fuboTV Inc. /FL - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2019

Or

For the transition period from ______ to ______

Commission file number 000-55353

FaceBank Group, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (212) 672-0055

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.0001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes [  ] No [X]

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates on June 28, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter) was $82,999,601.

The number of shares outstanding of the registrant’s common stock as of May 29, 2020, was 34,848,495 shares.

DOCUMENTS INCORPORATED BY REFERENCE — NONE

EXPLANATORY NOTE

On March 4, 2020, the Securities and Exchange Commission (the “SEC”) issued an order (Release No. 34-88318) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, as amended by Release No. 34-88465 issued on March 25, 2020 (as amended, the “Order”). The Order provided public companies with a 45-day extension to file certain disclosure reports, including their Annual Report on Form 10-K that would otherwise have been due between March 1, 2020 and July 1, 2020. As disclosed in FaceBank Group, Inc.’s (the “Company”) Current Report on Form 8-K filed with the SEC on March 31, 2020 (the “8-K”), the Company is relying on the Order and was unable to file this Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) on a timely basis due to the novel coronavirus pandemic (“COVID-19”). The headquarters and finance operations of the Company’s principal operating subsidiary are located in France. Local health authorities in France have enacted stringent restrictions designed to minimize risk to exposure to COVID-19 that have resulted in the mandatory confinement of people to their homes, subject to limited exceptions. In addition, due to travel restrictions imposed by the governments of the United States and France in the wake of the COVID-19 outbreak, the Company’s U.S. based independent auditor was unable to travel to France to perform the site visits needed to complete the audit of the Company’s financial statements for the fiscal year ended December 31, 2019. These restrictions have prevented the Company’s personnel and auditors from accessing the offices of the Company’s subsidiary in France. All of the foregoing slowed the accounting and auditing work required to compile and audit the Company’s financial statements for the year ended December 31, 2019 to be included in the Annual Report. Based on the foregoing, on March 31, 2020, the Company filed the 8-K to avail itself of a 45-day extension to file this Annual Report relying on the exemptions provided by the SEC Order. This Annual Report on Form 10-K is being filed in reliance on the SEC Order.

TABLE OF CONTENTS

FORM 10-K

Part I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this annual report on Form 10-K contains “forward-looking statements.” These forward-looking statements are contained principally in the sections titled “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; the relative cost of our operation methods as compared to our competitors; new production projects, entry and expansion into new markets; achieving status as an industry leader; our competitive advantages over our competitors; brand image; our ability to meet market demands; the sufficiency of our resources in funding our operations; our intention to engage in mergers and acquisitions; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to: the risks of limited management, labor and financial resources; the risks generally associated with develop stage companies; our ability to establish and maintain adequate internal controls; our ability to develop and maintain a market in our securities; and our ability obtain financing, if and when needed, on terms that are acceptable. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

As used in this annual report on Form 10-K, “FaceBank,” “we”, “our”, “us” and the “Company” refer to FaceBank Group, Inc., a Florida corporation, and its subsidiaries unless the context requires otherwise.

Item 1. BUSINESS

Overview and Corporate Information

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. Our headquarters relocated to 1330 Avenue of the Americas, New York, NY 10019 following the merger, and our telephone number is (212) 672-0055. You can access our websites, including historical financial information pertaining to fuboTV, Inc., 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 Annual Report on Form 10-K and is not incorporated by reference herein.

The financial statements included in this Annual Report on Form 10-K represent only the historical operating results of Facebank Group, Inc. and do not include the operating results of fuboTV, Inc.

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.

Industry Overview

With the broad global adoption of internet connectivity, streaming platforms have seen rapid adoption as consumers engage with TV and audio through a variety of devices, including TV, mobile phones and tablets. The penetration of multiple devices and streaming has brought the convenience of watching whatever, whenever and wherever to consumers. According to Comscore over-the-top media services (“OTT”) Intelligence data, as of March 2019, half of all US households have OTT streaming. Streaming continues to increase its share of TV viewing hours, now accounting for 15% of total TV viewing hours based on 3 month average in March 2019, but is still in the early innings of adoption. The majority, 65% of OTT viewing households, still have subscriptions to traditional PayTV, according to Comscore OTT Intelligence. While traditional live TV accounts for the majority of TV viewing hours for US households, the proportion is declining as customers continue cutting the cord. Consumers are increasingly favoring the streaming experience and lower cost of streaming services. As stated in a February 2019 eMarketer report, cord-cutters and cord-nevers are expected to reach 49 million US households in 2020.

Historically, sports and news have been a key growth driver for PayTV operators to attract audiences at scale. Amongst streaming providers, live sports and news represent a largely untapped opportunity, as virtual multichannel video programming distributors, or vMVPDs, have been focused largely on entertainment offerings. Avid sports fans have been forced to stay tethered to the PayTV ecosystem. According to a December 2019 Moffett Nathansan report, 60% of US households consume sports on a regular basis and 90% of sports consuming households continue to subscribe to PayTV, creating a significant opportunity to provide live sports over streaming.

