Item
1. Financial Statements
fuboTV
Inc.
Condensed
Consolidated Balance Sheets
(in
thousands, except for share and per share information)
|
|
September
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
38,864
|
|
|
$
|
7,624
|
|
Accounts
receivable, net
|
|
|
6,975
|
|
|
|
8,904
|
|
Prepaid
and other current assets
|
|
|
12,177
|
|
|
|
1,445
|
|
Total
current assets
|
|
|
58,016
|
|
|
|
17,973
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
1,840
|
|
|
|
335
|
|
Restricted
cash
|
|
|
1,275
|
|
|
|
-
|
|
Financial
assets at fair value
|
|
|
-
|
|
|
|
1,965
|
|
Intangible
assets, net
|
|
|
238,440
|
|
|
|
116,646
|
|
Goodwill
|
|
|
493,847
|
|
|
|
227,763
|
|
Right-of-use
assets
|
|
|
4,886
|
|
|
|
3,519
|
|
Other
non-current assets
|
|
|
1,009
|
|
|
|
24
|
|
Total
assets
|
|
$
|
799,313
|
|
|
$
|
368,225
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
61,679
|
|
|
$
|
36,373
|
|
Accrued
expenses
|
|
|
37,363
|
|
|
|
20,402
|
|
Due
to related parties
|
|
|
85,847
|
|
|
|
665
|
|
Notes
payable
|
|
|
5,884
|
|
|
|
4,090
|
|
Notes
payable - related parties
|
|
|
35
|
|
|
|
368
|
|
Convertible
notes, net of $710 discount as of December 31, 2019
|
|
|
-
|
|
|
|
1,358
|
|
Shares
settled liability
|
|
|
43
|
|
|
|
1,000
|
|
Deferred
revenue
|
|
|
15,424
|
|
|
|
-
|
|
Profit
share liability
|
|
|
2,119
|
|
|
|
1,971
|
|
Warrant
liabilities
|
|
|
28,085
|
|
|
|
24
|
|
Derivative
liability
|
|
|
-
|
|
|
|
376
|
|
Long
term borrowings - current portion
|
|
|
9,696
|
|
|
|
-
|
|
Current
portion of lease liability
|
|
|
903
|
|
|
|
815
|
|
Total
current liabilities
|
|
|
247,078
|
|
|
|
67,442
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
9,428
|
|
|
|
30,879
|
|
Lease
liability
|
|
|
3,997
|
|
|
|
2,705
|
|
Long
term borrowings
|
|
|
25,905
|
|
|
|
43,982
|
|
Other
long-term liabilities
|
|
|
3,968
|
|
|
|
41
|
|
Total
liabilities
|
|
|
290,376
|
|
|
|
145,049
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (Note 19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
D Convertible Preferred stock, par value $0.0001, 2,000,000 shares authorized, 0 and 461,839 shares issued and
outstanding as of September 30, 2020 and December 31, 2019, respectively; aggregate liquidation preference of $0 and $462
as of September 30, 2020 and December 31, 2019, respectively
|
|
|
-
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Series
AA Convertible Preferred stock, par value $0.0001, 35,800,000 shares authorized, 32,324,362 and 0 shares issued and outstanding
as of September 30, 2020 and December 31, 2019, respectively
|
|
|
566,124
|
|
|
|
-
|
|
Common
stock par value $0.0001: 400,000,000 shares authorized; 47,531,170 and 28,912,500 shares issued and outstanding
at September 30, 2020 and December 31, 2019, respectively
|
|
|
5
|
|
|
|
3
|
|
Additional
paid-in capital
|
|
|
385,030
|
|
|
|
257,002
|
|
Accumulated
deficit
|
|
|
(458,632
|
)
|
|
|
(56,123
|
)
|
Non-controlling
interest
|
|
|
16,410
|
|
|
|
22,602
|
|
Accumulated
other comprehensive loss
|
|
|
-
|
|
|
|
(770
|
)
|
Total
stockholders’ equity
|
|
|
508,937
|
|
|
|
222,714
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY
|
|
$
|
799,313
|
|
|
$
|
368,225
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements
fuboTV
Inc.
Condensed
Consolidated Statements of Operations
(Unaudited)
(in
thousands, except share and per share amounts)
|
|
For
the Three Months Ended
September 30,
|
|
|
For
the Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
53,433
|
|
|
$
|
-
|
|
|
$
|
92,945
|
|
|
$
|
-
|
|
Advertisements
|
|
|
7,520
|
|
|
|
-
|
|
|
|
11,843
|
|
|
|
-
|
|
Software licenses,
net
|
|
|
-
|
|
|
|
5,834
|
|
|
|
7,295
|
|
|
|
5,834
|
|
Other
|
|
|
249
|
|
|
|
-
|
|
|
|
586
|
|
|
|
-
|
|
Total
revenues
|
|
|
61,202
|
|
|
|
5,834
|
|
|
|
112,669
|
|
|
|
5,834
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber related
expenses
|
|
|
61,228
|
|
|
|
-
|
|
|
|
114,315
|
|
|
|
-
|
|
Broadcasting and
transmission
|
|
|
9,778
|
|
|
|
-
|
|
|
|
19,270
|
|
|
|
-
|
|
Sales and marketing
|
|
|
22,269
|
|
|
|
93
|
|
|
|
33,526
|
|
|
|
417
|
|
Technology and development
|
|
|
10,727
|
|
|
|
5,222
|
|
|
|
20,277
|
|
|
|
5,222
|
|
General and administrative
|
|
|
8,270
|
|
|
|
2,171
|
|
|
|
42,130
|
|
|
|
3,688
|
|
Depreciation and
amortization
|
|
|
14,413
|
|
|
|
5,273
|
|
|
|
34,050
|
|
|
|
15,589
|
|
Impairment
of intangible assets and goodwill
|
|
|
236,681
|
|
|
|
-
|
|
|
|
236,681
|
|
|
|
-
|
|
Total operating
expenses
|
|
|
363,366
|
|
|
|
12,759
|
|
|
|
500,249
|
|
|
|
24,916
|
|
Operating
loss
|
|
|
(302,164
|
)
|
|
|
(6,925
|
)
|
|
|
(387,580
|
)
|
|
|
(19,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
and financing costs
|
|
|
(2,203
|
)
|
|
|
(1,094
|
)
|
|
|
(18,109
|
)
|
|
|
(1,994
|
)
|
Interest income
|
|
|
-
|
|
|
|
482
|
|
|
|
-
|
|
|
|
482
|
|
Gain (loss)
on extinguishment of debt
|
|
|
1,321
|
|
|
|
-
|
|
|
|
(9,827
|
)
|
|
|
-
|
|
Loss on issuance
of common stock and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,507
|
)
|
|
|
-
|
|
Gain on sale of
assets
|
|
|
7,631
|
|
|
|
-
|
|
|
|
7,631
|
|
|
|
-
|
|
Unrealized gain
in equity method investment
|
|
|
-
|
|
|
|
-
|
|
|
|
2,614
|
|
|
|
-
|
|
Loss on deconsolidation
of Nexway
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,919
|
)
|
|
|
-
|
|
Change in fair value
of warrant liabilities
|
|
|
4,543
|
|
|
|
-
|
|
|
|
9,143
|
|
|
|
-
|
|
Change in fair value
of subsidiary warrant liability
|
|
|
-
|
|
|
|
831
|
|
|
|
3
|
|
|
|
4,432
|
|
Change in fair value
of shares settled liability
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,665
|
)
|
|
|
-
|
|
Change in fair value
of derivative liability
|
|
|
101
|
|
|
|
(1
|
)
|
|
|
(426
|
)
|
|
|
1,017
|
|
Change in fair value
of profit share liability
|
|
|
-
|
|
|
|
-
|
|
|
|
(148
|
)
|
|
|
-
|
|
Foreign currency
exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,010
|
)
|
|
|
|
|
Other
income (expense)
|
|
|
583
|
|
|
|
(1,230
|
)
|
|
|
147
|
|
|
|
(1,230
|
)
|
Total other income
(expense)
|
|
|
11,976
|
|
|
|
(1,012
|
)
|
|
|
(37,073
|
)
|
|
|
2,707
|
|
Loss before income
taxes
|
|
|
(290,188
|
)
|
|
|
(7,937
|
)
|
|
|
(424,653
|
)
|
|
|
(16,375
|
)
|
Income
tax benefit
|
|
|
(16,071
|
)
|
|
|
(1,028
|
)
|
|
|
(20,589
|
)
|
|
|
(3,234
|
)
|
Net loss
|
|
|
(274,117
|
)
|
|
|
(6,909
|
)
|
|
|
(404,064
|
)
|
|
|
(13,141
|
)
|
Less: net income
(loss) attributable to non-controlling interest
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
1,555
|
|
|
|
2,653
|
|
Net loss attributable
to controlling interest
|
|
$
|
(274,117
|
)
|
|
$
|
(6,781
|
)
|
|
$
|
(402,509
|
)
|
|
$
|
(15,794
|
)
|
Less: Deemed dividend on Series D Preferred
stock
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Less: Deemed
dividend - beneficial conversion feature on preferred stock
|
|
|
-
|
|
|
|
(379
|
)
|
|
|
-
|
|
|
|
(379
|
)
|
Net
loss attributable to common stockholders
|
|
$
|
(274,117
|
)
|
|
$
|
(7,166
|
)
|
|
$
|
(402,509
|
)
|
|
$
|
(16,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(6.20
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(11.00
|
)
|
|
$
|
(0.80
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
44,199,709
|
|
|
|
24,363,124
|
|
|
|
36,577,183
|
|
|
|
20,165,089
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
fuboTV
Inc.
Condensed
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity
(Unaudited)
(in
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Series
AA
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Noncontrolling
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
Balance
at December 31, 2019 (As restated)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
28,912,500
|
|
|
$
|
3
|
|
|
$
|
257,002
|
|
|
$
|
(56,123
|
)
|
|
$
|
(770
|
)
|
|
$
|
22,602
|
|
|
$
|
222,714
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
795,593
|
|
|
|
-
|
|
|
|
2,297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,297
|
|
Issaunce
of common stock - subsidiary share exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
1,552,070
|
|
|
|
-
|
|
|
|
1,150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,150
|
)
|
|
|
-
|
|
Common
stock issued in connection with note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
7,500
|
|
|
|
-
|
|
|
|
67
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67
|
|
Stock
based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,040,000
|
|
|
|
-
|
|
|
|
10,061
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,061
|
|
Deemed
dividend related to immediate accretion of redemption feature of convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(171
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(171
|
)
|
Accrued
Series D Preferred Stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
Deconsolidation of
Nexway
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
770
|
|
|
|
(2,595
|
)
|
|
|
(1,825
|
)
|
Net
loss (As restated)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(55,470
|
)
|
|
|
-
|
|
|
|
(873
|
)
|
|
|
(56,343
|
)
|
Balance
at March 31, 2020 (Unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
32,307,663
|
|
|
$
|
3
|
|
|
$
|
270,397
|
|
|
$
|
(111,593
|
)
|
|
$
|
-
|
|
|
$
|
17,984
|
|
|
$
|
176,791
|
|
Issuance
of common stock and warrants for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
3,906,313
|
|
|
|
1
|
|
|
|
478
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
479
|
|
Issuance
of common stock - subsidiary share exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
1,201,749
|
|
|
|
-
|
|
|
|
892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(892
|
)
|
|
|
-
|
|
Common
stock issued in connection with note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
192
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
192
|
|
Right
to receive Series AA Preferred Stock in connection with acquisition of fuboTV Merger
|
|
|
32,324,362
|
|
|
|
566,124
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
566,124
|
|
Settlement of share
settled liability
|
|
|
-
|
|
|
|
-
|
|
|
|
900,000
|
|
|
|
-
|
|
|
|
9,054
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,054
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
343,789
|
|
|
|
-
|
|
|
|
8,715
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,715
|
|
Redemption
of redemption feature of convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
126
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126
|
|
Accrued
Series D Preferred Stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(72,922
|
)
|
|
|
-
|
|
|
|
(682
|
)
|
|
|
(73,604
|
)
|
Balance
at June 30, 2020 (Unaudited)
|
|
|
32,324,362
|
|
|
$
|
566,124
|
|
|
|
38,684,514
|
|
|
$
|
4
|
|
|
$
|
289,720
|
|
|
$
|
(184,389
|
)
|
|
$
|
-
|
|
|
$
|
16,410
|
|
|
$
|
687,869
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
2,162,163
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
Issuance
of common stock and warrants for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
5,212,753
|
|
|
|
1
|
|
|
|
42,619
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,620
|
|
Issuance
of common stock to original owners of Facebank AG
|
|
|
-
|
|
|
|
-
|
|
|
|
1,200,000
|
|
|
|
-
|
|
|
|
12,395
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,395
|
|
Exercise of stock
options
|
|
|
-
|
|
|
|
-
|
|
|
|
226,740
|
|
|
|
-
|
|
|
|
324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
324
|
|
Common
stock issued in connection with note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reclassification
of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,535
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,535
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
6,305
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,305
|
|
Redemption
of convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
132
|
|
|
|
(126
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(274,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(274,117
|
)
|
Balance
at September 30, 2020 (Unaudited)
|
|
|
32,324,362
|
|
|
$
|
566,124
|
|
|
|
47,531,170
|
|
|
$
|
5
|
|
|
$
|
385,030
|
|
|
$
|
(458,632
|
)
|
|
$
|
-
|
|
|
$
|
16,410
|
|
|
$
|
508,937
|
|
|
|
Series
X Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
|
|
Balance
at December 31, 2018
|
|
|
1,000,000
|
|
|
$
|
-
|
|
|
|
7,532,776
|
|
|
$
|
1
|
|
|
$
|
227,570
|
|
|
$
|
(21,763
|
)
|
|
$
|
26,742
|
|
|
$
|
232,550
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
378,098
|
|
|
|
-
|
|
|
|
1,778
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,778
|
|
Preferred
stock converted to common stock
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
15,000,000
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock issued for lease settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
18,935
|
|
|
|
-
|
|
|
|
130
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130
|
|
Issuance
of subsidiary common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65
|
|
Additional
shares issued for reverse stock split
|
|
|
-
|
|
|
|
-
|
|
|
|
1,374
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,466
|
)
|
|
|
599
|
|
|
|
(2,867
|
)
|
Balance
at March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
22,931,183
|
|
|
$
|
2
|
|
|
|
229,542
|
|
|
$
|
(25,229
|
)
|
|
$
|
27,341
|
|
|
$
|
231,656
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
386,792
|
|
|
|
-
|
|
|
|
422
|
|
|
|
-
|
|
|
|
-
|
|
|
|
422
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,547
|
)
|
|
|
2,182
|
|
|
|
(3,365
|
)
|
Balance
at June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
23,317,975
|
|
|
$
|
2
|
|
|
$
|
229,964
|
|
|
$
|
(30,776
|
)
|
|
$
|
29,523
|
|
|
$
|
228,713
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
217,271
|
|
|
|
-
|
|
|
|
717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
717
|
|
Acquisition of Facebank
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500,000
|
|
|
|
-
|
|
|
|
8,250
|
|
|
|
-
|
|
|
|
3,582
|
|
|
|
11,832
|
|
Issaunce
of common stock - subsidiary share exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
856,354
|
|
|
|
-
|
|
|
|
2,979
|
|
|
|
-
|
|
|
|
(2,979
|
)
|
|
|
-
|
|
Issuance
of common stock for services rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
15,009
|
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101
|
|
Issuance
of common stock in connection with cancellation of a consulting agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
Deemed
dividend related to immediate accretion of redemption feature of convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(379
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(379
|
)
|
Deemed
dividend on Series D preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
Accrued
Series D Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,781
|
)
|
|
|
(128
|
)
|
|
|
(6,909
|
)
|
Balance
at September 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
26,908,609
|
|
|
$
|
2
|
|
|
$
|
241,634
|
|
|
$
|
(37,557
|
)
|
|
$
|
29,998
|
|
|
$
|
234,077
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
fuboTV
Inc.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
(in
thousands, except share and per share amounts)
|
|
For
the Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(404,064
|
)
|
|
$
|
(13,141
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
34,050
|
|
|
|
15,589
|
|
Stock-based compensation
|
|
|
24,081
|
|
|
|
-
|
|
Impairment expense
intangibles
|
|
|
88,059
|
|
|
|
-
|
|
Impairment expense
goodwill
|
|
|
148,622
|
|
|
|
-
|
|
Issuance of common
stock in connection with cancellation of a consulting agreement
|
|
|
-
|
|
|
|
13
|
|
Issuance of common
stock for services rendered
|
|
|
-
|
|
|
|
101
|
|
Non-cash expense
relating to issuance of warrants and common stock
|
|
|
2,209
|
|
|
|
|
|
Loss on deconsolidation
of Nexway, net of cash retained by Nexway
|
|
|
8,564
|
|
|
|
-
|
|
Common stock issued
in connection with note payable
|
|
|
67
|
|
|
|
-
|
|
Gain (loss)
on extinguishment of debt
|
|
|
9,827
|
|
|
|
-
|
|
Loss on issuance
of common stock and warrants
|
|
|
13,507
|
|
|
|
-
|
|
Gain on sale of assets
|
|
|
(7,631
|
)
|
|
|
-
|
|
Amortization of debt
discount
|
|
|
12,271
|
|
|
|
501
|
|
Deferred income tax
benefit
|
|
|
(20,589
|
)
|
|
|
(3,234
|
)
|
Change in fair value
of derivative liability
|
|
|
426
|
|
|
|
(1,017
|
)
|
Change in fair value
of warrant liability
|
|
|
(9,146
|
)
|
|
|
-
|
|
Change in fair value
of subsidiary warrant liability
|
|
|
-
|
|
|
|
(4,432
|
)
|
Change in fair value
of shares settled liability
|
|
|
1,665
|
|
|
|
-
|
|
Change in fair value
of profit share liability
|
|
|
148
|
|
|
|
-
|
|
Unrealized gain on
equity method investments
|
|
|
(2,614
|
)
|
|
|
-
|
|
Amortization of right-of-use
assets
|
|
|
434
|
|
|
|
46
|
|
Accrued interest
on note payable
|
|
|
244
|
|
|
|
557
|
|
Foreign currency
loss
|
|
|
1,010
|
|
|
|
-
|
|
Other adjustments
|
|
|
(56
|
)
|
|
|
(636
|
)
|
Changes in operating
assets and liabilities of business, net of acquisitions:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,071
|
)
|
|
|
3,620
|
|
Prepaid expenses
and other current assets
|
|
|
(10,558
|
)
|
|
|
(100
|
)
|
Accounts payable
|
|
|
7,881
|
|
|
|
2,819
|
|
Accrued expenses
|
|
|
(11,569
|
)
|
|
|
617
|
|
Due from related
parties
|
|
|
36,589
|
|
|
|
-
|
|
Deferred revenue
|
|
|
6,615
|
|
|
|
-
|
|
Lease
liability
|
|
|
(421
|
)
|
|
|
(46
|
)
|
Net cash (used in) provided by operating
activities
|
|
|
(72,450
|
)
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(103
|
)
|
|
|
-
|
|
Advance to fuboTV
Pre-Merger
|
|
|
(10,000
|
)
|
|
|
-
|
|
Acquisition of fuboTV’s
Pre-Merger cash and cash equivalents and restricted cash
|
|
|
9,373
|
|
|
|
-
|
|
Sale of Facebank
AG
|
|
|
(619
|
)
|
|
|
|
|
Investment in Panda
Productions (HK) Limited
|
|
|
-
|
|
|
|
(1,050
|
)
|
Acquisition of FaceBank
AG and Nexway, net of cash paid
|
|
|
-
|
|
|
|
2,300
|
|
Sale of profits interest
in investment in Panda Productions (HK) Limited
|
|
|
-
|
|
|
|
655
|
|
Purchase of intangible
assets
|
|
|
-
|
|
|
|
(250
|
)
|
Payments for leasehold
improvements
|
|
|
-
|
|
|
|
(9
|
)
|
Lease
security deposit
|
|
|
-
|
|
|
|
(21
|
)
|
Net cash (used in) provided by investing
activities
|
|
|
(1,349
|
)
|
|
|
1,625
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from sale
of common stock and warrants
|
|
|
97,142
|
|
|
|
2,916
|
|
Proceeds from exercise
of stock options
|
|
|
324
|
|
|
|
-
|
|
Proceeds from issuance
of convertible notes
|
|
|
3,003
|
|
|
|
275
|
|
Repayments of convertible
notes
|
|
|
(3,913
|
)
|
|
|
(523
|
)
|
Proceeds from issuance
of Series D preferred stock
|
|
|
203
|
|
|
|
450
|
|
Redemption of
Series D preferred stock
|
|
|
(883
|
)
|
|
|
-
|
|
Proceeds from loans
|
|
|
33,649
|
|
|
|
-
|
|
Repayments of notes
payable
|
|
|
(14,143
|
)
|
|
|
-
|
|
Repayments of short
term borrowings
|
|
|
(8,407
|
)
|
|
|
-
|
|
Proceeds from sale
of subsidiary’s common stock
|
|
|
-
|
|
|
|
65
|
|
Repayments to related
parties notes
|
|
|
-
|
|
|
|
410
|
|
Repayments of note
payable related party
|
|
|
(333
|
)
|
|
|
(259
|
)
|
Repayment
to related parties
|
|
|
(328
|
)
|
|
|
(351
|
)
|
Net cash provided by financing activities
|
|
|
106,314
|
|
|
|
2,983
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and restricted cash
|
|
|
32,515
|
|
|
|
5,865
|
|
Cash at beginning
of period
|
|
|
7,624
|
|
|
|
31
|
|
Cash and restricted
cash at end of period
|
|
|
40,139
|
|
|
$
|
5,896
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
6,161
|
|
|
$
|
170
|
|
Income
tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non cash financing and investing activities:
|
|
|
|
|
|
|
|
|
Issuance
of convertible preferred stock for Merger
|
|
$
|
566,124
|
|
|
$
|
-
|
|
Reclass
of shares settled liability for intangible asset to stock-based compensation
|
|
$
|
1,000
|
|
|
$
|
-
|
|
Settlement
of share settled liability
|
|
$
|
9,054
|
|
|
$
|
-
|
|
Issuance
of common stock to original owners of Facebank AG
|
|
$
|
12,395
|
|
|
$
|
-
|
|
Issaunce
of common stock - subsidiary share exchange
|
|
$
|
2,042
|
|
|
$
|
-
|
|
Common
stock issued in connection with note payable
|
|
$
|
259
|
|
|
$
|
-
|
|
Issuance
of common stock upon acquisition of Facebank AG and Nexway
|
|
$
|
-
|
|
|
$
|
8,250
|
|
Accrued
Series D Preferred Stock dividends
|
|
$
|
17
|
|
|
$
|
5
|
|
Deemed
dividend related to immediate accretion of redemption feature of convertible preferred stock
|
|
$
|
171
|
|
|
$
|
379
|
|
Common
stock issued for lease settlement
|
|
$
|
-
|
|
|
$
|
130
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
1.
