain of the officers and directors of NTN and certain of the officers and managers of Brooklyn have interests in the Merger that are different from the stockholders of NTN and members of Brooklyn, respectively, and that may influence them to support or approve the Merger without regard to the interests of the stockholders of NTN or the members of Brooklyn.

Certain officers and directors of NTN and certain officers and managers of Brooklyn participate in arrangements that provide them with interests in the Merger that are different from the interests of the stockholders of NTN and members of Brooklyn including, among others, the continued service as an officer or director of the combined company, severance benefits, the acceleration of vesting of equity awards, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined company in accordance with Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). These interests, among others, may influence the officers and directors of NTN and the officers and managers of Brooklyn to support or approve the Merger. For more information concerning the interests of NTN and Brooklyn’s respective officers, managers and directors in the Merger, see the sections entitled “The Merger—Interests of NTN Directors and Executive Officers in the Merger” and “The Merger—Interests of Brooklyn Managers and Officers in the Merger.”

The market price of NTN common stock following the Merger may decline as a result of the Merger.

The market price of NTN common stock may decline as a result of the Merger for a number of reasons including if:

NTN stockholders and Brooklyn members will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.

After the completion of the Merger, the current stockholders of NTN and the current members of Brooklyn will own a smaller percentage of the combined company than their ownership in the respective companies prior to the Merger. At the effective time of Merger, Brooklyn’s members will exchange their equity interests in Brooklyn for shares of NTN common stock representing between approximately 94.08% and 96.74% of the outstanding common stock of NTN immediately after the effective time of the Merger on a fully diluted basis (less a portion of such shares which will be allocated to Maxim in respect of the success fee owed to it by Brooklyn), and NTN’s stockholders as of immediately prior to the effective time, will own between approximately 5.92% and 3.26% of the outstanding common stock of NTN immediately after the effective time on a fully diluted basis. Consequently, NTN stockholders and Brooklyn members will be able to exercise less influence over the management and policies of the combined company following the closing of the Merger than they currently exercise over the management and policies of their respective companies.

NTN stockholders and Brooklyn members may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined company is not able to realize the strategic and financial benefits currently anticipated from the Merger, NTN stockholders and Brooklyn members will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent that the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the Merger.

The combined company may need to raise additional capital by issuing securities or debt or through licensing or other arrangements, which may cause dilution to the combined company’s stockholders or restrict the combined company’s operations or impact its proprietary rights. Future issuances of the combined company’s common stock pursuant to options outstanding following the Merger and under its equity incentive plan could result in additional dilution.

The combined company may be required to raise additional funds sooner than currently planned. If either NTN or Brooklyn hold less cash at the time of the closing of the Merger than the parties currently expect, the combined company may need to raise additional capital sooner than expected. Additional financing may not be available to the combined company when needed or it may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may include covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of the combined company’s technologies or product candidates and proprietary rights, or grant licenses on terms that are not favorable to the combined company.

In addition, the exercise or conversion of some or all of the combined company’s outstanding options (or, after the Merger, the issuance of equity awards under the combined company’s equity incentive plan) could result in additional dilution in the percentage ownership interest of current NTN stockholders and Brooklyn members in the combined company.

During the pendency of the Merger, NTN and Brooklyn may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of NTN and Brooklyn to make acquisitions, subject to certain exceptions relating to fiduciary duties, or to complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during such period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties and, with respect to NTN, other than the asset sale. Any such transactions could be favorable to such party’s securityholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative acquisition proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit NTN and Brooklyn from soliciting alternative acquisition proposals or cooperating with persons making unsolicited acquisition proposals, except in limited circumstances where the board of directors of NTN and the board of managers of Brooklyn, as applicable, determines in good faith that an unsolicited alternative acquisition proposal is or is reasonably likely to lead to a superior offer and that failure to cooperate with the proponent of that proposal would reasonably be likely to be inconsistent with the board’s fiduciary duties.