PayTV has been slow to adapt to changing customer needs. In its Telecommunications Report, the American Customer Satisfaction Index (ACSI) found that streaming-video services averaged a score of 76 out of 100 while traditional PayTV remained substantially lower at 62 out of 100 (last places amongst the 46 industries tracked by ASCI) in 2019. Further, according to Leichtman Research Group as of November 2019, the average US cable package costs $110 per month, significantly higher than virtually all OTT options. PayTV providers have struggled to retain consumers, as US PayTV households decreased by 5.9 million in 2019, according to eMarketer. Virtual MVPDs (vMVPDs), services that provide multiple television channels via broadband, are quickly taking a share of the market by delivering greater value at a lower price. vMVPDs offer consumers a larger range of content that can be viewed anywhere, on any device, online or off, and with new features continuously being innovated. With superior direct-to-consumer (DTC) relationships and easier, more convenient functionality, we believe it will be a matter of time before streaming is the preferred medium across all platforms for TV consumption.

We also expect that the COVID-19 pandemic will have lasting effects on consumer behavior. With the increasing likelihood of sports resuming with empty stadiums and otherwise generally limited in-person viewership, we believe fans will turn to digital streaming solutions. vMVPDs are also a more affordable alternative to PayTV, which, we believe, in this current economic climate, further accelerates adoption.

Our Market Opportunity

The rapid shift to TV streaming has disrupted the traditional cable TV distribution model, creating new options for consumers and new opportunities for broadcasters and advertisers. Cord-cutting and cord-never households continue to accelerate adoption in the US, as PayTV subscribers increasingly favor the streaming experience. We believe this creates significant opportunities for vMVPDs to address the $199 billion global PayTV services market in 2018, according to a September 2019 Digital TV Research report.

Traditional Linear TV advertising spending in the U.S. was $71 billion in 2019, according to a March 2020 eMarketer report, and is expected to be $175 billion globally in 2020, according to a June 2019 MAGNA report. As consumers continue to spend more time streaming content, we believe advertisers will allocate dollars away from traditional TV advertising to advertising on streaming services. According to a MAGNA April 2019 report, OTT advertising spending is expected to reach $5 billion in 2020. Today, streaming accounts for 15% of total TV hours viewed, but only attracts 5% of ad spending. If OTT advertising spending rises to levels commensurate with current share of viewing hours, this represents over $10 billion of additional opportunity.

Streaming platforms have a significant opportunity to enable digital subscriptions, eCommerce transactions and other consumer services. We believe our sports-first product offering is well suited to facilitate sports wagering in the future as a natural extension of engaging sports content. Sports wagering is a rapidly growing and large opportunity. According to H2 Gambling Capital, the global online sports wagering market was estimated to be approximately $70 billion in 2019.

Our Offerings

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 (Adults 18-49; Primetime), dozens of channels with sports, the most news, and the most popular entertainment channels on television. Subscribers have the option to add premium channels and additional channel packages, as well as upgrade features such as more Cloud DVR storage and additional simultaneous streams with Family Share.

fuboTV streams most NFL, MLB, NBA and NHL games, all major soccer leagues and a wide range of college and other sports. Airing nearly 35,000 sporting events per year on the channels we carry, our extensive sports coverage attracts sports-fans looking to replace cable TV. While our sports offerings are key to customer acquisition, our broader entertainment and live news continue to drive viewership and retention on the platform. fuboTV has a robust news lineup with more news channels in its base plan than any other live TV streaming platform and also offers over 700 local TV channels covering 99% of US households. Additionally, fuboTV’s entertainment offering includes more than 30,000 TV shows and movies via VOD each month.

Our Competition

The TV streaming market continues to grow and evolve as more viewers shift from traditional PayTV to streaming. There is significant competition in the TV market for users, advertisers and content. We principally compete with legacy PayTV operators, such as AT&T / DirecTV, Charter, Comcast, Cox and Altice, along with other vMVPDs. While the presence of these competitors in the market has helped to boost consumer awareness of TV streaming, contributing to the growth of the overall market, their resources and brand recognition present substantial competitive challenges.

We compete on various factors to acquire and retain users. These factors include quality and breadth of content offerings, especially within live sports; features of our TV streaming platform, including ease of use and superior user experience; brand awareness in the market; and perceived value relative to the price of our service. Additionally, we compete for user engagement. Many users have multiple subscriptions to various streaming services and allocate time and money between them.