|
Organization
and Nature of Business
|
Incorporation
fuboTV
Inc. (“fuboTV” or the “Company”) was incorporated under the laws of the State of Florida in February 2009
under the name York Entertainment, Inc. The Company changed its name to FaceBank Group, Inc. on September 30, 2019. On August
10, 2020, the Company changed its name to fuboTV Inc. and as of May 1, 2020, the Company’s trading symbol was changed to
from “FBNK” to “FUBO.”
Unless
the context otherwise requires, “fuboTV,” “we,” “us,” “our,” and the “Company”
refers to fuboTV and its subsidiaries on a consolidated basis, and “fuboTV Pre-Merger” refers to fuboTV Inc., a Delaware
corporation, prior to the Merger, and “fuboTV Sub” refers to fuboTV Media Inc., a Delaware corporation, and the Company’s
wholly-owned subsidiary following the Merger. “FaceBank Pre-Merger” refers to FaceBank Group, Inc. prior to the Merger
and its subsidiaries prior to the closing of the Merger.
Merger
with fuboTV Pre-Merger
On
April 1, 2020 (the “Effective Time”), fuboTV Acquisition Corp., a Delaware corporation and FaceBank Pre-Merger’s
wholly-owned subsidiary (“Merger Sub”) merged with and into fuboTV Pre-Merger, whereby fuboTV Pre-Merger continued
as the surviving corporation and became our wholly-owned subsidiary pursuant to the terms of the Agreement and Plan of Merger
and Reorganization dated as of March 19, 2020, by and among us, Merger Sub and fuboTV Pre-Merger (the “Merger Agreement”
and such transaction, the “Merger”) (See Note 4).
In
accordance with the terms of the Merger Agreement, at the Effective Time of the Merger, all of the capital stock of fuboTV Pre-Merger
was converted into shares of our newly-created class of Series AA Convertible Preferred Stock, par value $0.0001 per share (the
“Series AA Preferred Stock”) (See Note 17). Each share of Series AA Convertible Preferred Stock is entitled
to 0.8 votes per share and is convertible into two shares of our common stock, only in connection with the sale of such shares
on an arms’-length basis either pursuant to an exemption from registration under Rule 144 promulgated under the Securities
Act or pursuant to an effective registration statement under the Securities Act. Prior to our uplist to the NYSE, the Series AA
Convertible Preferred Stock benefited from certain protective provisions that, for example, required us to obtain the approval
of a majority of the shares of outstanding Series AA Convertible Preferred Stock, voting as a separate class, before undertaking
certain matters.
Prior
to the Merger, the Company was, and after the Merger continues to be, in part, a character-based virtual entertainment business
and a developer of digital human likeness for celebrities, focused on applications in traditional entertainment, sports entertainment,
live events, social networking, mixed reality (AR/VR) and artificial intelligence. As a result of the Merger, fuboTV Pre-Merger,
a leading live TV streaming platform for sports, news, and entertainment, became a wholly-owned subsidiary of the Company.
In
connection with the Merger, on March 11, 2020, the Company and HLEE Finance S.a r.l. (“HLEE”) entered into a Credit
Agreement, dated as of March 11, 2020, pursuant to which HLEE provided the Company with a $100.0 million revolving line of credit
(the “Credit Facility”). The Credit Facility was secured by substantially all the assets of the Company. The Credit
Facility was terminated on July 8, 2020.
On
March 19, 2020, the Company, Merger Sub, Evolution AI Corporation (“EAI”) and Pulse Evolution Corporation (“PEC”
and collectively with EAI, Merger Sub and the Company, the “Initial Borrower”) and FB Loan Series I, LLC (“FB
Loan”) entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which the Initial
Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10.1 million (the “Senior
Notes”). The Company received proceeds of $7.4 million, net of an original issue discount of $2.7 million. In connection
with the FB Loan, the Company, fuboTV Sub and certain of their respective subsidiaries granted a lien on substantially of their
assets to secure the obligations under the Senior Notes. See Note 13 for more information about the Note Purchase Agreement.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Prior
to the Merger, fuboTV Pre-Merger and its subsidiaries were party to a Credit and Guaranty Agreement, dated as of April 6, 2018
(the “AMC Agreement”), with AMC Networks Ventures LLC as lender, administrative agent and collateral agent (“AMC
Networks Ventures”). fuboTV Pre-Merger previously granted AMC Networks Ventures a lien on substantially all of its assets
to secure its obligations thereunder. The AMC Agreement survived the Merger and, as of the Effective Time, there was $23.6 million
outstanding under the AMC Agreement, net of debt issuance costs. In connection with the Merger, the Company guaranteed the obligations
of fuboTV Pre-Merger under the AMC Agreement on an unsecured basis. The liens of AMC Networks Ventures on the assets of fuboTV
Pre-Merger are senior to the liens in favor of FB Loan and FaceBank Pre-Merger securing the Senior Notes.
Nature
of Business after the Merger
Prior
to the Merger, the Company focused on developing its technology-driven IP in sports, movies and live performances. Since the acquisition
of fuboTV Pre-Merger, we are principally focused on offering consumers a leading live TV streaming platform for sports, news and
entertainment through fuboTV. The Company’s revenues are almost entirely derived from the sale of subscription services
and the sale of advertisements in the United States.
Our
subscription-based streaming services are offered to consumers who can sign-up for accounts through which we provide basic plans
with the flexibility for consumers to purchase the add-ons and features best suited for them. Besides the website, consumers can
also sign-up via some TV-connected devices. The fuboTV platform provides a broad suite of unique features and personalization
tools such as multi-channel viewing capabilities, favorites lists and a dynamic recommendation engine as well as 4K streaming
and Cloud DVR offerings.
2.
|
Liquidity,
Going Concern and Management Plans
|
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue
as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in
the normal course of business.
The
Company had cash and cash equivalents of $38.9 million, a working capital deficiency of $189.1 million and an accumulated deficit
of $458.6 million as of September 30, 2020. The Company incurred a $404.1 million net loss for the nine months ended September
30, 2020. Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities.
The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects
to continue to incur substantial losses as it continues to fully ramp up its operating activities. While we expect to continue
incurring losses in the foreseeable future, we successfully raised $183 million in October 2020, net of offering expenses,
through a public offering of our common stock. The proceeds from this offering provide us with the necessary liquidity to continue
as a going concern for at least one year from the date these financial statements are issued.
In
addition to the foregoing, the Company cannot predict the long-term impact on its development timelines, revenue levels and its
liquidity due to the worldwide spread of COVID-19. Based upon the Company’s current assessment, it does not expect the impact
of the COVID-19 pandemic to materially impact the Company’s operations. However, the Company is continuing to assess the
impact the spread of COVID-19 may have on its operations.
3.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation and Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements include the accounts, as of September 30, 2020, of the Company,
its wholly-owned subsidiaries and its 99.7%-owned operating subsidiary EAI, which, until the Merger, was the Company’s principal
operating subsidiary; inactive subsidiaries York Production LLC and York Production II LLC; wholly-owned subsidiaries Facebank
AG, StockAccess Holdings SAS (“SAH”) and FBNK Finance Sarl (“FBNK Finance”); its 70.0% ownership in Highlight
Finance Corp. (“HFC”); and its 76% ownership in Pulse Evolution Corporation (“PEC”). Subsequent to the
Merger, fuboTV Pre-Merger became our wholly owned subsidiary. All inter-company balances and transactions have been eliminated
in consolidation.
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to
the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”).
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments,
consisting of normal recurring adjustments and events in the current period such as the Nexway deconsolidation and acquisition
of fuboTV Pre-Merger, considered necessary for a fair presentation of such interim results.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
results for the unaudited condensed consolidated statement of operations are not necessarily indicative of results to be expected
for the year ending December 31, 2020 or for any future interim period. The unaudited condensed consolidated balance sheet as
at December 31, 2019 has been derived from the audited financial statements; however, it does not include all of the information
and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019 and notes
thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on May 29, 2020, as amended on Form 10-K/A
filed with the SEC on August 11, 2020 along with the consolidated financial statements for fuboTV Pre-Merger for the year ended
December 31, 2019 and notes thereto included on Form 8-K/A filed with the SEC on June 17, 2020.
Reclassifications
For
the three and nine months ended September 30, 2019, the Company has reclassified certain prior year amounts on the face of the
financial statements in order to conform to the current year presentation. These reclassifications had no effect on the Company’s
consolidated financial position, results of operations, or liquidity.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical
experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
The significant estimates and assumptions include allocating the fair value of purchase consideration to assets acquired and liabilities
assumed in business acquisitions, useful lives of property and equipment and intangible assets, recoverability of goodwill, long-lived
assets, and investments, accruals for contingent liabilities, valuations of derivative liabilities, equity instruments issued
in share-based payment arrangements and accounting for income taxes, including the valuation allowance on deferred tax assets.
Significant
Accounting Policies
For
a detailed discussion about the Company’s significant accounting policies, see the Company’s Annual Report on Form
10-K filed with the SEC on May 29, 2020, as amended on Form 10-K/A filed with the SEC on August 11, 2020.
Segment
and Reporting Unit Information
Operating
segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed
by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and
in assessing performance. A committee consisting of the Company’s executives are determined to be the CODM. The CODM
reviews financial information and makes resource allocation decisions between the fubo TV and Facebank pre-merger businesses.
As such, the Company has two operating segments (fuboTV and Facebank) as of September 30, 2020. As of September 30, 2020,
the Facebank operating segment had nominal operations.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Cash,
Cash Equivalents and Restricted Cash
The
Company considers all highly liquid investments with remaining maturities at the date of purchase of three months or less to be
cash equivalents, including balances held in the Company’s money market account. The Company also classifies amounts in
transit from payment processors for customer credit card and debit card transactions as cash equivalents. Restricted cash primarily
represents cash on deposit with financial institutions in support of a letter of credit outstanding in favor of the Company’s
landlord for office space. The restricted cash balance has been excluded from the cash balance and is classified as restricted
cash on the condensed consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents and
restricted cash within the consolidated balance sheet that sum to the total of the same on the consolidated statement of cash
flows:
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
38,864
|
|
|
$
|
7,624
|
|
Restricted cash
|
|
|
1,275
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
cash, cash equivalents and restricted cash
|
|
$
|
40,139
|
|
|
$
|
7,624
|
|
Certain
Risks and Concentrations
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of demand deposits. The Company
maintains cash deposits with financial institutions that at times exceed applicable insurance limits.
The
majority of the Company’s software and computer systems utilizes data processing, storage capabilities and other services
provided by Amazon Web Services, or AWS, which cannot be easily switched to another cloud service provider. As such, any disruption
of the Company’s interference with AWS would adversely impact the Company’s operations and business.
Fair
Value of Financial Instruments
The
Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value into three levels as follows:
Level
1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level
2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable
or whose significant value drivers are observable; and
Level
3 — assets and liabilities whose significant value drivers are unobservable.
Accounts
Receivable, net
The
Company records accounts receivable at the invoiced amount less an allowance for any potentially uncollectable accounts. The Company’s
accounts receivable balance consists of amounts due from the sale of advertisements. In evaluating our ability to collect outstanding
receivable balances, we consider many factors, including the age of the balance, collection history, and current economic trends.
Bad debts are written off after all collection efforts have ceased. Based on the Company’s current and historical collection
experience, management concluded that an allowance for doubtful accounts was not necessary as of September 30, 2020 or December
31, 2019.
No
individual customer accounted for more than 10% of revenue for the three and nine months ended September 30, 2020 and 2019. Four
customers accounted for more than 10% of accounts receivable as of September 30, 2020. No customers accounted for more than
10% of accounts receivable as of December 31, 2019.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Property
and Equipment, net
Property
and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the estimated
useful life of the assets. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed
from the accounts and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss
in the period realized. Maintenance and repairs are expensed as incurred.
Acquisitions
and Business Combinations
The
Company allocates the fair value of purchase consideration issued in business combination transactions to the tangible assets
acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The
excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded
as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible
assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows
from: (a) acquired technology, (b) trademarks and trade names, and (c) customer relationships, useful lives, and discount rates.
Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain
and unpredictable and, as a result, actual results may differ from estimates. The allocation of the purchase consideration may
remain preliminary as the Company gathers additional facts about the circumstances that existed as of the acquisition date during
the measurement period. The measurement period shall not exceed one year from the acquisition date. Upon the conclusion of the
measurement period, any subsequent adjustments are recorded to earnings.