Because the lack of a public market for Brooklyn’s securities makes it difficult to evaluate the value of such securities, the members of Brooklyn may receive shares of NTN common stock in the Merger that have a value that is less than, or greater than, the fair market value of Brooklyn’s securities and/or NTN may pay more than the fair market value of Brooklyn’s securities.

The outstanding securities of Brooklyn are privately held and not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Brooklyn. Because the percentage of NTN common stock to be issued to Brooklyn members was determined based on negotiations between NTN and Brooklyn, it is possible that the value of NTN common stock to be received by Brooklyn members in the Merger will be less than the fair market value of Brooklyn, or NTN may pay more than the aggregate fair market value for Brooklyn.

Litigation relating to the Merger could require NTN, Brooklyn or the combined company to incur significant costs and suffer management distraction and could delay or enjoin the Merger.

NTN and Brooklyn could be subject to demands or litigation relating to the Merger, whether or not the Merger is consummated. In the past, securities class action or shareholder derivative litigation often follows certain significant business transactions, such as the announcement of a merger. Such actions may create uncertainty relating to the Merger, or delay or enjoin the Merger. The combined company may become involved in this type of litigation before or after the closing of the Merger. Litigation is often expensive and diverts management’s attention and resources, which could adversely affect NTN’s, Brooklyn’s or the combined company’s business. Insurance may not be sufficient to cover all costs or damages related to this type of litigation.

The ownership of the combined company common stock is expected to be concentrated, which may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause the combined company stock price to decline.

Executive officers and directors of the combined company and their affiliates are expected to beneficially own or control approximately 39.7% of the outstanding shares of the combined company common stock immediately following the effective time of the Merger on a fully diluted basis (assuming Brooklyn’s members immediately prior to the effective time of the Merger and Maxim own 94.08% of the outstanding common stock of NTN immediately following the effective time of the Merger on a fully diluted basis). Accordingly, these executive officers, directors and their affiliates, acting as a group, will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the combined company assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the combined company, even if such a change of control would benefit the other stockholders of the combined company. The significant concentration of stock ownership may adversely affect the trading price of the combined company’s common stock due to investors’ perception that conflicts of interest may exist or arise.

A Brooklyn member will recognize taxable gain upon the exchange of Brooklyn membership interests in the Merger if and to the extent that (i) the aggregate amount of Brooklyn liabilities attributable to the membership interests exchanged by the Brooklyn member exceeds (ii) the Brooklyn member’s aggregate tax basis in the Brooklyn membership interests exchanged by such Brooklyn member.

Under applicable federal income tax laws, Brooklyn liabilities that are treated as recourse liabilities for U.S. federal income tax purposes are generally allocated to those Brooklyn members that are treated as bearing the economic risk of loss with respect to the recourse liabilities and Brooklyn liabilities treated as nonrecourse liabilities for U.S. federal income tax purposes are generally allocated to the Brooklyn members based on their respective percentage interests. A Brooklyn member will generally be treated as bearing the economic risk of loss with respect to a Brooklyn recourse liability to the extent that either (i) the Brooklyn member (or a related person) made a nonrecourse loan to Brooklyn and the economic risk of loss for the liability is not borne by another Brooklyn member or (ii) the Brooklyn member (or a related person) guaranteed such liability. Under Section 357(c) of the Code, if a corporation assumes (or, is treated for U.S. federal tax purposes as having assumed) liabilities of the transferor (or accepts property subject to liabilities) in a transaction described in Section 351 of the Code, the transferor generally must recognize taxable gain in the amount by which the liabilities exceed the transferor’s basis in the property contributed to the corporation. As a result of the transactions, the Brooklyn liabilities allocated to the Brooklyn members will be assumed by NTN. Accordingly, a Brooklyn member that, for tax purposes, has been allocated Brooklyn liabilities will recognize taxable gain upon the exchange of Brooklyn membership interests in the Merger if and to the extent that (i) the aggregate amount of Brooklyn recourse and nonrecourse liabilities attributable to the membership interests exchanged by the Brooklyn member exceeds (ii) the Brooklyn member’s aggregate tax basis in the Brooklyn membership interests exchanged by such Brooklyn member.

