Unless otherwise indicated, references in this Annual Report on Form 10-K to "FaceBank," "we," "us," "our" and the "Company" are to FaceBank Group, Inc. and its subsidiaries, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the accompanying related notes included in this Annual Report on Form 10-K.





Overview

FaceBank Group, Inc. was incorporated under the laws of the State of Florida in February 2009 under the name York Entertainment, Inc. On September 30, 2019, the Company's name was changed to FaceBank Group, Inc.

On April 1, 2020, FaceBank effected a merger (the "Merger") pursuant to which fuboTV, Inc., a Delaware corporation and a leading live TV streaming platform for sports, news and entertainment, became a wholly owned subsidiary of the Company. On May 1, 2020, the Company's trading symbol was changed to FUBO.

Before the Merger, Facebank Group was and continues to be a character-based virtual entertainment company, and a leading developer of digital human likeness for celebrities and consumers, focused on applications in traditional entertainment, sports entertainment, live events, social networking, mixed reality (AR/VR) and artificial intelligence. Facebank Group is positioned as a technology driven, intellectual property company with significant revenue participations in the digital likeness of leading celebrities and character-based entertainment properties.

Following the Merger, we operate our business under the name "fuboTV" and we are in the process of changing the name of FaceBank Group, Inc. to fuboTV, Inc.





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Nature of Business

The Company is a leading digital entertainment company, combining fuboTV's direct-to-consumer live TV streaming platform with FaceBank's technology-driven IP in sports, movies and live performances. This business combination, operating as fuboTV, Inc., will create a content delivery platform for traditional and future-form IP. fuboTV plans to leverage FaceBank's IP sharing relationships with leading celebrities and other digital technologies to enhance its already robust sports and entertainment offerings.

Since the Merger, while we continue our previous business operations, we are principally focused on offering consumers a leading live TV streaming platform for sports, news and entertainment through fuboTV. fuboTV revenues are almost entirely derived from the sale of subscription services and advertising in the United States, though fuboTV has started to assess expansion opportunities into international markets, with operations in Canada and the launch in late 2018 of its first ex-North America offering of streaming entertainment, to consumers in Spain.

Our subscription-based services are offered to consumers who can sign-up for accounts at https://fubo.tv, through which we provide basic plans with the flexibility for consumers to purchase the add-ons and features best suited for them. Besides the website, consumers can also sign-up via some TV-connected devices. The fuboTV platform provides, what we believe to be, a superior viewer experience, with a broad suite of unique features and personalization tools such as multi-channel viewing capabilities, favorites lists and a dynamic recommendation engine as well as 4K streaming and Cloud DVR offerings.

Results of Operations for the Years Ended December 31, 2019 and 2018





                                                Years Ended December 31,
                                                  2019              2018
          Revenues                            $       4,271               -
          General and administrative                (13,793 )        (6,746 )
          Amortization of intangible assets         (20,682 )        (8,209 )
          Impairment of intangible assets            (8,598 )             -
          Depreciation                                  (83 )            (8 )
          Other income (expense)                     (4,514 )          (243 )
          Income tax benefit                          5,272           2,114
          Net loss                            $     (38,127 )     $ (13,092 )




Revenues

During the year ended December 31, 2019 we recognized net revenues of approximately $4.3 million related primarily from the sale of software licenses. There were no revenues recognized for the year ended December 31, 2018.





General and administrative

During the year ended December 31, 2019 general and administrative expenses totaled $13.8 million compared to $6.8 million for the year ended December 31, 2018. The increase of $7.0 million is primarily related to $7.7 million of general and administrative expenses from our 2019 acquisitions of Facebank AG and Nexway, offset by $0.7 million of lower general and administrative expenses, consisting of $2.5 million of lower stock-based compensation expenses, offset by increases of $1.8 million for employee salaries and related expenses, legal and professional fees, and other administrative expenses.

Amortization of intangible assets

During the year ended December 31, 2019 amortization expenses for intangible assets totaled $20.7 million compared to $8.2 million for the year ended December 31, 2018. The increase of $12.5 million was primarily due to amortization expenses recognized in connection with our acquisition of Evolution AI Corp in September 2018.





Long-Term Asset Impairments

During the year ended December 31, 2019 impairment expenses related to long-term assets totaled $8.6 million. We recognized $8.6 million of impairments related to the intangible assets acquired in connection with our acquisitions of Nexway and Facebank AG.