Revenue
From Contracts With Customers
The
Company recognizes revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (the “revenue
standard”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control
of that good or service. The following five steps are applied to achieve that core principle:
|
●
|
Step
1: Identify the contract with the customer
|
|
●
|
Step
2: Identify the performance obligations in the contract
|
|
●
|
Step
3: Determine the transaction price
|
|
●
|
Step
4: Allocate the transaction price to the performance obligations in the contract
|
|
●
|
Step
5: Recognize revenue when the company satisfies a performance obligation
|
The
Company generates revenue from the following sources:
|
1.
|
Subscriptions
– The Company sells various subscription plans through its website and third-party
app stores. These subscription plans provide different levels of streamed content and
functionality depending on the plan selected. Subscription fees are fixed and paid in
advance by credit card on a monthly, quarterly or annual basis. A subscription customer
executes a contract by agreeing to the Company’s terms of service. The Company
considers the subscription contract legally enforceable once the customer has accepted
terms of service and the Company has received credit card authorization from the customer’s
credit card company. The terms of service allow customers to terminate the subscription
at any time, however, in the event of termination, no prepaid subscription fees are refundable.
The Company recognizes revenue when it satisfies a performance obligation by transferring
control of the promised services to the customers, which is ratably over the subscription
period. Upon the customer agreeing to the Company’s terms and conditions and
authorization of the credit card, the customer simultaneously receives and consumes the
benefits of the streamed content ratably throughout the term of the contract. Subscription
services sold through third-party app stores are recorded gross in revenue with fees
to the third-party app stores recorded in subscriber related expenses in the consolidated
statement of operations. Management concluded that the customers are the end user of
the subscription services sold by these third-party app stores.
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
|
2.
|
Advertisements
– The Company executes agreements with advertisers that want to display ads (“impressions”) within the streamed
content. The Company enters into individual insertion orders (“IOs”) with advertisers, which specify the term
of each ad campaign, the number of impressions to be delivered and the applicable rate to be charged. The Company invoices
advertisers monthly for impressions actually delivered during the period. Each executed IO provides the terms and conditions
agreed to in respect of each party’s obligations. The Company recognizes revenue at a point in time when it satisfies
a performance obligation by transferring control of the promised services to the advertiser, which generally is when the advertisement
has been displayed.
|
|
|
|
|
3.
|
Software
licenses, net – Revenue from the sale of software licenses are recognized as a single performance obligation at the
point in time that the software license is delivered to the customer. The Company under its contracts is required to provide
its customers with 30 days to return the license for a full refund, regardless of reason, and the Company will be provided
a refund in full of its cost to sell the license. Therefore, for Nexway, the Company acts as an agent and recognizes revenue
on a net basis. As a result of the deconsolidation of Nexway AG which was effective as of March 31, 2020, the Company
no longer generates revenue from software licenses.(See Note 7)
|
|
|
|
|
4.
|
Other
– The Company has an annual contract to sub-license its rights to broadcast certain international sporting events to
a third party. The Company recognizes revenue under this contract at a point in time when it satisfies a performance obligation
by transferring control of the promised services to the third party, which generally is when the third party has access to
the programming content.
|
Subscriber
Related Expenses
Subscriber
related expenses consist primarily of affiliate distribution rights and other distribution costs related to content streaming.
The cost of affiliate distribution rights is generally incurred on a per subscriber basis and are recognized when the related
programming is distributed to subscribers. The Company has certain arrangements whereby affiliate distribution rights are paid
in advance or are subject to minimum guaranteed payments. An accrual is established when actual affiliate distribution costs are
expected to fall short of the minimum guaranteed amounts. To the extent actual per subscriber fees do not exceed the minimum guaranteed
amounts, the Company will expense the minimum guarantee in a manner reflective of the pattern of benefit provided by these subscriber
related expenses, which approximates a straight-line basis over each minimum guarantee period within the arrangement. Subscriber
related expenses also include credit card and payment processing fees for subscription revenue, customer service, certain employee
compensation and benefits, cloud computing, streaming, and facility costs. The Company receives advertising spots from television
networks for sale to advertisers as part of the affiliate distribution agreements.
Broadcasting
and Transmission
Broadcasting
and transmission expenses are charged to operations as incurred and consist primarily of the cost to acquire a signal, transcode,
store, and retransmit it to the subscribers.
Sales
and Marketing
Sales
and marketing expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation,
agency costs, advertising campaigns and branding initiatives. All sales and marketing costs are expensed as they are incurred.
Advertising expense totaled $18.2 million and $22.7 million for the three and nine months ended September 30, 2020, respectively,
and $0.1 million and $0.3 million in advertising expense was incurred for the three and nine months ended September 30, 2019,
respectively.
Technology
and Development
Technology
and development expenses are charged to operations as incurred. Technology and development expenses consist primarily of payroll
and related costs, benefits, rent and utilities, stock-based compensation, technical services, software expenses, and hosting
expenses.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
General
and Administrative
General
and administrative expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation,
corporate insurance, office expenses, professional fees, as well as travel, meals, and entertainment costs.
Net
Loss Per Share
Basic
net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted net loss per common share excludes the potential impact of the Company’s convertible
notes, convertible preferred stock, common stock options and warrants because their effect would be anti-dilutive.
The
following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(274,117
|
)
|
|
$
|
(6,909
|
)
|
|
$
|
(404,064
|
)
|
|
$
|
(15,794
|
)
|
Less: net (loss)
income attributable to non-controlling interest
|
|
|
—
|
|
|
|
(128
|
)
|
|
|
1,555
|
|
|
|
2,653
|
|
Less: Deemed dividend
- beneficial conversion feature on preferred stock
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
Add:
deemed dividend on Series D Preferred Stock
|
|
|
—
|
|
|
|
(379
|
)
|
|
|
—
|
|
|
|
(379
|
)
|
Net loss attributable
to common stockholders
|
|
$
|
(274,117
|
)
|
|
$
|
(7,166
|
)
|
|
$
|
(402,509
|
)
|
|
$
|
(16,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
44,199,709
|
|
|
|
24,363,124
|
|
|
|
36,577,183
|
|
|
|
20,165,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(6.20
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(11.00
|
)
|
|
$
|
(0.80
|
)
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their
inclusion would have been anti-dilutive:
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Common stock purchase warrants
|
|
|
9,538,533
|
|
|
|
200,007
|
|
Series AA convertible preferred shares
|
|
|
64,648,724
|
|
|
|
-
|
|
Series D convertible preferred shares
|
|
|
-
|
|
|
|
455,233
|
|
Stock options
|
|
|
17,952,213
|
|
|
|
16,667
|
|
Convertible notes
variable settlement feature
|
|
|
-
|
|
|
|
609,491
|
|
Total
|
|
|
92,139,470
|
|
|
|
1,281,398
|
|
Recently
Issued Accounting Standards
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a
“current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit
losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable
supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on
financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU was effective
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.
Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company will
adopt this standard on January 1, 2021 and the Company does not anticipate that adopting the standard will have a material impact
on the condensed financial statements and related disclosures.
In
December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain
exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,
with early adoption permitted. The Company adopted this standard
on January 1, 2020 and the adoption did not have a material impact on the condensed financial statements and related disclosures.
In
August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required
under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative
scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for
annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified
retrospective or fully retrospective method of transition. The Company is currently evaluating the impact this ASU will have on
its condensed consolidated financial statements and related disclosures.
On
April 1, 2020, we completed the Merger, as described in Note 1. In accordance with the terms of the Merger Agreement, all of the
capital stock of fuboTV Pre-Merger was converted, at a stock exchange ratio of 1.82, into the right to receive 32,324,362 shares
of Series AA Convertible Preferred Stock, a newly-created class of our Preferred Stock. Pursuant to the Series AA Certificate
of Designation, each share of Series AA Convertible Preferred Stock is convertible into two shares of the Company’s common
stock only in connection with the sale of such shares on an arms’-length basis either pursuant to an exemption from registration
under Rule 144 promulgated under the Securities Act or pursuant to an effective registration statement under the Securities Act.
As of September 30, 2020, 31,611,147 shares of Series AA Convertible Preferred Stock were issued.
In
addition, each outstanding option to purchase shares of common stock of fuboTV Pre-Merger was assumed by FaceBank Pre-Merger and
converted into options to acquire FaceBank Pre-Merger’s common stock at a stock exchange ratio of 3.64. In accordance with
the terms of the Merger Agreement, the Company assumed 8,051,098 stock options issued and outstanding under the fuboTV Pre-Merger’s
2015 Equity Incentive Plan (the “2015 Plan”) with a weighted-average exercise price of $1.32 per share. From and after
the Effective Time, such options may be exercised for shares of the Company’s common stock under the terms of the 2015 Plan.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
preliminary purchase price for the merger was determined to be $576.1 million, which consists of (i) $530.1 million market value
($8.20 per share stock price of the Company as of April 1, 2020) of 64.6 million common shares, (ii) $36.0 million related to
the fair value of outstanding options vested prior to the Merger and (iii) $10.0 million related to the effective settlement of
a preexisting loan receivable from fuboTV Pre-Merger. No gain or loss was recognized on the settlement as the loan was effectively
settled at the recorded amount. Transaction costs of $0.9 million were expensed as incurred.
The
Company accounted for the Merger as a business combination under the acquisition method of accounting. FaceBank Pre-Merger was
determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) FaceBank
Pre-Merger’s stockholders owned approximately 57% of the voting common shares of the combined company immediately following
the closing of the Merger (54% assuming the exercise of all vested stock options as of the closing of the transaction)
and (ii) directors appointed by FaceBank Pre-Merger would hold a majority of board seats in the combined company.
The
following table presents a preliminary allocation of the purchase price to the net assets acquired, inclusive of intangible assets,
with the excess fair value recorded to goodwill. The goodwill, which is not deductible for tax purposes, is attributable to the
assembled workforce of fuboTV Pre-Merger, planned growth in new markets, and synergies expected to be achieved from the combined
operations of FaceBank Pre-Merger and fuboTV Pre-Merger. The goodwill established will be included within a new fuboTV reporting
unit. These estimates are provisional in nature and adjustments may be recorded in future periods as appraisals and other valuation
reviews are finalized.
During
the nine months ended September 30, 2020, the Company continued finalizing its valuations of the assets acquired and liabilities
assumed in the April 1, 2020 acquisition of fuboTV based on new information obtained about facts and circumstances that existed
as of the acquisition date. During the three months ended September 30, 2020, the Company recorded preliminary measurement
period adjustments, mainly to reduce its acquisition date goodwill by approximately $65.3 million and the corresponding
net deferred tax liability based on an estimate of the realizability of deferred tax assets acquired in the merger and the resulting
impact on the Company’s valuation allowance of its deferred tax assets. The Company is continuing to gather information
about the realizability of its deferred tax assets and this initial estimate may be subject to change during the measurement period.
Any
necessary adjustments will be finalized within one year from the date of acquisition (in thousands).
|
|
Fair
Value
|
|
Assets acquired:
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
8,040
|
|
Accounts receivable
|
|
|
5,831
|
|
Prepaid expenses
and other current assets
|
|
|
976
|
|
Property &
equipment
|
|
|
2,042
|
|
Restricted cash
|
|
|
1,333
|
|
Other noncurrent
assets
|
|
|
397
|
|
Operating leases
- right-of-use assets
|
|
|
5,395
|
|
Intangible assets
|
|
|
243,612
|
|
Deferred tax
assets
|
|
|
252
|
|
Goodwill
|
|
|
493,847
|
|
Total
assets acquired
|
|
$
|
761,725
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
Accounts payable
|
|
$
|
51,687
|
|
Accounts payable
– due to related parties
|
|
|
14,811
|
|
Accrued expenses
and other current liabilities
|
|
|
50,249
|
|
Accrued expenses
and other current liabilities – due to related parties
|
|
|
30,913
|
|
Long term borrowings
- current portion
|
|
|
5,625
|
|
Operating lease
liabilities
|
|
|
5,395
|
|
Deferred revenue
|
|
|
8,809
|
|
Long-term debt,
net of issuance costs
|
|
|
18,125
|
|
Total
liabilities assumed
|
|
$
|
185,614
|
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
576,111
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
fair values of the intangible assets acquired were determined using the income and cost approaches. The fair value measurements
were primarily based on significant inputs that are not observable in the market and thus represent Level 3 measurements as defined
in ASC 820. The relief from royalty method was used to value the software and technology and tradenames. The relief from royalty
method is an application of the income method and estimates fair value for an asset based on the expected cost to license a similar
asset from a third-party. Projected cash flows are discounted at a required rate of return that reflects the relative risk of
achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost
of replacing an asset with another of equivalent economic utility, was used for customer relationships. The cost to replace a
given asset reflects the estimated reproduction or replacement cost for these customer related assets. The estimated useful lives
and fair value of the intangible assets acquired are as follows (in thousands):
|
|
Estimated
Useful Life
(in
Years)
|
|
Fair
Value
|
|
|
|
|
|
|
|
Software
and technology
|
|
9
|
|
$
|
181,737
|
|
Customer
relationships
|
|
2
|
|
|
23,678
|
|
Tradenames
|
|
9
|
|
|
38,197
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
243,612
|
|
The
deferred tax assets represent the deferred tax impact associated with the differences in book and tax basis, including
incremental differences created from the preliminary purchase price allocation and acquired net operating losses. Deferred taxes
associated with estimated fair value adjustments reflect an estimated blended federal and state tax rate, net of tax effects on
state valuation allowances. For balance sheet purposes, where U.S. tax rates were used, rates were based on recently enacted U.S.
tax law. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on
post-merger activities, including cash needs, the geographical mix of income, and changes in tax law. This determination is preliminary
and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities of fuboTV
Pre-Merger.
For
the nine month period ended September 30, 2020, our condensed consolidated statement of operations included $112.7 million of
revenues and a net loss of $274.1 million, which included non-cash goodwill and intangible asset impairment charges
of $236.7 million for the legacy Facebank reporting unit, a $20.6 million benefit for income taxes associated with the legacy
Facebank reporting unit and a $7.6 million gain on the sale of Facebank AG. Net loss attributable to common stockholders for
the nine months ended September 30, 2020 reflects $1.2 million of interest expense associated with a short-term loan issued in
connection with the Merger. The following unaudited pro forma consolidated results of operations assume that the acquisition of
fuboTV Pre-Merger was completed as of January 1, 2019 (in thousands, except per share data).
|
|
Nine
months ended September 30
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
163,716
|
|
|
$
|
99,321
|
|
Net
loss attributable to common stockholders
|
|
$
|
(448,412
|
)
|
|
$
|
(164,303
|
)
|
Pro
forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the
periods presented, nor is it intended to be a projection of future results.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
5.
|
Revenue
from contracts with customers
|
Disaggregated
revenue
The
following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues (in thousands):
|
|
Three
Months Ended September 30
|
|
|
Nine
months ended September 30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Subscriptions
|
|
$
|
53,433
|
|
|
$
|
-
|
|
|
$
|
92,945
|
|
|
$
|
-
|
|
Advertisements
|
|
|
7,520
|
|
|
|
-
|
|
|
|
11,843
|
|
|
|
-
|
|
Software
licenses, net – Nexway eCommerce Solutions
|
|
|
-
|
|
|
|
5,834
|
|
|
|
7,295
|
|
|
|
5,834
|
|
Other
|
|
|
249
|
|
|
|
-
|
|
|
|
586
|
|
|
|
-
|
|
Total
revenue
|
|
$
|
61,202
|
|
|
$
|
5,834
|
|
|
$
|
112,669
|
|
|
$
|
5,834
|
|
Contract
balances
There
were no losses recognized related to any receivables arising from the Company’s contracts with customers for the three and
nine months ended September 30, 2020 and 2019.
For
the three and nine months ended September 30, 2020 and 2019, the Company did not recognize material bad-debt expense and there
were no material contract assets recorded on the accompanying condensed consolidated balance sheet as of September 30, 2020 and
December 31, 2019.
The
contract liabilities primarily relate to upfront payments and consideration received from customers for subscription services.
As of September 30, 2020, the Company’s contract liabilities totaled approximately $15.4 million and are recorded as deferred
revenue on the accompanying condensed consolidated balance sheet. There were no contract liabilities recorded as of December 31,
2019.
Transaction
price allocated to remaining performance obligations
The
Company does not disclose the transaction price allocated to remaining performance obligations since
subscription
and advertising contracts have an original expected term of one year or less.
6.
|
Property
and equipment, net
|
Property
and equipment, net, is comprised of the following (in thousands):
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
Furniture
and fixtures
|
|
$
|
668
|
|
|
$
|
335
|
|
Computer
equipment
|
|
|
737
|
|
|
|
-
|
|
Leasehold
improvements
|
|
|
2,280
|
|
|
|
-
|
|
|
|
|
3,685
|
|
|
|
335
|
|
Less:
Accumulated depreciation
|
|
|
(1,845
|
)
|
|
|
-
|
|
Total
property and equipment, net
|
|
$
|
1,840
|
|
|
$
|
335
|
|
Depreciation
expense totaled approximately $0.1 million for the three months ended September 30, 2020. Depreciation expense totaled approximately
$0.3 million for the nine months ended September 30, 2020. There was no depreciation expense for the three and nine months ended
September 30, 2019.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
7.
|
FaceBank
AG and Nexway - Assets Held For Sale
|
Through
its ownership in FaceBank AG, the Company had an equity investment of 62.3% in Nexway AG (“Nexway”), which it acquired
on September 16, 2019. The equity investment in Nexway was a controlling financial interest and the Company consolidated its investment
in Nexway under ASC 810, Consolidation.
On
March 31, 2020, the Company relinquished 20% of the total Nexway shareholder votes associated with its investment, which reduced
the Company’s voting interest in Nexway to 37.6%. As a result of the Company’s loss of control in Nexway, the Company
deconsolidated Nexway as of March 31, 2020 as it no longer has a controlling financial interest.
