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Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

17.

Commitments and Contingencies

Litigation

From time to time, the Company is subject to legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm its financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or outcomes could occur that have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition or operating results. The Company is not currently subject to any pending material legal proceedings except as described below.

The Company and its directors were named as defendants in ten substantially similar actions brought by purported stockholders of the Company arising out of the Merger: Henson v. NTN Buzztime, Inc., No. 1:20-cv-08663-LGS (S.D.N.Y. filed Oct. 16, 2020); Monsour v. NTN Buzztime, Inc., No. 1:20-cv-08755-LGS (S.D.N.Y. filed Oct. 20, 2020); Amanfo v. NTN Buzztime, Inc., No. 1:20-cv-08747-LGS (S.D.N.Y. filed Oct. 20, 2020); Carlson v. NTN Buzztime, Inc., No. 1:21-cv-00047-LGS (S.D.N.Y. filed Jan. 4, 2021); Finger v. NTN Buzztime, Inc., No. 1:21-cv-00728-LGS (S.D.N.Y. filed Jan. 26, 2021); Falikman v. NTN Buzztime, Inc., No. 1:20-cv-05106-EK-SJB (E.D.N.Y. filed Oct. 23, 2020); Haas v. NTN Buzztime, Inc., No. 3:20-cv-02123-BAS-JLB (S.D. Cal. Oct. 29, 2020); Gallo v. NTN Buzztime, Inc., No. 3:21-cv-00157-WQH-AGS (S.D. Cal. filed Jan. 28, 2021); Chinta v. NTN Buzztime, Inc., No. 1:20-cv-01401-CFC (D. Del. filed Oct. 16, 2020); and Nicosia v. NTN Buzztime, Inc., No. 1:21-cv-00125-CFC (D. Del. filed Jan. 30, 2021 ) (collectively, the “Stockholder Actions”). Brooklyn also was named as a defendant in two of the actions (Chinta and Nicosia). The Stockholder Actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. Henson and Monsour assert additional claims for breach of fiduciary duty. The complaints allege that defendants failed to disclose allegedly material information in the Form S-4 Registration Statement filed with the SEC on October 2, 2020, including (1) certain details regarding any projections or forecasts the Company or Brooklyn may have made, and the analyses performed by the Company’s financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not the Company entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints allege that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints request a preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate a compliant Registration Statement; an accounting by the Company for all alleged damages suffered; a declaration that certain federal securities laws have been violated; and costs, including attorneys’ and expert fees and expenses. Process was served in Henson, Chinta, Amanfo, Falikman, Carlson and Gallo, but not in any of the other Stockholder Actions. Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief.

The Company and its directors deny any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been asserted, in the Stockholder Actions, as the Company believes the disclosures set forth in the Form S-4 complied fully with applicable law. Nevertheless, in order to avoid nuisance, potential expense and delay, and to provide additional information to the Company’s stockholders, the Company determined to voluntarily supplement the Form S-4 with further disclosures (the “Supplemental Disclosures”) on Form 8-K, filed on February 26, 2021. These Supplemental Disclosures discussed, inter alia, (1) certain details regarding any projections or forecasts the Company or Brooklyn may have made, and the analyses performed by the Company’s financial advisor, Newbridge Securities Corporation; and (2) information regarding whether or not the Company entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The Company believes that as a consequence of the issuance of the Supplemental Disclosures all claims asserted in the Stockholder Actions have been rendered moot, and have requested that all plaintiffs in the Stockholder Actions dismiss their claims voluntarily (or immediately inform the Company if they are not willing to do so). Since the issuance of the Supplemental Disclosures, the plaintiffs in Henson, Chinta, Monsour, Amanfo, Carlson and Nicosia have voluntarily dismissed their cases. The Company expects the plaintiffs in the other Stockholder Actions to do the same. On March 2, 2021, the court in Haas issued an order to show cause why the case should not be dismissed for failure to prosecute. Plaintiffs in the Stockholder Actions reserve the right to seek payment by the Company to their attorneys of a “mootness fee” in an amount yet to be determined in connection with the issuance of the Supplemental Disclosures.

On March 5, 2021, the Company and its directors were named as defendants in a putative class action brought by a purported stockholder in the Court of Chancery of the State of Delaware, entitled Carlson v. NTN Buzztime, Inc., Case No. 2021-0193- (Del. Ch. filed Mar. 5, 2021). The action asserts claims for violations of Section 211(c) of the Delaware General Corporation Law and the Company’s bylaws (and a concomitant breach of fiduciary duty), alleging that the Company failed to conduct an annual meeting of stockholders within thirteen months of the previous annual meeting of stockholders, which took place on June 7, 2019. Plaintiff is requesting certification of a class, declaratory relief, injunctive relief to compel an annual meeting of stockholders, and fees and costs. The complaint does not yet appear to have been served upon any of the defendants. The Company expects this action will be rendered moot upon the Company’s holding of its special meeting of stockholders on March 15, 2021.