Risks Related to the Asset Sale

While the Asset Sale is pending, it creates unknown impacts on NTN’s future which could materially and adversely affect its business, financial condition and results of operations.

While the Asset Sale is pending, it creates unknown impacts on NTN’s future. Therefore, NTN’s current or potential business partners may decide to delay, defer or cancel entering into new business arrangements with NTN pending consummation of the Asset Sale. The occurrence of these events individually or in combination could materially and adversely affect NTN’s business, financial condition and results of operations.

The failure to consummate the Asset Sale may materially and adversely affect NTN’s business, financial condition and results of operations.

The Asset Sale is subject to various closing conditions including stockholder approval of the Asset Sale Proposal as required under applicable law. NTN cannot control these conditions and cannot assure you that they will be satisfied. If the Asset Sale is not consummated, NTN may be subject to a number of risks, including the following:

The occurrence of any of these events individually or in combination could materially and adversely affect NTN’s business, financial condition and results of operations, which could cause the market value of NTN common stock to decline.

In addition, if the Asset Sale does not close and the Merger does close, the aggregate ownership percentage of the combined company by NTN stockholders will likely decrease due to an increase in the deficit of NTN’s net cash as a result of not receiving the $2.0 million in the Asset Sale.

Failure to complete the Asset Sale may result in NTN paying a termination fee to eGames.com. 

If the Asset Sale is not completed and the Asset Purchase Agreement is terminated under certain circumstances, NTN may be required to pay eGames.com a termination fee of $250,000. Even if a termination fee is not payable in connection with a termination of the Asset Purchase Agreement, NTN will have incurred significant legal, financial, advisory, accounting, audit and other general operating expenses, which must be paid whether or not the Asset Sale is completed. 

Certain of the officers and directors of NTN have interests in the Asset Sale that are different from the stockholders of NTN and that may influence them to support or approve the Asset Sale without regard to the interests of the stockholders of NTN. 

Certain officers and directors of NTN participate in arrangements that provide them with interests in the Asset Sale that are different from the interests of the stockholders of NTN including, among others, change-in-control benefits and the acceleration of vesting of equity awards. These interests, among others, may influence the officers and directors of NTN to support or approve the Asset Sale. For more information concerning the interests of NTN officers and directors, see the section entitled “The Asset Sale—Interests of NTN Directors and Executive Officers in the Asset Sale.” 

Risks Related to Brooklyn’s Business, Financial Position and Capital Requirements

In this section, and all other sections of the risk factors that follow discussing risk’s relating to Brooklyn’s business, “our”, “we”, “Company” or “Brooklyn” refers to Brooklyn ImmunoTherapeutics LLC

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

The development of our product candidates could be disrupted and materially adversely affected by the recent outbreak of COVID-19. As a result of measures imposed by the governments in affected regions, businesses and schools have been suspended due to quarantines intended to contain this outbreak. The spread of SARS CoV-2 from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. We are still assessing our business plans and the impact COVID-19 may have on our ability to conduct or the timeline of our clinical trials and the clinical trials being undertaken by investigators, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.

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 the INSPIRE study is fully populated, our other clinical studies may see significant delays as a result of the pandemic.

IRX-2 is a therapy based on interleukin-2, or IL-2, a type of cytokine signaling molecule in the immune system. While many of the mechanisms of action of COVID-19 are still unknown, there is evidence that for some patients, severe COVID-19 may result in “cytokine storm syndrome”, in which the body releases cytokines into the body too quickly, creating symptoms such as high fever, inflammation, severe fatigue and nausea, and can lead to severe or life-threatening symptoms.

