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MERGER AND DISPOSITION TRANSACTIONS

6 Months Ended

Jun. 30, 2021

MERGER AND DISPOSITION TRANSACTIONS [Abstract]

3)	MERGER AND DISPOSITION TRANSACTIONS

Merger

On August 12, 2020, Brooklyn, Brooklyn LLC and the Merger Sub entered into the Merger Agreement. The Merger closed on March 25, 2021. After the Merger, Brooklyn changed its name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.” The Merger was accounted for as a reverse acquisition, with Brooklyn LLC being deemed the acquiring company for accounting purposes. Brooklyn LLC, as the accounting acquirer, recorded the assets acquired and liabilities assumed of Brooklyn in the Merger at their fair values as of the acquisition date. Brooklyn’s common stock trades on the NYSE American stock exchange under the ticker symbol “BTX”.

Brooklyn LLC was determined to be the accounting acquirer based upon the terms of the Merger and other factors including (i) Brooklyn LLC members, having received common stock in the Merger that represented 96.35% of Brooklyn’s outstanding common stock on a fully diluted basis as of immediately after the Merger, (ii) all of the directors of Brooklyn immediately after the Merger having been designated by Brooklyn LLC under the terms of the Merger Agreement and (iii) existing members of Brooklyn LLC’s management having become the management of Brooklyn immediately after the Merger.

At the closing of the Merger, all the outstanding membership interests of Brooklyn LLC converted into the right to receive an aggregate of 39,991,625 shares of common stock, of which 1,067,668 shares were issued as compensation to Maxim Group LLC, Brooklyn LLC’s financial advisor (the “Financial Advisor”) for its services to Brooklyn LLC in connection with the Merger.

The purchase price of $8,177,614, which represents the consideration transferred in the Merger to stockholders of Brooklyn immediately before the Merger, was calculated based on the fair value of the common stock that those stockholders owned on March 25, 2021, immediately prior to the Merger, because that represented a more reliable measure of the fair value of consideration transferred in the Merger. The purchase price of $8,177,614 was calculated as follows:

Number of shares of common stock owned by Brooklyn stockholders immediately before the Merger		1,514,373
Multiplied by the fair value per share of common stock (i)	$	5.40
Total purchase price	$	8,177,614

(i)

Based on the closing price per share (post reverse stock split) of the common stock of Brooklyn as reported on the NYSE American stock exchange on March 25, 2021, immediately before the Merger.

Under the acquisition method of accounting, the total purchase price has been allocated to the acquired tangible and intangible assets and assumed liabilities of Brooklyn based on their estimated fair values as of March 25, 2021, the Merger closing date. Because the consideration paid by Brooklyn LLC in the Merger is more than the estimated fair values of Brooklyn’s net assets deemed to be acquired, goodwill equal to the difference is reflected in the unaudited pro forma condensed consolidated balance sheet. The goodwill of $8,588,576 has been calculated using the fair values of the net assets of Brooklyn as of March 25, 2021.

The preliminary 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			Pro Forma Fair Value Adjustment to Brooklyn \|Pre-Merger Assets			Preliminary Purchase Price Allocation Pro Forma Adjustment
Cash and cash equivalents	$	147,728		$	-		$	147,728
Accounts receivable		102,517			-			102,517
Prepaid expense and other current assets		329,596			-			329,596
Property and equipment, net		1,015,370			-			1,015,370
Software development costs		1,296,460			(368,460	)		928,000
Customers		-			548,000			548,000
Trade name		-			299,000			299,000
Accounts payable, accrued liabilities and other current liabilities		(3,781,173	)		-			(3,781,173	)
Net assets acquired, excluding goodwill	$	(889,502	)	$	478,540		$	(410,962	)

Total consideration	$	8,177,614
Net assets acquired, excluding goodwill		(410,962	)
Goodwill	$	8,588,576

Brooklyn LLC was obligated under the Merger Agreement to have $10,000,000 in cash and cash equivalents on its balance sheet at the effective time of the Merger. To ensure Brooklyn LLC had the required funds, certain beneficial holders of Brooklyn LLC’s Class A membership interests entered into contractual commitments to invest $10,000,000 into Brooklyn LLC immediately prior to the closing of the Merger. During March 2021, Brooklyn offered to its Class A unit holders an additional 5% rights offering for an additional $500,000 to be raised by a rights offering. Funding to the rights offering was received between February 17 and April 5, 2021.

Disposition

On March 26, 2021, Brooklyn sold its rights, title and interest in and to the assets relating to the business it operated prior to the Merger to eGames.com in exchange for a purchase price of $2,000,000 and assumption of specified liabilities relating to that business. The sale was completed in accordance with the terms of the Asset Purchase Agreement. Details of the Disposition are as follows:

Proceeds from sale:
Cash	$	132,055
Escrow		50,000
Assume advance/loans		1,700,000
Interest on advance/loans		67,945

Carrying value of assets sold:
Cash and cash equivalents		(13,461	)
Accounts receivable		(75,153	)
Prepaids and other current assets		(123,769	)
Property and equipment, net		(1,013,950	)
Software development costs		(927,368	)
Customers		(548,000	)
Trade name		(299,000	)
Goodwill		(8,588,576	)
Other assets		(103,173	)

Liabilities transferred upon sale:
Accounts payable and accrued expenses		113,156
Obligations under finance leases		16,676
Lease liability		25,655
Deferred revenue		54,803
Other current liabilities		148,987

Transaction costs		(265,000	)

Total loss on sale of assets	$	(9,648,173	)

Unaudited Pro Forma Disclosure

The following unaudited pro forma financial information summarizes the results of operations for the six months ended June 30, 2021 and 2020 as if the Merger and the Disposition had been completed as of January 1, 2020. Pro forma information primarily reflects adjustments relating to the reversal of transaction costs. Assuming that the Merger and the Disposition had been completed as of January 1, 2020, the transaction costs would have been expensed in the prior period.

	Six months ended June 30,
	2021			2020

Net loss attributable to common stockholders	$	(27,795,457	)	$	(3,060,464	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.79	)	$	(0.17	)