The
deconsolidation of Nexway resulted in a loss of approximately $11.9 million calculated as follows (in thousands):
Cash
|
|
$
|
5,776
|
|
Accounts
receivable
|
|
|
9,831
|
|
Inventory
|
|
|
50
|
|
Prepaid
expenses
|
|
|
164
|
|
Goodwill
|
|
|
51,168
|
|
Property
and equipment, net
|
|
|
380
|
|
Right-of-use
assets
|
|
|
3,594
|
|
Total
assets
|
|
$
|
70,963
|
|
Less:
|
|
|
|
|
Accounts
payable
|
|
|
34,262
|
|
Accrued
expenses
|
|
|
15,788
|
|
Lease
liability
|
|
|
3,594
|
|
Deferred
income taxes
|
|
|
1,161
|
|
Other
liabilities
|
|
|
40
|
|
Total
liabilities
|
|
$
|
54,845
|
|
Non-controlling
interest
|
|
|
2,595
|
|
Foreign
currency translation adjustment
|
|
|
(770
|
)
|
Loss
before fair value – investment in Nexway
|
|
|
14,293
|
|
Less:
fair value of shares owned by the Company
|
|
|
2,374
|
|
Loss
on deconsolidation of Nexway
|
|
$
|
11,919
|
|
The
Company’s voting interest in Nexway was further diluted to 31.2% as a result of additional financing which the Company did
not participate in.
During
the quarter ended September 30, 2020, the Company sold 100% of its ownership interest in Facebank AG and its investment
in Nexway to the former owners and recognized a gain on sale of its investment of approximately $7.6 million, which is included
as a gain on the sale of assets, a component of other income (expense) on the accompanying condensed consolidated
statement of operations.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
following table represents the net carrying value of the Company’s investment in Facebank AG and Nexway and the related
gain on sale of its investment:
Investment
in Nexway
|
|
$
|
4,988
|
|
Financial
assets at fair value
|
|
|
1,965
|
|
Goodwill
|
|
|
28,541
|
|
Total
assets
|
|
|
35,494
|
|
Loan
payable
|
|
|
56,140
|
|
Net
carrying amount
|
|
|
(20,646
|
)
|
Issuance
of common stock to original owners of Facebank AG
|
|
|
12,395
|
|
Cash
paid to former owners of Facebank AG
|
|
|
619
|
|
Gain
on sale of investment in Facebank AG
|
|
$
|
(7,631
|
)
|
In
March 2019, the Company entered into an agreement to finance and co-produce Broadway Asia’s theatrical production of DreamWorks’
Kung Fu Panda Spectacular Live at the Venetian Theatre in Macau (“Macau Show”). The Company determined the fair value
of the profits interest sold to certain investors to be approximately $1.8 million as of the date of this transaction and $2.1
million and $2.0 million as of September 30, 2020 and December 31, 2019, respectively.
The
table below summarizes the Company’s profits interest since the date of the transaction (in thousands except for unit and
per unit information):
Panda
units granted
|
|
|
26.2
|
|
Fair
value per unit on grant date
|
|
$
|
67,690
|
|
Grant
date fair value
|
|
$
|
1,773
|
|
Change
in fair value of Panda interests
|
|
|
198
|
|
Fair
value at December 31, 2019
|
|
$
|
1,971
|
|
Change
in fair value of Panda interests
|
|
|
148
|
|
Fair
value at September 30, 2020
|
|
$
|
2,119
|
|
9.
|
Intangible
Assets and Goodwill
|
The
Facebank reporting unit was developed by the Company’s former CEO, John Textor. On July 31, 2020, Mr. Textor resigned as
a member of the Board of Directors of the Company. Upon the Merger, Mr. Textor became Head of Studio of the Company and was to
manage the legacy Facebank reporting unit, which included human animation and digital likeness technologies. Mr. Textor submitted
his resignation as Head of Studio, which is effective October 30, 2020. As of September 30, 2020, Mr. Textor was not performing
substantive services for the Company. Mr. Textor’s continuing involvement was integral for further development of the Facebank
reporting unit, and therefore represents a triggering event to assess the carrying value of
its goodwill and intangible assets underlying the Facebank reporting unit. The Company performed an impairment analysis of the
Facebank goodwill and intangible assets and during the three and nine months ended September 30, 2020, the Company recorded an
intangible asset impairment charge of approximately $88.1 million and goodwill impairment charge of $148.6 million. After
these impairment charges the Facebank reporting unit had no allocated goodwill and intangible assets of $13.0 million.
The
following table represents the impairment charges recorded during the 3rd quarter of 2020 related to the Company’s
Facebank reporting unit (in thousands):
Intangible
assets
|
|
$
|
88,059
|
|
Goodwill
|
|
$
|
148,622
|
|
Total
impairment expense
|
|
$
|
236,681
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Intangible
Assets
The
Company performed a valuation of its intangible assets of the Facebank reporting unit as of September 30, 2020. The Company determined
that the carrying value of the intangible assets exceeded their fair value. During the three and nine months ended September 30,
2020, the Company recorded an impairment charge of approximately $88.1 million, which was approximately 88% of the carrying value
at September 30, 2020. Based on the impairment analysis, it was determined that the useful lives of human animation technologies,
trademark and tradenames, animation and visual effects technologies, and digital assets library were reduced from 7 years to 5
years.
The
table below summarizes the Company’s intangible assets at September 30, 2020 and December 31, 2019 (in thousands):
|
|
|
|
|
Weighted
Average
|
|
|
September
30, 2020
|
|
|
|
Useful
Lives
(Years)
|
|
|
Remaining
Life
(Years)
|
|
|
Intangible
Assets
|
|
|
Intangible
Asset
Impairment
|
|
|
Accumulated
Amortization
|
|
|
Net
Balance
|
|
Human
animation technologies
|
|
|
5
|
|
|
|
5
|
|
|
$
|
123,436
|
|
|
|
(79,884
|
)
|
|
|
(37,871
|
)
|
|
$
|
5,681
|
|
Trademark
and trade names
|
|
|
5
|
|
|
|
5
|
|
|
|
7,746
|
|
|
|
(3,903
|
)
|
|
|
(2,379
|
)
|
|
|
1,464
|
|
Animation
and visual effects technologies
|
|
|
5
|
|
|
|
5
|
|
|
|
6,016
|
|
|
|
(1,868
|
)
|
|
|
(1,848
|
)
|
|
|
2,300
|
|
Digital
asset library
|
|
|
5
|
|
|
|
5
|
|
|
|
7,536
|
|
|
|
(1,830
|
)
|
|
|
(2,185
|
)
|
|
|
3,522
|
|
Intellectual
Property
|
|
|
7
|
|
|
|
-
|
|
|
|
828
|
|
|
|
(574
|
)
|
|
|
(254
|
)
|
|
|
-
|
|
Customer
relationships
|
|
|
2
|
|
|
|
1.5
|
|
|
|
23,678
|
|
|
|
-
|
|
|
|
(5,920
|
)
|
|
|
17,758
|
|
fuboTV
tradename
|
|
|
9
|
|
|
|
8.5
|
|
|
|
38,197
|
|
|
|
-
|
|
|
|
(2,122
|
)
|
|
|
36,075
|
|
Software
and technology
|
|
|
9
|
|
|
|
8.5
|
|
|
|
181,737
|
|
|
|
-
|
|
|
|
(10,097
|
)
|
|
|
171,640
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
389,174
|
|
|
$
|
(88,059
|
)
|
|
$
|
(62,676
|
)
|
|
$
|
238,440
|
|
|
|
|
|
|
Weighted
Average
|
|
|
December
31, 2019
|
|
|
|
Useful
Lives
(Years)
|
|
|
Remaining
Life
(Years)
|
|
|
Intangible
Assets
|
|
|
Intangible
Asset
Impairment
|
|
|
Accumulated
Amortization
|
|
|
Net
Balance
|
|
Human
animation technologies
|
|
|
7
|
|
|
|
6
|
|
|
$
|
123,436
|
|
|
$
|
—
|
|
|
$
|
(24,646
|
)
|
|
$
|
98,790
|
|
Trademark
and trade names
|
|
|
7
|
|
|
|
6
|
|
|
|
9,432
|
|
|
|
(1,686
|
)
|
|
|
(1,549
|
)
|
|
|
6,197
|
|
Animation
and visual effects technologies
|
|
|
7
|
|
|
|
6
|
|
|
|
6,016
|
|
|
|
—
|
|
|
|
(1,203
|
)
|
|
|
4,813
|
|
Digital
asset library
|
|
|
5-7
|
|
|
|
5.5
|
|
|
|
7,505
|
|
|
|
—
|
|
|
|
(1,251
|
)
|
|
|
6,254
|
|
Intellectual
Property
|
|
|
7
|
|
|
|
6
|
|
|
|
3,258
|
|
|
|
(2,430
|
)
|
|
|
(236
|
)
|
|
|
592
|
|
Customer
relationships
|
|
|
11
|
|
|
|
11
|
|
|
|
4,482
|
|
|
|
(4,482
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
154,129
|
|
|
$
|
(8,598
|
)
|
|
$
|
(28,885
|
)
|
|
$
|
116,646
|
|
The
Company recorded amortization expense of $14.3 million and $5.2 million during the three months ended September 30, 2020 and 2019,
respectively, and $33.8 million and $15.5 million during the nine months ended September 30, 2020 and 2019, respectively.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
estimated future amortization expense associated with intangible assets is as follows (in thousands):
|
|
Future
Amortization
|
|
2020
|
|
$
|
9,731
|
|
2021
|
|
|
38,922
|
|
2022
|
|
|
30,043
|
|
2023
|
|
|
27,084
|
|
2024
|
|
|
27,010
|
|
Thereafter
|
|
|
105,650
|
|
Total
|
|
$
|
238,440
|
|
Goodwill
Using
the guidance of ASC 350-20 - Goodwill, the Company determined that the carrying value of its Facebank reporting unit exceeded
the fair value. During the three and nine months ended September 30, 2020, the Company recorded an impairment charge of approximately
$148.1 million related to the goodwill associated with the Facebank reporting unit, which represents the total amount of goodwill
allocated to Facebank.
The
following table is a summary of the changes to goodwill for the three and nine months ended September 30, 2020 (in thousands):
Balance
- December 31, 2019
|
|
$
|
227,763
|
|
Deconsolidation
of Nexway
|
|
|
(51,168
|
)
|
Balance
- March 31, 2020
|
|
$
|
176,595
|
|
Acquisition
of fuboTV
|
|
|
562,908
|
|
Less:
transfer to asset held for sale
|
|
|
(28,541
|
)
|
Balance
- June 30, 2020
|
|
$
|
710,962
|
|
Impairment
expense
|
|
|
(148,622
|
)
|
Measurement
period adjustment on the fuboTV acquisition
|
|
|
(68,493
|
)
|
Balance
- September 30, 2020
|
|
$
|
493,847
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
10.
|
Accounts
Payable and Accrued Expenses
|
Accounts
payable and accrued expenses are presented below (in thousands):
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Suppliers
|
|
|
-
|
|
|
$
|
37,508
|
|
Affiliate
fees
|
|
|
38,127
|
|
|
|
-
|
|
Broadcasting
and transmission
|
|
|
18,726
|
|
|
|
-
|
|
Selling
and marketing
|
|
|
13,998
|
|
|
|
-
|
|
Payroll
taxes (in arrears)
|
|
|
50
|
|
|
|
1,308
|
|
Accrued
compensation
|
|
|
2,887
|
|
|
|
3,649
|
|
Legal
and professional fees
|
|
|
4,472
|
|
|
|
3,936
|
|
Accrued
litigation loss
|
|
|
-
|
|
|
|
524
|
|
Taxes
(including value added)
|
|
|
9,774
|
|
|
|
5,953
|
|
Subscriber
related
|
|
|
2,660
|
|
|
|
-
|
|
Other
|
|
|
8,348
|
|
|
|
3,897
|
|
Total
|
|
$
|
99,042
|
|
|
$
|
56,775
|
|
The
Company recorded income tax benefits associated with the amortization of intangible assets of $16.1 million and $1.0 million
during the three months ended September 30, 2020 and 2019, respectively, and $20.6 million and $3.2 million during the
nine months ended September 30, 2020 and 2019, respectively. The Company’s current provision for income taxes consists
of state and foreign income taxes and is immaterial in all periods presented.
The
Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely
than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers
all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected
future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence,
such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. At September 30, 2020 and
December 31, 2019, the Company continued to maintain that the realization of its deferred tax assets has not achieved a more likely
than not threshold therefore, the net deferred tax assets have been fully offset by a valuation allowance. The following is a
rollforward of the Company’s deferred tax liability from January 1, 2020 to September 30, 2020 (in thousands):
Balance at December 31,
2019
|
|
$
|
30,879
|
|
Income tax benefit
(associated with the amortization of intangible assets)
|
|
|
(1,038
|
)
|
Deconsolidation
of Nexway
|
|
|
(1,162
|
)
|
Balance at March 31, 2020
|
|
$
|
28,679
|
|
Acquisition of fuboTV
Pre-Merger
|
|
|
65,613
|
|
Income
tax benefit (associated with the amortization of intangible assets)
|
|
|
(3,498
|
)
|
Balance at June 30, 2020
|
|
$
|
90,794
|
|
Income tax benefit
(associated with the amortization of intangible assets)
|
|
|
(16,071
|
)
|
Measurement
period adjustment
|
|
|
(65,295
|
)
|
Balance at
September 30, 2020
|
|
$
|
9,428
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
following table represents amounts due to related parties as of September 30, 2020 and December 31, 2019 consist of the following
(in thousands):
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Affiliate
fees
|
|
$
|
85,116
|
|
|
$
|
-
|
|
Alexander
Bafer, former Executive Chairman
|
|
|
458
|
|
|
|
20
|
|
John
Textor, former Chief Executive Officer and affiliated companies
|
|
|
264
|
|
|
|
592
|
|
Other
|
|
|
9
|
|
|
|
53
|
|
Total
|
|
$
|
85,847
|
|
|
$
|
665
|
|
The
Company has entered into affiliate distribution agreements with CBS Corporation and related entities, New Univision Enterprises,
LLC, AMC Network Ventures, LLC, Viacom International, Inc. and Discovery, Inc. and related entities which are holders of the Company’s
convertible preferred stock. AMC Networks Ventures, LLC is also the lender to the senior secured loan (see Note 13). The
aggregate affiliate distribution fees recorded to subscriber related expenses for related parties were $37.0 million and $60.1
million for the three and nine months ended September 30, 2020, respectively. There were no affiliate distribution fees for the
three and nine months ended September 30, 2019.
On
July 31, 2020, Alexander Bafer resigned as a member of the Company’s Board of Directors and as an executive officer of the
Company.
On
July 31, 2020, John Textor resigned as a member of the Board of Directors of the Company. The amounts due to Mr. Textor represent
an unpaid compensation liability assumed in the acquisition of EAI.
The
amounts due to other related parties also represent financing obligations assumed in the acquisition of EAI.
During
the year ended December 31, 2019, the Company received a $300,000 advance (the “FaceBank Advance”) from FaceBank,
Inc., a development stage company controlled by Mr. Textor. During the quarter ended March 31, 2020, the Company repaid the FaceBank
Advance in full to FaceBank, Inc. No further amounts are due and payable by the Company under the FaceBank Advance.
Notes
Payable – Related Parties
On
August 8, 2018, the Company assumed a $172,000 note payable due to a relative of the then-Chief Executive Officer, John Textor.
The note had a three-month roll-over provision, and different maturity and repayment amounts if not fully paid by its due date.
The note bears interest at 18% per annum. The Company had accrued default interest for the additional liability in excess of the
principal amount. Accrued interest and penalties as of December 31, 2019 was approximately $0.3 million, and was recognized as
note payable – related parties on the accompanying condensed consolidated balance sheet. On August 3, 2020, the note maturity
date was extended to December 31, 2020 and is no longer in default. On September 13, 2020, the note was amended to reduce the
interest rate to 4% per annum retroactive to issuance date of the note. As of September 30, 2020 the principal balance and
accrued interest totaled approximately $35,000.
Senior
Secured Loan
In
April 2018, fuboTV pre-Merger entered into a senior secured term loan with AMC Networks Ventures, LLC (the “Term Loan”)
with a principal amount of $25.0 million, bearing interest equal to LIBOR (London Interbank Offered Rate) plus 5.25% per annum
and with scheduled principal payments beginning in 2020. The Company recorded this loan at its fair value of $23.8 million in
connection with its acquisition of fuboTV Pre-Merger on April 1, 2020. The Company has made principal repayments of $2.5 million
during the nine months ended September 30, 2020. As of September 30, 2020, the outstanding balance of the Term Loan is $22.5 million
and is included in short-term and long-term borrowings on the accompanying condensed consolidated balance sheet.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
Term Loan matures on April 6, 2023, has certain financial covenants and requires the Company to maintain a certain minimum subscriber
level. The Company was in compliance with all covenants at September 30, 2020.
Evolution
AI Corporation
The
Company has recognized, through the accounting consolidation of EAI, a $2.7 million note payable bearing interest at the rate
of 10% per annum that was due on October 1, 2018 (“EAI Note”). The cumulative accrued interest on the EAI Note amounts
to $1.6 million. The EAI Note is currently in a default condition due to non-payment of principal and interest. The EAI Note relates
to the acquisition of technology from parties who, as a result of the acquisition of EAI, own 15,000,000 shares of the Company’s
common stock (after the conversion of 1,000,0000 shares of Series X Convertible Preferred Stock during the year ended December
31, 2019). The holders of the EAI Note have agreed not to declare the EAI Note in default and to forbear from exercising remedies
which would otherwise be available in the event of a default, while the EAI Note continues to accrue interest. The Company is
currently in negotiation with such holders to resolve the matter and the outstanding balance as of September 30, 2020, including
interest and penalties, is $4.4 million. The balance of $4.4 million is included in notes payable, net of discount on the accompanying
condensed consolidated balance sheet.
FBNK
Finance SarL
On
February 17, 2020, FBNK Finance issued EUR 50.0 million of bonds (or $56.1 million). There were 5,000 notes with a nominal value
EUR 10,000 per note. The bonds were issued at par with 100% redemption price. The maturity date of the bonds is February 15, 2023
and the bonds have a 4.5% annual fixed rate of interest. Interest is payable semi-annually on August 15 and February 15. The majority
of the proceeds was used for the redemption of the bonds issued by SAH, HFC and Nexway SAS. The bonds are unconditional and unsubordinated
obligations of FBNK Finance. As part of this transaction, the Company recorded a loss of $11.1 million during the nine months
ended September 30, 2020 which was recorded as loss extinguishment of debt on the accompanying condensed consolidated statement
of operations. During the nine months ended September 30, 2020, the Company recorded a $1.0 million foreign exchange loss upon
remeasurement to USD.
During
the quarter ended September 30, 2020, the Company sold its investment in FaceBank AG and Nexway and derecognized the carrying
value of the bonds of $56.1 million (see Note 7).
Credit
and Security Agreement
As
described in Note 1, on March 11, 2020, the Company and HLEEF entered into the Credit Facility with HLEEF. The Credit Facility
is secured by substantially all the assets of the Company. As of September 30, 2020, there were no amounts outstanding under the
Credit Facility.
On
July 8, 2020, the Company entered into a Termination and Release Agreement with HLEE Finance to terminate the Credit Agreement.
The Company did not draw down on the Credit Agreement during its term.
Note
Purchase Agreement
As
described in Note 1, on March 19, 2020, the Company and the other parties thereto entered into the Note Purchase Agreement, pursuant
to which the Company sold to FB Loan the Senior Notes. In connection with the Company’s acquisition of fuboTV Pre-Merger,
the proceeds of $7.4 million, net of an original issue discount of $2.7 million, were used to fund the advance to fuboTV
Pre-Merger.
Each
Borrower’s obligations under the Senior Notes are secured by substantially all of the assets of each such Borrower pursuant
to a Security Agreement, dated as of March 19, 2020, by and among Borrower and FB Loan (the “Security Agreement”).
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
Note Purchase Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the
Borrower and its subsidiaries to, among other things, incur debt, grant liens, make certain restricted payments, make certain
loans and other investments, undertake certain fundamental changes, enter into restrictive agreements, dispose of assets, and
enter into transactions with affiliates, in each case, subject to limitations and exceptions set forth in the Note Purchase Agreement.
The Note Purchase Agreement also contains customary events of default that include, among other things, certain payment defaults,
cross defaults to other material obligations, covenant defaults, change of control defaults, judgment defaults, and bankruptcy
and insolvency defaults. If an event of default exists, the lenders may require the immediate payment of all obligations under
the Note Purchase Agreement, and may exercise certain other rights and remedies provided for under the Note Purchase Agreement,
the Security Agreement, the other loan documents and applicable law.
Interest
on the Senior Notes shall accrue until full and final repayment of the principal amount of the Senior Note at a rate of 17.39%
per annum. On the first business day of each calendar month in which the Senior Note is outstanding, beginning on April 1, 2020,
Borrower shall pay in arrears in cash to FB Loan accrued interest on the outstanding principal amount of the Senior Note. The
maturity date of the Senior Notes is the earlier to occur of (i) July 8, 2020 and (ii) the date the Borrower receives the proceeds
of any financing. The Borrower may prepay or redeem the Senior Note in whole or in part without penalty or premium.
In
connection with the Note Purchase Agreement, the Company issued FB Loan a warrant to purchase 3,269,231 shares of its common stock
at an exercise price of $5.00 per share (the “FB Loan Warrant”) and 900,000 shares of its common stock. The fair value
of the warrant on the Senior Notes issuance date was approximately $15.6 million and is recorded as a warrant liability in the
accompanying condensed consolidated balance sheet with subsequent changes in fair value recognized in earnings each reporting
period (see Note 14). The fair value of the 900,000 common stock issued was based upon the closing price of the Company’s
common stock as of March 19, 2020 (or $8.15 per share or $7.3 million). Since the fair value of the warrants and common stock
exceeded the principal balance of the Senior Notes, the Company recorded a loss on issuance of the Senior Notes totaling $12.9
million and is reflected in the accompanying condensed consolidated statement of operations.
The
900,000 shares were valued at $8.15 per share at March 19, 2020 and $7.5 million set forth on the balance sheet for shares settled
payable for note payable reflects the fair value of 900,000 shares to be issued at $8.35 per share as of March 31, 2020. On April
28, 2020, these shares were issued at $10.00 per share. The Company recorded a change in fair value of shares settled payable
of approximately $1.7 million during the nine months ended September 30, 2020, respectively.
Pursuant
to the Note Purchase Agreement, the Borrower agreed, among other things that (i) the Company shall file a registration statement
with the Commission regarding the purchase and sale of 900,000 shares of the Company’s common stock issued to FB Loan in
connection with the Note Purchase Agreement (the “Shares”) and any shares of capital stock issuable upon exercise
of the FB Loan Warrant (the “Warrant Shares)”); and (ii) the Company shall have filed an application to list the Company’s
Common Stock for trading on the NASDAQ exchange, on or before the date that is thirty (30) days following the closing date of
the Note Purchase Agreement. Refer to the Amendments to the Note Purchase Agreements section below for further details.
Amendments
to the Note Purchase Agreement
On
April 21, 2020, the Company and the other parties to the Note Purchase Agreement entered into an Amendment to the Note Purchase
Agreement to (i) extend the deadline for registration of the resale of the Shares and the Warrant Shares to May 25, 2020 and (ii)
provide that in lieu of the obligation under the Note Purchase Agreement to apply to list on NASDAQ within thirty (30) days of
March 19, 2020, the Company shall have initiated the process to list its capital stock on a national exchange on or before the
date that is thirty (30) days following March 19, 2020. The Company has initiated this process.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Subsequently,
on May 28, 2020, the Company and the other parties to the Note Purchase Agreement entered into a Consent and Second Amendment
to the Note Purchase Agreement (the “Second Amendment”), pursuant to which, among other things, FB Loan agreed to
extend the deadline for registration for of the Shares and the Warrant Shares for resale to July 1, 2020. In addition:
|
(i)
|
FB
Loan consented to the May 11, 2020 sale by the Company of capital stock for aggregate consideration in the amount of $7.5
million; and
|
|
(ii)
|
the
provision requiring that following receipt by any loan party or any subsidiary of proceeds of any financing, the Borrower
must prepay the Senior Note in an amount equal to 100% of the cash proceeds of such financing, was removed.
|
On
July 1, 2020, the Company and the other parties to the Note Purchase Agreement entered into a Third Amendment to Note Purchase
Agreement (the “Third Amendment”), pursuant to which (i) the deadline for registration of the Shares and the Warrant
Shares for resale was extended to July 8, 2020 and (ii) the deadline for the redemption of the Senior Notes by the Borrower was
amended to be the earlier to occur of (y) July 8, 2020 and (z) the date the Borrower receives the proceeds of any financing.
On
August 3, 2020, pursuant to the Fourth Amendment to the Note Purchase Agreement (the “Fourth Amendment”), the Company
agreed (i) to file a registration statement on Form S-1 (the “Registration Statement”) prior to August 7, 2020 that
shall include the Shares, (ii) that within 91 days after the effective date of the Registration Statement, the Company shall file
a registration statement with the Commission registering the Shares and the Warrant Shares, and (iii) that the Company shall have
been approved to list its capital stock on a national exchange prior to the effective date of the Registration Statement.
On
July 3, 2020, the Company repaid $10.1 million related to the
Note Purchase Agreement.
Paycheck
Protection Program Loan
On
April 21, 2020, the Company entered into a Promissory Note (the “PPP Note”) with JPMorgan Chase Bank, N.A. as the
lender (the “Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Paycheck Protection
Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) in a principal
amount of $4.7 million pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
The
PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation,
group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The Loan is subject
to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health care benefits,
and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms
and limitations of the PPP. The Company used the Loan amount for Qualifying Expenses. However, no assurance is provided that the
Company will obtain forgiveness of the Loan in whole or in part.
The
interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed under the PPP Loan, or a portion
of them, are not forgiven, the Company will be required to make principal and interest payments in monthly installments beginning
seven months from April 2020. The PPP Note matures in two years.
The
PPP Note includes events of default. Upon the occurrence of an event of default, the Lender will have the right to exercise remedies
against the Company, including the right to require immediate payment of all amounts due under the PPP Note.
The
Company has recorded the principal balance of $4.7 million as $1.9 million of long-term borrowings and $2.8 million
as long-term borrowings– current portion on the accompanying condensed consolidated balance sheet.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Revenue
Participation Agreement
On
May 15, 2020, the Company entered into a revenue participation agreement with Fundigo, LLC for $10.0 million (the “Purchase
Price”). The Company received net proceeds of $9.5 million, net of an original issue discount of $0.5 million, in exchange
for participation in all of the Company’s future accounts, contract rights, and other obligations arising from or relating
to the payment of monies from the Company’s customers and/or third party payors (the “Revenues”), until an amount
equal to 145% of the Purchase Price, or $14.5 million (the “Revenue Purchased Amount”). The repayment amount is reduced
under the following circumstances.
(i)
If the Company pays $12.0 million of the Revenue Purchased Amount to Fundigo LLC before June 15, 2020, such payments shall constitute
payment in full of the Revenue Purchased Amounts and no additional debits will be made.
(ii)
If the Company pays $13.0 million of the Revenue Purchased Amount to Fundigo LLC before July 4, 2020, such payments shall constitute
payment in full of the Revenue Purchased Amounts and no additional debits will be made.
The
Company accounted for this agreement as a loan and as of September 30, 2020 the loan was repaid in full. Interest expense incurred
on the loan was $3.1 million for the nine months ending September 30, 2020.
Century
Venture
On
May 15, 2020, the Company entered into a loan agreement (the “Loan”) with Century Venture, SA, receiving proceeds
of $1.6 million to use for working capital and general corporate purposes. The Loan will bear interest at a rate of 8% per annum,
payable in arrears on the 15th day of each month. In the event the Company fails to make a payment within ten (10) days after
the due date, the Company shall pay interest on any overdue payment at the highest rate allowed by applicable law.
All
remaining unpaid principal together with interest accrued and unpaid shall be due and payable upon the earlier of (a) completion
of any debt or equity financing of the Company, which results in proceeds of at least $50 million, or (b) May 14, 2021. As of
September 30, 2020 the principal balance and accrued interest is approximately $1.6 million.
On
September 30, 2020, following negotiations with Century Venture, SA, the Company agreed to repay the Loan in full (inclusive of
any interest, fees and penalties) owed under the Credit Agreement. The Company paid $1.6 million on October 2, 2020, the Credit
Agreement and related Loan were automatically terminated.
Credit
Agreement
On
July 16, 2020, we entered into a Credit Agreement (the “Access Road Credit Agreement”) with Access Road Capital LLC
(the “Lender”). Pursuant to the terms of the Access Road Credit Agreement, the Lender extended a term loan (the “Loan”)
to us with a principal amount of $10.0 million. The Loan bears interest at a fixed rate of 13.0% per annum and matures on July
16, 2023. The Company repaid the loan in full on October 2, 2020.
14.
|
Fair
Value Measurements
|
The
Company holds investments in equity securities and limited partnership interests, which are accounted for at fair value and classified
within financial assets at fair value on the condensed consolidated balance sheet, with changes in fair value recognized as investment
gain / loss in the condensed consolidated statements of operations. The Company also held an investment in Nexway common stock
that was publicly traded on the Frankfurt Exchange. Additionally, the Company’s convertible notes, derivatives and warrants
were classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other
income (expense) in the condensed consolidated statements of operations.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
following table classifies the Company’s assets and liabilities measured at fair value on a recurring basis into the fair
value hierarchy as of September 30, 2020 and December 31, 2019 (in thousands):
|
|
Fair
valued measured at September 30, 2020
|
|
|
|
Quoted
prices
in active
markets
(Level 1)
|
|
|
Significant
other observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
Financial
Liabilities at Fair Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Profits
interest sold
|
|
|
-
|
|
|
|
-
|
|
|
|
2,119
|
|
Warrant
liability - Subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
21
|
|
Warrant
liability
|
|
|
-
|
|
|
|
-
|
|
|
|
28,065
|
|
Total
Financial Liabilities at Fair Value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
30,205
|
|
|
|
December
31, 2019
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Assets at Fair Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets at fair value
|
|
$
|
1,965
|
|
|
$
|
—
|
|
|
$
|
1,965
|
|
|
$
|
—
|
|
Total
|
|
$
|
1,965
|
|
|
$
|
—
|
|
|
$
|
1,965
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities at Fair Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
1,203
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,203
|
|
Profit
share liability
|
|
|
1,971
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,971
|
|
Derivative
liability
|
|
|
376
|
|
|
|
—
|
|
|
|
—
|
|
|
|
376
|
|
Warrant
liability - subsidiary
|
|
|
24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
Total
|
|
$
|
3,574
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,574
|
|
Derivative
Financial Instruments
The
following table presents changes in Level 3 liabilities measured at fair value (in thousands) for the three and nine months ended
September 30, 2020. Unobservable inputs were used to determine the fair value of positions that the Company has classified within
the Level 3 category.
|
|
Derivative
-
Convertible
Notes
|
|
|
Warrants
(assumed
from
subsidiary)
|
|
|
Profits
Interests
Sold
|
|
|
Warrant
Liability
|
|
|
Embedded
Put Option
|
|
Fair
value at December 31, 2019
|
|
$
|
1,203
|
|
|
$
|
24
|
|
|
$
|
1,971
|
|
|
$
|
-
|
|
|
$
|
376
|
|
Change
in fair value
|
|
|
(206
|
)
|
|
|
(3
|
)
|
|
|
148
|
|
|
|
(9,143
|
)
|
|
|
(220
|
)
|
Additions
|
|
|
3,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,743
|
|
|
|
172
|
|
Redemption
|
|
|
(4,580
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(328
|
)
|
Reclassification
of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,535
|
)
|
|
|
-
|
|
Fair
value at September 30, 2020
|
|
$
|
-
|
|
|
$
|
21
|
|
|
$
|
2,119
|
|
|
$
|
28,065
|
|
|
$
|
-
|
|
Profit
Share Liability - The fair value of the profits interest sold related to the Panda investment was determined using an expected
cash flow analysis. The change in fair value of profit share liability of $0.1 million for the nine months ended September 30,
2020 is reported as a component of other income (expense) in the condensed consolidated statement of operations.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Warrant
Liabilities
On
September 25, 2020, the Company repaid all of its variable convertible notes. As a result of this repayment, the Company is no
longer subject to a sequencing policy and therefore reclassified $13.5 million of warrant liabilities to additional paid in capital.
FB
Loan Warrant
In
connection with its Note Purchase Agreement (see Note 13), the Company issued the FB Loan Warrant and utilized the Black-Scholes
pricing model. The warrant liability was recorded at the date of grant at fair value. Subsequent changes in fair value for the
three and nine months ended September 30, 2020 was $0.1 million and $5.5 million, respectively and was recorded as other expense
in the condensed consolidated statement of operations. On September 30, 2020 the Company entered into the first amendment to the
warrant which amended the warrant strike price from $5.00 to $2.75.
The
significant assumptions used in the valuation are as follows:
|
|
September
30, 2020
|
|
Fair
value of underlying common shares
|
|
$
|
9.00
|
|
Exercise
price
|
|
$
|
2.75
|
|
Expected
dividend yield
|
|
|
—
|
%
|
Expected
volatility
|
|
|
50.7
|
%
|
Risk
free rate
|
|
|
0.22
|
%
|
Expected
term (years)
|
|
|
4.46
|
|
Purchase
Agreements with Investors
Between
May 11, 2020 and June 8, 2020, the Company entered into Purchase Agreements with certain investors (the “Investors”),
pursuant to which the Company sold an aggregate of 3,735,922 shares (the “Purchased Shares”) of the Company’s
common stock and issued 3,735,922 warrants to the Investors. See Note 17. Absent the Company’s sequencing policy as disclosed
in the Company’s Annual Report on Form 10-K/A filed with the SEC on August 10, 2020, the Company would have recorded these
warrants as equity classified.
The
aggregate warrant liabilities were recorded at the respective date of grant at fair value using a Monte Carlo simulation model.
Subsequent changes in fair value for the three and nine months ended September 30, 2020 were $4.4 million and $14.8 million,
respectively, and were recorded as change in fair value of warrant liabilities in the condensed consolidated statement
of operations. The Company used a Monte Carlo simulation model to estimate the fair value of the warrant liability at September
30, 2020:
|
|
September
30, 2020
|
|
Fair
value of underlying common shares
|
|
$
|
9.00
|
|
Exercise
price
|
|
$
|
7.00
|
|
Expected
dividend yield
|
|
|
—
|
%
|
Expected
volatility
|
|
|
73.6
– 74.3
|
%
|
Risk
free rate
|
|
|
0.12
|
%
|
Expected
term (years)
|
|
|
1.12
– 1.19
|
|
As
of September 30, 2020, the Company reclassified the fair value of $12.0 million of warrant liabilities to additional paid-in capital.
Between
August 20, 2020 and September 29, 2020, the Company entered into Purchase Agreements Investors, with certain investors (the “Investors”),
pursuant to which the Company sold an aggregate of 1,843,726 shares (the “Purchased Shares”) of the Company’s
common stock and issued 1,843,726 warrants to the Investors. See Note 17. The was aggregate warrant liabilities were recorded
at the date of grant at fair value of $5.5 million using a Monte Carlo simulation model. Subsequent changes in fair value for
the three and nine months ended September 30, 2020 were $1.3 million for each period, respectively, and were recorded as change
in fair value of warrant liabilities in the condensed consolidated statement of operations. The Company used a Monte Carlo
simulation model to estimate the fair value of the warrant liability at September 30, 2020:
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
|
|
September
30, 2020
|
|
Fair
value of underlying common shares
|
|
$
|
9.00
|
|
Exercise
price
|
|
$
|
9.25
|
|
Expected
dividend yield
|
|
|
—
|
%
|
Expected
volatility
|
|
|
69.7
– 71.2 -
|
%
|
Risk
free rate
|
|
|
0.12
|
%
|
Expected
term (years)
|
|
|
1.39
– 1.49
|
|
ARETE
Wealth Management
On
May 25, 2020, the Company issued to ARETE Wealth Management a warrant to purchase 275,000 shares of the Company’s common
stock for investment services. Absent the Company’s sequencing policy as disclosed in the Company’s Annual Report
on Form 10-K/A filed with the SEC on August 10, 2020, the Company would have recorded these warrants as equity classified. The
warrant liability was recorded at the date of grant at fair value. Subsequent changes in fair value for the three and nine
months ended September 30, 2020 was $0.4 million and $0.7 million, respectively and was recorded as change in fair value
of warrant liabilities in the condensed consolidated statement of operations.
The
significant assumptions used in the valuation are as follows:
|
|
September
30, 2020
|
|
Fair
value of underlying common shares
|
|
$
|
9.00
|
|
Exercise
price
|
|
$
|
5.00
|
|
Expected
dividend yield
|
|
|
—
|
%
|
Expected
volatility
|
|
|
60.0
|
%
|
Risk
free rate
|
|
|
0.27
|
%
|
Expected
term (years)
|
|
|
4.6
|
|
As
of September 30, 2020, the Company reclassified the fair value of $1.5 million of warrant liabilities to additional paid-in capital.
Convertible
Notes
On
April 1, 2020, the Company issued 142,118 common stock warrants in connection with a $1.1 million convertible note. The warrant
was recorded as a warrant liability utilizing the Black-Scholes pricing model. The warrant liability was recorded at the date
of grant at fair value. Subsequent changes in fair value for the three and nine months ended September 30, 2020 was $1.5 million
and $1.8 million, respectively, and was recorded as change in fair value of warrant liability in the condensed consolidated statement of operations. On September
29, 2020, the Company entered into an amendment related to the common stock warrants and issued an additional 217,357 warrants.
15.
|
Convertible
Notes Payable
|
As
of September 30, 2020 there were no convertible notes outstanding, and as of December 31, 2019, convertible notes outstanding
totaled $1.4 million. During the three and nine months ended September 30, 2020, the Company repaid $2.8 million and $3.9 million
of principal balances, and approximately $0.9 million of related interest expense and prepayment penalties owed on its
convertible notes.
Series
D Convertible Preferred Stock
On
March 6, 2020, the Company (i) entered into a stock purchase agreement to issue 203,000 shares of its Series D Preferred Stock,
for proceeds of $203,000 and (ii) during the nine months ended September 30, 2020 the Company redeemed 682,000 shares of Series
D Preferred Stock in exchange for approximately $0.9 million.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
The
following table summarizes the Company’s Series D Preferred Stock activities for the three and nine months ended September
30, 2020 (dollars in thousands):
|
|
Series
D Preferred Stock
|
|
|
|
Shares
|
|
|
Amount
|
|
Total
temporary equity as of December 31, 2019
|
|
|
461,839
|
|
|
$
|
462
|
|
Issuance
of Series D convertible preferred stock for cash
|
|
|
203,000
|
|
|
|
203
|
|
Offering
cost related to issuance of Series D convertible preferred stock
|
|
|
-
|
|
|
|
(3
|
)
|
Deemed
dividends related to immediate accretion of offering cost
|
|
|
-
|
|
|
|
3
|
|
Accrued
Series D preferred stock dividends
|
|
|
17,198
|
|
|
|
17
|
|
Bifurcated
redemption feature of Series D convertible preferred stock
|
|
|
-
|
|
|
|
(171
|
)
|
Deemed
dividends related to immediate accretion of bifurcated redemption feature of Series D convertible preferred stock
|
|
|
-
|
|
|
|
171
|
|
Redemption
of Series D preferred stock (including accrued dividends)
|
|
|
(682,037
|
)
|
|
|
(682
|
)
|
Total
temporary equity as of September 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
The
redemption of the 659,000 shares of Series D Preferred Stock (amounts in thousands except share and per share values):
Series
D preferred stock issued
|
|
|
659,000
|
|
Per
share value
|
|
$
|
1.00
|
|
Series
D preferred stock value
|
|
$
|
659
|
|
Accrued
dividends
|
|
$
|
23
|
|
Total
Series D preferred stock
|
|
$
|
682
|
|
Redemption
percentage
|
|
$
|
1.29
|
|
Total
redemption
|
|
$
|
880
|
|
Holders
of shares of the Series D Preferred Stock were entitled to receive, cumulative cash dividends at the rate of 8% on $1.00 per share
of the Series D Preferred Stock per annum (equivalent to $0.08 per annum per share), subject to adjustment. The dividends were
payable solely upon redemption, liquidation or conversion.
The
Series D Preferred Stock was classified as temporary equity because it had redemption features that were outside of the Company’s
control upon certain triggering events, such as a Market Event. A “Market Event” is defined as any trading day during
the period which shares of the Series D Preferred Stock are issued and outstanding, where the trading price for such date is less
than $0.35. In the event of a Market Event, the Series D Preferred Stock shall be subject to mandatory redemption and the stated
value shall immediately be increased to $1.29 per share of Series D Preferred Stock. The Market Event was considered to be outside
the control of the Company, resulting in classification of the Series D Preferred Stock as temporary equity.
The
initial discounted carrying value resulted in recognition of a bifurcated redemption feature of $0.2 million, further reducing
the initial carrying value of the shares of Series D Preferred Stock. The discount to the aggregate stated value of the shares
of Series A Convertible Preferred Stock, resulting from recognition of the bifurcated redemption feature was immediately accreted
as a reduction of additional paid-in capital and an increase in the carrying value of the Series D Shares. The accretion is presented
in the condensed consolidated statement of operations as a deemed dividend, increasing net loss to arrive at net loss attributable
to common stockholders.
As
of September 30, 2020, all of the shares of Series D Preferred Stock have been redeemed by the Company and there will be no future
issuances.
17.
|
Stockholders’
Equity/ (Deficit)
|
Preferred
Stock Designations
On
March 20, 2020, FaceBank Pre-Merger amended its Articles of Incorporation to withdraw, cancel and terminate the previously-filed
(i) Certificate of Designation of with respect to 5,000,000 shares of its Series A Preferred Stock, par value $0.0001 per share,
(ii) Certificate of Designation with respect to 1,000,000 shares of its Series B Preferred Stock, par value $0.0001 per share,
(iii) Certificate of Designation with respect to 41,000,000 shares of its Series C Preferred Stock, par value $0.0001 per share
and (iv) Certificate of Designation with respect to 1,000,000 shares of its Series X Preferred Stock, par value $0.0001 per share.
Upon the withdrawal, cancelation and termination of such designations, all shares previously designated as Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series X Preferred Stock were returned to the status of authorized
but undesignated shares of the Company’s Preferred Stock, par value $0.0001 per share.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
On
March 20, 2020, in connection with the Merger, FaceBank Pre-Merger filed an amendment to its Articles of Incorporation to designate
35,800,000 of its authorized preferred stock as “Series AA Convertible Preferred Stock” pursuant to a Certificate
of Designation of Series AA Convertible Preferred Stock (the “Series AA Preferred Stock Certificate of Designation”).
The Series AA Convertible Preferred Stock (the “Series AA Preferred Stock”) has no liquidation preference. The Series
AA Preferred Stock is entitled to receive dividends and other distributions as and when paid on the Common Stock on an as converted
basis. Each share of Series AA Preferred Stock is initially convertible into two shares of Common Stock, subject to adjustment
as provided in the Series AA Preferred Stock Certificate of Designation and shall only be convertible immediately following the
sale of such shares on an arms’-length basis either pursuant to an exemption from registration under Rule 144 promulgated
under the Securities Act or pursuant to an effective registration statement under the Securities Act. Each share of Series AA
Preferred Stock shall have 0.8 votes per share (the “Voting Rate”) on any matter submitted to the holders of the Common
Stock for a vote and shall vote together with the Common Stock on such matters for as long as the Series AA Preferred Stock is
outstanding. The Voting Rate shall be subject to adjustment in the event of stock splits, stock combinations, recapitalizations
reclassifications, extraordinary distributions and similar events. There are 713,215 shares reserved for issuance to certain shareholders
of fuboTV Pre-Merger in connection with the Merger.
Common
Stock Activity
Issuance
of Common Stock for Cash
The
Company raised approximately $2.3 million through issuances of an aggregate of 795,593 shares of its common stock in private placement
transactions during the three months ended March 31, 2020 with investors.
The
Company raised approximately $0.5 million through issuances of an aggregate of 170,391 shares of its common stock in private placement
transactions during the three months ended June 30, 2020 with investors.
On
July 2, 2020, the Company entered into a Purchase Agreement with Credit Suisse Capital LLC, pursuant to which the Company sold
2,162,163 shares of the Company’s common stock at a purchase price of $9.25 per share for an aggregate purchase price of
$20.0 million.
Issuance
of Common Stock and Warrants for Cash
Between
May 11, 2020 and June 8, 2020, the Company entered into Purchase Agreements Investors, pursuant to which the Company sold an aggregate
of 3,735,922 shares of the Company’s common stock at a purchase price of $7.00 per share and issued warrants to the Investors
covering a total of 3,735,922 shares of the Company’s common stock for an aggregate purchase price of $26.1 million.
Between
August 20, 2020 and August 28, 2020, the Company entered into Purchase Agreements Investors, pursuant to which the Company sold
an aggregate of 5,212,753 shares of the Company’s common stock at a purchase price of $9.25 per share and issued warrants
to the Investors covering a total of 1,303,186 shares of the Company’s common stock for an aggregate purchase price of $48.2
million.
Issuance
of Common Stock Related to PEC Acquisition
During
the three months ended September 30, 2020, there were no shares of the Company’s common stock exchanged for shares of its
subsidiary PEC. During the nine months ended September 30, 2020, the Company has issued 2,753,819 shares of its common stock in
exchange for 17,950,055 shares of its subsidiary PEC, respectively. The interests exchange in PEC were previously recorded within
noncontrolling interests and the transactions were accounted for as a reduction of $2.0 million of noncontrolling interests for
the carrying value of those noncontrolling interests at the date of exchange with an offsetting increase in Additional paid-in
capital, during the nine months ended September 30, 2020.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Issuance
of Common Stock for Shares Settled Liability
During
the three months ended June 30, 2020, the Company issued 900,000 shares of its common stock with a fair value of approximately
$9.1 million or $10.00 per share in connection with the Company’s Note Purchase Agreement with FB Loan (See Note 13).
Issuance
of Common Stock for Services Rendered
On
January 1, 2020, the Company entered into the first amendment to a joint business development agreement and issued 200,000 shares
of its restricted common stock with a fair value of $1.8 million in exchange for business development services.
During
the three months ended March 31, 2020, the Company issued 275,000 shares of its common stock with a fair value of $2.3 million
in exchange for consulting services.
During
the three months ended March 31, 2020, the Company issued 62,500 shares of its common stock with a fair value of approximately
$0.6 million in exchange for services rendered in connection with the Company’s amended Digital Likeness Development Agreement
by and among Floyd Mayweather, the Company and FaceBank, Inc., effective as of July 31, 2019, as amended (the “Mayweather
Agreement”).
During
the three months ended March 31, 2020, the Company issued 2,500 shares of its common stock with a fair value of $26,000 in exchange
for consulting services.
During
the three months ended June 30, 2020, the Company issued 343,789 shares of its common stock with a fair value of $3.1 million
in exchange for consulting services.
Issuance
of Common Stock for Exercise of Stock Options
During
the three months ended September 30, 2020, 226,740 options to purchase shares of the Company’s common stock were exercised
for cash of approximately $0.3 million or $1.43 per share.
Issuance
of Common Stock for Employee Compensation
On
February 20, 2020, the Company issued 300,000 shares of its common stock to an officer of the Company at a fair value of $2.7
million, or $9.00 per share.
During
the three months ended March 31, 2020, the Company issued 200,000 shares of its common stock with a fair value of $1.6 million
as compensation to service providers for services rendered.
Share
Purchase Agreement
On
July 10, 2020, we entered into a Share Purchase Agreement (the “SPA”) with C2A2 Corp. AG Ltd. and Aston Fallen (the
“Purchaser”). Pursuant to the terms of the SPA, the Purchaser agreed to acquire all of the 1,000 shares of Facebank
AG common stock, held by the Company. The transaction closed on July 10, 2020 and the Company redeemed an aggregate of 3,633,114
shares of the Company’s common stock at a redemption price of $0.0001 per share in exchange for 4,833,114 new shares of
Company common stock at a sale price of $0.0001 per share, resulting in a net issuance of 1,200,000 new shares of the Company’s
common stock. The Company recognized a gain of approximately $7.6 million on this transaction during the third quarter.
Issuance
of Common Stock in Connection with Convertible Notes
During
the three months ended September 30, 2020, the Company did not issue any shares of its common stock in connection with its convertible
notes. During the nine months ended September 30, 2020, the Company issued 62,500 shares of its common stock with a fair value
of approximately $0.3 million, respectively, in connection with the issuance of convertible notes.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Equity
Compensation Plan Information
The
Company’s 2014 Equity Incentive Stock Plan (the “2014 Plan”) provides for the issuance of up to 16,667 incentive
stock options and nonqualified stock options to the Company’s employees, officers, directors, and certain consultants. The
2014 Plan is administered by the Company’s Board and has a term of 10 years.
Contemporaneous
with the closing of the Merger, the Company assumed 8,051,098 stock options issued and outstanding under the fuboTV Pre-Merger
2015 Equity Incentive Plan (the “2015 Plan”) with a weighted-average exercise price of $1.32 per share. From the Effective
Time, such options may be exercised for shares of our common stock under the terms of the 2015 Plan.
On
April 1, 2020, the Company approved the establishment of the Company’s 2020 Equity Incentive Plan (the “Plan”).
The Company created an incentive option pool of 12,116,646 shares of the Company’s Common Stock under the Plan. On October
8, 2020, the Company amended the Company’s Plan to increase the maximum aggregate number of shares available for issuance
under the Plan by 19,000,000 shares (the “Pool Increase”). The Pool Increase is conditional upon shareholder approval
at the next annual meeting of shareholders.
On
May 21, 2020, we established our Outside Director Compensation Policy to set forth guidelines for the compensation of our non-employee
directors for their service on our Board of Directors.
Stock-based
compensation
During
the three and nine months ended September 30, 2020 the Company recognized stock-based compensation expense totaling $6.3 million
and $24.1 million, respectively. No stock-based compensation was recognized during the three and nine months ended September 30,
2019.
Options
The
Company provides stock-based compensation to employees, directors and consultants under the Plan. The fair value of each stock
option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has been
a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected
stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so
until such time as it has adequate historical data regarding the volatility of its own traded stock price. The risk-free interest
rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately
equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends
and does not expect to pay any cash dividends in the foreseeable future.
During
the three and nine months ended September 30, 2020, the Company granted 1,394,860 and 7,141,899 options to purchase shares of
the Company’s common stock under the Plan, respectively. During the nine months ended September 30, 2020, 280,000 options
to purchase shares of the Company’s commons stock were granted outside of the Plan. No options were granted during the nine
months ended September 30, 2019.
The
following was used in determining the fair value of stock options granted during the three months and nine months ended September
30, 2020:
|
|
For
the Three Months
Ended September 30,
2020
|
|
|
For
the Nine Months
Ended September 30,
2020
|
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected price volatility
|
|
|
45
|
%
|
|
|
45%
- 57
|
%
|
Risk free interest rate
|
|
|
0.23% - 0.38
|
%
|
|
|
0.23% - 0.58
|
%
|
Expected term
|
|
|
5.3 - 6.1
|
|
|
|
5.3 - 6.1
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
Employees
A
summary of activity under the Plan for the nine months ended September 30, 2020 is as follows (in thousands, except share and
per share amounts):
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Outstanding
as of December 31, 2019
|
|
|
16,667
|
|
|
$
|
28.20
|
|
|
$
|
-
|
|
|
|
7.3
|
|
Options
assumed from Merger
|
|
|
8,051,098
|
|
|
$
|
1.31
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
7,141,899
|
|
|
$
|
8.79
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(226,740
|
)
|
|
$
|
1.43
|
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(389,008
|
)
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
Outstanding
as of September 30, 2020
|
|
|
14,593,916
|
|
|
$
|
4.99
|
|
|
$
|
61,234
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
vested and exercisable as of September 30, 2020
|
|
|
6,081,567
|
|
|
$
|
2.01
|
|
|
$
|
42,736
|
|
|
|
6.9
|
|
The
total fair value of stock options granted during the nine months ended September 30, 2020 was approximately $62.8 million. During
the nine months ended September 30, 2020, 226,740 options were exercised with a weighted average fair value of approximately $0.3
million or $1.43 per share.
As
of September 30, 2020, the unrecognized stock-based compensation expense related to unvested options was approximately $50.6 million
to be recognized over a period of 3.1 years.
Market
and Service Condition Based Options
During
the nine months ended September 30, 2020, 3,078,297 options were granted that vest on the earlier of each anniversary of the grant
date or based on the achievement of pre-established parameters relating to the performance of the Company’s stock price
(not included in table above).
Stock
based compensation expense is based on the estimated value of the awards on the grant date, and is recognized over the period
from the grant date through the expected vest dates of each vesting condition, both of which were estimated based on a Monte Carlo
simulation model applying the following key assumptions as of the grant date:
Dividend
yield
|
|
|
—
|
%
|
Expected
volatility
|
|
|
76.0
– 88.1
|
%
|
Risk
free rate
|
|
|
0.24
– 0.30
|
%
|
Derived
service period
|
|
|
1.59
– 1.91
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
A
summary of activity under the Plan for market and service based stock options for the nine months ended September 30, 2020 is
as follows (in thousands, except share and per share amounts):
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Outstanding
as of December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
3,078,297
|
|
|
$
|
9.69
|
|
|
|
|
|
|
|
6.8
|
|
Outstanding
as of September 30, 2020
|
|
|
3,078,297
|
|
|
$
|
9.69
|
|
|
$
|
450
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
vested and exercisable as of September 30, 2020
|
|
|
-
|
|
|
$
|
9.69
|
|
|
$
|
-
|
|
|
|
6.6
|
|
Non-employees
During
the three months ended March 31, 2020, in connection with the Mayweather Agreement, the Company granted options to purchase 280,000
shares of the Company’s common stock at an exercise price of $7.20 per share. This option has a fair value of $1,031,000,
a five-year term and expires on December 21, 2024. These options were immediately vested as of the grant date.
As
part of the Merger, the Company also assumed 343,047 options granted to non-employees with a weighted average exercise price of
$0.23 (included in table above). Stock-based compensation expense related to unvested non-employee options is immaterial as of
September 30, 2020.
There
were no options granted to non-employees in the three months ended June 30, 2020 and September 30, 2020.
Warrants
A
summary of the Company’s outstanding warrants as of September 30, 2020 are presented below (in thousands, except share and
per share amounts):
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Outstanding
as of December 31, 2019
|
|
|
200,007
|
|
|
$
|
13.31
|
|
|
$
|
-
|
|
|
|
0.2
|
|
Issued
|
|
|
9,538,526
|
|
|
$
|
6.62
|
|
|
$
|
23,119
|
|
|
|
1.7
|
|
Expired
|
|
|
(200,000
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Outstanding
as of September 30, 2020
|
|
|
9,538,533
|
|
|
$
|
5.83
|
|
|
$
|
32,670
|
|
|
|
2.6
|
|
Warrants
exercisable as of September 30, 2020
|
|
|
9,538,533
|
|
|
$
|
5.83
|
|
|
$
|
32,670
|
|
|
|
2.6
|
|
On
March 19, 2020, in connection with its Note Purchase Agreement (see Note 13), the Company issued the FB Loan Warrant, a
warrant to purchase 3,269,231 shares of its common stock with a fair value of $15.6 million.
On
April 1, 2020, the Company issued 142,118 common stock warrants in connection with a $1.1 million convertible note. The exercise
price is $7.74 with a 5-year term. On September 29, 2020, the Company entered into an amendment related to the common stock warrants
and issued an additional 217,357 warrants. Under the terms of the amendment the 359,475 common stock warrants will have an amended
exercise price of $3.06 per share.
On
April 23, 2020, the Company issued 55,172 warrants in connection with a $0.4 million convertible note. The exercise price is $9.00
with a 3-year term.
Between
May 11, 2020 and June 8, 2020, the Company issued 3,735,922 warrants in connection with Purchase Agreements with Investors with
an exercise price of $7.00 with a 1.5-year term.
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
On
May 25, 2020, the Company issued to ARETE Wealth Management a warrant to purchase 275,000 shares of the Company’s common
stock with an initial exercise price of $5.00 per share.
Between
August 20, 2020 and September 29, 2020, the Company issued 1,843,726 warrants in connection with Purchase Agreements with Investors
with an exercise price of $9.25 with a 1.5-year term.
On
February 14, 2019, the Company entered into a lease for offices in Jupiter, Florida. The lease had an initial term of 18 months
commencing March 1, 2019 until August 31, 2020 with a base annual rent of $89,000. The Company had an option to extend the lease
for another year until August 31, 2021 for annual rent of $95,000 and a second option for an extension until August 31, 2022 for
annual rent of $98,000. The Company recorded the lease obligations in accordance with ASC 842. As of August 31, 2020, the Company
did not extend the lease term and the lease was terminated.
As
part of the acquisition of Nexway on September 19, 2019, the Company recognized right of use assets of $3.6 million and lease
liabilities of $3.6 million associated with an operating lease obtained in the acquisition. At December 31, 2019, the Company
had operating lease liabilities of $3.5 million and right of use assets of $3.5 million recorded in the consolidated balance sheet.
At March 31, 2020, the Company deconsolidated its investment in Nexway and accordingly, reduced its operating lease liabilities
and right of use assets to $0.
As
part of the acquisition of fuboTV Pre-Merger on April 1, 2020, the Company recognized right of use assets and lease liabilities
of $5.4 million for three operating leases. fuboTV Pre-Merger had entered into a lease agreement in April 2017 for approximately
10,000 square feet of office space in New York, NY. The lease commenced in April 2017 and the initial term of the lease is for
a period of ten years with an option to renew for an additional five years. The renewal option is not considered in the remaining
lease term as the Company is not reasonably certain that it will exercise such option. On January 30, 2018, the Company amended
their lease agreement to add approximately 6,600 square feet of office space. The lease term commenced in February 2018 and is
effective through March 2021.
In
February 2020, fuboTV Pre-Merger entered into a sublease with Welltower, Inc. to lease approximately 6,300 square feet of office
space in New York, NY. The lease commenced in March 2020 and is effective through July 30, 2021. The annual rent for the space
is $455,000.
The
components of lease expense were as follows:
|
|
Three
Months Ended
September 30, 2020
|
|
|
Nine
Months Ended
September 30, 2020
|
|
Operating leases
|
|
|
|
|
|
|
|
|
Operating
lease cost
|
|
$
|
312
|
|
|
$
|
623
|
|
Variable
lease cost
|
|
|
-
|
|
|
|
-
|
|
Operating lease expense
|
|
|
312
|
|
|
|
623
|
|
Short-term lease
rent expense
|
|
|
-
|
|
|
|
-
|
|
Total rent expense
|
|
$
|
312
|
|
|
$
|
623
|
|
Supplemental
cash flow information related to leases were as follows:
|
|
Three
Months Ended
September 30, 2020
|
|
|
Nine
Months Ended
September 30, 2020
|
|
Operating cash flows from
operating leases
|
|
$
|
305
|
|
|
$
|
610
|
|
Right-of-use assets exchanged for operating
lease liabilities
|
|
$
|
5,373
|
|
|
$
|
5,373
|
|
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
As
of September 30, 2020, future minimum payments for the operating leases are as follows:
Year Ended December 31, 2020
|
|
$
|
305
|
|
Year Ended December 31, 2021
|
|
|
1,030
|
|
Year Ended December 31, 2022
|
|
|
778
|
|
Year Ended December 31, 2023
|
|
|
805
|
|
Year Ended December 31, 2024
|
|
|
805
|
|
Thereafter
|
|
|
2,111
|
|
Total
|
|
|
5,834
|
|
Less present
value discount
|
|
|
(934
|
)
|
Operating lease
liabilities
|
|
$
|
4,900
|
|
19.
|
Commitments
and Contingencies
|
The
Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. When
the Company determines that a loss is both probable and reasonably estimable, a liability is recorded and disclosed if the amount
is material to the financial statements taken as a whole. When a material loss contingency is only reasonably possible, the Company
does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range
of loss, if such an estimate can reasonably be made. Legal expenses associated with any contingency are expensed as incurred.
In
connection with closed litigation on two separate matters that resulted in judgments against PEC, a majority interest of which
was subsequently purchased by the Company, we have accrued $0.5 million which remains on the balance sheet as a liability at September
30, 2020 and December 31, 2019. The Company, on behalf of its subsidiary, is in settlement discussions with the parties.
On
August 27, 2018, plaintiff Scott Meide filed a complaint in the United States District Court for the Middle District of Florida,
Jacksonville Division against PEC, now one of our majority-owned subsidiaries, naming its former officers, among others, as defendants.
The plaintiff’s claims are based on three investments: (i) the purchase of 750,000 restricted shares from PEC for the amount
of $300,000 on July 18, 2014; (ii) the purchase of 800,000 shares of PEC from defendant Gregory Centineo in July 2015; and (iii)
an investment in Evolution AI Corporation in 2018 in the amount of $75,000. Until recently, Mr. Meide was proceeding pro se.
Although he has pled multiple claims, the crux of Mr. Meide’s claim, at least as pled in the Second Amended Complaint, which
is the operative complaint, is that he was fraudulently induced into making all three investments. The complaint contains a claim
for federal securities fraud which forms the only basis for federal jurisdiction. All of the defendants have moved to dismiss
the Second Amended Complaint on various grounds, including, but not limited to, the ground that the plaintiff Mr. Meide lacks
standing to bring the claims since the purchases of securities were made by Jacksonville Injury Center, LLC, rather than Mr. Meide
in his individual capacity.
On
June 29, 2020, an attorney entered an appearance for Mr. Meide and filed (i) a motion to substitute Jacksonville Injury Center,
LLC as the plaintiff and (ii) a motion for leave to file an amended complaint. All of the defendants have filed oppositions to
the motion to substitute and motion for leave to amend. The proposed new complaint continues to allege fraud, but also purports
to plead a shareholder derivative lawsuit in connection with a claim of an improper transfer of assets to the Company. The new
proposed complaint also names the Company as a new defendant. Discovery in the matter has been stayed since July of 2019. The
matter is set for trial in September of 2020, but we do not expect the trial to go forward given the pending motions to dismiss
and stay of discovery.
On
September 4, 2020, the court entered an order dismissing with prejudice Mr. Meide’s claim for federal securities fraud.
In its order, the court directed the clerk of court to enter judgment in favor of PEC and related defendants on Mr. Meide’s
claim for federal securities fraud. The court also denied Mr. Meide’s attempt to file a third amended complaint or substitute
plaintiffs in the action. The court dismissed without prejudice the remaining state law claims on the ground that the court declined
to exercise supplemental jurisdiction over them. The state law claims may be reasserted in state court. The court also reserved
jurisdiction to determine whether an award of sanctions against Mr. Meide is appropriate. The court has ordered the parties to
mediation with respect to the issue of sanctions and, in the event that the mediation is unsuccessful, the court has indicated
that it will set a deadline for the filing of any motions for an award of sanctions against Mr. Meide. The court-ordered mediation
is set for December 10, 2020
fuboTV
Inc.
Notes
to Condensed Consolidated Financial Statements
On
June 8, 2020, Andrew Kriss and Eric Lerner (the “Plaintiffs”) filed a Summons with Notice in the Supreme Court of
the State of New York, Nassau County naming as defendants the Company, PEC, John Textor and Frank Patterson, among others
(Index No. 605474/20). On November 12, 2020, Plaintiffs filed a Complaint, which asserts claims for breach of express contract
and implied duties, fraud in the inducement, unjust enrichment, conversion, declaratory relief, fraud and fraudulent conveyance.
The claims arise from an alleged relationship between Plaintiffs and defendant PEC. Plaintiffs seek monetary damages in an
amount to be proven at trial, but not less than six million dollars ($6,000,000). The Company intends to vigorously defend
this litigation.
On
October 8, 2020, we sold 18,300,000 shares of our common stock in a public offering at $10.00 per share generating $170.2 million
in proceeds, net of offering costs. On October 22, 2020, the investment bankers exercised their right to purchase an additional
1,406,708 shares of common stock at $10.00 per share generating an additional $13.1 million in proceeds, net of offering costs.
On
September 30, 2020, following negotiations with Century Venture, SA, the Company agreed to repay the Loan related to its Credit
Agreement in full (inclusive of any interest, fees and penalties). The Company paid $1.6 million on October 2, 2020, the Credit
Agreement and related Loan were automatically terminated.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction
with our unaudited condensed consolidated financial statements and the accompanying related notes included in this Quarterly Report
on Form 10-Q and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission
(the “SEC”) on May 29, 2020, as amended on Form 10-K/A, filed with the SEC on August 11, 2020 for the year ended December
31, 2019.
The
results of our operations for the three and nine months ended September 30, 2020 are not readily comparable against the results
of our operations in the comparable prior year three and nine month period ended September 30, 2019 as a result of our acquisitions
of fuboTV Pre-Merger and Facebank AG, and our acquisition of and then deconsolidation of Nexway AG and its subsidiaries.
Incorporation
fuboTV
Inc. (“fuboTV” or the “Company”) was incorporated under the laws of the State of Florida in February 2009
under the name York Entertainment, Inc. The Company changed its name to FaceBank Group, Inc. on September 30, 2019. On August
10, 2020, the Company changed its name to fuboTV Inc. and as of May 1, 2020, the Company’s trading symbol was changed from
“FBNK” to “FUBO.”
Unless
the context otherwise requires, “fuboTV,” “we,” “us,” “our,” and the “Company”
refers to fuboTV and its subsidiaries on a consolidated basis, and “fuboTV Pre-Merger” refers to fuboTV Inc., a Delaware
corporation, prior to the Merger, and “fuboTV Sub” refers to fuboTV Media Inc., a Delaware corporation, and the Company’s
wholly-owned subsidiary following the Merger. “FaceBank Pre-Merger” refers to FaceBank Group, Inc. prior to the Merger
and its subsidiaries prior to the closing of the Merger.
Merger
with fuboTV Pre-Merger
On
April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”) merged
with and into fuboTV Pre-Merger, whereby fuboTV Pre-Merger continued as the surviving corporation and became our wholly-owned
subsidiary pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020, by and among
us, Merger Sub and fuboTV Pre-Merger (the “Merger Agreement” and such transaction, the “Merger”).
In
accordance with the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), all
of the capital stock of fuboTV Pre-Merger was converted into the right to receive shares of our newly-created class of Series
AA Convertible Preferred Stock, par value $0.0001 per share (the “Series AA Preferred Stock”). Each share of Series
AA Preferred Stock is entitled to 0.8 votes per share and shall only be convertible immediately following the sale of such shares
on an arms’-length basis either pursuant to an exemption from registration under Rule 144 promulgated under the Securities
Act or pursuant to an effective registration statement under the Securities Act. Prior to our uplist to the NYSE, the Series AA
Preferred Stock benefited from certain protective provisions that would require us to obtain the approval of a majority of the
shares of outstanding Series AA Preferred Stock, voting as a separate class, before undertaking certain matters.
Prior
to the Merger, the Company was, and after the Merger continues to be, in part, a character-based virtual entertainment business,
and a developer of digital human likeness for celebrities, focused on applications in traditional entertainment, sports entertainment,
live events, social networking, mixed reality (AR/VR) and artificial intelligence. As a result of the Merger, fuboTV Pre-Merger,
a leading live TV streaming platform for sports, news, and entertainment, became a wholly-owned subsidiary of the Company.
In
connection with the Merger, on March 11, 2020, the Company and HLEE Finance S.a r.l. (“HLEE”) entered into a Credit
Agreement, dated as of March 11, 2020, pursuant to which HLEE provided the Company with a $100.0 million revolving line of credit
(the “Credit Facility”). The Credit Facility was secured by substantially all the assets of the Company. On July 8,
2020, the Company entered into a Termination and Release Agreement with HLEE Finance to terminate the Credit Agreement. The Company
did not draw down on the Credit Agreement during its term.
On
March 19, 2020, FaceBank Pre-Merger, Merger Sub, Evolution AI Corporation (“EAI”) and Pulse Evolution Corporation
(“PEC” and collectively with EAI, Merger Sub and FaceBank Pre-Merger, the “Initial Borrower”) and FB Loan
Series I, LLC (“FB Loan”) entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant
to which the Initial Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10.1 million
(the “Senior Notes”). The Company received proceeds of $7.4 million, net of an original issue discount of $2.7 million.
In connection with the FB Loan, FaceBank Pre-Merger, fuboTV Pre-Merger and certain of their respective subsidiaries granted a
lien on substantially all of their assets to secure the obligations under the Senior Notes. The Company made a $7.5 million payment
on the Note Purchase Agreement on May 28, 2020 and paid the remaining balance of $2.6 million on July 3, 2020.
Prior
to the Merger, fuboTV Pre-Merger and its subsidiaries were party to a Credit and Guaranty Agreement, dated as of April 6, 2018
(the “AMC Agreement”), with AMC Networks Ventures LLC as lender, administrative agent and collateral agent (“AMC
Networks Ventures”). fuboTV Pre-Merger previously granted AMC Networks Ventures a lien on substantially all of its assets
to secure its obligations thereunder. The AMC Agreement survived the Merger and, as of the Effective Time, there was $23.8 million
outstanding under the AMC Agreement (excluding issuance costs). In connection with the Merger, the Company guaranteed the obligations
of fuboTV Pre-Merger under the AMC Agreement on an unsecured basis. The liens of AMC Networks Ventures on the assets of fuboTV
Pre-Merger are senior to the liens in favor of FB Loan and the Company securing the Senior Notes.
Nature
of Business
The
Company is a leading digital entertainment company, combining fuboTV Pre-Merger’s direct-to-consumer live TV streaming,
or vMVPD, platform with FaceBank Pre-Merger’s technology-driven IP in sports, movies and live performances. We expect that
this business combination will create a content delivery platform for traditional and future-form IP. We plan to leverage FaceBank
Pre-Merger’s IP sharing relationships with leading celebrities and other digital technologies to enhance its already robust
sports and entertainment offerings.
Since
the Merger, while we continue our previous business operations, we are principally focused on offering consumers a leading live
TV streaming platform for sports, news and entertainment through fuboTV. The Company’s revenues are almost entirely derived
from the sale of subscription services and the sale of advertisements in the United States, though the Company has started to
assess expansion opportunities into international markets, with operations in Canada and the launch in late 2018 of its first
ex-North America offering of streaming entertainment, to consumers in Spain.
Our
subscription-based services are offered to consumers who can sign-up for accounts at https://fubo.tv, through which we provide
basic plans with the flexibility for consumers to purchase the add-ons and features best suited for them. Besides the website,
consumers can also sign-up via some TV-connected devices. The fuboTV platform provides, what we believe to be, a superior viewer
experience, with a broad suite of unique features and personalization capabilities such as multi-channel viewing capabilities,
favorites lists and a dynamic recommendation engine as well as 4K streaming and Cloud DVR offerings.
Components
of Results of Operations
Revenues,
net
Subscription
Subscription
revenues consist primarily of subscription plans sold through the Company’s website and third-party app stores.
Advertisements
Advertisement
revenue consists primarily of fees charged to advertisers who want to display ads (‘impressions”) within the streamed
content.
Software
licenses, net
Software
license revenue consists of revenue generated from the sale of software licenses at one of our former subsidiaries, Nexway eCommerce
Solutions. As a result of the deconsolidation of Nexway AG, which was effective as of March 31, 2020, the Company no longer generates
revenue from software licenses.
Other
Other
revenue consists of a contract to sub-license rights to broadcast certain international sporting events to a third party.
Subscriber
Related Expenses
Subscriber
related expenses consist primarily of affiliate distribution rights and other distribution costs related to content streaming.
Broadcasting
and Transmission
Broadcasting
and transmission expenses consist primarily of the cost to acquire a signal, transcode, store, and retransmit it to the subscribers.
Sales
and Marketing
Sales
and marketing expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation,
agency costs, advertising campaigns and branding initiatives.
Technology
and Development
Technology
and development expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation,
technical services, software expenses, and hosting expenses.
General
and Administrative
General
and administrative expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation,
corporate insurance, office expenses, professional fees, as well as travel, meals, and entertainment costs.
Depreciation
and amortization
Depreciation
and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets.
Other
income (expense)
Other
income (expense) primarily consists of issuance gains/losses and the change in fair value of financial instruments, interest expense
and financing costs on our outstanding borrowings, unrealized gains/losses on equity method investments, and the loss recorded
on the deconsolidation of a subsidiary.
Income
tax benefit
The
Company’s deferred tax liability and income tax benefit relates to our book and tax basis differences in identifiable intangible
assets and the current tax impact of the amortization of finite-lived intangible assets. These intangible assets are not deductible
for tax purposes and the deferred tax liability has been established for the amount of such temporary differences expected
to reverse in periods where net operating loss carryforwards will not be available to offset the taxable income generated from
these reversals.
Results
of Operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
53,433
|
|
|
$
|
—
|
|
|
$
|
92,945
|
|
|
$
|
—
|
|
Advertisements
|
|
|
7,520
|
|
|
|
—
|
|
|
|
11,843
|
|
|
$
|
—
|
|
Software licenses,
net
|
|
|
—
|
|
|
|
5,834
|
|
|
|
7,295
|
|
|
$
|
5,834
|
|
Other
|
|
|
249
|
|
|
|
—
|
|
|
|
586
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
61,202
|
|
|
$
|
5,834
|
|
|
$
|
112,669
|
|
|
$
|
5,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber related
expenses
|
|
|
61,228
|
|
|
|
—
|
|
|
|
114,315
|
|
|
|
—
|
|
Broadcasting and
transmission
|
|
|
9,778
|
|
|
|
—
|
|
|
|
19,270
|
|
|
|
—
|
|
Sales and marketing
|
|
|
22,269
|
|
|
|
93
|
|
|
|
33,526
|
|
|
|
417
|
|
Technology and development
|
|
|
10,727
|
|
|
|
5,222
|
|
|
|
20,277
|
|
|
|
5,222
|
|
General and administrative
|
|
|
8,270
|
|
|
|
2,171
|
|
|
|
42,130
|
|
|
|
3,688
|
|
Depreciation
and amortization
|
|
|
14,413
|
|
|
|
5,273
|
|
|
|
34,050
|
|
|
|
15,589
|
|
Impairment
of goodwill and intangible assets
|
|
|
236,681
|
|
|
|
-
|
|
|
|
236,681
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
|
|
363,366
|
|
|
|
12,759
|
|
|
|
500,249
|
|
|
|
24,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(302,164
|
)
|
|
|
(6,925
|
)
|
|
|
(387,580
|
)
|
|
|
(19,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
and financing costs, net
|
|
|
(2,203
|
)
|
|
|
(1,094)
|
|
|
|
(18,109
|
)
|
|
|
(1,994)
|
|
Interest income
|
|
|
-
|
|
|
|
482
|
|
|
|
|
|
|
|
482
|
|
Loss on deconsolidation
of Nexway
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,919
|
)
|
|
|
—
|
|
Gain (loss)
on extinguishment of debt
|
|
|
1,321
|
|
|
|
—
|
|
|
|
(9,827
|
)
|
|
|
—
|
|
Loss on issuance
of common stock and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,507)
|
|
|
|
-
|
|
Change in fair value
of warrant liability
|
|
|
4,543
|
|
|
|
—
|
|
|
|
9,143
|
|
|
|
—
|
|
Change in fair value
of subsidiary warranty liability
|
|
|
—
|
|
|
|
831
|
|
|
|
3
|
|
|
|
4,432
|
|
Change in fair value
of shares settled liability
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,665
|
)
|
|
|
—
|
|
Change in fair value
of derivative liability
|
|
|
101
|
|
|
|
(1
|
)
|
|
|
(426
|
)
|
|
|
1,017
|
|
Change in fair value
of Panda interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(148
|
)
|
|
|
—
|
|
Unrealized gain on
equity method investment
|
|
|
—
|
|
|
|
—
|
|
|
|
2,614
|
|
|
|
—
|
|
Gain on sale of assets
|
|
|
7,631
|
|
|
|
—
|
|
|
|
7,631
|
|
|
|
—
|
|
Foreign
currency exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,010
|
)
|
|
|
-
|
|
Other
income (expense)
|
|
|
583
|
|
|
|
(1,230
|
)
|
|
|
147
|
|
|
|
(1,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense)
|
|
|
11,976
|
|
|
|
(1,012
|
)
|
|
|
(37,073
|
)
|
|
|
2,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(290,188
|
)
|
|
|
(7,937
|
)
|
|
|
(424,653
|
)
|
|
|
(16,375
|
)
|
Income
tax benefit
|
|
|
(16,071
|
)
|
|
|
(1,028
|
)
|
|
|
(20,589)
|
|
|
|
(3,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(274,117
|
)
|
|
$
|
(6,909
|
)
|
|
$
|
(404,064
|
)
|
|
$
|
(13,141
|
)
|
On
September 19, 2019, the Company acquired Facebank AG, Nexway and on April 1,2020 fuboTV Pre-Merger. The results of our operations
for the three and nine months ended September 30, 2020 include the results of operations of Facebank AG and Nexway and also include
the effects of the deconsolidation of Nexway as of March 31, 2020 and the sale of Facebank AG in the three months ended September
30, 2020. The results of our operations for the three and nine months ended September 30, 2020 also include the results of
operations of fuboTV post-Merger. Because of this, the results of operations for the three and nine months ended September 30,
2020 are not comparable to the results of operations for the three and nine months ended September 30, 2019.
Revenue,
net
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, we recognized revenues of $61.2 million, primarily related to $53.3 million of subscription
revenue, $7.5 million of advertising revenue and $0.2 million in other revenue. These revenues were generated entirely by fuboTV
post-Merger which Merger occurred on April 1, 2020, and there are no comparable results in the prior year.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, we recognized revenues of $112.7 million, primarily related to $92.9 million of subscription
revenue, $11.8 million of advertising revenue and $0.6 million in other revenue in connection with the second quarter acquisition
of fuboTV Pre-Merger. These revenues were generated entirely by the fuboTV business which we acquired through the Merger that
closed on April 1, 2020, and there are no comparable results in the prior year. In addition, we generated $7.3 million related
to the sale of software licenses from our acquisition of Facebank AG.
Subscriber
related expenses
Three
Months Ended September 30, 2020 and 2019
During
the three and nine months ended September 30, 2020, we recognized subscriber related expenses of $61.2 million and 114.3 million,
respectively due to affiliate distribution rights and other distribution costs in connection with the streaming revenue generated
from the fuboTV business, which we acquired through the Merger that closed on April 1, 2020.
There
were no subscriber related expenses recognized during the three and nine months ended September 30, 2019.
Broadcasting
and transmission
Three
Months Ended September 30, 2020 and 2019
During
the three and nine months ended September 30, 2020, we recognized broadcasting and transmission expenses of $9.8 million and $19.3
million, respectively primarily related to transmissions of our services in connection with the streaming revenue generated from
the fuboTV business, which we acquired through the Merger that closed on April 1, 2020.
There
were no broadcasting and transmission expenses recognized during the three and nine months ended September 30, 2019.
Sales
and marketing
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, we recognized sales and marketing expenses of $22.3 million as compared to $0.1 million
during the three months ended September 30, 2019. The increase in sales and marketing expenses were primarily related to marketing
expenses incurred to acquire new customers to our streaming platform after the Merger on April 1, 2020.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, we recognized sales and marketing expenses of $33.5 million as compared to $0.4 million
during the nine months ended September 30, 2019. The increase in sales and marketing expense is primarily related to marketing
expenses incurred to acquire new customers to our streaming platform after the Merger on April 1, 2020. The remaining increase
in sales and marketing expenses were related to the costs incurred to acquire new customers of Nexway resulting from our 2019
acquisitions of Facebank AG and Nexway.
Technology
and development
Three
and Nine Months Ended September 30, 2020 and 2019
During
the three and nine months ended September 30, 2020, we recognized technology and development expenses of $10.7 million and $20.3
million in connection with the development of our streaming platform after the Merger on April 1, 2020.
Technology
and development expenses incurred during the three and nine months ended September 30, 2019 relate entirely to the consolidation
of Nexway.
General
and Administrative
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, general and administrative expenses totaled $8.3 million, compared to $2.2 million
for the three months ended September 30, 2019. The increase of $6.1 million was primarily related to $6.9 million
of incremental general and administrative expenses as a result of the acquisition of fuboTV Pre-Merger offset by a $0.8 million
reduction of expenses due to the deconsolidation of Nexway.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, general and administrative expenses totaled $42.1 million, compared to $3.7 million
for the nine months ended September 30, 2019. The increase of $38.4 million was primarily related to $24.1 million
of stock compensation expense, $9.6 million of incremental expenses as a result of the acquisition of fubo TV Pre-Merger and $6.2
million of professional services due to additional financing and acquisition activities, offset in part by a $0.8 million reduction
of expenses due to the deconsolidation of Nexway.
Depreciation
and amortization
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, we recognized depreciation and amortization expenses of $14.4 million compared to $5.3
million during the three months ended September 30, 2019. The increase of $9.2 million is primarily related to $9.1 million of
amortization expenses recognized on the intangible assets acquired as part of the Merger on April 1, 2020.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, we recognized depreciation and amortization expenses of $34 million compared to $15.6
million during the nine months ended September 30, 2019. The increase of $18.4 million is primarily related to $18.1 million of
amortization expense recorded for the intangible assets acquired in connection with the Merger on April 1, 2020.
Impairment
of intangible assets and goodwill
During
the three months and nine months ended September 30, 2020, we recognized an impairment of Facebank Pre-Merger intangible assets
and goodwill of $236.7 million.
Other
Income (Expense)
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, we recognized $12 million of other income (net), compared to $1 million of other expense
(net) during the three months ended September 30, 2019. The increase of $13 million was primarily related to a $7.6 million gain
on the sale of the Facebank AG and Nexway assets, $4.5 million related to the change in fair value of warrant liabilities
and $1.3 million gain on the extinguishment of debt.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, we recognized $37.1 million of other expense (net), compared to $2.7 million of other
income (net) during the nine months ended September 30, 2019. The increase of $39.8 million of other expense (net) was
primarily related to $16.6 million of incremental net interest expense on our outstanding borrowings, $9.8
million loss on extinguishment of debt, a $11.9 million loss on the deconsolidation of Nexway, $13.5 million loss on issuance
of common stock and warrants and $1.7 million change in fair value of change in shares settled liability. These expenses were
partially offset by a $7.6 million gain on the sale of the Facebank AG and Nexway assets, $9.1 million gain related to
the change in fair value of warrant liabilities and a $2.6 million unrealized gain on our equity method investment in Nexway.
For the nine months ended September 30, 2019, we recognized $4.4 million of other income (net) related to a change in fair value
of subsidiary warrant liability.
Income
tax benefit
Three
Months Ended September 30, 2020 and 2019
During
the three months ended September 30, 2020, we recognized an income tax benefit of $16.1 million, compared to $1.0 million during
the three months ended September 30, 2019. The $15.1 million increase in income tax benefits was related primarily to the impairment
of Facebank Pre-Merger intangible assets.
Nine
Months Ended September 30, 2020 and 2019
During
the nine months ended September 30, 2020, we recognized an income tax benefit of $20.6 million, compared to $3.2 million during
the nine months ended September 30, 2019. The $17.4 million increase was primarily related to the impairment of Facebank Pre-Merger
intangible assets.
Liquidity
and Going Concern
The
accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern,
which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of
business.
We
had cash and cash equivalents of $38.9 million, a working capital deficiency of $189.1 million and an accumulated deficit of $458.6
million at September 30, 2020. We incurred a $404.1 million net loss for the nine months ended September 30, 2020.
While we expect to continue incurring losses in the foreseeable future, we successfully raised $183 million in October 2020,
net of offering expenses, through a public offering of our common stock. The proceeds from this offering provide us with the necessary
liquidity to continue to as a going concern for a period of at least one year from the date these financial statements are issued.
Our
future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully
attract and retain subscribers, develop new technologies that can compete in a rapidly changing market with many competitors and
the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement
our product and service offerings.
In
addition to the foregoing, based on our current assessment, we do not expect any material impact on our long-term development
timeline and our liquidity due to the worldwide spread of a novel strain of coronavirus (“COVID 19”). However, we
are continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat
the virus throughout the world. Given the daily evolution of the COVID-19 outbreak and the global response to curb its spread,
COVID-19 may affect our results of operations, financial condition or liquidity.
Cash
Flows (in thousands)
|
|
Nine
Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash provided by (used
in) operating activities
|
|
|
(72,450
|
)
|
|
|
1,257
|
|
Net cash provided by used in investing activities
|
|
|
(1,349
|
)
|
|
|
1,625
|
|
Net cash provided
by financing activities
|
|
|
106,314
|
|
|
|
2,983
|
|
Net increase in cash and cash equivalents
|
|
|
32,515
|
|
|
|
5,865
|
|
Operating
Activities
For
the nine months ended September 30, 2020, net cash used in operating activities was $72.5 million, which consisted of
our net loss of $404.1 million, adjusted for non-cash movements of $305.1 million. The non-cash movements included
$236.7 impairment of Facebank Pre-Merger intangible assets and goodwill, $34 million of depreciation and amortization
expenses primarily related to intangible assets, $24.1 million of stock-based compensation, $13.5 million of loss on
issuance of common stock and warrants, $12.3 million of amortization of debt discounts, $9.8 million loss on
extinguishment of debt, $8.6 million loss on deconsolidation of Nexway, $1.7 million of change in fair value of shares
settled liability and $1 million of loss on foreign currency exchange, partially offset by $20.6 million of deferred income
tax benefit, $9.1 million of change in fair value of warrant liability, $7.6 million gain on the sale of assets and $2.6
million of unrealized gain on investments. Changes in operating assets and liabilities resulted in cash inflows of
approximately $52.6 million, primarily due to a net increase in accounts payable, accrued expenses and other current
liabilities of $32.9 million due to timing of payments, a net decrease in prepaid expenses and other current assets
of $10.6 million and a net increase in deferred revenue of $6.6 million.
For
the nine months ended September 30, 2019, net cash provided by operating activities was $1.3 million, which consisted of our net
loss of $13.1 million, adjusted for non-cash movements of $7.5 million. The non-cash movements included $15.6 million of depreciation
and amortization expenses primarily related to intangible assets, $0.5 million of amortization of debt discounts and $0.6 million
of accrued interest expense related to our notes payable, partially offset by $4.4 million related to the change in fair value
of subsidiary warrant liability, $3.2 million of deferred income tax benefits, $1 million of change in fair value of derivative
liability and $0.6 million of other adjustments. Changes in operating assets and liabilities resulted in cash outflows of approximately
$0.1 million, primarily consisted of increases in accounts receivable of $3.6 million offset by increases in accounts payable
and accrued expenses of $3.4 million due to timing of payments.
Investing
Activities
For
the nine months ended September 30, 2020, net cash used in investing activities was $1.3 million, which consisted of a
$10.0 million advance to fuboTV Pre-Merger, $0.6 million cash paid as part of the disposition of Facebank AG and $0.1 million
of capital expenditures, offset by $9.4 million of net cash acquired in the acquisition of fuboTV Pre-Merger.
For
the nine months ended September 30, 2019, net cash provided by investing activities was $1.6 million, which primarily consisted
of our $2.3 million acquisition of Facebank AG and Nexway, $0.7 million sale of profits interest in our investment in Panda Productions
(HK) Limited (“Panda”), partially offset by a $1.1 million payment for our investment in Panda and $0.3 million for
the purchase of intangible assets.
Financing
Activities
For
the nine months ended September 30, 2020, net cash provided by financing activities was $106.3 million. The net cash provided
is primarily related to $97.1 million of proceeds received from the sale of our common stock, $33.6 million of proceeds received
in connection with short-term and long-term borrowings and $3.0 million of proceeds received from the issuance of convertible
notes. These proceeds were partially offset by repayments of $11.6 million in connection with the Note Purchase Agreement, $8.4
million of notes payable, $3.9 million in connection with convertible notes, $2.5 million in connection with our loan with AMC
Networks Ventures, LLC, and $0.9 million in connection with the redemption of Series D preferred stock.
For
the nine months ended September 30, 2019, net cash provided by financing activities was $3.0 million. The net cash provided is
primarily related to $2.9 million of proceeds received from the sale of our common stock and warrants, $0.5 million from the sale
of preferred stock and $0.4 million of proceeds from related parties. These proceeds were partially offset by repayments of $0.5
million of our convertible notes and repayments of $0.3 million of our notes payable.
Off-Balance
Sheet Arrangements
As
of September 30, 2020, there were no off-balance sheet arrangements.
Critical
Accounting Policies
Our
discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Those estimates and assumptions include, but are not limited to, fair value of stock-based awards, fair
value of equity instruments, impairment of goodwill and intangible assets, allocating the fair value of purchase consideration
issued in business acquisitions, and accounting for income taxes, including the valuation allowance on deferred tax assets.
There
have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.
Revenue
from Customers
We
recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (the “revenue
standard”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control
of that good or service.
The
following five steps are applied to achieve that core principle:
Step
1: Identify the contract with the customer
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to the performance obligations in the contract
Step
5: Recognize revenue when the company satisfies a performance obligation
Subscription
revenue is recognized when we satisfy a performance obligation by transferring control of the promised services to the customers.
Advertising revenue is recognized at a point in time when we satisfy a performance obligation by transferring control of the promised
services to the advertiser, which generally is when the advertisement has been displayed.
Recently
Issued Accounting Pronouncements
See
Note 3 in the accompanying condensed consolidated financial statements for a discussion of recent accounting policies.