On June 10, 2020, a letter was published in the Journal of Medical Virology submitted by Wen Luo, Jia-Wen Zhang, Wei Zhang, Yuan-Long Lin and Qi Wang, supported by grants from the State Key Laboratory of Veterinary Technology, Harbin Veterinary Research Institute. The letter stated that, based on a review of 25 patients admitted to ICU with a confirmed infection of COVID-19, cytokine storm of a number of interleukins, including IL-2, was absent. The letter therefore suggested that the severity of COVID-19 symptoms is not directly associated with circulating levels of IL-2. However, there can be no assurance that further study will bear this out or that patients treated with IRX-2, who are already at higher risk for COVID-19 due to their underlying diagnosis, will not be adversely affected.

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 September 30, 2020, we had an accumulated deficit of approximately $16.0 million. Since inception, we have financed our operations with approximately $23 million in capital contributions from the beneficial holders of our Class A membership interests.

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.

Even if we receive regulatory approval for any of IRX-2 or any future product candidates (including any products that may be developed from the licensed technology if Brooklyn exercises its option to exclusively license certain technology from Novellus), we do not know when or if such product candidate will generate product revenue. Our ability to generate product revenue depends on a number of factors, including, but not limited to, our ability to:

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, it will be able to achieve or maintain profitability. Neither will 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.

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 to continue to incur substantial and increasing losses through the commercialization of IRX - 2 or any other product candidate we may acquire or in-license, if approved. None of our product candidates have been approved for marketing anywhere in the world, and we may never receive such approval. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to generate product revenue and achieve profitability is dependent on our ability to complete the development of our product candidates, obtain necessary regulatory approvals for such product candidates, and manufacture and successfully market our product candidates alone or in collaboration with others. 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 if Brooklyn exercises its option to exclusively license certain technology from Novellus). 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 expect that our research and development expenses in connection with our development programs for product candidate 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.

Our business is heavily dependent on the successful development, regulatory approval and commercialization of our product candidate.

We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures will be devoted to the continued clinical evaluation of our lead product candidate, IRX-2, and the monotherapy and combination studies related thereto and the commercialization of such product candidates following regulatory approval, if received, as well as the continued clinical and preclinical evaluation of any 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 exlusively license certain technology from Novellus). 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 candidate.

We cannot be certain that IRX - 2 or any other product candidate 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) will receive regulatory approval or be successfully commercialized even if it receives regulatory approval. 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. We are not permitted to market IRX - 2 or any other product candidate we may acquire or in-license in the United States (including any products that may be developed from the licensed technology if Brooklyn exercises its option to exclusively license certain technology from Novellus) until we receive approval of a new drug application, or NDA, or Biologic License Application, or BLA or in any foreign country until it receives the requisite approvals from the appropriate authorities in such countries for marketing authorization. In addition, we have not yet demonstrated our ability to complete later-stage or pivotal clinical trials for any of our product candidates.

We have not submitted an NDA or BLA for IRX-2 to the FDA or any comparable application to any other regulatory authority. Obtaining approval of an NDA or BLA or similar regulatory approval is an extensive, lengthy, expensive and inherently uncertain process, and the FDA or other foreign regulatory authorities may delay, limit or deny approval of any of our product candidates for many reasons, including:

Even if we do receive regulatory approval to market any product candidate, any such approval may be subject to limitations on the indicated uses or patient populations for which it may market the product. Accordingly, even if we are able to obtain the requisite financing to continue to fund its development programs, we cannot assure you that IRX - 2 or any other product candidate 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) will be successfully developed or commercialized.

In addition, because IRX-2 targets one or more indications in the medical oncology field, if IRX-2 or any other product candidate we may develop or in-license, encounter safety or efficacy problems, developmental delays, regulatory issues, supply issues, or other problems, our development plans for the affected product candidate and some or all of our other product candidates could be significantly harmed, which would harm its business. Further, competitors who are developing products in the oncology field 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.

Clinical studies required for our product candidates are expensive and time-consuming, and their outcome is uncertain.