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Other Income/Expense

During the year ended December 31, 2019 other expenses totaled $4.5 million compared to other expenses of $0.2 million for the year ended December 31, 2018. The $4.3 million increase to other expenses was primarily related to $8.3 million of losses recorded on investments in connection with our acquisitions of Facebank AG and Paddle 8, and our Panda investment, $2.1 million of interest expense related to our convertible notes and long-term borrowings, $0.2 million recorded for the change in fair value of our Panda interests, offset by $4.5 million recorded for the change in fair value of our subsidiary warrant liability, and $0.8 million for the change in fair value of our derivative liability related to our convertible notes and series D preferred stock.





Income Taxes

During the year ended December 31, 2019, we recognized an income tax benefit of $5.3 million. The Company's deferred tax liability and income tax benefit relates to our amortizable intangible assets. The amortization of intangible assets of $20.7 million caused the deferred tax liability to decrease by $5.3 million, which resulted in the recognition of an income tax benefit.

During the year ended December 31, 2018, we recorded an income tax benefit of $2.1 million. The Company's deferred tax liability is tied to our amortizable intangible assets. The amortization of intangibles of $8.2 million caused the deferred tax liability to decrease from $2.1 million, which resulted in an income tax benefit for the period.





Net Income/Loss

During the year ended December 31, 2019 and 2018, our net loss was $38.1 million and $13.1 million, respectively.





Liquidity and Going Concern



Cash Flows (in thousands)



                                                December 31,
                                             2019         2018

Net cash used in operating activities $ 1,731 $ (3,153 ) Net cash used in investing activities 1,509

            -

Net cash provided by financing activities 4,353 3,107 Net decrease in cash

$ 7,593     $    (46 )

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

The Company has cash of $7.6 million, a working capital deficiency of $49.5 million and an accumulated deficit of $56.1 million at December 31, 2019. The Company recorded a net loss of $38.1 million and net cash provided by operating activities was $1.7 million for the year ended December 31, 2019. The Company expects to continue incurring losses in the foreseeable future and will need to raise additional capital to fund its operations, meet its obligations in the ordinary course of business and execute its longer-term business plan. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year from the date that those financial statements are issued. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management believes that the Company has access to capital resources through potential issuances of debt and equity securities. The ability of the Company to continue as a going concern is dependent on the Company's ability to execute its strategy and raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity securities for cash, to operate its business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case or equity financing. In addition to the foregoing, based on the Company's current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of a novel strain of coronavirus ("COVID 19"). However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.





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The Company's future capital requirements and the adequacy of its available funds will depend on many factors, including its ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings.

The ability of the Company to continue as a going concern is dependent on the Company's ability to execute its strategy and to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity securities for cash to operate its business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case or equity financing.

In addition to the foregoing, based on the Company's current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of a novel strain of coronavirus ("COVID 19"). However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.





Operating Activities

For the year ended December 31, 2019, net cash provided by operating activities was $1.7 million, which consisted of our net loss of $38.1 million, adjusted for non-cash expenses of $28.1 million including, $8.6 million of impairment charges recorded for intangible assets acquired with our acquisitions of Facebank AG and Nexway, $20.7 million of amortization expenses related to our intangible assets acquired with Evolution AI, $8.3 million of losses recorded on investments, $1.4 million of stock-based compensation, and $0.6 million of amortization of the debt discount, offset by $5.3 million related to the change in fair value of our subsidiary warrant liability and our derivative liability, and $5.3 million of income tax benefit. Changes in operating assets and liabilities primarily consisted of increases in accounts payable of $5.5 million, offset by a decrease in accounts receivable of $7.7 million.

For the year ended December 31, 2018, net cash used in operating activities was $3.2 million, which primarily consisted of our net loss of $13.1 million, adjusted for non-cash expenses of $9.3 million including, $8.2 million of depreciation and amortization expenses, $3.8 million of stock-based compensation expense, $1.5 million of amortization expense for the debt discount related to our convertible notes, offset by $2.1 million of income tax benefit, $1.9 million for the gain on extinguishment related to our convertible notes, $0.7 million for the change in fair value of our derivative liability, and the increase in accounts payable and accrued expenses of $0.6 million.





Investing Activities

For the year ended December 31, 2019, net cash provided by investing activities was $1.5 million, which primarily consisted of $2.3 million of cash received, net of cash paid, in connection with our acquisition of Facebank AG and Nexway, $1.0 million paid for our investment in Panda Productions (HK) Limited ("Panda"), offset by $0.7 million received from accredited investors for an interest in Panda, $0.2 million paid for intangible assets related to our Virtual Mayweather agreement, and $0.2 million purchases of property and equipment.

There were no investing activities for the year ended December 31, 2018.





Financing Activities

For the year ended December 31, 2019, net cash provided by financing activities was $4.4 million. The net cash provided is primarily related to $3.6 million of proceeds received from the sale of our common stock and warrants, $0.7 million of proceeds received from the issuance of our preferred stock, $0.4 million received as an advance from a related party, $0.8 million of proceeds received from the issuance of a convertible note and $0.1 million of proceeds received from the issuance of our subsidiary's common stock, offset by repayments of $0.5 million in connection with our convertible notes, repayments of $0.4 million to related parties, and $0.3 million paid for the redemption of our Series D preferred stock.

For the year ended December 31, 2018, net cash provided by financing activities was $3.1 million. The net cash provided is primarily related to $3.1 million of proceeds received from the sale of our common stock, $1.8 million of proceeds received from the issuance of our convertible notes, offset by repayments of $1.8 million of our convertible notes.

Off-Balance Sheet Arrangements

As of December 31, 2019, there were no off-balance sheet arrangements.





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Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. We evaluate, on an ongoing basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that we report in our consolidated financial statements. The Securities and Exchange Commission (the "SEC"), considers an entity's most critical accounting policies to be those policies that are both most important to the portrayal of a company's financial condition and results of operations and those that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation. For a more detailed discussion of the accounting policies of the Company, see Note 4 of the Notes to the Consolidated Financial Statements, "Summary of Significant Accounting Policies".

We believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation of our consolidated financial statements.

Impairment Testing of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

During the year ended December 31, 2019, the Company recorded impairment charges of approximately $8.6 million related to the intangible assets acquired with the Company's acquisition of Nexway and Facebank AG.

Acquisitions and Business Combinations

The Company allocates the fair value of purchase consideration issued in business combination transactions to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trade-marks and trade names, useful lives, and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

The Company tests goodwill for impairment at the reporting unit level on an annual basis on December 31 for each fiscal year or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a single reporting unit is less than its carrying amount under ASU No. 2017-04, Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, issued by the FASB. If it is determined that the fair value is less than its carrying amount, the excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss.

The Company tested goodwill for impairment as of December 31, 2019 and based on its review, the Company did not record a goodwill impairment charge during the year ended December 31, 2019. There were no goodwill impairment charges recorded during the year ended December 31, 2018. Changes in economic and operating conditions and the impact of COVID-19 could result in goodwill impairment in future periods.





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Intangible Assets

The Company's intangible assets represent definite lived intangible assets, which are being amortized on a straight- line basis over their estimated useful lives as follows:





               Human animation technologies                7 years
               Trademark and trade names                   7 years
               Animation and visual effects technologies   7 years
               Digital asset library                     5-7 years
               Intellectual Property                       7 years
               Customer relationships                     11 years

Revenue From Contracts With Customers

The Company recognizes revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (the "revenue standard") on a net basis, as the Company is an agent and not a principal. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. The following five steps are applied to achieve that core principle:





  ? Step 1: Identify the contract with the customer
  ? Step 2: Identify the performance obligations in the contract
  ? Step 3: Determine the transaction price
  ? Step 4: Allocate the transaction price to the performance obligations in the
    contract
  ? Step 5: Recognize revenue when the company satisfies a performance obligation

The Company recognized net revenues from contracts with customers of approximately $4.3 million during the year ended December 31, 2019, primarily from the sale of software licenses. Revenue from the sale of software licenses are recognized as a single performance obligation at the point in time that the software license is delivered to the customer. The Company under its contracts is required to provide its customers with 30 days to return the license for a full refund, regardless of reason, and the Company will be provided a refund in full of its cost to sell the license. Therefore, for Nexway, the Company acts as an agent and recognizes revenue on a net basis.

Derivative Financial Instruments

The Monte Carlo Model was used to estimate the fair value of the embedded conversion features of the Company's convertible notes. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the convertible notes. There were no extinguishment charges, as the notes converted to shares in accordance with the prepayment provisions specified in the note agreements.





Warrant Liability

The Company accounts for common stock warrants with cash settlement features as liability instruments at fair value. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's consolidated statements of operations. The fair value of liabilities classified as warrants has been estimated using the Monte Carlo simulation model.





Convertible Preferred Stock

Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control, as temporary equity ("mezzanine") until such time as the conditions are removed or lapse.

Recently Issued Accounting Pronouncements

See Note 4 in the accompanying consolidated financial statements for a discussion of recent accounting policies.

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