S-1 1 forms-1.htm

 

As filed with the Securities and Exchange Commission on August 10, 2020

 

Registration No. 333-

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

 

 

FACEBANK GROUP, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Florida   4841   26-4330545

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

FaceBank Group, Inc.

1330 Avenue of the Americas

New York, NY 10019

(212) 672-0055

 

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

David Gandler

Chief Executive Officer

FaceBank Group, Inc.

1330 Avenue of the Americas

New York, NY 10019

(212) 672-0055

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

Robert G. Day, Esq.

Megan J. Baier, Esq.

Mark G.C. Bass, Esq.

Wilson Sonsini Goodrich & Rosati,

Professional Corporation

1301 Avenue of the Americas

New York, NY 10019

(212) 999-5800

 

Simone Nardi

Chief Financial Officer

FaceBank Group, Inc.

1330 Avenue of the Americas

New York, NY 10019

(212) 672-0055

 

Richard C. Segal, Esq.

Eric Blanchard, Esq.

Divakar Gupta, Esq.

Cooley LLP

500 Boylston Street

Boston, MA 02116

(617) 937-2300

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [  ]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [  ]   Accelerated filer [  ]
  Non-accelerated filer [X]   Smaller reporting company [X]
      Emerging growth company [  ]

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered   Proposed Maximum Aggregate Offering Price (1)(2)     Amount of Registration Fee  
Common Stock, par value $0.0001 per share   $ 100,000,000      $

12,980

 

 

  (1) Includes the aggregate offering price of shares of common stock that may be sold if the underwriters exercise their option to purchase additional shares.
  (2)

Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended, on the basis of the maximum aggregate offering price.

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

 

 

 

 

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS (Subject to completion)

 

Dated August 10, 2020

 

 

 

shares of Common Stock

 

We are offering up to              shares of common stock.

 

Our common stock is quoted on the OTCQB Venture Market under the symbol “FUBO.” On August 7, 2020, the last reported sale price of our common stock was $10.20 per share. We intend to apply to list our common stock on the                       under the symbol “FUBO.”

 

We have three classes of authorized capital stock: common stock; Series AA convertible preferred stock; and Series D convertible preferred stock. We refer to the Series AA convertible preferred stock as the Series AA Preferred Stock and to the Series D convertible preferred stock as the Series D Preferred Stock. The rights of the holders of common stock and Series AA convertible preferred stock are identical, except for voting and conversion rights. Each share of common stock is entitled to one vote. Each share of Series AA convertible preferred stock is entitled to 0.8 votes and is convertible into two (2) shares of common stock upon an arms’-length transfer pursuant to Rule 144 under the Securities Act of 1933, as amended, or upon a registration of such shares by us. The holders of Series D convertible preferred stock are generally not entitled to vote and are eligible to convert into shares of common stock at the option of the holder on the six-month anniversary of issuance, as further described in “Description of Capital Stock.” Following this offering, outstanding shares of Series AA convertible preferred stock will represent approximately    % of the voting power of our outstanding capital stock, and outstanding shares of common stock will represent approximately    % of the voting power of our outstanding capital stock, assuming, in each case, no exercise by the underwriters of their option to purchase additional shares.

 

We are a “smaller reporting company” as defined under the federal securities laws and, as such, we may continue to elect to comply with certain reduced public company reporting requirements in future reports. Certain implications of being a “smaller reporting company” are described on page 4 of this prospectus.

 

 

 

Investing in our common stock involves a high degree of risk. These risks are described under the caption “Risk Factors” that begins on page 8 of this prospectus.

 

 

 

Neither the United States Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the common stock that may be offered under this prospectus, nor have any of these regulatory authorities determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

   Per Share   Total 
Public offering price  $    $  
Underwriting discount (1)  $    $  
Proceeds, before expenses, to us  $    $  
Proceeds, before expenses, to the selling shareholder  $    $  

 

 

(1) See “Underwriting” for a description of all compensation payable to underwriters.

 

We and the selling shareholder named in this prospectus have granted the underwriters the option to purchase up to an additional                             shares of common stock in the aggregate at the public offering price, less the underwriting discount. We will not receive any proceeds from any sale of shares by the selling shareholder.

 

The underwriters expect to deliver the shares against payment therefor to purchasers on or about                      , 2020 through the book-entry facilities of The Depository Trust Company.

 

  Evercore ISI  
BMO Capital Markets Needham & Company Oppenheimer & Co.
   
Roth Capital Partners   Wedbush Securities

 

Prospectus dated                , 2020.

 

 

 

 

TABLE OF CONTENTS

 

  Page
Glossary of Key Metrics and Non-GAAP Measures ii
Prospectus Summary 1
Risk Factors 8
Cautionary Note Regarding Forward-Looking Statements 32
Industry Data 33
Use of Proceeds 34
Dividend Policy 35
Capitalization 36
Dilution 37
Unaudited Pro Forma Combined Financial Information 39
Management’s Discussion and Analysis of Financial Condition and Results of Operations 60
Business 76
Management 85
Executive Compensation 90
Certain Relationships and Related Person Transactions 104
Selling Shareholder 112
Description of Capital Stock 113
Material U.S. Federal Income Tax Considerations for Non-U.S. Holders of Our Common Stock 118
Shares Eligible for Future Sale 122
Underwriting 123
Legal Matters 131
Experts 132
Where You Can Find More Information 133
Index to Consolidated Financial Statements F-1

 

 

 

We have not, and the selling shareholder has not, and the underwriters have not, authorized anyone to provide you with any different or additional information or make any representation other than as contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We, the selling shareholder and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide.

 

This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. You should not assume that the information appearing in this prospectus or any prospectus supplement is accurate as of any date other than the date of the applicable document, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates. This prospectus does not constitute an offer, or an invitation on our behalf, to subscribe for and purchase any of the securities, and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

For investors outside the United States: we have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

 

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

 

i

 

 

GLOSSARY OF KEY METRICS AND NON-GAAP MEASURES

 

On April 1, 2020, we acquired fuboTV Inc., or fuboTV, by the merger of fuboTV Acquisition Corp., our wholly-owned subsidiary, with and into fuboTV, which we refer to as the “Merger.” Following the Merger, the combined company operates under the name “fuboTV,” our trading symbol is “FUBO,” and we are in the process of changing our name to “fuboTV Inc.” For purposes of this Glossary, and when the key metrics and measures contained herein are used throughout this prospectus, these metrics are specific to fuboTV Inc. and its subsidiaries prior to the Merger, also referred to as “fuboTV Pre-Merger.” The following are metrics specific to fuboTV Pre-Merger.

 

Below please find a glossary of terms we use throughout this prospectus, including certain non-GAAP measures. We have historically monitored the following key subscriber and subscription, engagement and financial metrics for fuboTV Pre-Merger to help us evaluate growth trends, establish budgets and assess operational performance. In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP and operational measures in respect of fuboTV Pre-Merger are useful in evaluating the performance of our business historically and on a go-forward basis. All of our metrics only refer to primary account holders, rather than multiple household members who could be accessing one account.

 

Subscriber and Subscription Metrics

 

Subscribers

 

Subscribers are accounts that have completed registration with fuboTV and have activated a payment method, from which fuboTV has collected payment in the month ending the relevant period. Subscribers are paying accounts for fuboTV, not the number of individuals viewing content on fuboTV.

 

Users

 

Users are unique account holders with access to the product, whether that be through a paid subscription (a Subscriber) or a trial/free account.

 

Attachments

 

Attachments are incremental add-ons sold on top of the base subscription.

 

Attach Rate

 

The Attach Rate represents the total number of Attachments at the end of the period divided by the number of Subscribers at the end of the period.

 

Content Attachments

 

Content Attachments are add-ons that include additional content (such as Sports Plus with NFL RedZone, fubo Cycling, and Showtime).

 

Service Attachments

 

Service Attachments are add-ons that expand the capabilities of the product, such as Cloud DVR Plus (increased Cloud DVR capacity) and Family Share (to allow 3 simultaneous streams).

 

Gross Paid Subscriber Additions

 

Gross Paid Subscriber Additions for a given period represents the total number of first-time Subscribers in that period.

 

ii

 

 

Engagement Metrics

 

Monthly Active Users (MAUs)

 

Monthly Active Users (MAUs) represent the total count of Subscribers that have consumed content for greater than 10 seconds in the 30-days preceding the period-end indicated.

 

Daily Active Users (DAUs)

 

Daily Active Users (DAUs) represent any Subscriber who streams greater than 10 seconds on a given day.

 

Content Hours

 

Content hours represent the sum of total hours of content watched on the fuboTV platform for a given period (inclusive of users on a free trial).

 

Monthly Content Hours Watched per MAU

 

Content Hours per MAU represents the total Content Hours viewed by MAUs in a given month divided by the number of MAUs in the period.

 

Channels Watched per MAU

 

Channels Watched per MAU represents the total number of channels per MAU watched for more than 10 seconds in a given period divided by the MAUs in the period.

 

Programs per MAU

 

Programs per MAU represents the average number of programs per MAU watched for more than 10 seconds in a given period.

 

Percentage of Non-Sports Content Hours

 

Percentage of Non-Sports Content Hours represents the percentage of Content Hours that are news or entertainment in the indicated period.

 

Financial Metrics

 

Monthly Average Revenue per User (Monthly ARPU)

 

Monthly ARPU (Monthly Average Revenue Per User) represents total subscription and advertising revenue collected in the period divided by the average number of daily Subscribers in such period, divided by the number of months in the period.

 

iii

 

 

Monthly Subscription Average Revenue per User (ARPU)

 

Monthly Subscription ARPU represents subscription revenues collected in the period divided by the average number of daily Subscribers in such period, divided by the number of months in the period.

 

Monthly Ad Average Revenue per User (ARPU)

 

Monthly Ad ARPU represents advertising revenues collected in a given period divided by the average number of daily Subscribers in the period, divided by the number of months in the period.

 

Subscriber Acquisition Cost (SAC)

 

Subscriber Acquisition Cost (SAC) reflects total GAAP sales and marketing expenses less headcount related to sales and marketing spend for a given period divided by Gross Paid Subscriber Additions for the same period.

 

Average Cost per User (ACPU)

 

Average Cost Per User (ACPU) represents Variable COGS per Subscriber.

 

Variable COGS

 

Variable COGS represents GAAP subscriber related expenses, payment processing for deferred revenue (current period), in-app billing, or IAB, fees for deferred revenue (current period), less minimum guarantees expensed, payment processing for deferred revenue, IAB fees for deferred revenue and other subscriber related expenses.

 

Adjusted Contribution

 

Adjusted Contribution represents Subscriber Revenue minus Variable COGS.

 

Adjusted Contribution Margin

 

Adjusted Contribution Margin represents Subscriber Revenue minus Variable COGS divided by Subscriber Revenue.

 

Subscriber Revenue

 

Subscriber Revenue represents subscription and advertising revenue for a given period, less revenue recognized from deferred revenue related to the last month of the prior period, plus deferred revenue related to the last month of the current period.

 

See “Selected Consolidated Financial Data—Key Metrics” for more information and reconciliations of ACPU, and Adjusted Contribution Margin and SAC to the most directly comparable financial measures calculated and presented in accordance with GAAP.

 

iv

 

 

PROSPECTUS SUMMARY

 

This summary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including the information referred to under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and other information included elsewhere in this prospectus, before making an investment decision. See also the section entitled “Where You Can Find More Information.”

 

On April 1, 2020, we acquired fuboTV Inc., or fuboTV, by the merger of fuboTV Acquisition Corp., our wholly-owned subsidiary, with and into fuboTV, which we refer to as the “Merger.” Following the Merger, the combined company operates under the name “fuboTV,” our trading symbol is “FUBO,” and we are in the process of changing our name to “fuboTV Inc.”

 

Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refers to the combined company post-Merger – FaceBank Group, Inc., or FaceBank, and its subsidiaries, including fuboTV. “FaceBank Pre-Merger” refers to FaceBank Group, Inc. and its subsidiaries prior to the closing of the Merger, and “fuboTV Pre-Merger” refers to fuboTV Inc. and its subsidiaries prior to the Merger. For more information regarding the Merger, please see “Merger with fuboTV Inc.” below.

 

Overview

 

fuboTV is the leading sports-first, live TV streaming platform, offering subscribers access to tens of thousands of live sporting events annually as well as leading news and entertainment content. fuboTV’s platform allows customers to access content through streaming devices, and on SmartTVs, mobile phones, tablets and computers. fuboTV launched in 2015 and today is a leading independent virtual multichannel video programming distributor, or vMVPD, in the United States. fuboTV Pre-Merger closed 2019 with approximately 316,000 paid subscribers. Over the course of 2019, fuboTV Pre-Merger’s paid Subscribers and free trial Users streamed a total of 299 million hours of content on our platform, a 210% increase over 2018. Furthermore, fuboTV Pre-Merger’s MAUs are highly engaged and have watched on average 120 hours of content per month during the three months ended March 31, 2020.

 

At the core of our offering is our proprietary technology platform optimized for live TV and sports viewership. Our proprietary technology stack has enabled us to regularly offer new features and functionality. For example, we were first to market with vMVPD streaming in 4K resolution. We also offer multi-view on Apple TV, which enables subscribers to watch two live streams simultaneously, as well as the ability to watch select sports content from multiple camera angles. In the summer of 2020, we enhanced our sports-centric offering with the addition of ESPN and ABC as well as other top programming from Disney. We currently provide access to over 700 local TV channels covering 99% of U.S. households. Our app ranked #1 in last-twelve-months, or LTM, user ratings versus other popular live TV streaming providers in both the Apple App Store and Google Play Store, according to Appbot.com as of May 31, 2020. We offer subscribers a live TV streaming product, priced at $59.99 per month, with the option to purchase add-ons and features best suited to their preferences. The base plan includes a broad mix of 100+ channels, including 43 of the top 50 Nielsen-ranked networks (among adults aged 18-49), across sports, news and entertainment.

 

We generate revenue from our subscribers through reoccurring subscription fees, as well as through premium services and features that we refer to as Attachments (e.g., enhanced Cloud DVR, Family Share plan). In 2019, fuboTV Pre-Merger generated a monthly average revenue per user, or Monthly ARPU, of approximately $54, an increase of 42% year-over-year, through a combination of subscription and advertising revenue. In addition, fuboTV Pre-Merger’s advertising platform grew 201% year-over-year and is a key driver of our monetization strategy. We believe our premium content and industry-leading consumer experience uniquely position us to rapidly grow our advertising business.

 

We have achieved significant revenue growth in recent years while systematically driving improvements in our key operating metrics. fuboTV Pre-Merger reached 287,316 paid subscribers on March 31, 2020, which represents a 37% increase from March 31, 2019, although down relative to the prior quarter due to seasonality and suspension of the sports seasons stemming from COVID-19. fuboTV Pre-Merger’s 2019 revenues grew to $146.5 million, an increase of 96% versus fuboTV Pre-Merger’s fiscal year 2018 revenues of $74.8 million. The advertising component to fuboTV Pre-Merger’s revenues is rapidly growing and reached $12.5 million (8% of fuboTV Pre-Merger’s total revenues) in 2019, up 201% from 2018.  fuboTV Pre-Merger’s net losses were $129.3 million and $173.7 million for the years ended December 31, 2018 and 2019, respectively.

 

Following the Merger, we also continue to be a character-based virtual entertainment company and a leading developer of digital human likeness for celebrities and consumers, focused on applications in traditional entertainment, sports entertainment, live events, social networking, mixed reality (AR/VR) and artificial intelligence. We expect our technology-driven intellectual property business model, featuring the IP sharing relationships with leading celebrities and recognized entertainment properties, to leverage fuboTV Pre-Merger’s content delivery platform for traditional and future-form content, adding to its already robust sports and entertainment offerings. While FaceBank Pre-Merger’ entertainment initiatives are expected to contribute to fuboTV Pre-Merger’s over-the-top, or OTT, content offerings, anticipated projects such as Virtual Championship Boxing with Floyd Mayweather, are principally designed to bring new sources of revenues and cashflow to fuboTV Pre-Merger from established revenue sources such as pay-per-view.

 

 

 1 

 

 

Industry Overview

 

As the internet has become increasingly pervasive, streaming platforms have seen rapid growth as consumers engage with streaming video and audio through a variety of devices, including connected TVs, mobile phones, and tablets. Multiple connected devices within households and widespread broadband connectivity have enabled consumers to watch an increasing breadth of content. According to a Parks Associates survery, as of March 2020, 76% of all U.S. broadband households have at least some form of OTT video service subscription. Streaming continues to increase its share of TV viewing hours – accounting for 18% of total TV viewing hours based on a 3-month average in April 2020 – but we believe it is still in the relatively early innings of adoption. As of April 2020, 58% of OTT viewing households still had subscriptions to traditional Pay TV, according to Comscore OTT Intelligence. While traditional live TV accounts for the majority of TV viewing hours for U.S. households, the proportion is declining as customers continue cutting the cord. Consumers are increasingly favoring the superior customer experience and lower cost of streaming services. As stated in a February 2020 eMarketer report, cord-cutting and cord-never U.S. households are expected to reach 49 million in 2020.

 

Historically, sports and news have been a key growth driver for Pay TV operators to attract audiences at scale. Amongst streaming providers, live sports and news represent an opportunity as most OTT subscription services have been focused primarily on entertainment offerings, requiring sports fans to, until recently, remain tethered to the Pay TV ecosystem. According to a December 2019 MoffettNathanson report, 60% of U.S. Pay TV households consume sports on a regular basis and about 90% of sports and news consuming households continue to subscribe to Pay TV, creating a significant opportunity to provide live sports over streaming.

 

Our Market Opportunity

 

The rapid shift to TV streaming has disrupted the traditional cable TV distribution model, creating new options for consumers and new opportunities for broadcasters and advertisers. Cord-cutting and cord-never households continue to accelerate adoption in the U.S., as Pay TV subscribers increasingly favor the streaming experience. We believe this creates significant opportunities for vMVPDs to address the $226 billion global Pay TV services market in 2019, according to an April 2020 Grand View Research report.

 

U.S. traditional linear TV advertising spending was approximately $95 billion in 2019 and is expected to decrease by 13% in 2020 to approximately $83 billion, according to a June 2020 MAGNA report. Meanwhile, U.S. digital advertising spend was approximately $128 billion in 2019 and is expected to grow by 2% to reach approximately $130 billion in 2020. As consumers continue to spend more time streaming content, we believe advertisers will allocate dollars away from traditional TV advertising and towards advertising on streaming services. Streaming platforms also offer a significant opportunity to enable online subscriptions, eCommerce transactions, and other consumer services. We believe our sports-first product offering is particularly well suited to one day facilitate sports wagering services as a natural extension of our engaging sports content. Sports wagering is a rapidly growing and large opportunity. According to Zion Market Research, the global sports betting market is expected to reach approximately $155 billion by 2024.

 

Our Business Model

 

Our business model is “come for the sports, stay for the entertainment.” This translates to leveraging sporting events to acquire subscribers at lower acquisition costs, given the pre-existing demand for sports. We then leverage our technology and data to induce retentive behaviors such as favoriting channels, recording shows, downloading multiple apps and increasing discovery through our proprietary machine learning recommendations engine.

 

We drive our business model with three core activities:

 

Grow our paid subscriber base
Optimize engagement and retention
Increase monetization

 

 2 

 

 

Our Offerings

 

Our offerings are aimed to address the needs of the parties in the TV streaming ecosystem.

 

Subscribers

 

We offer consumers a leading live TV streaming platform for sports, news, and entertainment. We provide basic plans with the flexibility for consumers to purchase the add-ons and features best suited for them. Our base plan, fubo Standard, includes 100+ channels, including 43 of the top 50 Nielsen-rated networks (among adults aged 18-49 in the primetime viewing time), dozens of channels with sports, news, and some of the most popular entertainment channels on television. Subscribers have the option to add premium channels and additional channel packages, as well as upgrade Attachments such as more DVR storage with Cloud DVR Plus and additional simultaneous streams with Family Share.

 

Advertisers

 

We believe our leading, independent live TV streaming platform offers a unique opportunity to advertisers. As more households are cutting the cord and traditional linear TV viewers continue to decline, advertisers are increasingly focusing on OTT platforms to reach consumers. fuboTV’s sports-first live TV platform offers a growing and increasingly valuable live audience and provides un-skippable ad inventory on high-quality content. We believe our growing subscriber base and increasing household viewing hours will make the platform highly attractive to many advertisers. Advertisers also benefit from combining traditional TV advertising formats with the advantages of digital advertising in measurability, relevancy and interactivity.

 

Content Providers

 

fuboTV’s TV streaming platform creates the opportunity for content providers to monetize and distribute their content to our highly engaged audience. In doing so, content providers are expanding their audiences, which have shrunk on traditional TV because of ongoing cord-cutting. By aggregating a broad variety of content to deliver a comprehensive offering on our platform, we believe fuboTV is able to provide greater engagement and value to subscribers than content providers would otherwise be able to deliver independently. Furthermore, our data-driven platform enables us to capture valuable insights on consumer behavior and preferences, which are increasingly valuable to our content providers.

 

Our Competitive Strengths

 

We believe that fuboTV Pre-Merger’s revenue and subscriber growth are a result of the following competitive strengths:

 

Comprehensive Sports, News & Entertainment Offering. While we continue to attract consumers with our extensive premium sports content, we believe our increasingly broad and deep news and entertainment offerings drive total viewership and retention of our users. We believe we will continue to optimize our content offering by identifying and executing strategic deals that best suit our consumers’ preferences.

 

Proprietary Technology with Enhanced Features. Because we design, develop and operate all core segments of our platform, we can capture broad and deep analytics about platform usage and user behavior. These analytics, and the unique data insights derived from them, allow us to better understand and continually adjust our strategy to meet the needs of our subscribers. We believe our proprietary technology infrastructure is scalable, which provides an ongoing cost and margin advantage as we grow.

 

Intuitive User Experience. We are continuing to innovate to give subscribers a premium viewing experience that they are unable to find with cable TV and are regularly first-to-market with new product features. Our product is highly customizable and provides an optimized experience for personalized live streaming, including tools such as unique user profiles, multiple angle and screen viewing, favorites lists, a dynamic recommendation engine and Cloud DVR offerings.

 

Efficiency of Cloud-based OTT model. fuboTV’s capital-efficient cloud-based OTT model doesn’t require us to devote capex to procuring, maintaining inventory of and delivering superfluous, and often outdated, proprietary set-top boxes to customers that do not want or need them.

 

Delivering Significant Value to Our Subscribers. We seek to provide a flexible product offering, delivering leading bundles for consumers that best meet their target price point. fuboTV’s base package is cheaper than traditional Pay TV options and includes a broad array of 100+ channels across sports, news and entertainment.

 

 3 

 

 

Our Growth Strategy

 

We believe that we are at the early stages of our growth and that we are at an inflection point in the TV industry where streaming has begun to surpass traditional linear TV in several key areas, including content choice, ease of access and use across devices, and cost savings to consumers. We have identified potential growth opportunities, both in current markets and adjacent markets, that provide additional upside to our business model. The key elements to our growth strategy include:

 

Accelerate Subscriber Acquisition

 

Upsell and Retain Existing Subscribers

 

Grow Advertising Inventory

 

Continuing to Enhance Our Content Portfolio and Technology

 

Enter Adjacent Markets, Including Wagering

 

Expand Internationally

 

Our Virtual Entertainment Portfolio and Technology

 

Following the Merger, we also continue to be a character-based virtual entertainment company and a leading developer of digital human likeness for celebrities and consumers, focused on applications in traditional entertainment, sports entertainment, live events, social networking, mixed reality (AR/VR) and artificial intelligence. We expect our technology-driven intellectual property business model, featuring the IP sharing relationships with leading celebrities and recognized entertainment properties, to leverage Pre-Merger fuboTV’s content delivery platform for traditional and future-form content, adding to its already robust sports and entertainment offerings.

 

We believe FaceBank Pre-Merger’s human animation and digital likeness technologies, which have allowed us to secure attractive long-term revenue sharing relationships with globally-recognized celebrities and entertainment properties, represent an opportunity to offer innovative new forms of entertainment content to our Subscribers and to consumers at large. Our recent announcement of plans to develop a new form of pay-per-view sports entertainment, featuring ‘Virtual Mayweather’ competing in simulated championship-style fights against other historically significant champion boxers provides an example of the types of future-form content that we believe will be attractive to fuboTV consumers. 

 

Risk Factors

 

Investing in our common stock involves risk. You should carefully consider all the information in this prospectus prior to investing in our common stock. These risks are discussed more fully in the section entitled “Risk Factors” immediately following this prospectus summary. Some of these risks and uncertainties include, but are not limited to, the following:

 

  We have incurred operating losses in the past, expect to incur operating losses in the future and may never achieve or maintain profitability.
     
  Our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern.
     
  We will require additional capital to meet our financial obligations and support planned business growth, and this capital might not be available to us on acceptable terms or at all.
     
  We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which could lead investors to lose confidence in the accuracy and completeness of our financial reports.
     
 

TV streaming is highly competitive and many companies, including large technology companies, TV brands, and service operators, are actively focusing on this industry. If we fail to differentiate ourselves and compete successfully with these companies, it will be difficult for us to attract subscribers and our business will be harmed.

     
 

The long-term and fixed cost nature of certain of our content commitments may limit our operating flexibility and could adversely affect our liquidity and results of operations.

     
  Our revenue is subject to seasonality, and if subscriber behavior during certain seasons falls below our expectations, our business may be harmed.
     
  The recent COVID-19 pandemic and the global attempt to contain it may harm our industry, business, results of operations and ability to raise additional capital.

 

Merger with fuboTV Inc.

 

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation, or Merger Sub, and our wholly-owned subsidiary merged with and into fuboTV Inc., a Delaware corporation, or “fuboTV,” whereby fuboTV 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, or the Merger Agreement, by and among us, Merger Sub and fuboTV.

 

In accordance with the terms of the Merger Agreement, at the effective time of the Merger, or the Effective Time, all of the capital stock of fuboTV 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, or the Series AA Preferred Stock. Each share of Series AA Preferred Stock is entitled to 0.8 votes per preferred share and is convertible into two (2) 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 of 1933 (also referred to as the Securities Act) or pursuant to an effective registration statement under the Securities Act. See “Description of Capital StockSeries AA Preferred Stock” for more information.

 

Implications of Being a Smaller Reporting Company

 

We are a “smaller reporting company” and will remain a smaller reporting company while either (i) the market value of our stock held by non-affiliates was less than $250 million as of the last business day of our most recently completed second fiscal quarter or (ii) our annual revenue was less than $100 million during our most recently completed fiscal year and the market value of our stock held by non-affiliates was less than $700 million as of the last business day of our most recently completed second fiscal quarter. We intend to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies, such as reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies.

 

Corporate Information

 

We were incorporated in 2009 under the laws of the State of Florida under the name York Entertainment, Inc. On September 30, 2019, our name was changed to FaceBank Group, Inc. fuboTV was incorporated in 2015 as a Delaware corporation. Following the Merger, we operate our business under the name “fuboTV,” and we are in the process of changing the name of FaceBank Group, Inc. to fuboTV Inc. Our headquarters are located at 1330 Avenue of the Americas, New York, NY 10019, and our telephone number is (212) 672-0055. You can access our websites, including historical financial information pertaining to fuboTV Pre-Merger, at https://fubo.tv, https://ir.fubo.tv, https://facebankgroup.com and https://ir.facebankgroup.com. Information contained on our websites is not part of this prospectus or the registration statement of which it forms a part and is not incorporated by reference in this prospectus or the registration statement of which it forms a part.

 

 4 

 

 

THE OFFERING

 

 

Common stock offered by us                      shares of common stock (or               if the underwriters exercise their option to purchase additional shares from us and the selling shareholder in full)
     

Common stock offered by us and the selling shareholder pursuant to the underwriters’ option to purchase additional shares

 

                     shares, comprised of (i) 900,000 shares offered by the selling shareholder and (ii) shares offered by us

     
Total shares of our common stock to be outstanding after this offering                       shares (or               if the underwriters exercise their option to purchase additional shares from us and the selling shareholder in full)
     
Total shares of common stock to be outstanding after this offering, assuming conversion of all Series AA Preferred Stock  

27,412,393 shares of Series AA Preferred Stock (or 54,824,786 shares of common stock on an as-converted basis)

     
Voting power held by holders of our common stock after giving effect to this offering                      %
     
Voting power held by holders of our Series AA Preferred Stock after giving effect to this offering                      %
     
Use of proceeds  

We estimate that the net proceeds to us from this offering will be approximately $            million (or approximately $     million if the underwriters exercise their option to purchase additional shares from us in full), based on an assumed public offering price of $10.20 per share, which is the last reported sale price of our common stock on the OTCQB on August 7, 2020, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We expect to use the proceeds of this offering for working capital and general corporate purposes and for growing our live TV streaming platform.

 

We will not receive any proceeds from the sale of shares of common stock by the selling shareholder.

 

See “Use of Proceeds.”

     
OTCQB Venture Market symbol   “FUBO.” We intend to apply to list our common stock on the                      under the symbol “FUBO.”
     

Voting and Conversion Rights

 

The rights of the holders of common stock and Series AA convertible preferred stock are identical, except for voting and conversion rights. Each share of common stock is entitled to one vote. Each share of Series AA convertible preferred stock is entitled to 0.8 votes and is convertible into two (2) shares of common stock upon an arms’-length transfer pursuant to Rule 144 under the Securities Act of 1933, as amended, or upon a registration of such shares by us. The holders of Series D convertible preferred stock are generally not entitled to vote and are eligible to convert into shares of common stock at the option of the holder on the six-month anniversary of issuance, as further described in “Description of Capital Stock.” Following this offering, outstanding shares of Series AA convertible preferred stock will represent approximately          % of the voting power of our outstanding capital stock, and outstanding shares of common stock will represent approximately          % of the voting power of our outstanding capital stock, assuming, in each case, no exercise by the underwriters of their option to purchase additional shares.

     
Risk Factors   See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

 

Unless otherwise indicated, all information in this prospectus relating to the number of shares of our common stock outstanding is based on 38,684,136 shares outstanding as of June 30, 2020 and does not include:

 

  7,477,443 shares of common stock issuable upon the exercise of certain outstanding warrants with a weighted-average exercise price of $6.08 per share.
     
  489,089 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $4.22 per share.
     
  16,667 shares of common stock issuable upon the exercise of an option outstanding under our 2014 Equity Incentive Stock Plan at an exercise price of $28.20 per share;
     
  150,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan;
     
 

7,482,684 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $1.47 per share under the fuboTV Inc. 2015 Equity Incentive Plan;

     
  8,825,336 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $8.92 per share under our 2020 Equity Incentive Plan;
     
 

3,291,310 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan;

     
  shares issuable upon the conversion of certain convertible notes issued by the Registrant with an aggregate principal outstanding balance of $2,773,000; and
     
 

up to 54,858,373 shares of our common stock reserved for issuance upon conversion of our (i) 203,000 shares issued and outstanding of Series D Preferred Stock or our (ii) 27,412,393 shares issued and outstanding of Series AA Preferred Stock (see “Description of Capital Stock—Preferred Stock”).

     
    Unless otherwise indicated, all information in this prospectus reflects or assumes the following:

 

  no exercise or termination of options or warrants outstanding as of June 30, 2020;
     
  no conversion of any shares of our Series AA Preferred Stock or Series D Preferred Stock outstanding as of June 30, 2020;
     
  no conversion of convertible notes outstanding as of June 30, 2020; and
     
  no exercise by the underwriters of their option to purchase up to             additional shares of common stock from the us and the selling shareholder in this offering.

 

 5 

 

 

SELECTED HISTORICAL FINANCIAL DATA OF FUBOTV PRE-MERGER

 

In the following tables, we provide fuboTV Pre-Merger’s selected consolidated financial data. You should read the selected historical financial data set forth below in conjunction with fuboTV Pre-Merger’s consolidated financial statements, the notes to fuboTV Pre-Merger’s consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The selected historical statement of operations data as of and for the three months ended March 31, 2020 and 2019 and the selected historical balance sheet data as of March 31, 2020 was derived from fuboTV Pre-Merger’s unaudited historical consolidated financial statements included elsewhere in this prospectus. The selected historical financial data for the years ended December 31, 2018 and 2019 have been derived from fuboTV Pre-Merger’s historical audited consolidated financial statements that are included elsewhere in this prospectus. FuboTV Pre-Merger’s historical results are not necessarily indicative of results to be expected for future periods.

 

    Three Months Ended
March 31,
    Year Ended December 31,  
    2020     2019     2019     2018  
    (unaudited)     (unaudited)              
Consolidated Statement of Operations Data:  

(in thousands, except

per share data)

   

(in thousands, except

per share data)

 
                         
Revenue:                                
Subscription revenue   $ 46,388     $ 26,627     $ 133,303     $ 70,112  
Advertising revenue     4,122       1,871       12,450       4,131  
Other     537       118       777       577  
Total revenue     51,047       28,616       146,530       74,820  
Operating expenses:                                
Subscriber-related expenses     58,001       43,495       201,448       98,894  
Broadcasting and transmission     9,230       7,236       33,103       24,373  
Sales and marketing     7,713       5,884       37,245       47,478  
Technology and development     8,327       6,936       30,001       19,909  
General and administrative     3,104       2,182       15,876       11,121  
Depreciation and amortization     135       119       616       440  
Total operating expenses     86,510       65,852       318,289       202,215  
Operating loss     (35,463 )     (37,236 )     (171,759 )     (127,395 )
Other expenses:                                
Interest expense, net of interest income     493       647       2,035       2,445  
(Gain) loss on extinguishment of debt           (102 )     (102 )     4,171  
Change in fair value of derivative liability                     -       (4,697 )
Total other expenses     493       545       1,933       1,919  
Loss before income taxes     (35,956 )     (37,781 )     (173,692 )     (129,314 )
Provision (benefit) for income taxes     2       2       9       (2 )
Net loss and comprehensive loss   $ (35,958 )   $ (37,783 )   $ (173,701 )   $ (129,312 )

 

The following table presents fuboTV Pre-Merger’s consolidated balance sheet data as of March 31, 2020 and December 31, 2019:

 

    As of March 31, 2020  
    Actual     As Adjusted(1)  
Consolidated Balance Sheet Data:   (in thousands)     (in thousands)  
    (unaudited)     (unaudited)  
Cash, cash equivalents   $ 8,040     $    
Total current assets     14,847          
Total assets     18,619          
Total current liabilities     175,457          
Long-term debt, net of issuance costs     18,007          
Total shareholders’ deficit     423,260          

 

  (1)

Reflects the issuance and sale of                     shares of common stock in this offering at an assumed public offering price of $            per share, which is the last reported sale price of our common stock on the OTCQB on             , after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted balance sheet data is illustrative only and will change based on the actual public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed public offering price of $            per share, which is the last reported sale price of our common stock on OTCQB on                 , would increase or decrease  as adjusted cash, current assets, and shareholders’ equity by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A 1,000,000 share increase or decrease in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease as adjusted cash, current assets, and shareholders’ equity by                , assuming the assumed public offering price per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

 6 

 

 

SELECTED HISTORICAL FINANCIAL DATA OF FACEBANK PRE-MERGER

 

In the following tables, we provide FaceBank Pre-Merger’s selected consolidated financial data. You should read the selected historical financial data set forth below in conjunction with FaceBank Pre-Merger’s consolidated financial statements, the notes to FaceBank Pre-Merger’s consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The selected historical statement of operations data as of and for the three months ended March 31, 2020 and 2019 and the selected historical balance sheet data as of March 31, 2020 was derived from FaceBank Pre-Merger’s unaudited historical consolidated financial statements included elsewhere in this prospectus. The selected historical financial data for the years ended December 31, 2018 and 2019 have been derived from FaceBank Pre-Merger’s historical audited consolidated financial statements that are included elsewhere in this prospectus. FaceBank Pre-Merger’s historical results are not necessarily indicative of results to be expected for future periods.

 

    Three Months Ended March 31,     Year Ended December 31,  
   

2020

(As Restated)

    2019    

2019

(As Restated)

    2018  
    (Unaudited)     (Unaudited)        
Consolidated Statement of Operations Data:  

(in thousands, except per

share data)

   

(in thousands, except per

share data)

 
                         
Revenues   $ 7,295       -     $ 4,271     $ -  
Operating expenses                                
General and administrative     20,203       1,037       13,793       6,746  
Amortization of intangible assets     5,217       5,153       20,682       8,209  
Impairment of intangible assets     -       -       8,598       -  
Depreciation     3       5       83       8  
Total operating expenses     25,423       6,195       43,156       14,963  
Operating loss     (18,128 )     (6,195 )     (38,885 )     (14,963 )
                                 
Other income (expense)                                
Interest expense and financing costs     (2,581 )     (446 )     (2,062 )     (2,651 )
Loss on deconsolidation of Nexway     (11,919 )      -       -       -  
Loss on issuance of notes, bonds and warrants     (24,053 )     -               -  
Gain on extinguishment of convertible notes     -       -       -       1,852  
Loss on investments     -       -       (8,281 )     -  
Foreign currency loss     -       -       (18 )     -  
Other expense     (436 )     -       726       (94 )
Change in fair value of warrant liability     (366 )     -       -       -  
Change in fair value of subsidiary warrant liability     (15 )     2,477       4,504       (91 )
Change in fair value of derivative liability     297       128       815       741  
Change in fair value of shares settled liability     (180 )     -       -       -  
Change in fair value of Panda interests     -       -       (198 )     -  
Total other income (expense)     (39,253 )      2,159       (4,514 )     (243 )
Loss before income taxes     (57,381 )     (4,036 )     (43,399 )     (15,206 )
Income tax benefit     (1,038 )     (1,169 )     (5,272 )     (2,114 )
Net loss     (56,343 )     (2,867 )     (38,127 )     (13,092 )
Less: net loss attributable to non-controlling interest     873       599       3,767       2,482  
Net loss attributable to controlling interest   $ (55,470 )   $ (3,466 )   $ (34,360 )   $ (10,610 )
Less: Deemed dividend on Series D Preferred stock     -       -       (9 )     -  
Less: Deemed dividend – beneficial conversion feature on preferred stock     (171 )     -       (589 )     -  
Net loss attributable to common shareholders   $ (55,641 )   $ (3,466 )   $ (34,958 )   $ (10,610 )
                                 
Other comprehensive income (loss)                                
Foreign currency translation adjustment     -       -       (770 )     -  
Comprehensive loss   $ (55,641 )   $ (3,466 )   $ (35,728 )   $ (10,610 )
                                 
Net loss per share attributable to common shareholders                                
Basic and diluted   $ (1.83 )   $ (0.27 )   $ (1.57 )   $ (2.37 )
                                 
Weighted average shares outstanding                                
Basic and diluted     30,338,073       12,883,381       22,286,060       4,481,600  

 

The following table presents FaceBank Pre-Merger’s consolidated balance sheet data as of March 31, 2020:

 

    As of March 31, 2020  
   

Actual

(As Restated)

    As Adjusted(1)  
Consolidated Balance Sheet Data:   (in thousands)  
    (unaudited)   
Cash   $ 81     $    
Total current assets     10,211          
Total assets   $ 302,665          
Total current liabilities     41,601          
Total liabilities     125,411          
Temporary equity     463          
Shareholders’ equity     176,791          

 

  (1) Reflects the issuance and sale of          shares of common stock in this offering at an assumed public offering price of $            per share, which is the last reported sale price of our common stock on the OTCQB on         , after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted balance sheet data is illustrative only and will change based on the actual public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed public offering price of $         per share, which is the last reported sale price of our common stock on OTCQB on        , would increase or decrease as adjusted cash, current assets, and shareholders’ equity by approximately $       , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A 1,000,000 share increase or decrease in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease as adjusted cash, current assets, and shareholders’ equity by       , assuming the assumed public offering price per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

 7 

 

 

RISK FACTORS

 

An investment in our common stock offered by this prospectus involves a substantial risk of loss. You should carefully consider these risk factors, together with all of the other information included in this prospectus, our financial statements and the related notes appearing at the end of this prospectus, before you decide to purchase shares of our common stock. The occurrence of any of the following risks could materially adversely affect our business, financial condition or operating results. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment.

 

RISKS RELATED TO THE BUSINESS

 

We have incurred operating losses in the past, expect to incur operating losses in the future and may never achieve or maintain profitability.

 

We have incurred losses since inception. FaceBank Pre-Merger’s net losses were $13.1 million and $38.1 million for the years ended December 31, 2018 and 2019, respectively, and $56.3 million as of March 31, 2020. fuboTV Pre-Merger’s net losses were $129.3 million and $173.7 million for the years ended December 31, 2018 and 2019, respectively, and $36.0 million as of March 31, 2020. As of March 31, 2020, FaceBank Pre-Merger had an accumulated deficit of $111.6 million, and fuboTV Pre-Merger had an accumulated deficit of $436.2 million. If our revenue and gross profit do not grow at a greater rate than our operating expenses, we will not be able to achieve and maintain profitability. A number of our operating expenses, including expenses related to streaming content obligations, are fixed. If we are not able to either reduce these fixed obligations or other expenses or maintain or grow our revenue, our near-term operating losses may increase. Additionally, we may encounter unforeseen operating or legal expenses, difficulties, complications, delays and other factors that may result in losses in future periods. If our expenses exceed our revenue, we may never achieve or maintain profitability and our business may be harmed.

 

Our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern.

 

To date, we have not been profitable and have incurred significant losses and cash flow deficits, and we anticipate that we will continue to report losses and negative cash flow. As a result of these net losses and cash flow deficits and other factors, our management has determined that there is a substantial doubt about our ability to continue as a going concern over the next twelve months.

 

Additionally, both FaceBank Pre-Merger’s current and former independent registered public accountants issued audit opinions – FaceBank Pre-Merger’s current accountants with respect to FaceBank Pre-Merger’s consolidated financial statements for the year ended December 31, 2019, and FaceBank Pre-Merger’s former firm with respect to FaceBank Pre-Merger’s consolidated financial statements for the year ended December 31, 2018 – indicating that there is substantial doubt about FaceBank Pre-Merger’s ability to continue as a going concern. FaceBank Pre-Merger’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Additionally, fuboTV Pre-Merger’s accountants with respect to fuboTV Pre-Merger’s consolidated financial statements for the year ended December 31, 2019 indicated there was substantial doubt about fuboTV Pre-Merger’s ability to continue as a going concern.

 

The reaction of investors to the inclusion of a going concern statement by FaceBank Pre-Merger’s independent registered public accountants and our management’s determination that we may be unable to continue as a going concern could materially adversely affect the price of our common stock. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing. If our ability to generate cash flow from operations is delayed or reduced, including as a result of the effects of the COVID-19 pandemic, and if we are unable to raise additional funding from other sources, we may be unable to continue in business. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 8 

 

 

We will require additional capital to meet our financial obligations and support planned business growth, and this capital might not be available on acceptable terms or at all.

 

We intend to continue to make significant investments to support planned business growth and may require additional funds to respond to business challenges, including the need to enhance our platform, improve our operating infrastructure or acquire complementary businesses, personnel and technologies. Accordingly, we will need to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our then existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing we secure could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we were to violate the restrictive covenants, we could incur penalties, increased expenses and an acceleration of the payment terms of our outstanding debt, which could in turn harm our business.

 

We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

 

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which could lead investors to lose confidence in the accuracy and completeness of our financial reports.

 

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Securities Exchange Act of 1934, as amended. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

In connection with the audit of the financial statements of FaceBank Pre-Merger as of and for the fiscal year ended December 31, 2019, we and our independent registered public accounting firm identified several material weaknesses in FaceBank Pre-Merger’s internal control over financial reporting:

 

  FaceBank Pre-Merger has failed to adequately invest in its accounting and reporting functions such that it is unable to timely record transactions, reconcile accounts and convert local GAAP produced information outside of the United States into U.S. GAAP-compliant information to timely prepare and adequately review financial statements in accordance with U.S. GAAP across the spectrum of entities within the consolidated group.
     
  FaceBank Pre-Merger has not retained adequate financial and accounting personnel on a continuous basis, and such limited personnel are not involved when decisions are made by management, so they lack critical time and information in order to properly and timely report on the transactions and events.
     
  FaceBank Pre-Merger management in the United States has failed to set up reporting functions and to manage the operations of majority-owned subsidiaries in Europe such that it is unable to timely produce the required accounting information for filing under its 1934 Act requirements.

 

 9 

 

 

  FaceBank Pre-Merger at the parent level has not made the investment required to properly document and maintain an effective internal control system in compliance with the requirements of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
     
  FaceBank Pre-Merger has failed to timely test for impairment of intangible assets and goodwill at its acquisition subsidiaries.
     
  FaceBank Pre-Merger failed to timely record revenue in the proper net form as agent and not principal by its subsidiary Nexway AG.

 

Since the Merger, the Company has taken steps to address the internal control deficiencies that contributed to the material weaknesses, including:

 

  transitioning responsibility over the accounting function to the finance personnel of fuboTV Pre-Merger, including individuals with prior experience working for finance departments of public companies;
     
  hiring additional experienced finance and accounting personnel with technical accounting experience, supplemented by third-party resources;
     
  documenting and formally assessing our accounting and financial reporting policies and procedures, and implementing segregation of duties in key functions;
     
  assessing significant accounting transactions and other technical accounting and financial reporting issues, preparing accounting memoranda addressing these issues and maintaining these memoranda in our corporate records timely;
     
  improving the compilation processes, documentation and monitoring of our critical accounting estimates; and
     
  implementing processes for creating an effective and timely close process.

 

The implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. If we are unsuccessful in remediating the material weaknesses and otherwise establishing and maintaining an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be materially adversely affected. We can give no assurance that implementation of our plans will remediate these deficiencies in internal control or that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

 

Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and could cause us to fail to meet our reporting obligations. In addition, we could become subject to investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

 

 10 

 

 

The restatement of our previously issued financial statements could expose us to risks that could materially adversely affect our financial position, results of operations and cash flows. 

 

We have restated our previously-issued financial statements for the year ended December 31, 2019 and quarter ended March 31, 2020. These restatements, and the remediation efforts we intend to undertake could expose us to a number of risks that could materially adversely affect our financial position, results of operations and cash flows.

 

TV streaming is highly competitive and many companies, including large technology companies, TV brands, and service operators, are actively focusing on this industry. If we fail to differentiate ourselves and compete successfully with these companies, it will be difficult for us to attract subscribers and our business will be harmed.

 

TV streaming is increasingly competitive and global. Our success depends in part on attracting and retaining subscribers on, and effective monetization of, our platform. To attract and retain subscribers, we need to be able to respond efficiently to changes in consumer tastes and preferences and continue to increase the type and number of content offerings. Effective monetization requires us to continue to update the features and functionality of our streaming platform for subscribers and advertisers.

 

Companies such as Netflix, Amazon.com, Dish Network, Apple Inc. and Google Inc. offer TV streaming products that compete with our platform. In many cases, these competitors have the financial resources to subsidize the cost of their streaming devices in order to promote their other products and services making it harder for us to acquire new subscribers and increase hours streamed. Some of these companies also promote their brands through traditional forms of advertising, such as TV commercials, as well as Internet advertising or website product placement, and have greater resources than us to devote to such efforts.

 

In addition, many TV brands, such as LG, Samsung Electronics Co., Ltd. and VIZIO, Inc., offer their own TV streaming solutions within their TVs. Other devices, such as Microsoft’s Xbox and Sony’s PlayStation game consoles and many DVD and Blu-ray players, also incorporate TV streaming functionality. Similarly, some service operators, such as Comcast and Cablevision, offer TV streaming applications as part of their cable service plans and can leverage their existing consumer bases, installation networks, broadband delivery networks and name recognition to gain traction in the TV streaming market.

 

We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to increase in the future. This increased competition could result in pricing pressure, lower revenue and gross profit or the failure of our platform to gain or maintain broad market acceptance. To remain competitive, we need to continuously invest in product development and marketing. We may not have sufficient resources to continue to make the investments needed to maintain our competitive position. In addition, many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us, which provide them with advantages in developing, marketing or servicing new products and offerings. As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion and sales of their products or the distribution of their content, and influence market acceptance of their products better than we can. These competitors may also be able to adapt more quickly to new or emerging technologies or standards and may be able to deliver products and services at a lower cost. New entrants may enter the TV streaming market with unique service offerings or approaches to providing video. In addition, our competitors may enter into business combinations or alliances that strengthen their competitive positions. Increased competition could reduce our market share, revenue and operating margins, increase our operating costs, harm our competitive position and otherwise harm our business.

 

 11 

 

 

The long-term and fixed cost nature of certain of our content commitments may limit our operating flexibility and could adversely affect our liquidity and results of operations.

 

In connection with licensing streaming content, we typically enter into multi-year agreements with content providers. These agreements have sometimes required us to pay minimum license fees for content that are not tied to subscriber usage or the size of our subscriber base. Given the multiple-year duration and sometimes fixed cost nature of content commitments, if subscriber acquisition and retention do not meet our expectations, our margins may be adversely impacted, and we may not be in a position to make the minimum guarantee payments required under certain content licenses. We have already failed to make minimum guarantee payments to certain key programmers and may not be in a position to make similar payments in the future. If we do not make these payments, then we may lose access to such content, which in turn may further depress subscriber acquisition or retention, cause other programmers to exercise termination rights due to the content mix available through our service, or impact our ability to obtain content from other programmers. Payment terms for certain content commitments, such as content we directly produce, will typically require more up-front cash payments than other content licenses or arrangements whereby we do not fund the production of such content. Additionally, we are currently in breach under certain of our content provider agreements as a result of our unwillingness to make certain fixed fee payments required pursuant to such agreements. We are currently negotiating the terms of these agreements, and in particular, fixed fee payments required thereunder, but if we are unsuccessful in renegotiating these agreements or the payments required thereunder, our partners could terminate these agreements and require us to make these fixed fee payments in their entirety, which could adversely affect our business, results of operations and financial condition.

 

To the extent subscriber and/or revenue growth do not meet our expectations, our liquidity and results of operations could be adversely affected as a result of content commitments and accelerated payment requirements of certain agreements. In addition, the long-term and fixed cost nature of certain of our content commitments may limit our flexibility in planning for, or reacting to changes in our business and the market segments in which we operate. If we license and/or produce content that is not favorably received by consumers in a territory, or is unable to be shown in a territory, acquisition and retention may be adversely impacted and given the long-term and fixed cost nature of certain of our content commitments, we may not be able to adjust our content offering quickly and our results of operation may be adversely impacted.

 

Our revenue and gross profit are subject to seasonality, and if subscriber behavior during certain seasons falls below our expectations, our business may be harmed.

 

Seasonal variations in subscriber and marketing behavior significantly affect our business. We have previously experienced, and expect to continue to experience, effects of seasonal trends in subscriber behavior due to the seasonal nature of sports. Additionally, increased Internet usage and sales of streaming service subscriptions during the fourth quarter of each calendar year affect our business. We also may experience higher advertising sales during the fourth quarter of each calendar year due to greater advertiser demand during the holiday season, but also incur greater marketing expenses as we attempt to attract new subscribers to our platform. In addition, expenditures by advertisers tend to be cyclical and are often discretionary in nature, reflecting overall economic conditions, the economic prospects of specific advertisers or industries, budgeting constraints and buying patterns, and a variety of other factors, many of which are outside our control.

 

Given the seasonal nature of our subscriptions, accurate forecasting is critical to our operations. We anticipate that this seasonal impact on revenue and gross profit is likely to continue, and any shortfall in expected revenue, due to macroeconomic conditions, a decline in the effectiveness of our promotional activities, actions by our competitors, or for any other reason, would cause our results of operations to suffer significantly. A substantial portion of our expenses are personnel-related and include salaries, stock-based compensation and benefits that are not seasonal in nature. Accordingly, in the event of a revenue shortfall, we would be unable to mitigate the negative impact on margins, at least in the short term, and our business would be harmed.

 

The recent COVID-19 pandemic and the global attempt to contain it may harm our industry, business, results of operations and ability to raise additional capital.

 

The global spread of COVID-19 and the various attempts to contain it have created significant volatility, uncertainty and economic disruption. In response to government mandates, health care advisories and employee concerns, we have altered certain aspects of our operations. Our workforce has had to spend a significant amount of time working from home, which may impact their productivity. Travel has been severely curtailed, and virtually all professional and college sports leagues have cancelled or altered seasons and events. Such limitations caused by the pandemic have also resulted in us seeking extensions for our current and periodic filings with the SEC. As a result, our broadcasting partners had and are having to substitute other content in the place of previously scheduled live sporting events. While professional sports are returning in the United States, there is no guarantee that those seasons continue uninterrupted or at all. The potential further delay or cancellation of professional and college sports may cause us to temporarily have less popular content available on our platform, which could negatively impact consumer demand for and subscription retention to our platform and our number of paid subscribers.

 

 12 

 

 

The full extent to which the COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the actions of professional and college sports leagues; the availability and cost to access the capital markets; the effect on our subscribers and subscriber demand for and ability to pay for our platform; disruptions or restrictions on our employees’ ability to work and travel; and interruptions or restrictions related to the provision of streaming services over the internet, including impacts on content delivery networks and streaming quality. During the COVID-19 pandemic, we may not be able to provide the same level of customer service that our subscribers are used to, which could negatively impact their perception of our platform resulting in an increase in cancellations. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, subscribers and shareholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our subscribers, or on our financial results.

 

If we fail to obtain or maintain popular content, we may fail to retain existing subscribers and attract new subscribers.

 

We have invested a significant amount of time to cultivate relationships with our content providers; however, such relationships may not continue to grow or yield further financial results. We currently have over 240 streaming channels on our platform in the United States, and we must continuously maintain existing relationships and identify and establish new relationships with content providers to provide popular content. In order to remain competitive, we must consistently meet user demand for popular streaming channels and content. If we are not successful in maintaining channels on our platform that attract and retain a significant number of subscribers, or if we are not able to do so in a cost-effective manner, our business will be harmed.

 

If our efforts to attract and retain subscribers are not successful, our business will be adversely affected.

 

We have experienced significant subscriber growth over the past several years. Our ability to continue to attract subscribers will depend in part on our ability to consistently provide our subscribers with compelling content choices and effectively market our platform. Furthermore, the relative service levels, content offerings, pricing and related features of our competitors may adversely impact our ability to attract and retain subscribers. In addition, many of our subscribers rejoin our platform or originate from word-of-mouth advertising from existing subscribers. If our efforts to satisfy our existing subscribers are not successful, we may not be able to attract subscribers, and as a result, our ability to maintain and/or grow our business will be adversely affected. If consumers perceive a reduction in the value of our platform because, for example, we introduce new or adjust existing features, adjust pricing or platform offerings, or change the mix of content in a manner that is not favorably received by them, we may not be able to attract and retain subscribers. Subscribers cancel their subscription for many reasons, including due to a perception that they do not use the platform sufficiently, the need to cut household expenses, availability of content is unsatisfactory, competitive services provide a better value or experience and customer service issues are not satisfactorily resolved. We must continually add new subscriptions both to replace canceled subscriptions and to grow our business beyond our current subscription base. While we permit multiple subscribers within the same household to share a single account for non-commercial purposes, if account sharing is abused, our ability to add new subscribers may be hindered and our results of operations may be adversely impacted. If we do not grow as expected, given, in particular, that our content costs are largely fixed in nature and contracted over several years, we may not be able to adjust our expenditures or increase our (per subscriber) revenues commensurate with the lowered growth rate such that our margins, liquidity and results of operation may be adversely impacted. If we are unable to successfully compete with current and new competitors in both retaining our existing subscribers and attracting new subscribers, our business will be adversely affected. Further, if excessive numbers of subscribers cancel our service, we may be required to incur significantly higher marketing expenditures than we currently anticipate replacing these subscribers with new subscribers.

 

 13 

 

 

Our agreements with distribution partners contain parity obligations which limit our ability to pursue unique partnerships.

 

Our agreements with distribution partners contain obligations which require us to offer them the same technical features, content, pricing and packages that we make available to our other distribution partners and also require us to provide parity in the marketing of the availability of our application across our distribution partners. These parity obligations may limit our ability to pursue technological innovation or partnerships with individual distribution partners and may limit our capacity to negotiate favourable transactions with different partners or otherwise provide improved products and services. As our technical feature developments progress at varying speeds and at different times with different distribution partners, we currently offer some enhanced technical features on distribution platforms that we do not make available on other distribution platforms, which limits the quality and uniformity of our offering to all consumers across our distribution platforms. In addition, delays in technical developments across our distribution partners puts us at risk of breaching our parity obligations with such distribution platforms, which threatens the certainty of our agreements with distribution partners.

 

If we are unable to maintain an adequate supply of ad inventory on our platform, our business may be harmed.

 

We may fail to attract content providers that generate sufficient ad content hours on our platform and continue to grow our video ad inventory. Our business model depends on our ability to grow video ad inventory on our platform and sell it to advertisers. We grow ad inventory by adding and retaining content providers on our platform with ad-supported channels that we can monetize. The amount, quality and cost of inventory available to us can change at any time. If we are unable to grow and maintain a sufficient supply of quality video advertising inventory at reasonable costs to keep up with demand, our business may be harmed.

 

We operate in a highly competitive industry and we compete for advertising revenue with other Internet streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV and satellite and Internet radio. We may not be successful in maintaining or improving our fill-rates or CPMs.

 

Our competitors offer content and other advertising mediums that may be more attractive to advertisers than our TV streaming platform. These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising. If we are unable to increase our advertising revenue by, among other things, continuing to improve our platform’s data capabilities to further optimize and measure advertisers’ campaigns, increase our advertising inventory and expand our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.

 

If the advertisements on our platform are not relevant or not engaging to our subscribers, our growth in active accounts and hours streamed may be adversely impacted.

 

We have made, and are continuing to make, investments to enable advertisers to deliver relevant advertising content to subscribers on our platform. Existing and prospective advertisers may not be successful in serving ads that lead to and maintain user engagement. Those ads may seem irrelevant, repetitive or overly targeted and intrusive. We are continuously seeking to balance the objectives of our subscribers and advertisers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain subscribers and advertisers. If we do not introduce relevant advertisements or such advertisements are overly intrusive and impede the use of our TV streaming platform, our subscribers may stop using our platform which will harm our business.

 

We may not be successful at expanding our content to areas outside our current content offering and even if we are able to expand into other content areas and sustain such expansion, we may not be successful in overcoming our reputation as primarily a live sports streaming service.

 

We currently have a reputation as primarily a live sports streaming service. We are making efforts to expand our content offerings outside live sports streaming, and currently offer a wide selection of news and entertainment content. However, we may not be successful at expanding our content to areas outside our current content offering, or maintaining content from our current content offering, and even if we are able to expand into other content areas and sustain such expansion, we may not be successful in overcoming our reputation as primarily a live sports streaming service.

 

 14 

 

 

Integrating the business of fuboTV Pre-Merger and FaceBank Pre-Merger may be more difficult, costly, or time-consuming than anticipated.

 

We are still in the process of integrating fuboTV Pre-Merger and FaceBank Pre-Merger. A successful integration of these businesses will depend substantially on our ability to consolidate operations, corporate cultures, systems and procedures and to eliminate redundancies and costs. We may not be able to combine our businesses without encountering difficulties, such as:

 

  the loss of key employees;
  disruption of operations and business;
  inability to maintain and increase competitive presence;
  possible inconsistencies in standards, control procedures and policies;
  unexpected problems with costs, operations, personnel and technology; and/or
  problems with the assimilation of new operations, sites or personnel, which could divert resources from regular operations.

 

Additionally, general market and economic conditions may inhibit our successful integration. Achieving the anticipated benefits of the Merger is subject to a number of uncertainties, including whether we integrate our businesses, including our organizational culture, operations, technologies, services and products, in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits on the anticipated timeframe, or at all, could result in a reduction in the price of our shares as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely affect our business, results of operations and financial condition. Additionally, we made fair value estimates of certain assets and liabilities in the Merger. Actual values of these assets and liabilities could differ from our estimates, which could result in our not achieving the anticipated benefits of the acquisition. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.

 

We may be subject to fines or other penalties imposed by the Internal Revenue Service and other tax authorities.

 

We are currently delinquent in filing annual tax returns with the Internal Revenue Service and several states. Pre-Merger Facebank has not filed its federal and state income tax returns for several years. We are in the process of working to remedy this issue by filing these delinquent tax returns. We may be subject to penalties and interest with the tax authorities because of the late tax returns. There can be no assurance that we remedy our delinquent filings sufficiently, and we may face penalties and fees which would adversely affect our operating results and investors’ confidence in our internal operations.

 

We could be required to collect additional sales and other similar taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our subscriptions and adversely affect our operating results.

Sales and use, value-added, goods and services, and similar tax laws and rates are complicated and vary greatly by jurisdiction. There is significant uncertainty as to what constitutes sufficient nexus for a state or local jurisdiction to levy taxes, fees, and surcharges for sales made over the internet, as well as whether our subscriptions are subject to tax in various jurisdictions. The vast majority of states have considered or adopted laws that impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States recently ruled in South Dakota v. Wayfair, Inc. et. al. (Wayfair) that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may enforce laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. We have not always collected sales and other similar taxes in all jurisdictions in which we are required to, and we are working with our tax advisors to determine our collection obligations in each jurisdiction. We may be obligated to collect and remit sales tax in jurisdictions in which we have not collected and remitted sales tax. A successful assertion by one or more states requiring us to collect taxes where we historically have not or presently do not do so could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us and decrease our future sales, which could adversely affect our business and operating results.

 

We are subject to taxation-related risks in multiple jurisdictions.

 

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be challenged by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.

 

Tax laws are being re-examined and evaluated globally. New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. Tax authorities are increasingly scrutinizing the tax positions of companies. If U.S. or other foreign tax authorities change applicable tax laws, our overall liability could increase, and our business, financial condition or results of operations may be adversely impacted.

 

 15 

 

 

We might not be able to utilize a significant portion of our net operating loss carryforwards.  

 

As of December 31, 2019, we had available to us federal net operating loss carryforwards, a portion of which will, if not used, expire at various dates. Under legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, as modified by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses in tax years beginning after December 31, 2020 is limited. Other limitations may apply for state tax purposes.

 

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change income may be limited. We have not determined whether we have experienced Section 382 ownership changes in the past, and therefore a portion of our net operating loss carryforwards may be subject to an annual limitation under Section 382 of the Code. In addition, we may experience ownership changes in the future as a result of subsequent changes in our stock ownership, including this offering, some of which may be outside of our control. A past or future ownership change that materially limits our ability to use our historical net operating loss and tax credit carryforwards may harm our future operating results by effectively increasing our future tax obligations.

 

If we fail to comply with the reporting obligations of the Exchange Act, our business, financial condition, and results of operations, and investors’ confidence in us, could be materially and adversely affected.

 

As a public company, we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports, quarterly reports, and current reports. Our failure to prepare and disclose this information in a timely manner and meet our reporting obligations in their entirety could subject us to penalties under federal securities laws and regulations of the exchange we are listed on, expose us to lawsuits, and restrict our ability to access financing on favorable terms, or at all.

 

Prior to the Merger, fuboTV Pre-Merger was not a public company and FaceBank Pre-Merger had limited resources. Our management has faced significant challenges in consolidating the functions of fuboTV Pre-Merger and FaceBank Pre-Merger and their subsidiaries, including integrating their technologies, organizations, procedures, policies and operations. In connection with the Merger, we have been working to integrate certain operations of fuboTV Pre-Merger and FaceBank Pre-Merger, including, among other things, back-office operations, information technology and regulatory compliance.

 

We have been and expect to continue to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of sales and marketing and finance and accounting. Prior to such expansion, as a result of previously maintaining a limited legal, finance and accounting staff, we may later determine that certain related party transactions were not properly identified, reviewed and approved prior to us entering into them with such related parties.

 

As we seek to increase staffing levels to manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and our limited experience in managing such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert or stretch our management and business development resources in a way that we may not anticipate. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

 

Additionally, for our recent Exchange Act filings, we have relied on an order (the “Order”) issued by the SEC pursuant to Section 36 of the Exchange Act (Release No. 34-88465), permitting filing extensions to certain public companies based on the COVID-19 pandemic. We relied upon this permissible extension in good faith after analyzing, among other things, the fact that our books and records were not easily accessible, which resulted in delays in preparation and completion of our financial statements, and that the various governmental mandatory closures of businesses have precluded our personnel, particularly our senior accounting staff, from obtaining access to our subsidiaries’ books and records necessary to prepare our financial statements. Following this analysis, we believe that we satisfied all eligibility criteria to take advantage of these extensions. If it is later determined that we were ineligible to rely upon the Order for such extensions, our filings could be deemed to be late, which could have a material adverse effect on our ability to raise capital, which could have a material adverse effect on our business, results of operations, and financial condition.

 

 16 

 

 

We will need to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition, and any inability to do so could adversely affect our billing services and financial reporting.

 

We have increasingly complex business arrangements with our content publishers and licensees, and the rules that govern revenue and expense recognition in our business are increasingly complex. To manage the expected growth of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will negatively affect our billing services and financial reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our subscribers, content publishers or licensees; cause harm to our reputation and brand; and could also result in errors in our financial and other reporting.

 

Our User metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.

 

We regularly review key metrics related to the operation of our business, including, but not limited to Content Hours, Monthly Content Hours Watched per MAU, MAUs, ARPU, and number of Subscribers, to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates of our subscriber base for the applicable period of measurement, there are inherent challenges in measuring how our platform is used across large populations.

 

Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of MAUs were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of subscribers to satisfy our growth strategies.

 

In addition, advertisers generally rely on third-party measurement services to calculate our metrics, and these third-party measurement services may not reflect our true audience. If advertisers, partners, or investors do not perceive our subscriber, geographic, or other demographic metrics to be accurate representations of our subscriber base, or if we discover material inaccuracies in our subscriber, geographic, or other demographic metrics, our reputation may be seriously harmed.

 

Non-compliance with the objective and subjective criteria for the Paycheck Protection Program loan could have a material adverse effect on our business.

 

On April 21, 2020, we availed ourselves of a PPP Loan from JPMorgan Chase Bank, N.A., in the aggregate amount of $4,699,240.00, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a note dated April 21, 2020 issued by the Company, matures on April 21, 2022, and bears interest at a rate of 0.98% per annum, payable monthly commencing on November 21, 2020. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020 The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

 

 17 

 

 

On April 23, 2020, the Secretary of the U.S. Department of the Treasury stated that the SBA will perform a full review of any PPP Loan over $2.0 million before forgiving the loan. In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, the maintenance of our entire workforce, notwithstanding certain “work-from-home” limitations. We also took into account our need for additional funding to continue operations, and our ability to currently access alternative forms of capital in the current market environment. Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the objectives of the PPP Loan of the CARES Act. If it is later determined that we were ineligible to receive the PPP Loan or determined that we did not comply with requirements after receiving the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties and adverse publicity, which could have a material adverse effect on our business, results of operations, and financial condition.

 

Our financial condition and results of operations could be adversely affected if we do not effectively manage our current or future debt.

 

In connection with the Merger, we incurred approximately $33.80 million of additional indebtedness from (i) the sale of senior secured promissory notes in an aggregate principal amount of $10.05 million to FB Loan Series I, LLC, or the Senior Notes, and (ii) our guarantee of approximately $23.75 million of existing indebtedness of fuboTV under its existing senior secured credit facility with AMC Networks Ventures LLC, or the AMC Facility, which is secured by a lien on substantially all of the assets of fuboTV. Following the Merger, we have repaid the Senior Notes in full as of July 3, 2020. In addition, we have outstanding convertible promissory notes with an aggregate principal amount of $2,773,000. To the extent not converted, we may be required to pay principal, interest, and any late fees to the holders of these notes. Furthermore, on July 16, 2020, Access Road Capital LLC made a term loan to us in the principal amount equal to $10,000,000, which is currently outstanding. We are currently conducting a review of our credit agreements to determine our ongoing compliance obligations under such agreements.

 

As a result of such transactions, we have a substantially greater amount of debt than we had maintained in the past, which could adversely affect our ability to take advantage of corporate opportunities and could adversely affect our business, financial condition and results of operations. For example:

 

  our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes may be limited or financing may be unavailable;
     
  a substantial portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other obligations and will not be available for use in our business;
     
  lack of liquidity could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;
     
  our debt obligations will make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations; and
     
  if we fail to make required debt payments or to comply with other covenants in our debt agreements, we would be in default under the terms of these agreements, which could permit our creditors to accelerate repayment of the debt and could cause cross-defaults under other debt agreements.

 

If we incur any additional debt, the related risks that we and our subsidiaries face could intensify.

 

 18 

 

 

Servicing our indebtedness will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial indebtedness.

 

Our ability to make scheduled payments of the principal and interest when due, or to refinance our borrowings under our debt agreements, will depend on our future performance and our ability to raise further equity financing, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to both (i) satisfy our existing and future obligations to our creditors and (ii) allow us to make necessary capital expenditures. If we are unable to generate such cash flow or raise further equity financing, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. We may need or desire to refinance our existing indebtedness, and there can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms, if at all. Our ability to refinance the term loans or existing or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our current or future debt agreements.

 

If TV streaming develops more slowly than we expect, our operating results and growth prospects could be harmed. In addition, our future growth depends in part on the growth of TV streaming advertising.

 

TV streaming is a relatively new and rapidly evolving industry, making our business and prospects difficult to evaluate. The growth and profitability of this industry and the level of demand and market acceptance for our platform are subject to a high degree of uncertainty.

 

We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband Internet access, the quality of broadband content delivery, the quality and reliability of new devices and technology, the cost for subscribers relative to other sources of content, as well as the quality and breadth of content that is delivered across streaming platforms. These technologies, products and content offerings continue to emerge and evolve. Subscribers, content publishers or advertisers may find TV streaming platforms to be less attractive than traditional TV, which would harm our business. In addition, many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as TV, radio and print. The future growth of our business depends in part on the growth of TV streaming advertising, and on advertisers increasing spend on such advertising. We cannot be certain that they will do so. If advertisers do not perceive meaningful benefits of TV streaming advertising, then this market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.

 

Legal proceedings could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention.

 

From time to time, we may be subject to litigation or claims that could negatively affect our business operations and financial position. We may face allegations or litigation related to our acquisitions, securities issuances or business practices. Litigation disputes could cause us to incur unforeseen expenses, result in content unavailability, and otherwise occupy a significant amount of our management’s time and attention, any of which could negatively affect our business operations and financial position. While the ultimate outcome of investigations, inquiries, information requests and related legal proceedings is difficult to predict, such matters can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, reputational harm or costs and significant payments, any of which could negatively affect our business operations and financial position.

 

 19 

 

 

We could become subject to litigation regarding intellectual property rights that could be costly and harm our business.

 

Third parties have previously asserted, and may in the future assert, that we have infringed, misappropriated or otherwise violated their intellectual property rights. Plaintiffs that have no relevant product revenue may not be deterred by our own issued patents and pending patent applications in bringing intellectual property rights claims against us. The cost of patent litigation or other proceedings, even if resolved in our favor, could be substantial. Some of our competitors may be better able to sustain the costs of such litigation or proceedings because of their substantially greater financial resources. Patent litigation and other proceedings may also require significant management time and divert management from our business. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing risks could harm our business.

 

As a result of intellectual property infringement claims, or to avoid potential claims, we have previously chosen to, and may in the future choose or be required to, seek licenses from third parties. These licenses may not be available on commercially reasonable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, with the potential for our competitors to gain access to the same intellectual property. In addition, the rights that we secure under intellectual property licenses may not include rights to all of the intellectual property owned or controlled by the licensor, and the scope of the licenses granted to us may not include rights covering all of the products and services provided by us and our licensees. Furthermore, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property; cease making, licensing or using technologies that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content or materials; and to indemnify our partners and other third parties. In addition, any lawsuits regarding intellectual property rights, regardless of their success, could be expensive to resolve and would divert the time and attention of our management and technical personnel.

 

If our trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by our competitors, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.

 

We rely and expect to continue to rely on a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, copyright, patent and trade secret protection laws, to protect our proprietary rights. We may also seek to enforce our proprietary rights through court proceedings or other legal actions. We have filed and we expect to file from time to time for trademark and patent applications. Nevertheless, these applications may not be approved, third parties may challenge any copyrights, patents or trademarks issued to or held by us, third parties may knowingly or unknowingly infringe our intellectual property rights, and we may not be able to prevent infringement or misappropriation without substantial expense to us. If the protection of our intellectual property rights is inadequate to prevent use or misappropriation by third parties, the value of our brand, content, and other intangible assets may be diminished.

 

Failure to protect our domain names could also adversely affect our reputation and brand and make it more difficult for subscribers to find our website and our service. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

 

Our use of open source software could impose limitations on our ability to commercialize our platform.

 

We incorporate open source software in our platform. From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Although we monitor our use of open source software, the terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to sell subscriptions to our platform. In such event, we could be required to make our proprietary software generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our platform, to re-engineer our platform or to discontinue our platform in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could harm our business.

 

 20 

 

 

If we are unable to obtain necessary or desirable third-party technology licenses, our ability to develop platform enhancements may be impaired.

 

We utilize commercially available off-the-shelf technology in the development of our platform. As we continue to introduce new features or improvements to our platform, we may be required to license additional technologies from third parties. These third-party licenses may be unavailable to us on commercially reasonable terms, if at all. If we are unable to obtain necessary third-party licenses, we may be required to obtain substitute technologies with lower quality or performance standards, or at a greater cost, any of which could harm the competitiveness of our platform and our business.

 

We are subject to a number of legal requirements and other obligations regarding privacy, security, and data protection, and any failure to comply with these requirements or obligations could have an adverse effect on our reputation, business, financial condition and operating results.

 

Various federal and state laws and regulations govern the collection, use, retention, sharing and security of the data we receive from and about our subscribers and other individuals. The regulatory environment for the collection and use of data relating to individuals, including subscriber and other consumer data, by online service providers, content distributors, advertisers and publishers is unsettled in the United States and internationally. Privacy groups and government bodies, including the Federal Trade Commission, increasingly have scrutinized issues relating to the use, collection, storage, disclosure, and other processing of data, including data that is associated with personal identities or devices, and we expect such scrutiny to continue to increase. The U.S. federal and various state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding the collection, distribution, use, disclosure, storage, and security of certain types of information. In addition to government regulation, self-regulatory standards and other industry standards may legally or contractually apply to us, be argued to apply to us, or we may elect to comply with such standards or to facilitate compliance with such standards by content publishers, advertisers, or others.

 

For example, the California Consumer Privacy Act, or CCPA, became operative on January 1, 2020. The CCPA requires covered companies to provide new disclosures to California consumers, and to afford such consumers new abilities to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Further, a new privacy law, the California Privacy Rights Act, or the CPRA, recently was certified by the California Secretary of State to appear on the ballot for the November 3, 2020 election. If this initiative is approved by California voters, the CPRA would significantly modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply.

 

Our use of data to deliver relevant advertising on our platform places us and our content publishers at risk for claims under a number of unsettled laws, including the Video Privacy Protection Act, or VPPA. Some content publishers have been engaged in litigation over alleged violations of the VPPA relating to activities on online platforms in connection with advertising provided by unrelated third parties. The Federal Trade Commission has also revised its rules implementing the Children’s Online Privacy Protection Act, or COPPA Rules, broadening the applicability of the COPPA Rules, including the types of information that are subject to these regulations, and could effectively apply to limit the information that we or our content publishers and advertisers collect and use through certain content publishers, the content of advertisements and in relation to certain channel partner content. We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other laws, regulations, and other standards relating to privacy, data protection, and information security.

 

Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy or data protection legal framework with which we must comply. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual. These laws and regulations often are more restrictive than those in the United States and are rapidly evolving. For example, the European Union, or EU, and its member states have laws and regulations requiring informed consent for the placement of cookies or other tracking technologies and the delivery of relevant advertisements. More generally, the EU General Data Protection Regulation, or the GDPR, which has been in effect since May 25, 2018, imposes stringent obligations relating to data protection and security and authorizes fines up to 4% of global annual revenue or €20 million, whichever is greater, for some violations. Some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of operating our platform.

 

Complying with the GDPR, CCPA, and other laws, regulations, and other obligations relating to privacy, data protection, data localization or security may cause us to incur substantial operational costs or require us to modify our data handling practices. We also expect that there will continue to be new proposed laws and regulations concerning privacy, data protection and information security, and we cannot yet determine the impact such future laws, regulations and standards, or amendments to or re-interpretations of, existing laws and regulations, industry standards, or other obligations may have on our business. New laws and regulations, amendments to or re-interpretations of existing laws and regulations, industry standards, and contractual and other obligations may require us to incur additional costs and restrict our business operations.

 

Furthermore, the interpretation and application of laws, regulations, standards, contractual obligations and other obligations relating to privacy, data protection, and information security are uncertain, and these laws, standards, and contractual and other obligations may be interpreted and applied in a manner that is, or is alleged to be, inconsistent with our data management and processing practices, our policies or procedures, or the features of our platform. We may face claims or allegations that we are in violation of these laws, regulations, standards, or contractual or other obligations. We could be required to fundamentally change our business activities and practices or modify our platform or practices to address laws, regulations, or other obligations relating to privacy, data protection, or information security, or claims or allegations that we have failed to comply with any of the foregoing, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new features could be limited.

 

Increased regulation of data collection, use and distribution practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws and regulations, all could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business. Additionally, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of content publishers and advertisers may limit their use and adoption of, and reduce the overall demand for, our platform and advertising on our platform, and content publishers and advertisers may be at risk for violation or alleged violation of laws, regulations, and other standards relating to privacy, data protection, and information security relating to their activities on our platform. More generally, privacy, data protection, and information security concerns, whether or not valid, may inhibit market adoption of our platform, particularly in certain foreign countries.

 

Any inability to adequately address privacy, data protection or security-related concerns, even if unfounded, or to successfully negotiate privacy, data protection or security-related contractual terms with content publishers, advertisers, or others, or to comply with applicable laws, regulations and other obligations relating to privacy, data protection, and security, could result in additional cost and liability to us, regulatory investigations and proceedings, and claims, litigation, and other liability involving governmental entities and private parties, damage to our reputation, and inhibit use of our platform by advertisers and sales of subscriptions to our platform, all of which could harm our business, financial condition, and results of operations.

 

 21 

 

 

If government regulations relating to the Internet or other areas of our business change, we may need to alter the manner in which we conduct our business and we may incur greater operating expenses.

 

We are subject to general business regulations and laws, as well as regulations and laws specific to the Internet, which may include laws and regulations related to user privacy, data protection, information security, consumer protection, payment processing, taxation, intellectual property, electronic contracts, Internet access and content restrictions. We cannot guarantee that we have been or will be fully compliant in every jurisdiction. Litigation and regulatory proceedings are inherently uncertain, and the laws and regulations governing issues such as privacy, payment processing, taxation and consumer protection related to the Internet continue to develop. For example, laws relating to the liability of providers of online services for activities of their subscribers and other third parties have been tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the advertisements posted or the content provided by subscribers. Moreover, as Internet commerce and advertising continues to evolve, increasing regulation by federal, state and foreign regulatory authorities becomes more likely.

 

As we improve our TV streaming platform, we may also be subject to new laws and regulations specific to such technologies.

 

We are subject to payment processing risk.

 

Acceptance and processing of payments are subject to certain rules and regulations, including additional authentication requirements for certain payment methods, and require payment of interchange and other fees. To the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, changes to rules or regulations concerning payments, loss of payment partners and/or disruptions or failures in our payment processing systems, partner systems or payment products, including products we use to update payment information, our revenue, operating expenses and results of operation could be adversely impacted.

 

Changes in competitive offerings for entertainment video, including the potential rapid adoption of piracy-based video offerings, could adversely impact our business.

 

The market for entertainment video is intensely competitive and subject to rapid change. Through new and existing distribution channels, consumers have increasing options to access entertainment video. The various economic models underlying these channels include subscription, transactional, ad-supported and piracy-based models. All of these have the potential to capture meaningful segments of the entertainment video market. Piracy, in particular, threatens to damage our business, as its fundamental proposition to consumers is so compelling and difficult to compete against: virtually all content for free. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. Traditional providers of entertainment video, including broadcasters and cable network operators, as well as Internet based e-commerce or entertainment video providers are increasing their streaming video offerings.

 

 22 

 

 

Several of these competitors have long operating histories, large customer bases, strong brand recognition, exclusive rights to certain content and significant financial, marketing and other resources. They may secure better terms from suppliers, adopt more aggressive pricing and devote more resources to product development, technology, infrastructure, content acquisitions and marketing. New entrants may enter the market or existing providers may adjust their services with unique offerings or approaches to providing entertainment video. Companies also may enter into business combinations or alliances that strengthen their competitive positions. If we are unable to successfully compete with current and new competitors, our business will be adversely affected, and we may not be able to increase or maintain market share or revenues.

 

If content providers refuse to license streaming content or other rights upon terms acceptable to us, our business could be adversely affected.

 

Our ability to provide our subscribers with content they can watch depends on content providers and other rights holders licensing rights, including distribution rights, to such content and certain related elements thereof, such as the public performance of music contained within the content we distribute. The license periods and the terms and conditions of such licenses vary. As content providers develop their own streaming services, they may be unwilling to provide us with access to certain content, including popular series or movies. If the content providers and other rights holders are not or are no longer willing or able to license us content upon terms acceptable to us, our ability to stream content to our subscribers may be adversely affected and/or our costs could increase. Because of these provisions as well as other actions we may take, content available through our service can be withdrawn on short notice. As competition increases, we see the cost of certain programming increase.

 

Further, if we do not maintain a compelling mix of content, our subscriber acquisition and retention may be adversely affected.

 

Our content providers impose a number of restrictions on how we distribute and market our products and services, which can adversely affect our business.

 

A number of our major content partners impose significant restrictions on how we can distribute and market our products and services. For example, our content partners may prevent us from partnering with third party distributors and manufacturers to exploit new market opportunities or prevent us from bundling or reselling our products with third party products and services, or otherwise restrict how we might brand or market our products and services. Our content partners also impose restrictions on the content and composition of the packages we can make available to our customers and restrictions on how we might make some or all of our content available to customers (such as on a standalone basis, length of free trials or access modified or shorter form content). These restrictions may prevent us from responding dynamically to changing customer expectations or market demands or exploiting lucrative partnership opportunities. Content providers may also restrict the advertising that may be made available in connection with their content, including restrictions on the content and timing of such advertising, and restrictions on how advertising may be sold (such as a limit to sale on an aggregated, non-content specific basis only), which limits our opportunity to exploit potentially lucrative revenue streams.

 

Content providers may also only provide their content on a service that includes a minimum number of channels from other providers, or require that we only provide their content in specific service tiers that include a specific mix of programming. Certain provisions in these agreements could become a challenge to comply with if we were to lose rights under agreements with key programmers.

 

 23 

 

 

In addition, our content partners generally impose requirements on us to treat them at least as favorably as other major providers in various ways, such as equal treatment with respect to content recommendations, displays on user interfaces, the marketing and promotion of content and streaming quality standards. This may materially restrict the functionality and performance of our technology, particularly our proprietary recommendation engine. This may also prevent us from offering commercial benefits to certain content providers, limiting our capacity to negotiate favorable transactions and overall limiting our ability to provide improved products and services.

 

Our agreements with content providers are complex, with various rights restrictions and favorability obligations which impose onerous compliance obligations.

 

The content rights granted to us are complex and multi-layered and differ substantially across different content and content providers. We may be able to make certain content available on a video-on-demand basis or on certain devices but may be restricted from doing the same with other content, sometimes even with the same content provider. We are often not able to make certain content available at certain times or in certain geographical regions. In addition, our obligations to provide equality in the treatment between certain content providers require us to continuously monitor and assess treatment of content providers and content across our products and services.

 

These complex restrictions and requirements impose a significant compliance burden which is costly and challenging to maintain. A failure to maintain these obligations places us at risk of breaching our agreements with content providers, which could lead to loss of content and damages claims, which would negatively impact on our products and service and our financial position.

 

If our efforts to build a strong brand and to maintain customer satisfaction and loyalty are not successful, we may not be able to attract or retain subscribers, and our business may be harmed.

 

Building and maintaining a strong brand is important to our ability to attract and retain subscribers, as potential subscribers have a number of TV streaming choices. Successfully building a brand is a time-consuming and comprehensive endeavor and can be positively and negatively impacted by any number of factors. Some of these factors, such as the quality or pricing of our platform or our customer service, are within our control. Other factors, such as the quality of the content that our content publishers provide, may be out of our control, yet subscribers may nonetheless attribute those factors to us. Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors are larger companies and promote their brands through traditional forms of advertising, such as print media and TV commercials, and have substantial resources to devote to such efforts. Our competitors may also have greater resources to utilize Internet advertising or website product placement more effectively than we can. If we are unable to execute on building a strong brand, it may be difficult to differentiate our business and platform from our competitors in the marketplace; therefore, our ability to attract and retain subscribers may be adversely affected and our business may be harmed.

 

If the technology we use in operating our business fails, is unavailable, or does not operate to expectations, our business and results of operation could be adversely impacted.

 

We utilize a combination of proprietary and third-party technology to operate our business. This includes the technology that we have developed to recommend and merchandise content to our consumers as well as enable fast and efficient delivery of content to our subscribers and their various consumer electronic devices. For example, as part of the content delivery systems, we use third-party CDNs. To the extent Internet Service Providers (“ISPs”) do not interconnect with our CDN or charge us to access their networks, or if we experience difficulties in our CDN’s operation, our ability to efficiently and effectively deliver our streaming content to our subscribers could be adversely impacted and our business and results of operation could be adversely affected.

 

Likewise, our system for predicting subscriber content preferences is based on advanced data analytics systems and our proprietary algorithms. We have invested, and will continue to invest, significant resources in refining these technologies; however, we cannot assure you that such investments will yield an attractive return or that such refinements will be effective. The effectiveness of our ability to predict subscriber content preferences depends in part on our ability to gather and effectively analyze large amounts of subscriber data. Our ability to predict content that our subscribers enjoy is critical to the perceived value of our platform among subscribers and failure to make accurate predictions could materially adversely affect our ability to adequately attract and retain subscribers and sell advertising to meet investor expectations for growth or to operate the business profitably. We also utilize third-party technology to help market our service, process payments, and otherwise manage the daily operations of our business. If our technology or that of third-parties we utilize in our operations fails or otherwise operates improperly, including as a result of “bugs” in our development and deployment of software, our ability to operate our service, retain existing subscribers and add new subscribers may be impaired. Any harm to our subscribers’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.

 

The quality of our customer support is important to our subscribers, and if we fail to provide adequate levels of customer support we could lose subscribers, which would harm our business.

 

Our subscribers depend on our customer support organization to resolve any issues relating to our platform. A high level of support is critical for the successful marketing of our platform. Providing high-level support is further challenging during the COVID-19 pandemic and resulting remote work environment. If we do not effectively train, update and manage our customer support organization that assists our subscribers in using our platform, and if that support organization does not succeed in helping them quickly resolve any issues or provide effective ongoing support, it could adversely affect our ability to sell subscriptions to our platform and harm our reputation with potential new subscribers.

 

 24 

 

 

We could be subject to economic, political, regulatory and other risks arising from our international operations.

 

Operating in international markets requires significant resources and management attention and subjects us to economic, political, regulatory and other risks that may be different from or incremental to those in the U.S. In addition to the risks that we face in the U.S., our international operations involve risks that could adversely affect our business, including:

 

  the need to adapt our content and user interfaces for specific cultural and language differences;
     
  difficulties and costs associated with staffing and managing foreign operations;
     
  political or social unrest and economic instability;
     
  compliance with laws such as the Foreign Corrupt Practices Act, UK Bribery Act and other anti-corruption laws, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials;
     
  difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions, including local ownership requirements for streaming content providers and laws and regulations relating to privacy, data protection and information security, and the risks and costs of non-compliance with such laws, regulations and customs;
     
  regulatory requirements or government action against our service, whether in response to enforcement of actual or purported legal and regulatory requirements or otherwise, that results in disruption or non-availability of our service or particular content in the applicable jurisdiction;
     
  adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;
     
  fluctuations in currency exchange rates;
     
  profit repatriation and other restrictions on the transfer of funds;
     
  differing payment processing systems;
     
  new and different sources of competition; and
     
  different and more stringent user protection, data protection, privacy and other laws, including data localization and/or restrictions on data export, and local ownership requirements.

 

Our failure to manage any of these risks successfully could harm our international operations and our overall business and results of our operations.

 

Any significant interruptions, delays or discontinuations in service or disruptions in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service, unauthorized disclosure of data, including subscriber and corporate information, or theft of intellectual property, including digital content assets, which could adversely impact our business.

 

Our reputation and ability to attract, retain and serve our subscribers is dependent upon the reliable performance and security of our computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from, among other things, earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, rogue employees, power loss, telecommunications failures, and cybersecurity risks. Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver our service. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our subscription to existing and potential subscribers.

 

 25 

 

 

Our computer systems and those of third parties we use in our operations are subject to cybersecurity threats, including cyber-attacks such as computer viruses, denial of service attacks, physical or electronic break-ins and similar disruptions. These systems periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of personal information and other data, content, confidential information or intellectual property. Additionally, outside parties may attempt to induce employees or subscribers to disclose sensitive or confidential information in order to gain access to data. Any attempt by hackers to obtain our data (including subscriber and corporate information) or intellectual property (including digital content assets), disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to remedy and damage our reputation.

 

We have implemented certain systems and processes designed to thwart hackers and protect our data and systems, but the techniques used to gain unauthorized access to data, systems, and software are constantly evolving, and we may be unable to anticipate or prevent unauthorized access, and we may be delayed in detecting unauthorized access or other security breaches and other incidents. There is no assurance that hackers may not have a material impact on our service or systems in the future or that security breaches or other incidents may not occur due to these or other causes. Efforts to prevent disruptions to our service and unauthorized access to our systems are expensive to develop, implement and maintain. These efforts require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated and may limit the functionality of or otherwise negatively impact our service offering and systems. Additionally, disruption to our service and data security breaches and other incidents may occur as a result of employee or contractor error. Any significant disruption to our service or access to our systems or any data that we or those who provide services for us maintain or otherwise process, or the perception that any of these have occurred, could result in a loss of subscriptions, harm to our reputation, and adversely affect our business and results of operations. Further, a penetration of our systems or a third-party’s systems or any loss of or unauthorized access to, use, alteration, destruction, or disclosure of personal information or other data could subject us to business, regulatory, litigation and reputation risk, which could have a negative effect on our business, financial condition and results of operations. With the increase in remote work during the current COVID-19 pandemic, we and the third parties we use in our operations face increased risks to the security of infrastructure and data, and we cannot guarantee that our or their security measures will prevent security breaches. We also may face increased costs relating to maintaining and securing our infrastructure and data that we maintain and otherwise process.

 

Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

 

 26 

 

 

We depend on highly skilled key personnel to operate our business, and if we are unable to attract, retain, and motivate qualified personnel, our ability to develop and successfully grow our business could be harmed.

 

We believe that our future success is highly dependent on the talents and contributions of our senior management and co-founders, including David Gandler, our Co-Founder and Chief Executive Officer, Simone Nardi, our Chief Financial Officer, Alberto Horihuela, our Co-Founder and Chief Marketing Officer, Sung Ho Choi, our Co-Founder and Head of Product, Geir Magnusson Jr., our Chief Technology Officer, members of our executive team, and other key employees, such as key engineering, finance, legal, research and development, marketing, and sales personnel. Our future success depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees. All of our employees, including our senior management, are free to terminate their employment relationship with us at any time, and their knowledge of our business and industry may be difficult to replace. Qualified individuals are in high demand, particularly in the digital media industry, and we may incur significant costs to attract them. We use equity awards to attract talented employees, but if the value of our common stock declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees. If we are unable to attract and retain our senior management and key employees, we may not be able to achieve our strategic objectives, and our business could be harmed. In addition, we believe that our key executives have developed highly successful and effective working relationships. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. If one or more of these individuals leave, we may not be able to fully integrate new executives or replicate the current dynamic and working relationships that have developed among our senior management and other key personnel, and our operations could suffer.

 

We rely upon a number of partners to make our service available on their devices.

 

We currently offer subscribers the ability to receive streaming content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes and mobile devices. Some of our agreements with key distribution partners give distribution partners the ability to terminate their carriage of our service at any time. If we are not successful in maintaining existing and creating new relationships, or if we encounter technological, content licensing, regulatory, business or other impediments to delivering our streaming content to our subscribers via these devices, our ability to retain subscribers and grow our business could be adversely impacted.

 

Our business could be adversely affected if a number of our partners do not continue to provide access to our service or are unwilling to do so on terms acceptable to us, which terms may include the degree of accessibility and prominence of our service. Furthermore, devices are manufactured and sold by entities other than fuboTV, and while these entities should be responsible for the devices’ performance, the connection between these devices and fuboTV may nonetheless result in consumer dissatisfaction toward fuboTV and such dissatisfaction could result in claims against us or otherwise adversely impact our business. In addition, technology changes to our streaming functionality may require that partners update their devices, or may lead to us to stop supporting the delivery of our service on certain legacy devices. If partners do not update or otherwise modify their devices, or if we discontinue support for certain devices, our service and our subscribers’ use and enjoyment could be negatively impacted.

 

The impact of worldwide economic conditions may adversely affect our business, operating results, and financial condition.

 

Our financial performance is subject to worldwide economic conditions and their impact on levels of advertising spending. Expenditures by advertisers generally tend to reflect overall economic conditions, and to the extent that the economy continues to stagnate, reductions in spending by advertisers could have a material adverse impact on our business. Historically, economic downturns have resulted in overall reductions in advertising spending. Economic conditions may adversely impact levels of consumer spending, which could adversely impact our number of subscribers.

 

Consumer purchases of discretionary items generally decline during recessionary periods and other periods in which disposable income is adversely affected. To the extent that overall economic conditions reduce spending on discretionary activities, our ability to retain current and obtain new subscribers could be hindered, which could reduce our subscription revenue and negatively impact our business.

 

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We rely upon Amazon Web Services to operate certain aspects of our service and any disruption of or interference with our use of the Amazon Web Services operation would impact our operations and our business would be adversely impacted.

 

Amazon Web Services, or AWS, provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a “cloud” computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities and other services provided by AWS. Currently, we run the vast majority of our computing on AWS. Given this, along with the fact that we cannot easily switch our AWS operations to another cloud provider, any disruption of or interference with our use of AWS would impact our operations and our business would be adversely impacted. While the retail side of Amazon competes with us, we do not believe that Amazon will use the AWS operation in such a manner as to gain competitive advantage against our service, although if it was to do so it could harm our business.

 

Changes in how we market our service could adversely affect our marketing expenses and subscription levels may be adversely affected.

 

We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service and content to existing and potential new subscribers. We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that subscribers or potential subscribers deem certain marketing platforms or practices intrusive or damaging to our brand. If the available marketing channels are curtailed, our ability to engage subscribers and attract new subscribers may be adversely affected.

 

Companies that promote our service may decide that we negatively impact their business or may make business decisions that in turn negatively impact us. For example, if they decide that they want to compete more directly with us, enter a similar business or exclusively support our competitors, we may no longer have access to their marketing channels. We also acquire a number of subscribers who rejoin our service having previously canceled their subscription. If we are unable to maintain or replace our sources of subscribers with similarly effective sources, or if the cost of our existing sources increases, our subscription levels and marketing expenses may be adversely affected.

 

We utilize marketing to promote our content, drive conversation about our content and service, and drive viewing by our subscribers. To the extent we promote our content inefficiently or ineffectively, we may not obtain the expected acquisition and retention benefits and our business may be adversely affected.

 

We may pursue future acquisitions, which involve a number of risks, and if we are unable to address and resolve these risks successfully, such acquisitions could harm our business.

 

We may in the future acquire businesses, products or technologies to expand our offerings and capabilities, subscriber base and business. We may pursue acquisitions of entities that are not profitable and have significant liabilities. We have evaluated, and expect to continue to evaluate, a wide array of potential strategic transactions. Any acquisition could be material to our financial condition and results of operations and any anticipated benefits from an acquisition may never materialize. In addition, the process of integrating acquired businesses, products or technologies may create unforeseen operating difficulties and expenditures. Acquisitions in international markets would involve additional risks, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. We may not be able to address these risks successfully, or at all, without incurring significant costs, delays or other operational problems and if we were unable to address such risks successfully our business could be harmed.

 

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RISKS RELATED TO OWNING SHARES OF OUR COMMON STOCK

 

Our operating results may fluctuate, which makes our results difficult to predict.

 

Our revenue and operating results could vary significantly from quarter-to-quarter and year-to-year because of a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed herein, factors that may contribute to the variability of our quarterly and annual results include:

 

  our ability to retain our current Subscriber base and increase our number of Subscribers;
     
  our ability to enter into new content deals or negotiate renewals with our content providers on terms that are favorable to us, or at all;
     
  our ability to effectively manage our growth;
     
  our ability to attract and retain existing advertisers;
     
  the effects of increased competition in our business;
     
  our ability to keep pace with changes in technology and our competitors;
     
  interruptions in service, whether or not we are responsible for such interruptions, and any related impact on our reputation;
     
  our ability to pursue and appropriately time our entry into new geographic or content markets and, if pursued, our management of this expansion;
     
  costs associated with defending any litigation, including intellectual property infringement litigation;
     
  the impact of general economic conditions on our revenue and expenses; and
     
  changes in regulations affecting our business.

 

Our stock is currently thinly traded, so shares may be unable to be sold at or near the quoted bid prices if a significant number of shares need to be sold.

 

We cannot give any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained. Although the shares of our common stock are quoted on the OTCQB, there has been limited trading in our shares, meaning that the number of persons interested in purchasing our common shares at any given time has been relatively small or non-existent. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent.

 

Our stock price is volatile.

 

The price at which our common stock has traded has fluctuated significantly. The price may continue to be volatile due to a number of factors including the following, some of which are beyond our control:

 

  variations in our operating results;
     
  variations between our actual operating results and the expectations of securities analysts, investors and the financial community;
     
  announcements of developments affecting our business, systems or expansion plans by us or others;
     
  competition, including the introduction of new competitors, their pricing strategies and services;

 

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  market volatility in general;
     
  the level of demand for our stock, including the amount of short interest in our stock; and
     
  the operating results of our competitors.

 

As a result of these and other factors, investors in our common stock may not be able to resell their shares at or above their original purchase price.

 

In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

 

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

 

If our existing shareholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that our existing shareholders might sell shares of common stock could also depress our market price. Our executive officers and directors and certain of our shareholders are subject to the lock-up agreements described under “Underwriting” and the Rule 144 holding period requirements described under “Shares eligible for future sale.” After these lock-up periods have expired, the holding periods have elapsed, additional shares will be eligible for sale in the public market. The market price of shares of our common stock may drop significantly when the restrictions on resale by our existing shareholders lapse. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

 

As further described in “Description of Capital Stock—Registration Rights”, certain equity holders of our securities have registration rights. We also filed a registration statement to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods and the expiration or waiver of lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options will be available for immediate resale in the United States in the open market.

 

Sales of our common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales could also cause the trading price of our common stock to fall and make it more difficult for you to sell shares of our common stock.

 

Additionally, certain of our employees, executive officers, and directors may enter into Rule 10b5-1 trading plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the employee, director, or officer when entering into the plan, without further direction from the employee, officer, or director. A Rule 10b5-1 trading plan may be amended or terminated in some circumstances. Our employees, executive officers, and directors also may buy or sell additional shares outside of a Rule 10b5-1 trading plan when they are not in possession of material, nonpublic information, subject to the expiration of the lock-up agreements and Rule 144 requirements referred to above.

 

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We do not expect to declare any cash dividends in the foreseeable future.

 

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur to realize future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

 

We will have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

 

Our management will have broad discretion in the application of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply the net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds from this offering in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

 

Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our shareholders and could cause our stock price to decline.

 

We may issue additional securities in the future. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing shareholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in future transactions, shareholders may be materially diluted. New investors in such future transactions could gain rights, preferences and privileges senior to those of holders of our common stock.

 

If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us, our business or our market. We do not currently have and may never obtain research coverage by securities or industry analysts. If no or few securities or industry analysts commence coverage of us, the stock price would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

Preparing and forecasting our financial results requires us to make judgments and estimates which may differ materially from actual results.

 

Given the dynamic nature of our business, and the inherent limitations in predicting the future, forecasts of our financial and operating data may differ materially from actual results. Such discrepancies could cause a decline in the trading price of our common stock. In addition, the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America also requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. We base such estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual results may differ from these estimates. Using such estimates has the potential to negatively impact the results we report which could negatively impact our stock price.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, capital expenditures, introduction of new products, regulatory compliance, plans for growth and future operations, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology. Actual events or results may differ from those expressed in these forward-looking statements, and these differences may be material and adverse. Forward looking statements contained in this prospectus include, but are not limited to, statements about:

 

  market conditions and global economic factors beyond our control, including the potential adverse effects of the ongoing global COVID-19 pandemic on our business and results of operations, on live sports and entertainment, and on the global economic environment;
     
  our ability to access debt and equity financing;
     
 

our efforts to establish and maintain and proper and effective internal controls;

     
  factors relating to our business, operations and financial performance, including:

 

  our ability to effectively compete in the live streaming, entertainment, and gaming industries;
     
  our ability to successfully integrate new operations;
     
 

our ability to maintain and expand our content offerings;

 

  the impact of management changes and organizational restructuring;
     
  the anticipated effects of the Merger;
     
  changes in applicable laws or regulations;
     
  litigation and our ability to adequately protect our intellectual property rights;
     
  our success in retaining or recruiting officers, key employees or directors;
     
  the possibility that we may be adversely affected by other economic, business and/or competitive factors; and
     
  other factors detailed herein under the section entitled “Risk Factors.”

 

We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in the section captioned “Risk Factors” and elsewhere in this prospectus. These risks are not exhaustive. Other sections of this prospectus include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

The forward-looking statements made in this prospectus relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this prospectus or to conform such statements to actual results or revised expectations, except as required by law.

 

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INDUSTRY DATA

 

This prospectus also contains estimates and other information concerning our industry, including market size and growth rates of the markets in which we participate, that are based on industry publications, surveys and forecasts, from the independent industry publications set forth below. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Although we are responsible for all of the disclosure contained in this prospectus and we believe the information from the industry publications and other third-party sources included in this prospectus is reliable, we have not independently verified the accuracy or completeness of the data contained in such sources. The content of the below sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.

 

The sources of certain statistical data, estimates and forecasts contained in this prospectus are the following independent industry publications or reports:

 

  American Customer Satisfaction Index, ACSI Telecommunications Report 2018-2019, May 21, 2019.
     
  Comscore, The State of OTT, June 2019.
     
  Comscore, The State of OTT, June 2020.
     
  Digital News Daily, 76% Of U.S. Households Have OTT Services, Vs. 62% With Traditional Pay TV, June 8, 2020.
     
  eMarketer, Did US TV Ad Spending Peak in 2018?, November 13, 2019.
     
  eMarketer, US Pay TV vs. Non-Pay-TV Households, 2015-2024 (millions), February 1, 2020.
     
  Grand View Research, Pay TV Market Size, Share & Trends Analysis Report By Technology (Cable TV, Satellite TV, IPTV), By Region (North America, Europe, Asia Pacific, Latin America, Middle East & Africa), And Segment Forecasts, 2020 – 2027, April 2020.
     
  Leichtman Research Group, 75% of TV Households Subscribe to a Pay-TV Service, November 5, 2019.
     
  MAGNA, MAGNA Advertising Forecasts (Summer 2019 Update), June 17, 2019.
     
  MAGNA, MAGNA Predicts US OTT Ad Revenues Will Double By 2020, April 5, 2019.
     
  MoffettNathanson, Q4 2019 Cord-Cutting Monitor: The Great Unwind, February 19, 2020.
     
  MoffettNathanson, U.S. Media & Communications in the Time of Coronavirus: State of the Industry 2020, May 15, 2020.
     
  MoffettNathanson, U.S. Pay TV and U.S. Media: Cord-Cutting Summit 2019 Takeaways, December 2, 2019.
     
  MoffettNathanson, U.S. Video Consumer Spend: The Great Deflation Debate, June 11, 2020.
     
  Multichannel News, Around 40% of U.S. Pay TV Ecosystem Up for Grabs?, December 3, 2019.
     
 

MAGNA, MAGNA Advertising Forecasts (Winter 2019 Update), December 9, 2019.

     
  MAGNA, Life After COVID: Global Ad Market to Recover in 2021 After Steep Downturn in 2020, June 15, 2020.
     
  Zion Market Research, Global Sports Betting Market Will Reach USD 155.49 Billion By 2024: Zion Market Research, December 24, 2018.

 

The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause actual results to differ from those expressed in these publications, surveys and forecasts.

 

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USE OF PROCEEDS

 

Unless otherwise set forth in a prospectus supplement, we currently intend to use the net proceeds of any offering of securities for working capital and general corporate purposes and for growing our live TV streaming platform. Accordingly, we will have significant discretion in the use of any net proceeds. The specific allocations of the proceeds we receive from the sale of our securities will be described in the applicable prospectus supplement.

 

We will not receive any proceeds from the sale of shares of common stock by the selling shareholder named herein.

 

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DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our shares of common stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Accordingly, we do not expect to pay cash dividends on our common stock in the foreseeable future. In addition, the terms of our credit facilities and our Series AA Preferred Stock include restrictions on our ability to pay dividends on our capital stock.

 

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CAPITALIZATION

 

The following table sets forth cash and cash equivalents, as well as our capitalization, as of June 30, 2020:

 

  on an actual basis; and
 

on an as adjusted basis to give effect to the issuance of common stock in this offering and the application of proceeds from the offering as described in “Use of Proceeds” as if each had occurred on June 30, 2020.

 

You should read this table in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Other Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto, included elsewhere in this prospectus.

 

   As of June 30, 2020 
   Actual   Adjusted 
   (in thousands, except share amounts) 
   (unaudited) 
         
Cash, cash equivalents          

Shareholders’ equity:

          
Common stock, $0.0001 par value,      shares authorized and issued and outstanding actual;     issued and outstanding adjusted          

Series AA convertible preferred stock, $0.0001 par value, 35,800,000 shares authorized and      issued and outstanding actual,       issued and outstanding adjusted

          

Series D convertible preferred stock, $0.0001 par value, 2,000,000 shares authorized and 203,000 issued and outstanding actual, issued and outstanding adjusted

          
Additional paid-in capital          
Accumulated deficit          
Non-controlling interest          

Accumulated other comprehensive loss

          
Total shareholders’ equity          
Total capitalization          

 

Each $1.00 increase or decrease in the assumed public offering price of $           per share, which was the closing price of our common stock on the OTCQB Venture Market on , 2020, would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all shareholders by approximately $           million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and additional expenses payable by us.

 

The table above does not include:

 

  7,477,443 shares of common stock issuable upon the exercise of certain outstanding warrants with a weighted-average exercise price of $6.08 per share.
     
  489,089 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $4.22 per share.
     
  16,667 shares of common stock issuable upon the exercise of an option outstanding under our 2014 Equity Incentive Stock Plan at an exercise price of $28.20 per share;
     
  150,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan;
     
  7,482,684 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $1.47 per share under the fuboTV Inc. 2015 Equity Incentive Plan;
     
  8,825,336 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $8.92 per share under our 2020 Equity Incentive Plan;
     
  3,291,310 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan;
     
  shares issuable upon the conversion of certain convertible notes issued by the Registrant with an aggregate principal outstanding balance of $2,773,000; and
     
  up to 54,858,373 shares of our common stock reserved for issuance upon conversion of our (i) 203,000 shares issued and outstanding of Series D Preferred Stock or our (ii) 27,412,393 shares issued and outstanding of Series AA Preferred Stock (see “Description of Capital Stock—Preferred Stock”).

 

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DILUTION

 

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after the completion of this offering. Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the as adjusted net tangible book value per share of our common stock immediately after completion of this offering.

 

Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of our common stock outstanding. Our net tangible book value as of June 30, 2020 was $           million, or $           per share, based on the total number of shares of our common stock outstanding as of June 30, 2020.

 

After giving effect to the sale by us of            shares of our common stock in this offering at the assumed public offering price of $           per share, which was the closing price of our common stock on OTCQB Venture Market on            , 2020, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us (not including the exercise by the underwriters of their option to purchase additional shares from us and the selling shareholder), our as-adjusted net tangible book value as of June 30, 2020 would have been $           million, or $           per share. This represents an immediate increase in net tangible book value of $           per share to our existing shareholders and an immediate dilution in net tangible book value of $           per share to investors purchasing shares of our common stock in this offering at the public offering price.

 

The following table illustrates this dilution:

 

Assumed public offering price per share       $  
Net tangible book value per share as of June 30, 2020, before giving effect to this offering  $      
Increase in net tangible book value per share attributable to new investors in this offering          
As adjusted net tangible book value, as adjusted to give effect to this offering       $  
Dilution in net tangible book value per share to new investors in this offering       $  

 

Each $1.00 increase or decrease in the assumed public offering price of $           per share, which was the closing price of our common stock on OTCQB Venture Market on      , 2020, would increase or decrease, as applicable, our as adjusted net tangible book value per share to new investors by $          , and would increase or decrease, as applicable, dilution per share to new investors in this offering by $   , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and additional expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, our as adjusted net tangible book value by $           per share and increase or decrease, as applicable, the dilution to new investors by $           per share, assuming the assumed public offering price remains the same, and after deducting underwriting discounts and commissions and additional expenses payable by us.

 

The following table presents, as of June 30, 2020, sale by us of            shares of our common stock in this offering at the assumed public offering price of $           per share, which was the closing price of our common stock on OTCQB Venture Market on    , 2020, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us (not including the exercise by the underwriters of their option to purchase additional shares from us and the selling shareholder), the differences between the existing shareholders and the new investors purchasing shares of our common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes proceeds received from the issuance of our common stock and preferred stock, and cash received from the exercise of stock options and the average price per share paid or to be paid to us at the assumed public offering price of $           per share, which was the closing price of our common stock on the OTCQB Venture Market on    , 2020, before deducting underwriting discounts and commissions and additional expenses payable by us:

 

   Shares Purchased  Total Consideration   Weighted-Average 
   Number  Percent   Amount   Percent   Price Per Share 
Existing shareholders              %  $                 %  $             
New investors      %  $         %  $          
Total      %  $       %     

 

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Each $1.00 increase or decrease in the assumed public offering price of $           per share, which was the closing price of our common stock on the OTCQB Venture Market on    , 2020, would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all shareholders by approximately $           million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and additional expenses payable by us.

 

The information above does not include:

 

  7,477,443 shares of common stock issuable upon the exercise of certain outstanding warrants with a weighted-average exercise price of $6.08 per share.
     
  489,089 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $4.22 per share.
     
  16,667 shares of common stock issuable upon the exercise of an option outstanding under our 2014 Equity Incentive Stock Plan at an exercise price of $28.20 per share;
     
  150,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan;
     
  7,482,684 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $1.47 per share under the fuboTV Inc. 2015 Equity Incentive Plan;
     
  8,825,336 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $8.92 per share under our 2020 Equity Incentive Plan;
     
  3,291,310 shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan;
     
  shares issuable upon the conversion of certain convertible notes issued by the Registrant with an aggregate principal outstanding balance of $2,773,000; and
     
  up to 54,858,373 shares of our common stock reserved for issuance upon conversion of our (i) 203,000 shares issued and outstanding of Series D Preferred Stock or our (ii) 27,412,393 shares issued and outstanding of Series AA Preferred Stock (see “Description of Capital Stock—Preferred Stock”).

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

fuboTV Merger and Related Debt Agreements

 

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of FaceBank Group, Inc. (“FaceBank” or the “Company”), merged with and into fuboTV Inc., a Delaware corporation (“fuboTV”), whereby fuboTV continued as the surviving corporation and became a wholly-owned subsidiary of FaceBank pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020 (the “Merger Agreement”) by and among FaceBank, Merger Sub and fuboTV (the “Merger”).

 

Following the Merger, the combined company operates under the name “fuboTV,” our trading symbol is “FUBO,” and we are in the process of changing our name to “fuboTV Inc.”  Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refers to the combined company post-Merger – FaceBank Group, Inc., or FaceBank, and its subsidiaries, including fuboTV. “FaceBank Pre-Merger” refers to FaceBank Group, Inc. and its subsidiaries prior to the closing of the Merger, and “fuboTV Pre-Merger” refers to fuboTV Inc. and its subsidiaries prior to the Merger.

 

On March 11, 2020, FaceBank Pre-Merger and HLEE Finance S.a r.l. (“HLEE”) entered into a Credit Agreement, dated as of March 11, 2020, pursuant to which HLEE provided FaceBank Pre-Merger with a $100,000,000 revolving line of credit (the “Credit Facility”). The Credit Facility is secured by substantially all the assets of the Company. As of July 7, 2020, there are no amounts outstanding under the Credit Facility, and the Company does not plan to draw down on the Credit Facility. On July 8, 2020, the Company terminated the Credit Facility.

 

On March 19, 2020, FaceBank Pre-Merger, Merger Sub, Evolution AI Corporation (“Evolution”) and Pulse Evolution Corporation (“PEC” and collectively with Evolution, Merger Sub and FaceBank Pre-Merger, the “Initial Borrower”) and FB Loan Series I, LLC (“FB Loan”) entered into a Note Purchase Agreement dated as of March 19, 2020, as amended (the “Note Purchase Agreement”) pursuant to which Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10,050,000 (the “Senior Notes”). On April 2, 2020, fuboTV and Sports Rights Management, LLC, a Delaware limited liability company and a wholly-owned subsidiary of fuboTV (“SRM”), also joined the Note Purchase Agreement as borrowers (fuboTV, SRM and the Initial Borrower, collectively, the “Borrower”). In connection with the Merger, the proceeds of $7.4 million, net of an original discount of $2.65 million, were sent directly to fuboTV Pre-Merger pursuant to the Signing Date Loan Agreement described below. As of July 31, 2020, the Company had repaid the Senior Notes in full ($10.05 million) plus accrued interest.

 

Interest on the Senior Notes accrued at a rate of 17.39% until full and final repayment of the principal amount of the Senior Notes. On the first business day of each calendar month in which the Senior Notes were outstanding, beginning on April 1, 2020, the Borrower was obligated to pay in arrears in cash to FB Loan accrued interest on the outstanding principal amount of the Senior Notes. Pursuant to the Note Purchase Agreement, the maturity date of the Senior Notes was the earlier to occur of (i) July 8, 2020 and (ii) the date the Borrower receives the proceeds of any financing. Each Borrower’s obligations under the Senior Notes were 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”).

 

In addition, in connection with the Note Purchase Agreement, FaceBank issued (i) 900,000 shares of FaceBank’s common stock and (ii) a warrant to purchase 3,269,231 shares of FaceBank’s common stock at an exercise price of $5.00 per share to FB Loan. The warrants expire on March 19, 2025.

 

Immediately following the execution and delivery of the Merger Agreement, FaceBank Pre-Merger and fuboTV Pre-Merger entered into a Loan and Security Agreement, dated as of March 19, 2020 (the “Signing Date Loan Agreement”), whereby FaceBank Pre-Merger advanced to fuboTV Pre-Merger a junior secured term loan in the aggregate principal amount of $10,000,000 (the “Signing Date Loan”) on the terms set forth in the Signing Date Loan Agreement using the net proceeds of the Senior Notes and other cash on hand. Interest on the Signing Date Loan accrues at a rate of 11% per annum. Interest is payable in arrears on the first business day of each calendar month commencing with the calendar month beginning on April 1, 2020. The maturity date for the Signing Date Loan was July 8, 2020. This loan has been repaid in full prior to the maturity date. Pursuant to the Signing Date Loan Agreement, fuboTV granted to FaceBank a junior security interest in substantially all of its assets as security for the payment of all obligations under the Signing Date Loan Agreement, the Signing Date Loan and the other transaction documents executed in connection therewith.

 

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 June 30, 2020, there is $22.5 million outstanding under the AMC Agreement, excluding consideration of debt discount costs. In connection with the Merger, FaceBank guaranteed the obligations of fuboTV under the AMC Agreement on an unsecured basis. The liens of AMC Networks Ventures on the assets of the Company were senior to the liens in favor of FB Loan and FaceBank securing the Senior Notes and the Signing Date Loan, respectively.

 

Accounting Treatment of fuboTV Merger

 

The following unaudited pro forma combined financial information was prepared using the acquisition method of accounting under accounting principles generally accepted in the United States (“GAAP”) and gives effect to the Merger. The Merger Agreement will be accounted for as an acquisition, with FaceBank Pre-Merger being deemed the acquiring company for accounting purposes.

 

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 shareholders own approximately 57% of the voting common shares of the combined company immediately following the closing of the Merger. Assuming the exercise of all vested stock options as of the closing of the transaction, FaceBank Pre-Merger’s shareholders own 54% of the voting common interest and (ii) directors appointed by FaceBank Pre-Merger will hold a majority of board seats in the combined company.

 

 39 

 

 

Pro Forma Financial Information

 

The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet as of March 31, 2020 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2020 and the year ended December 31, 2019 based upon the combined historical financial statements of fuboTV Pre-Merger and FaceBank Pre-Merger after giving effect to the Company’s acquisition of fuboTV Pre-Merger on March 31, 2020.

 

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 and for the year ended December 31, 2019 give pro forma effect to the acquisition of fuboTV Pre-Merger as if it had occurred on January 1, 2019, which is the earliest year for which pro forma financial statements are required to be presented. The unaudited pro forma combined balance sheet as of March 31, 2020 gives pro forma effect to the acquisition of fuboTV Pre-Merger as if it had occurred on March 31, 2020.

 

fuboTV Pre-Merger’s assets and liabilities will be measured and recognized at their fair values as of the transaction date, and combined with the assets, liabilities and results of operations of FaceBank after the consummation of the Merger.

 

The unaudited pro forma condensed combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed and have been made solely for the purpose of providing unaudited pro forma combined financial information. There can be no assurances that the final valuations will not result in material changes to the preliminary estimated purchase price allocation. The unaudited pro forma combined consolidated financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Merger or any integration costs. Additionally, the unaudited pro forma combined consolidated statement of operations does not include certain nonrecurring charges resulting directly from the Merger as described in the accompanying notes.

 

The unaudited pro forma condensed combined financial information is preliminary and has been prepared for illustrative purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had FaceBank Pre-Merger and fuboTV Pre-Merger been a combined company during the specified periods. The actual results reported in periods following the transaction may differ significantly from those reflected in this pro forma financial information presented herein for a number of reasons, including, but not limited to, differences between the assumptions used to prepare this pro forma financial information.

 

The assumptions and estimates underlying the unaudited adjustments to the pro forma combined financial statements are described in the accompanying notes, which should be read together with the unaudited pro forma combined financial statements.

 

The unaudited pro forma combined financial statements should be read together with FaceBank Pre-Merger’s and fuboTV Pre-Merger’s historical financial statements and the notes thereto, which are included elsewhere in this Form S-1.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2020
(UNAUDITED)

(in thousands, except per share amounts)

 

    FACEBANK                  
   

(Historical)

(As Restated)

   

FUBOTV

(Historical)

   

Pro Forma

Adjustments

    Note 4  

Pro Forma

Combined

 
Assets                            
Cash and cash equivalents   $ 81     $ 8,040     $ -         $ 8,121  
Accounts receivable, net of allowance for doubtful accounts     -       5,831       -           5,831  
Note receivable – fuboTV     10,000       -       (10,000 )   (g)     -  
Prepaid expenses and other current assets     130       976       -           1,106  
Total current assets     10,211       14,847       (10,000 )         15,058  
Property & equipment, net     -       2,042       -           2,042  
Deposits     24       -       -           24  
Investment in Nexway at fair value     2,374       -       -           2,374  
Financial assets at fair value     1,965       -       -           1,965  
Intangible assets     111,459       -       243,612     (c)     355,071  
Goodwill     176,595       -       574,120     (a)     750,715  
Right-of-use assets     37       -       3,845     (b)     3,882  
Restricted cash     -       1,333       -           1,333  
Other noncurrent assets     -       397       -           397  
Total assets   $ 302,665     $ 18,619     $ 811,577         $ 1,132,861  
                                     
Liabilities                                    
Accounts payable   $ 3,406     $ 51,687     $ -         $ 55,093  
Accounts payable - due to related parties     305       14,811       -           15,116  
Accrued expenses and other current liabilities     4,337       50,249       -           54,586  
Accrued expenses and other current liabilities - due to related parties     -       34,109       -           34,109  
Note payable, net of discount     5,207       -       -           5,207  
Notes payable - related parties     446       -       -           446  
Convertible notes, net of discounts     1,962       -       -           1,962  
Shares settled liability for note payable     7,515       -       (7,515 )   (e)(ii)     -  
Profit share liability     1,971       -       -           1,971  
Warrant liability – subsidiary     39       -       -           39  
Warrant liability     15,987       -       -           15,987  
Derivative liability     389       -       -           389  
Short-term debt     -       10,000       (10,000 )   (g)     -   
Long term borrowings - current portion     -       5,625                   5,625  
Current portion of lease liabilities     37       -       910     (b)     947  
Deferred rent - current portion     -       167       (167 )   (b)     -  
Deferred revenue     -       8,809       -           8,809  
Total current liabilities     41,601       175,457       (16,772 )         200,286  
Deferred income taxes     28,679       -       65,613     (a)     94,292  
Long-term debt, net of issuance costs     55,130       18,007       -           73,137  
Lease liabilities     -       -       4,276     (b)     4,276  
Deferred rent - net of current portion     -       1,174       (1,174 )   (b)     -  
Other long-term liabilities     1       -       -           1  
Total liabilities     125,411       194,638       51,943           371,992  
                                     
Commitments and Contingencies                                    
                                     
Convertible preferred stock, net of issuance costs     463       247,241       (247,241 )   (a)     463  
                                     
Shareholders’ Equity                                    
Series AA Convertible Preferred stock     -       -       576,100     (a)     576,100  
Series A Preferred stock     -       -       -           -  
Series B Convertible Preferred stock     -       -       -           -  
Series C Convertible Preferred stock     -       -       -           -  
Series D Convertible Preferred stock                                    
Series X Convertible Preferred stock     -       -       -           -  
Common stock     3       2       (2 )   (a)
(e)(ii)
    3  
Additional paid-in capital     270,397       12,955       (5,440 )   (a)
(e)(ii)
    277,912  
Accumulated deficit     (111,593 )     (436,217 )     436,217     (a)     (111,593 )