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. Conducting clinical studies is a lengthy, time-consuming, and expensive process. The length of time 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. Delays associated with products for which we are directly conducting clinical studies may cause them to incur additional operating expenses. The commencement and rate of completion of clinical studies may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of stable and qualified materials under cGMP, for use in clinical studies; slower than expected rates of patient recruitment; failure to recruit a sufficient number of patients; modification of clinical study protocols; changes in regulatory requirements for clinical studies; the lack of effectiveness during clinical studies; the emergence of unforeseen safety issues; delays, suspension, or termination of the clinical studies due to the IRB responsible for overseeing the study at a particular study site; and government or regulatory delays or “clinical holds” requiring suspension or termination of the studies.

The results from early clinical studies are not necessarily predictive of results obtained in later clinical studies. Accordingly, even if we obtain positive results from early clinical studies, future clinical studies may not have the same positive results. Clinical studies may not demonstrate sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates.

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 studies involving IRX-2 involve IRX-2 being studied 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.

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 NDAs 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.

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, 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. The FDA regulates the research, development, preclinical and nonclinical testing and clinical studies, manufacture, safety, effectiveness, record-keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products. Each new chemical entity presented to the FDA must first be preceded by an Investigational New Drug Application, or IND. The FDA regulates small molecule chemical entities as drugs, subject to an NDA under the FDCA. The FDA applies the same standard for biologics, requiring a BLA prior to licensure. Other products, such as vaccines, are also regulated under the Public Health Service Act. FDA has conflated the standards for approval of NDAs and BLAs so that it requires the same types of information on safety, effectiveness, and chemistry, manufacturing, and controls, or CMCs. 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. The regulatory review and approval process, which includes preclinical and nonclinical testing and clinical studies of each product candidate, is lengthy, expensive, and uncertain. we or our collaborators must obtain and maintain regulatory authorization to conduct clinical studies. We or our collaborators must obtain regulatory approval for each product it intends to market, and the manufacturing facilities used for the products must be inspected and meet legal requirements. 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, and in the case of biologics also potency and purity, for each intended use. The development and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.

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.

If we, our collaborators, or our contract manufacturing organizations, or CMOs, 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.

We do not have, and may never obtain, the regulatory approvals we need to market our product candidates.

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 post-approval study and other commitments or reporting requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance goals for review of NDAs or BLAs: six months for priority applications and ten months for standard applications. However, the FDA is not required to complete its review within these time periods. 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.

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 us or our partners may attain, and/or may adversely affect our receipt of revenues or royalties.

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 drug candidate, IRX-2, has received fast track designation in head and neck cancers. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug 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 whether or not 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.

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, Brooklyn may not be able to successfully commercialize its 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 its 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 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.

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.

Gene editing product candidates we may develop based on our option agreements with 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 only a few 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 Novellus, as they 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 the 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. Only a few 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.

The FDA, NIH and EMA have demonstrated caution in their regulation of gene therapy treatments, and ethical and legal concerns about gene therapy and genetic testing may result in additional regulations or restrictions on the development and commercialization of such products, which may be difficult to predict.

The FDA, NIH and EMA have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing. For example, the EMA advocates a risk-based approach to the development of a gene therapy product. Agencies at both the federal and state level in the United States, as well as the U.S. congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such action may delay or prevent commercialization any such product candidates we may seek to develop if we exercise our option agreements with Novellus.

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. 

We may be unable to successfully scale up manufacturing of IRX-2 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.

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 if Brooklyn exercises its option to exclusively license certain technology from Novellus), we will need to manufacture them in large quantities. Currently, we manufacture the active pharmaceutical ingredient for IRX-2 before it is sent to a finishing manufacturer. We are planning to increase the capacity of our proprietary facility to produce commercial quantities of IRX-2, 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 product 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, its 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 of the regulatory manufacturing requirements, the FDA will review those processes and the manufacturing facility as part of the review of any future NDA or BLA 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.

We will require substantial additional capital to fund our operations, and if we fail to obtain 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 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: