S-1/A 1 forms-1a.htm

 

As filed with the Securities and Exchange Commission on October 1, 2020

 

Registration No. 333-243876

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Amendment No. 2 to

 

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

 

 

fuboTV 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)

 

fuboTV 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

fuboTV 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

Gina Sheldon, Esq.

General Counsel

fuboTV 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

 

Amount

to be
Registered(1)

   

Proposed
Maximum

Offering Price

per Share(2)

   

Proposed

Maximum
Aggregate

Offering Price(2)

   

Amount of

Registration Fee(3)

 
Common Stock $0.0001 par value per share     17,250,000     $ 11.00     $ 189,750,000     $ 24,630  

 

(1) Includes the additional shares that the underwriters have the option to purchase from the Registrant.
   
(2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
   
(3) The Registrant previously paid $12,980 in connection with the initial filing of the Registration Statement.

 

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 October 1, 2020

 

 

 

15,000,000 shares of Common Stock

 

We are offering 15,000,000 shares of common stock.

 

Our common stock has a history of trading on the OTCQB Venture Market under the symbol “FUBO.” Based on information available to us, the low and high sales price per share of our common stock for such transactions for the period from April 1, 2020 through September 25, 2020 was $6.97 and $18.10, respectively. The volume weighted average price per share for the period from April 1, 2020 through September 25, 2020 was $10.52. On September 25, 2020, the last reported sale price of our common stock was $9.35 per share. We anticipate that the price of our common stock in this offering will be between $9.00 and $11.00 per share.

 

Our common stock has been approved for listing on the New York Stock Exchange, conditional upon the successful pricing of this offering, under the symbol “FUBO.”

 

We have two classes of authorized capital stock: common stock and Series AA convertible preferred stock. We refer to the Series AA convertible preferred stock as the Series AA Preferred Stock. We previously had a class of Series D convertible preferred stock, of which we redeemed the remaining outstanding shares on September 2, 2020. Any references to previously outstanding shares of our Series D convertible preferred stock are referred to as the Series D Preferred Stock. The rights of the holders of common stock and Series AA 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 Preferred Stock is entitled to 0.8 votes and is convertible into two (2) shares of common stock following the sale of such share of Series AA Preferred Stock on an arms’-length basis either pursuant to Rule 144 under the Securities Act of 1933, as amended (referred to as the Securities Act), or pursuant to an effective registration statement under the Securities Act, provided that such sale is conditioned on the applicable holder of Series AA Preferred Stock executing and delivering to us documentation reasonably requested by us in connection therewith and as is reasonably necessary to effectuate such transfer. Following this offering, outstanding shares of Series AA Preferred Stock will represent approximately 28.9% of the voting power of our outstanding capital stock, and outstanding shares of common stock will represent approximately 71.1% 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 10 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 discounts and commissions (1)  $    $  
Proceeds, before expenses, to us  $    $  

 

 

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

 

We have granted the underwriters the option to purchase up to an additional 2,250,000 shares of common stock in the aggregate at the public offering price, less the underwriting discount.

 

One or more funds affiliated with Dragoneer Investment Group, LLC have indicated an interest in purchasing an aggregate of up to $50 million in shares of our common stock in this offering at the initial public offering price. Because this indication of interest is not a binding agreement or commitment to purchase, one or more funds affiliated with Dragoneer Investment Group, LLC could determine to purchase more, less or no shares in this offering or the underwriters could determine to sell more, less or no shares to one or more funds affiliated with Dragoneer Investment Group, LLC. The underwriters will receive the same discount on any of our shares of common stock purchased by one or more funds affiliated with Dragoneer Investment Group, LLC as they will from any other shares of common stock sold to the public in this offering.

 

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 10
Cautionary Note Regarding Forward-Looking Statements 34
Industry Data 35
Use of Proceeds 36
Dividend Policy 37
Capitalization 38
Dilution 39
Unaudited Pro Forma Combined Financial Information 41
Selected Historical Financial Data of fuboTV Pre-Merger 51
Selected Historical Financial Data of FaceBank Pre-Merger 52
Reconciliation of Non-GAAP Financial Measures and Metrics 53
Management’s Discussion and Analysis of Financial Condition and Results of Operations 57
Business 91
Management 100
Executive Compensation 105
Certain Relationships and Related Person Transactions 119
Beneficial Ownership of Securities 124
Description of Capital Stock 127
Material U.S. Federal Income Tax Considerations for Non-U.S. Holders of Our Common Stock 133
Shares Eligible for Future Sale 137
Underwriting 138
Legal Matters 146
Experts 147
Where You Can Find More Information 148
Index to Consolidated Financial Statements F-1

 

 

 

We have 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 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 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 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 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., a Delaware corporation, or fuboTV Sub, by the merger of fuboTV Acquisition Corp., our wholly-owned subsidiary, with and into fuboTV Sub, which we refer to as the “Merger.” We subsequently changed our name from “FaceBank Group, Inc.” to “fuboTV Inc.”, and we changed the name of fuboTV Sub to “fuboTV Media Inc.” Following the Merger, the combined company operates under the name “fuboTV,” and our trading symbol is “FUBO.”

 

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 Sub and its subsidiaries for the period prior to the Merger, also referred to as “fuboTV Pre-Merger,” and fuboTV following the Merger. The following are metrics specific to fuboTV Pre-Merger and to the combined company post-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, and continue to monitor them for fuboTV after the 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 are useful in evaluating the performance of our business historically and on a go-forward basis. All of our metrics are measured by account and by primary holder as there may be 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.

 

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 the Subscribers who have each streamed 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

 

Monthly 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

 

Adjusted EBITDA

 

Adjusted EBITDA is net income (loss) calculated in accordance with GAAP plus: (i) interest expense (income); (ii) income tax expense; (iii) depreciation; (iv) amortization; (v) stock-based compensation; (vi) one-time non-cash operating expenses; and (vii) other income (expenses).

 

Average Revenue per User (ARPU)

 

Average Revenue per User (ARPU) represents Platform Bookings in the period divided by the average number of daily Subscribers in such period.

 

Monthly Average Revenue per User (Monthly ARPU)

 

Monthly Average Revenue per User (Monthly ARPU) represents Platform Bookings 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 (Monthly Subscription ARPU)

 

Monthly Subscription Average Revenue per User (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 (Monthly Ad ARPU)

 

Monthly Ad Average Revenue per User (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.

 

Number of Months Payback of SAC

 

Number of Months Payback of SAC is defined as SAC for Subscribers in the period, divided by the Adjusted Contribution Margin per Subscriber in 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 Platform Bookings minus Variable COGS.

 

Adjusted Contribution Margin

 

Adjusted Contribution Margin represents Platform Bookings minus Variable COGS divided by Platform Bookings.

 

Platform Bookings

 

Platform Bookings represent GAAP revenue less other 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.

 

Lifetime Value (LTV)

 

Lifetime Value (LTV) represents the cumulative monthly Adjusted Contribution Margin per Subscriber, starting from the indicated date over the subsequent time period. If the indicated time period includes months after June 2020, the monthly Average Contribution Margin figures for those months are projections.

 

See “Reconciliation of Non-GAAP Metrics” for more information and reconciliations of ACPU, ARPU Adjusted Contribution, Adjusted Contribution Margin, Adjusted EBITDA, Platform Bookings, SAC and Variable COGS 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., a Delaware corporation, or fuboTV Sub, by the merger of fuboTV Acquisition Corp., our wholly-owned subsidiary, with and into fuboTV Sub, which we refer to as the “Merger.” Following the Merger, the combined company operates under the name “fuboTV,” and our trading symbol is “FUBO.” We subsequently changed our name from FaceBank Group, Inc. to “fuboTV Inc.,” and we changed the name of fuboTV Sub to “fuboTV Media, Inc.”

 

Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refers to the combined company post-Merger – fuboTV Inc., or fuboTV, and its subsidiaries, including fuboTV Sub. “FaceBank Pre-Merger” refers to our Company and its subsidiaries prior to the closing of the Merger, and “fuboTV Pre-Merger” refers to fuboTV Media 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 Pre-Merger 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 140 hours of content per month during the three months ended June 30, 2020.

 

We offer subscribers a live TV streaming service, priced at $59.99 per month, with the option to purchase add-ons and features best suited to their preferences. Our 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. 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 September 15, 2020.

 

At the core of our offering is our proprietary technology platform purpose-built for live TV and sports viewership coupled with our first-party data. 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. We leverage our data throughout our organization to make data driven decisions on what content we acquire for our users, to influence product design and strategy to drive subscriber engagement and to enhance the capabilities and performance of our advertising platform for our advertising partners. 

 

We generate revenue from our subscribers through recurring 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, or $648 annually, an increase of 42% year-over-year, through a combination of subscription and advertising revenue. 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 reached 286,126 paid Subscribers on June 30, 2020, which represented a 47% increase from fuboTV Pre-Merger’s paid Subscribers on June 30, 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 revenues for the year ended December 31, 2019 grew to $146.5 million, an increase of 96% versus fuboTV Pre-Merger’s revenues of $74.8 million for the year ended December 31, 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. The advertising component to fuboTV Pre-Merger’s revenues has been rapidly growing and reached $12.5 million (8% of fuboTV Pre-Merger’s total revenues) for the year ended December 31, 2019, up 201% from the year ended December 31, 2018. Growth in advertising revenue is a key driver of our monetization strategy.

 

Following the Merger, we achieved revenue of $51.5 million for the six months ended June 30, 2020 and net loss of $129.9 million for the same period. The advertising component of our revenues reached $4.3 million (8% of our total revenues) for the six months ended June 30, 2020, (which represented three months of operations for fuboTV post Merger).

 

 

 1 

 

 

Industry Overview

 

Streaming services have experienced rapid growth in adoption as consumers engage with streaming video and audio through a variety of devices, including connected TVs, mobile phones, and tablets. According to a Parks Associates survey, as of March 2020, 76% of all U.S. broadband households have at least some form of OTT video service subscription. Furthermore, as of April 2020, 58% of connected TV viewing households still had subscriptions to cable and/or satellite, according to Comscore OTT Intelligence, which we believe is supported by the lack of streaming news and sports content. Despite the early adoption of OTT video streaming services, which are largely focused on entertainment content, streaming only accounts for 18% of total TV viewing hours based on a last 3-month average in April 2020. Traditional live TV accounts for the majority of TV viewing hours for U.S. households, however, the proportion is declining as customers continue cutting the cord. We believe consumers are increasingly favoring the superior customer experience, lower cost and better value 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.

 

Sports and news content have been a key driver for pay TV operators to retain and grow audiences. Most streaming subscription services have primarily focused on entertainment content 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. We believe this creates a significant opportunity to provide a pay TV replacement service via streaming that also features an enhanced live sports and news viewing experience.

 

Our Market Opportunity

 

Offering Subscribers a broad content offering, focused on sports as well as news and entertainment content, allows us to address three large markets in transition. These opportunities include traditional cable or satellite subscribers adopting streaming, traditional linear TV advertisers reallocating their budgets to reach digital audiences, and adjacent opportunities, like sports wagering (which we intend to implement), that complement a sports-first streaming content offering.

 

The rapid shift to TV streaming has disrupted the traditional cable TV and satellite distribution model, creating new options for consumers and new opportunities for broadcasters and advertisers to distribute their content and reach audiences, respectively. The number of cord-cutting and cord-never households continues to accelerate in the U.S., as cable and satellite subscribers increasingly favor the streaming experience. We believe this creates significant opportunities for vMVPDs to address the $84 billion U.S. and $226 billion global pay TV services market (as of 2019), according to an April 2020 Grand View Research report.

 

U.S. traditional linear TV advertising spending was approximately $61 billion in 2019 and is expected to decrease by 10% in 2020 to approximately $54 billion, according to a June 2020 MAGNA report. Meanwhile, U.S. digital advertising spend was approximately $127 billion in 2019 and is expected to grow by 3% 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 enable new opportunities including online subscriptions, eCommerce transactions, and other 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 premium 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 built-in demand for sports. We then leverage our technology and data to drive higher engagement and induce retentive behaviors such as favoriting channels, recording shows, and increasing discovery through our proprietary machine learning recommendations engine. Next, we look to monetize our growing base of highly engaged subscribers by driving higher average revenue per user (ARPU).

 

We drive our business model with three core strategies:

 

Grow our paid subscriber base
Optimize engagement and retention
Increase monetization

 

 2 

 

 

Our Offerings

 

Our offerings are designed 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 sports and news channels 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 viewers. 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 value and a superior experience to subscribers than content providers would otherwise be able to deliver independently. Furthermore, our data-driven platform enables us to capture key insights on consumer behavior and preferences, which are increasingly valuable to 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 content offerings enhances total viewership and retention of our users as a pay TV replacement. We believe we will continue to optimize our content offering by identifying and executing strategic deals that best suit our consumers’ preferences.

   
 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 less expensive than traditional cable or satellite options and includes a broad array of 100+ channels across sports, news and entertainment.

 

 Proprietary Technology and First-Party Data. Because we design, develop and operate all core segments of our platform, we are able to capture and analyze how our subscribers engage our offering. These unique data insights allow us to better understand and continually adjust our product and strategy to better meet the needs of our subscribers.

 

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 capabilities such as unique user profiles, multiple angle and screen viewing for sports, 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. Furthermore, our proprietary technology infrastructure is highly scalable, which we expect to provide ongoing cost and margin advantages as we grow.

 

 

 3 

 

 

Our Growth Strategy

 

We believe that we are in 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:

 

Continue to grow our subscriber base

 

Upsell and retain existing subscribers

 

Grow advertising inventory

   
 

Continuing to enhance our content portfolio

 

Continue to invest in our technology and data capabilities

 

Enter adjacent markets, including wagering

 

Expand internationally

 

Our Virtual Entertainment Portfolio and Technology

 

We believe FaceBank Pre-Merger’s human animation and digital likeness technologies, which have allowed us to secure revenue sharing relationships with globally-recognized celebrities, 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. 

 

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

 

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.
     
  We are not in compliance with the payment obligations of a significant number of our significant content agreements.
     
 

Our actual operating results may differ significantly from our guidance.

     
 

TV streaming is highly competitive and many companies, including large technology and entertainment 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 or retain 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 and gross profit are 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 Sub

 

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 Sub,” whereby fuboTV Sub 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 Sub. Following the Merger, we changed our name from “FaceBank Group, Inc.” to “fuboTV Inc.,” and we changed the name of fuboTV Sub to “fuboTV Media, Inc.” The combined company operates under the name “fuboTV,” and our trading symbol is “FUBO.”

 

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 Sub 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 following the sale of such share of Series AA Preferred Stock on an arms’-length basis either pursuant to Rule 144 under the Securities Act, or pursuant to an effective registration statement under the Securities Act, provided that such sale is conditioned on the applicable holder of Series AA Preferred Stock executing and delivering to us documentation reasonably requested by us in connection therewith and as is reasonably necessary to effectuate such transfer. 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.

 

Recent Developments

 

We expect to report that we had approximately $40 million  in cash, including restricted cash, as of September 30, 2020, of which we expect to pay approximately $11 million  to one of our lenders in the near future. This estimate, including the estimated payment to one of our lenders, is unaudited and preliminary and does not present all information necessary for an understanding of our financial condition as of September 30, 2020 and our results of operations for the three months ended September 30, 2020.

 

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. On August 10, 2020, our name was changed to fuboTV Inc. fuboTV Sub was incorporated in 2014 as a Delaware corporation. Following the Merger, we operate our business under the name “fuboTV.” 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  

15,000,000 shares

     

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

 

2,250,000 shares

     
Total shares of our common stock to be outstanding after this offering  

62,207,209 shares (or 64,457,209 if the underwriters exercise their option to purchase additional shares from us in full)

     

Total shares of Series AA Preferred Stock to be outstanding after this offering, or total shares of common stock to be outstanding from the conversion of Series AA Preferred Stock assuming conversion of all Series AA Preferred Stock

 

31,556,906 shares of Series AA Preferred Stock (or 63,113,812 shares of common stock on an as-converted basis)

     
Voting power held by holders of our common stock after giving effect to this offering  

71.1%

     
Voting power held by holders of our Series AA Preferred Stock after giving effect to this offering  

28.9%

     
Use of proceeds  

We estimate that the net proceeds to us from this offering will be approximately $136.5  million (or approximately $157.4 million if the underwriters exercise their option to purchase additional shares from us in full), based on an assumed public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.

  

See “Use of Proceeds.”

     
Indication of Interest   One or more funds affiliated with Dragoneer Investment Group, LLC have indicated an interest in purchasing an aggregate of up to $50 million in shares of our common stock in this offering at the initial public offering price. Because this indication of interest is not a binding agreement or commitment to purchase, one or more funds affiliated with Dragoneer Investment Group, LLC could determine to purchase more, less or no shares in this offering or the underwriters could determine to sell more, less or no shares to one or more funds affiliated with Dragoneer Investment Group, LLC. The underwriters will receive the same discount on any of our shares of common stock purchased by one or more funds affiliated with Dragoneer Investment Group, LLC as they will from any other shares of common stock sold to the public in this offering.
     
OTCQB Venture Market symbol and proposed New York Stock Exchange symbol   “FUBO.” Our common stock has been approved for listing on the New York Stock Exchange, conditional upon the successful pricing of this offering, under the symbol “FUBO.”
     

Voting and Conversion Rights

  The rights of the holders of common stock and Series AA 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 Preferred Stock is entitled to 0.8 votes and is convertible into two (2) shares of common stock following the sale of such share of Series AA Preferred Stock on an arms’-length basis either pursuant to Rule 144 under the Securities Act of 1933, as amended (referred to as the Securities Act), or pursuant to an effective registration statement under the Securities Act, provided that such sale is conditioned on the applicable holder of Series AA Preferred Stock executing and delivering to us documentation reasonably requested by us in connection therewith and as is reasonably necessary to effectuate such transfer. Following this offering, outstanding shares of Series AA Preferred Stock will represent approximately 28.9% of the voting power of our outstanding capital stock, and outstanding shares of common stock will represent approximately 71.1% 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 47,207,209 shares outstanding as of August 31, 2020 and does not include:

 

 

8,753,602 shares of common stock issuable upon the exercise of certain outstanding warrants with a weighted-average exercise price of $6.54 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;
     
  150,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan;
     
 

7,273,517 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $1.36 per share under the fuboTV Inc. 2015 Equity Incentive Plan;

     
  10,125,888 shares of common stock issuable upon the exercise of options outstanding at a weighted-average exercise price of $9.06 per share under our 2020 Equity Incentive Plan;
     
 

2,396,433 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 us with an aggregate principal outstanding balance of $2,348,000;
     
 

767,456 shares of our Series AA Preferred Stock issuable as stock merger consideration in connection with the Merger; and

     
 

up to 63,149,241 shares of our common stock reserved for issuance upon conversion of our (i) 203,000 shares issued and outstanding of Series D Preferred Stock (which have subsequently been redeemed) or (ii) 31,556,906 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 August 31, 2020;
     
  no conversion of any shares of our Series AA Preferred Stock or Series D Preferred Stock (which has subsequently been redeemed by us) outstanding as of August 31, 2020;
     
  no conversion of convertible notes outstanding as of August 31, 2020; and
     
 

no exercise by the underwriters of their option to purchase up to 2,250,000 additional shares of common stock in this offering.

 

Subsequent to August 31, 2020, we entered into agreements with holders of two of our outstanding warrants, FB Loan Series I, LLC, or FB Loan, and Auctus Fund LLC, or Auctus, that waived any prior defaults under the documentation governing the terms of their warrants. As of September 30, 2020, (i) the exercise price of the warrant held by FB Loan was $2.75 per share, and the number of shares of our common stock subject to the warrant remained 3,269,231 and (ii) the exercise price of the warrant held by Auctus was $3.06 per share, and the number of shares of our common stock subject to the warrant was increased to 359,475. As of September 30, 2020, we are in negotiations with another warrant holder that may result in the reduction of the exercise price of such holder’s outstanding warrant and a corresponding increase in the number of shares subject to the warrant. Any such increase in the number of shares subject to the warrant would equal no more than 1% of our fully-diluted shares following the offering.

 

 

 5 

 

 

SUMMARY HISTORICAL FINANCIAL DATA OF FUBOTV POST-MERGER

 

In the following tables, we provide the Company’s summary consolidated financial data. You should read the summary historical financial data set forth below in conjunction with the Company’s consolidated financial statements, the notes to the Company’s consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The summary historical statement of operations data as of and for the three and six months ended June 30, 2020 and 2019 was derived from the Company’s unaudited historical consolidated financial statements included elsewhere in this prospectus and, as the Merger was effected on April 1, 2020, reflects the data for the post-Merger combined Company. The three and six months ended June 30, 2019 includes the summary consolidated financial data for FaceBank Pre-Merger. The three months ended June 30, 2020 includes the summary consolidated financial data for the Company post-Merger. The six months ended June 30, 2020 includes the summary consolidated financial data for FaceBank Pre-Merger through the time of the Merger on April 1, 2020 as well as the summary consolidated financial data for the post-Merger Company from April 1, 2020 through June 30, 2020, but does not include any results of operations of fuboTV Pre-Merger. The Company’s historical results are not necessarily indicative of results to be expected for the year ended December 31, 2020 or any other future periods.

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
   2020   2019   2020   2019 
   (unaudited)   (unaudited)   (unaudited   (unaudited 
   (As Restated)       (As Restated)     
Consolidated Statement of Operations Data: 

(in thousands, except

per share data)

  

(in thousands, except

per share data)

 
                 
Revenues, net                    
Subscriptions  $39,511   $   $39,511   $ 
Advertisements   4,323        4,323     
Software licenses, net           7,295     
Other   338         338     
                     
Total Revenues  $44,172   $   $51,467   $ 
                     
Operating expenses:                    
Subscriber related expenses   53,087        53,087     
Broadcasting and transmission   9,492        9,492     
Sales and marketing   7,577    111    11,256    324 
Technology and development   9,551        9,551     
General and administrative   17,338    693    33,862    1,517 
Depreciation and amortization   14,417    5,158    19,637    10,316 
                     
Total operating expenses   111,462    5,962    136,885    12,157 
                     
Operating loss   (67,290)   (5,962)   (85,418)   (12,157)
                     
Other income (expense):                    
Interest expense and financing costs   (13,325)   (454)   (15,906)   (900)
Loss on deconsolidation of Nexway           (11,919)    
Loss on issuance of notes, bonds and warrants   (602)       (24,655)    
Change in fair value of warrant liabilities   4,966        4,600     
Change in fair value of subsidiary warranty liability   18    1,124    3    3,601 
Change in fair value of shares settled liability   (1,485)       (1,665)    
Change in fair value of derivative liabilities   (823)   890    (526)   1,018 
Change in fair value of profit share liability   (148)       (148)    
Unrealized gain on equity method investment   2,614        2,614     
Other expense   (1,010)       (1,446)    
                     
Total other (expense) income   (9,795)   1,560    (49,048)   3,719 
                     
Loss before income taxes   (77,085)   (4,402)   (134,466)   (8,438)
Income tax benefit   3,481    1,037    4,519    2,206 
                     
Net loss  $(73,604)  $(3,365)  $(129,947)  $(6,232)
Less: net (loss) income attributable to non-controlling interest   (682)   2,182    (1,555)   2,781 
                     
Net loss attributable to controlling interest  $(72,922)  $(5,547)  $(128,392)  $(9,013)
                     
Less: Deemed dividend – beneficial conversion feature on preferred stock           171     
                     
Net loss attributable to common stockholders  $(72,922)  $(5,547)  $(128,563)  $(9,013)
                     
Net loss per share attributable to common stockholders                    
Basic and diluted  $(2.08)  $(0.24)  $(3.97)  $(0.50)
                     
Weighted average shares outstanding:                    
Basic and diluted   35,045,390    22,964,199    32,390,829    17,952,188 

 

The following table presents fuboTV Post-Merger’s consolidated balance sheet data as of June 30, 2020:

 

    As of June 30, 2020  
    Actual     As Adjusted(1)  
Consolidated Balance Sheet Data:   (in thousands)     (in thousands)  
    (unaudited)     (unaudited)  
Cash, cash equivalents   $ 7,356     $ 143,856  
Total current assets     49,801       186,301  
Total assets     1,110,366       1,246,866  
Total current liabilities     308,108       308,108  
Total liabilities     422,289       422,289  
Temporary equity     208       208  
Total stockholders’ equity     687,869       824,369  

 

  (1)

Reflects the issuance and sale of 15,000,000 shares of common stock in this offering at an assumed public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, 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 $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease as adjusted cash and cash equivalents, total current assets, total assets, and total shareholders’ equity by approximately $14.0 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 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 and cash equivalents, total current assets, total assets, and total shareholders’ equity by $9.3 million, 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 

 

 

SUMMARY HISTORICAL FINANCIAL DATA OF FUBOTV PRE-MERGER

 

In the following tables, we provide fuboTV Pre-Merger’s summary consolidated financial data. You should read the summary 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 summary historical statement of operations data as of and for the three months ended March 31, 2020 and 2019 and the summary 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 summary 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:

 

  

As of

March 31, 2020

 
Consolidated Balance Sheet Data:  (in thousands) 
   (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 

 

 

 7 

 

 

SUMMARY HISTORICAL FINANCIAL DATA OF FACEBANK PRE-MERGER

 

In the following tables, we provide FaceBank Pre-Merger’s summary consolidated financial data. You should read the summary 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 summary historical statement of operations data as of and for the three months ended March 31, 2020 and 2019 and the summary 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 summary 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 
   (As Restated) 
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 

 

 

 8 

 

 

Non-GAAP Financial Measures and Metrics

 

In addition to our financial information presented in accordance with GAAP, we believe the following non-GAAP financial measures and metrics are useful to investors in evaluating our operating performance. We use the following non-GAAP financial measures and metrics, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial measures and metrics, when taken together with the corresponding GAAP financial measures and metrics, may be helpful to investors because they provide consistency and comparability with past financial performance and meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. The non-GAAP financial measures and metrics are presented for supplemental informational purposes only, have limitations as analytical tools, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP financial measures and metrics used by other companies. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures and metrics differently or may use other measures or metrics to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures and metrics as tools for comparison. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures and metrics to their most directly comparable GAAP financial measures, and not to rely on any single financial measure or metric to evaluate our business.

 

In the tables below, the data for the years ended December 31, 2018 and 2019 and for the three months ended March 31, 2020 includes financial and operational measures and metrics for fuboTV Pre-Merger, and the data for the three months ended June 30, 2020 includes financial and operational measures and metrics for the combined Company post-Merger, or fuboTV.

 

See the section titled “Reconciliation of Non-GAAP Financial Measures” for more information and reconciliation of our non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

 

    Three Months Ended     Year Ended  
    June 30,
2020
    March 31,
2020
    December 31, 2019     December 31, 2018  
    (in thousands)  
                         
Revenue   $ 44,172     $ 51,047     $ 146,530     $ 74,819  
Non-GAAP Platform Bookings   $ 44,100     $ 49,198     $ 150,902     $ 75,748  
Non-GAAP Monthly Average Revenue per User (Monthly ARPU)   $ 54.79     $ 54.16     $ 53.73     $ 37.93  

 

Platform Bookings represents GAAP revenue less other 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.

 

Monthly Average Revenue Per User (ARPU) represents Platform Bookings in the period divided by the average number of daily Subscribers in such period divided by the number of months in such period.

 

    Three Months Ended     Three Months Ended     Year Ended  
    June 30,
2020
    March 31,
2020
    December 31, 2019     December 31, 2018  
    (in thousands)  
                         
Sales & Marketing Expenses   $ 7,577     $ 7,713     $ 37,245     $ 47,478  
Non-GAAP Subscriber Acquisition Cost (SAC)   $ 58.16     $ 52.10     $ 66.85     $ 88.98  

 

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.

 

    Three Months Ended     Three Months Ended     Year Ended  
    June 30,
2020
    March 31,
2020
    December 31, 2019     December 31, 2018  
    (in thousands)  
                         
Subscriber Related Expenses   $ 53,087     $ 58,001     $ 201,448     $ 98,894  
Non-GAAP Variable COGS   $ 41,852     $ 47,747     $ 155,527     $ 81,063  
Non-GAAP Average Cost Per User (ACPU)   $ 52.00     $ 52.56     $ 55.37     $ 40.59  

 

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.

 

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

 

    Three Months Ended     Year Ended December 31,  
    June 30,
2020
    March 31,
2020
    2019     2018  
    (in thousands, except percentages)  
Revenue   $ 44,172     $ 51,047     $ 146,530     $ 74,819  
Subtract:                                
Other Revenue   $ (338 )   $ (537 )   $ (777 )   $ (577 )
Prior period subscriber deferred revenue   $ (8,066 )   $ (9,377 )   $ (4,228 )   $ (1,766 )
Add:                                
Current period subscriber deferred revenue   $ 8,332     $ 8,066     $ 9,377     $ 3,272  
Non-GAAP Platform Bookings   $ 44,100     $ 49,198     $ 150,902     $ 75,748  
                                 
Subscriber Related Expenses   $ 53,087     $ 58,001     $ 201,448     $ 98,894  
Add:                                
Payment Processing for Deferred Revenue (current period)     202     $ 161     $ 206       -  
In-App Billing Fees for Deferred Revenue (current period)   $ 42     $ 41     $ 53       -  
Subtract:                                
Minimum Guarantees Expensed   $ (10,222 )   $ (9,567 )   $ (43,931 )   $ (15,881 )
Payment Processing for Deferred Revenue (prior period)   $ (161 )   $ (206 )     -       -  
In-App Billing Fees for Deferred Revenue (prior period)   $ (41 )   $ (53 )   $ (98 )     -  
Other Subscriber Related Expenses   $ (1,055 )   $ (630 )   $ (2,151 )   $ (1,949 )
Non-GAAP Variable COGS   $ 41,852     $ 47,747     $ 155,527     $ 81,063  
                                 
Non-GAAP Platform Bookings   $ 44,100     $ 49,198     $ 150,902     $ 75,748  
Subtract:                                
Non-GAAP Variable COGS   $ 41,852     $ 47,747     $ 155,527     $ 81,063  
Non-GAAP Adjusted Contribution   $ 2,248     $ 1,451     $ (4,625 )   $ (5,315 )
Divide:                                
Non-GAAP Platform Bookings   $ 44,100     $ 49,198     $ 150,902     $ 75,748  
Non-GAAP Adjusted Contribution Margin     5 %     3 %     (3 )%     (7 )%

 

Adjusted Contribution represents Platform Bookings minus Variable COGS.

 

Adjusted Contribution Margin is defined as Platform Bookings minus Variable COGS divided by Platform Bookings.

 

    Three Months Ended     Year Ended December 31,  
    June 30,
2020
    March 31,
2020
    2019     2018  
    (in thousands)  
Net Income (loss)   $ (73,604 )   $ (92,301 )   $ (231,481 )   $ (142,404 )
Non-GAAP Adjusted EBITDA     (41,949 )     (36,735 )     (144,485 )     (128,517 )

 

Adjusted EBITDA is net income (loss) calculated in accordance with GAAP plus: (i) interest expense (income); (ii) income tax expense; (iii) depreciation; (iv) amortization; (v) stock-based compensation; (vi) one-time non-cash operating expenses; and (vii) other income (expenses).

 

See the section titled “Reconciliation of Non-GAAP Financial Measures” for more information and reconciliation of our non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

 

 9 

 

 

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. Our net loss for the three months ended June 30, 2020 was $73.6 million. 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 for the three months ended 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 for the three months March 31, 2020. As of June 30, 2020, we had an accumulated deficit of $184.4 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.

 

 10 

 

 

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.

 

 11 

 

 

  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.

 

 12 

 

 

We are not in compliance with the payment obligations of a significant number of our significant content agreements.

 

We are not in compliance with the payment obligations of a significant number of our significant content provider agreements as a result of our inability to make certain fee payments required pursuant to such agreements or our failure to make such payments on time. While we are currently working with our content partners and/or negotiating the terms of these agreements, if we are unsuccessful in renegotiating these agreements or receiving waivers of the due date of payments required thereunder, our partners could terminate these agreements and require us to make these fee payments in their entirety. Further, if our content partners terminate our agreements, we will also lose the right to include their content on our platform. Many of our content partners have an ability to terminate our agreements if we fail to maintain a certain content mix on our platform, so if certain content partners terminate our agreements due to our failure to make payments, we could also lose other content partners, which would likely further depress subscriber acquisition and retention and adversely affect our business, results of operations and financial condition.

 

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.

 

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 payment requirements of certain agreements. In addition, the long-term and fixed cost nature of certain of our 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 operations may be adversely impacted.

 

TV streaming is highly competitive and many companies, including large technology and entertainment 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 or retain 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.

 

 13 

 

 

Companies such as AT&T, Comcast, Cablevision, Cox and Altice, along with vMVPDs, such as YouTube TV, Hulu Live and Sling TV 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. 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. 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.

 

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.

 

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. Travel has been curtailed, and numerous professional and college sports leagues have cancelled or altered seasons and events. 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.

 

 14 

 

 

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. There can be no assurance that financing may be available on attractive terms, if at all. Our workforce has had to spend a significant amount of time working from home, which may impact their productivity. Such limitations caused by the pandemic have also resulted in us seeking extensions for our current and periodic filings with the SEC. 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, which includes channels available through our Attachments, 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 re-join our platform or originate from word-of-mouth referrals 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 cancelled 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 operations 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.

 

In connection with a transition to a new independent registered accounting firm, there is a risk that the new independent registered accounting firm might disagree with certain accounting positions which may result in a restatement of our previously issued financial statements.

 

We have recently engaged KPMG LLP, or KPMG, as our new independent registered accounting firm. In connection with KPMG’s audit of fiscal year 2020, KPMG will review our previously issued financial statements and, in the course of such review, may take positions contrary to those taken by us in consultation with our previous independent registered public accounting firms. If KPMG were to take such contrary positions, the impact of the divergent positions could result in us restating our previously issued financial statements. Any such restatement could adversely affect our reputation and business.

 

Our actual operating results may differ significantly from our guidance.

 

From time to time, we release guidance regarding our future performance, including that set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Outlook.” This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in such release and the factors described under “Cautionary Note on Forward-Looking Statements” in this prospectus and in our current and periodic reports filed with the SEC.

 

Guidance is based upon a number of assumptions and estimates that, although presented with numerical specificity, are inherently subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release this data is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties.

 

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of this prospectus. Any failure to successfully implement our operating strategy or the occurrence of any of the risks or uncertainties set forth in this prospectus could result in actual results being different than the guidance, and such differences may be adverse and material. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

 

The prospective financial information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Outlook” was not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information. Such prospective financial information has been prepared by, and is the responsibility of, our management. Neither our current or former independent registered public accountants or fuboTV Pre-Merger’s former independent auditors have audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to such prospective financial information and, accordingly, neither our current or former independent registered public accountants or fuboTV Pre-Merger’s former independent auditors express an opinion or any other form of assurance with respect thereto.

 

 15 

 

 

We could be subject to claims or have liability based on defects with respect to certain historical corporate transactions that were not properly authorized or documented.

 

We have determined that there have been defects with respect to certain historical corporate transactions, including transactions that were not or may not have been properly approved by our board of directors, transactions that may have breached our organizational documents, or transactions that may not have been adequately documented.

 

While we have attempted to narrow potential future claims by taking certain remedial corporate actions, the scope of liability with respect to such defects is uncertain and we cannot be sure that these actions will entirely remediate these defects or that we will not receive claims in the future from other persons asserting rights to shares of our capital stock, to stock options, or to amounts owed under other equity or debt instruments or investment contracts. To the extent any such claims are successful, the claims could result in dilution to existing shareholders, payments by us to note holders or security holders, us having to comply with registration or other investor rights, which could have a material adverse effect on our business, financial condition and results of operations.

 

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

 

Our agreements with certain 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 favorable 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. 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 cost per mille (“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.

 

 16 

 

 

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.

 

Certain of our subsidiaries are currently delinquent in filing annual tax returns with the Internal Revenue Service and several states. We are in the process of working with our subsidiaries 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 will 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. We may be obligated to collect and remit sales tax in jurisdictions in which we have not previously 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, value added type taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. It is possible that our tax 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 multinational 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.

 

 17 

 

 

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. In the past, we have failed to prepare and disclose this information in a timely manner. 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 expect to experience significant growth in the number of our employees and the scope of our operations. Prior to such expansion, as a result of previously maintaining a limited 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 certain of 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.

 

 18 

 

 

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, and our business and operating results could be materially and adversely affected.

 

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

 

On April 21, 2020, fuboTV Sub received a PPP Loan from JPMorgan Chase Bank, N.A., in the aggregate amount of $4,699,240, 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 fuboTV Sub, which 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 fuboTV Sub 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 has used the entire PPP Loan amount for what we consider to be qualifying expenses, under the current guidance as promulgated by the SBA. 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.

 

 19 

 

 

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. fuboTV Sub 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.

 

As of June 30, 2020 we had $43.7 million of outstanding indebtedness (excluding indebtedness held for sale which was disposed of in July 2020 upon the sale by the Company of all of its interest in Facebank AG to C2A2), which included approximately $22.5 million of indebtedness of fuboTV Sub under its 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 Sub; the PPP Loan, with an aggregate principal amount outstanding of approximately $4.7 million; revenue participation notes with an aggregate amount outstanding of $9.0 million; convertible notes with an aggregate principal amount outstanding of approximately $2,773,000, and other notes outstanding with an aggregate principal of approximately $12.1 million. Furthermore, on July 16, 2020, we incurred a term loan, which we refer to as the Forest Road Loan, from Access Road Capital LLC, or the Forest Lender, in the principal amount equal to $10,000,000, which is currently outstanding. While we have been in noncompliance with the terms of the Forest Road Loan, o n September 30, 2020, we entered into an agreement with the Forest Lender pursuant to which agreed to repay in full, from our cash reserves, all outstanding amounts (inclusive of any interest, fees and penalties) owed under the Forest Road Loan. We expect to make such payment on October 2, 2020. Upon repayment, our credit agreement with the Forest Lender and related loan documentation will automatically terminate and be of no further force or effect, other than those provisions that specifically survive termination or repayment in full of obligations thereunder. Until we have repaid all amounts owed under the Forest Road Loan, for so long as we are still in noncompliance with the terms of the Forest Road Loan, such noncompliance may trigger a cross-default under our other debt instruments, including our AMC Facility, which could permit our creditors to exercise remedies such as accelerating repayment of other debt or foreclosing on pledged assets.

 

As a result of the previously described outstanding indebtedness, 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.

 

Finally, we may be in noncompliance with the terms of certain of our other debt instruments. To the extent we are in noncompliance with the terms of such debt instruments, we may be required to make payments to the holders of such instruments, those holders may be entitled to the issuance of stock by us, and the holders of such stock may be entitled to registration or other investor rights.

 

 20 

 

 

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 service, 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.

 

 21 

 

 

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.

 

Historically, we have acquired certain intellectual property from third parties pursuant to asset purchase agreements or similar agreements in connection with corporate acquisitions and bankruptcy proceedings. We also generally enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. However, these agreements may not have been properly entered into on every occasion with the applicable counterparty, and such agreements may not always have been effective when entered into in granting ownership of, controlling access to and distribution of our proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our platform.

 

An inability to obtain music licenses could be costly and harm our business.

 

The Company relies on its content suppliers to secure the rights of public performance or communication to the public for musical works and sound recordings embodied in any programming provided to or through the Company’s platform. If our content suppliers have not secured public performance or communication to the public licenses on a through to the viewer basis, then the Company could have liability to copyright owners or their agents for such performances or communications. If our content suppliers are unable to secure such rights from copyright owners, then the Company may have to secure public performance and communication to the public licenses in its own name. The Company may not be able to obtain such licenses on favorable economic terms, and music licensors may assert that we have infringed their intellectual property rights in the absence of a license. The occurrence of any of the foregoing risks could harm our business.

 

If our technology, 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 technology and 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.

 

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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.

 

If we develop products and services related to sports betting, our business may become subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business. Any adverse change in regulations or their interpretation, or the regulatory climate applicable to these contemplated products and services, or changes in tax rules and regulations or interpretation thereof related to these contemplated products and services, could adversely impact our ability to operate our business as we seek to operate in the future, which could have a material adverse effect on our financial condition and results of operations.

 

We anticipate our business expanding into sports betting, in which case it will become generally subject to laws and regulations in the jurisdictions in which we will conduct our business or in some circumstances, of those jurisdictions in which we offer our services or those are available, as well as the general laws and regulations that apply to all e-commerce businesses, such as those related to privacy and personal information, tax and consumer protection. These laws and regulations vary from one jurisdiction to another and future legislative and regulatory action, court decisions or other governmental action, which may be affected by, among other things, political pressures, attitudes and climates, as well as personal biases, may at such time have a material impact on our operations and financial results, or may prevent us from expanding into such businesses entirely. In particular, some jurisdictions have introduced regulations attempting to restrict or prohibit online gaming, while others have taken the position that online gaming should be licensed and regulated and have adopted or are in the process of considering legislation and regulations to enable that to happen. In addition, some jurisdictions in which we may operate could presently be unregulated or partially regulated and therefore more susceptible to the enactment or change of laws and regulations.

 

Our growth prospects may also depend on the legal status of real-money gaming in various jurisdictions, predominantly within the United States, which is an initial area of focus, and legalization may not occur in as many states as we expect, or may occur at a slower pace than we anticipate. Additionally, even if jurisdictions legalize real money gaming, this may be accompanied by legislative or regulatory restrictions and/or taxes that make it impracticable or less attractive to operate in those jurisdictions, or the process of implementing regulations or securing the necessary licenses to operate in a particular jurisdiction may take longer than we anticipate, which could adversely affect our future results of operations and make it more difficult to meet our expectations for financial performance.

 

As a result of the foregoing, future legislative and regulatory action, and court decisions or other governmental action, may have a material impact on our operations and financial results. Governmental authorities could view us as having violated local laws, despite efforts to obtain all applicable licenses or approvals. There is also a risk that civil and criminal proceedings, including class actions brought by or on behalf of prosecutors or public entities or incumbent monopoly providers, or private individuals, could be initiated against us, Internet service providers, credit card and other payment processors, advertisers and others involved in the sports betting industry. Such potential proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being imposed upon us or our licensees or other business partners, while diverting the attention of key executives. Such proceedings could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as impact our reputation.

 

Furthermore, there can be no assurance that legally enforceable legislation will not be proposed and passed in jurisdictions relevant or potentially relevant to our business to prohibit, legislate or regulate various aspects of the sports betting industry (or that existing laws in those jurisdictions will not be interpreted negatively). Compliance with any such legislation may have a material adverse effect on our business, financial condition and results of operations, either as a result of our determination not to offer products or services in a jurisdiction or to cease doing so, or because a local license or approval may be costly for us or our business partners to obtain and/or such licenses or approvals may contain other commercially undesirable conditions.

 

Our anticipated participation in the sports betting industry may expose us to risks to which we have not previously been exposed, including risks related to trading, liability management, pricing risk, palpable errors, and reliance on third-party sports data providers for real-time and accurate data for sporting events, among others. We may experience lower than expected profitability and potentially significant losses as a result of a failure to determine accurately the odds in relation to any particular event and/or any failure of its sports risk management processes.

 

Participation in the sports, sports betting industry will expose our business to new risks that we have limited experience in handling. The nature and extent of such risks may be difficult to anticipate at this time, and therefore we may be relatively unprepared to manage these risks, or may obtain inadequate insurance to cover potential claims resulting from these risks.

 

Examples of these risks include:

 

  There can be significant variation in gross win percentage event-by-event and day-by-day, and odds compilers and risk managers are capable of human error; thus even allowing for the fact that a number of betting products are subject to capped pay-outs, significant volatility can occur. In addition, it is possible that there may be such a high volume of trading during any particular period that even automated systems would be unable to address and eradicate all risks.
     
  In some cases, the odds offered on a website constitute an obvious error, such as inverted lines between teams, or odds that are significantly different from the true odds of the outcome in a way that all reasonable persons would agree is an error. It is commonplace virtually worldwide for operators to void bets associated with such palpable errors, and in most mature jurisdictions these bets can be voided without regulatory approval at operator discretion, but in the U.S., it is unclear long term if state-by-state regulators will consistently approve voids or re-setting odds to correct odds on such bets, and in some cases, we may require regulatory approval to void palpable errors ahead of time. If regulators were to not allow voiding of bets associated with large obvious errors in odds making, we could be subject to covering significant liabilities.
     
  We may need to rely on other third-party sports data providers for real-time and accurate data for sporting events, and if such third parties do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected.

 

Any of the foregoing risks, or other risks we fail to anticipate as we expand our business into the sports betting industry, could expose us to significant liability or have a material adverse effect on our business, financial condition and results of operations.

 

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 businesses 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 other 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.

 

Further, Brexit has created uncertainty with regard to data protection regulation in the UK. In particular, while the Data Protection Act of 2018, which “implements” and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR. During the period of “transition” (i.e., until December 31, 2020), EU law will continue to apply in the UK, including the GDPR, after which the GDPR will be converted into UK law. Beginning in 2021, the UK will be a “third country” under the GDPR. We may incur liabilities, expenses, costs, and other operational losses under GDPR and the privacy laws of applicable EU Member States and the United Kingdom in connection with any measures we take to comply with them.

 

Although certain legal mechanisms have been designed to allow for the transfer of personal data from the UK, EEA and Switzerland to the United States, uncertainty about compliance with such data protection laws remains and such mechanisms may not be available or applicable with respect to the personal data processing activities necessary to research, develop and market our products. For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers, such as the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks. Specifically, on July 16, 2020, the Court of Justice of the European Union invalidated Decision 2016/1250 on the adequacy of the protection provided by the EU-U.S. Privacy Shield Framework. To the extent that we were to rely on the EU-U.S. Privacy Shield Framework, we will not be able to do so in the future, which could increase our costs and limit our ability to process personal data from the EU. The same decision also cast doubt on the ability to use one of the primary alternatives to the Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, to lawfully transfer personal data from Europe to the United States and most other countries.  At present, there are few if any viable alternatives to the Privacy Shield and the Standard Contractual Clauses.

 

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 (including, without limitation, the Payment Card Industry Data Security Standard) 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, card associations, 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, reputation, financial condition, and results of operations.

 

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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. In some instances, we have certain protections against claims related to such subscriber generated content, including or defamatory content. Specifically, Section 230 of the Communications Decency Act (CDA) provides immunity from liability for providers of an interactive computer service who publish defamatory information provided by users of the service. Immunity under the CDA has been well-established through case law. On a regular basis, however, challenges to both laws seek to limit immunity. For example, a recent executive order and a letter from several senators to the Federal Communications Commission (FCC) have renewed calls for the protections of Section 230 to be scaled back. Any such changes could affect our ability to claim protection under the CDA.

 

Moreover, as Internet commerce and advertising continues to evolve, increasing regulation by federal, state and foreign regulatory authorities becomes more likely. For example, California’s Automatic Renewal Law requires companies to adhere to enhanced disclosure requirements when entering into automatically renewing contracts with consumers. Other states have enacted similar laws in recent years. As a result, a wave of consumer class action lawsuits has been brought against companies that offer online products and services on a subscription or recurring basis, and we have received a letter alleging that we may have violated such a law. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, lost business, and proceedings or actions against us by governmental entities or others, which could impact our operating results.

 

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 and security 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 the operations or security of 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.

 

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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, and we may be operating outside the terms of some of our current licenses. 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.

 

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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 have a negative impact on our products and service and our financial position. See “Risk Factors—We are not in compliance with the payment obligations of a significant number of our significant content agreements.

 

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 generate revenue. 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.

 

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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, employees who are inattentive or careless and cause security vulnerabilities, 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.

 

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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, trade secrets, 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.

 

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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 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 Google Cloud Platform and Amazon Web Services to operate certain aspects of our service, and any disruption of or interference with our use of Google Cloud Platform and/or Amazon Web Services would impact our operations and our business would be adversely impacted.

 

Each of Google Cloud Platform, or GCP, and 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 both GCP and AWS. Currently, we run the vast majority of our computing on GCP with some key components running on AWS. Given this, along with the fact that we cannot easily switch what is specifically running now on GCP and/or AWS to another cloud provider, any disruption of or interference with our use of GCP and/or AWS would impact our operations, and our business would be adversely impacted. While Google (through YouTube TV) and, to a lesser extent, Amazon (through Amazon Prime) compete with us, we do not believe that Google or Amazon will use GCP or AWS in such a manner as to gain competitive advantage against our service, although if either Google or Amazon were 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 re-join 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.

 

This variability makes it difficult to forecast our future results with precision and to assess accurately whether increases or decreases are likely to cause quarterly or annual results to exceed or fall short of previously issued guidance. While we assess our quarterly and annual guidance and update such guidance when we think it is appropriate, unanticipated future volatility can cause actual results to vary significantly from our guidance, even where that guidance reflects a range of possible results.

 

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. While our common stock has been approved for listing on the New York Stock Exchange, conditional upon the successful pricing of this offering, we still cannot give any assurance that a more active public trading market for our common shares will develop or be sustained.

 

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.

 

Participation in this offering by entities affiliated with Dragoneer Investment Group, LLC could reduce the public float for our shares.

Certain entities affiliated with Dragoneer Investment Group, LLC, have indicated an interest in purchasing up to 5,000,000 shares of our common stock in this offering at the assumed offering price per share of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. Because this indication of interest is not a binding agreement or commitment to purchase, such entities could determine to purchase more, less, or no shares in this offering, or the underwriters could determine to sell more, less, or no shares to such entities.

If these entities purchase all or a portion of the shares in which they have indicated an interest in this offering, such purchase could reduce the available public float for our shares if such entities hold these shares long-term.

 

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. New investors in such future transactions could gain rights, preferences and privileges senior to those of holders of our common stock. In addition, following this offering, the Board intends to increase the number of shares available under the 2020 Equity Incentive Plan, or the 2020 Plan, so that the number of shares available for issuance post-offering is equal to between 10% and 15% of our shares outstanding following the offering on an as-converted basis (which we calculate to be between 12,940,752 and 19,411,127 shares of common stock). Such increase is subject to shareholder approval. In addition, the Board intends to grant our Chief Executive Officer a stock option to purchase shares of our common stock. The number of shares subject to such option is expected to be between 2.5% and 3.5% of our shares outstanding following the offering on an as-converted basis (which we calculate to be between 3,235,188 and 4,529,263 shares of common stock), all or a portion of which will be subject to forfeiture if the shareholders do not approve the increase to the shares reserved under the 2020 Plan.

 

If we issue the contemplated stock option to our Chief Executive Officer and/or if we issue additional stock options under our 2020 Equity Incentive Plan, shareholders may be materially diluted.

 

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, and if our operating and financial performance does not meet the guidance that we provide to the public, the market price of our common stock may decline.

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

In addition, we may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline. 

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS,

 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus may be forward-looking statements. 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, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the offering, guidance for the third and fourth quarters of 2020 and for the fiscal year 2021, as described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Outlook,” liquidity, growth and profitability strategies and factors and trends affecting our business, 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 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;
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