We also face competition for advertisers, which in part depends on our ability to acquire and retain users. Providing a large and engaged audience is crucial for advertisers on our live TV streaming platform. In the TV streaming market, the effectiveness of advertisements and return on investments play a pivotal role. As such, we are also competing for advertisers based on the return of ads compared to various other digital advertising platforms, including mobile and web. Additionally, advertisers continue to allocate a large portion of spend to advertise offline. Therefore, we also compete with traditional media platforms such as linear TV and radio. We are increasingly leveraging our data and analytics capabilities to optimize advertisements for both users and advertisers. We need to continue to maintain an appropriate advertising inventory for the growing demand for ads on our platform.

Furthermore, we compete to acquire exclusive content. While the broadcast and cable network content that comprises the vast majority of our offering is non-exclusive, our ability to additionally license exclusive content from right holders is dependent on the scale of our user base as well as license terms.

We also believe the prior work of our principals, continues to position the Company as a recognized leader in the production of hyper-realistic digital humans for applications in entertainment. We are aware of a number of companies connected to the video game market that are also attempting to improve the realism of digital humans in video game applications, and in other real-time applications. Traditional feature film visual effects companies also, from time to time, produce digital human characters for feature films. While such companies, in the video game markets and in the film markets, have struggled to produce digital human characters that are extremely realistic and believable as humans, we do expect the demand for digital humans and related applications to grow and such competition to intensify.

Our Competitive Strengths

We believe that our revenue and subscriber growth are a result of the following competitive strengths:

Comprehensive Sports, News & Entertainment Content

fuboTV began as a niche, soccer centric product offering and has since leveled up to become one of the broadest OTT entertainment offerings with over 75% of “C3” Viewership and many top Nielsen-ranked sports, news and entertainment channels for cord-cutters. C3 is a metric that is used by Nielsen TV ratings to measure TV viewership in live programming plus total playback by digital video recorder (ex. DVR) out to three days after. Nielsen TV ratings are the audience measurement systems operated by Nielsen Media Research that seek to determine the audience size and composition of television programming in the United States using a rating system. While we continue to hook consumers with extensive premium sports content, our increasingly broad and deep news and entertainment offerings drive total viewership and retention of our users. We believe we will continue to grow our premium content offering through identifying and executing strategic deals that best suit our consumer’s preferences.

Technology-driven, Character-based Entertainment IP

We believe our globally recognized human animation and digital likeness technologies, which have allowed us to secure attractive long-term revenue sharing relationships with leading celebrities and entertainment properties, represent an attractive and potentially lucrative opportunity to offer innovative new forms of entertainment content to our subscriber and to consumers at large. We currently have revenue participation rights, marketing licenses and/or residual rights pertaining to the digital likeness of Floyd Mayweather, Muhammad Ali, Michael Jackson, Elvis Presley, Marilyn Monroe, and ABBA. We also own minority interests in a production company which holds the exclusive rights to live theatrical adaptations of Dreamwork’s Kung Fu Panda in the continent of Asia. 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.

Intuitive User Experience

We believe our intuitive user experience and product features will enable us to become a leading OTT entertainment service. We believe that investing in the user experience has and will continue to generate significant benefits for our platform. We believe we are continually innovating to give subscribers a premium viewing experience they can’t 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 live streaming and personalization. The platform provides a broad suite of unique features and personalization tools such as multiple viewing capabilities, favorites lists and a dynamic recommendation engine as well as 4K streaming and Cloud DVR offerings. Through our dedication to providing a best-in-class customer experience, we have received overwhelmingly positive feedback. As our personalization becomes more refined, we believe we will increase our current users’ engagement and will attract new users to our platform.

Proprietary Technology with Enhanced Features

Proprietary technology and data are foundational to our sustainable competitive advantage. Our DTC model enables significant data capture, allowing us to best understand and adjust to our consumer needs, based on data points collected monthly from users. Coupling the deep understanding of our users from the data collected with our consistent investment in automated monitoring and our machine learning-based recommendation engine has allowed us to better address customer needs and enhance both user experience and targeted advertising opportunities. Further, we have continued to increase our IP portfolio to 15 issued, published and pending patents. We believe our proprietary technology infrastructure will continue to enable us to provide an unmatched user experience to our subscribers and is scalable, providing an ongoing cost and margin advantage as we grow.

Delivering Significant Value to Our Subscribers

We seek to provide a flexible product offering, delivering leading bundles for consumers that best meet their price point. With a broad menu of subscription plans and platform add-ons, subscribers are able to customize their offering with enhanced features and content, providing a valued platform at an attractive price. fuboTV’s base package is significantly cheaper than traditional PayTV options and includes 100+ channels across a variety of sports, news and entertainment content. In order to provide flexibility in pricing and the best value for our subscribers, our add-on options are an incremental cost to the base plan and enable users to purchase both enhanced content (e.g. Sports Plus, which features NFL RedZone; SHOWTIME) and feature attachments (e.g. enhanced Cloud DVR, Family Share plan). fuboTV is also the only vMVPD to stream in 4K. Our value to subscribers continues to be exhibited as we continue to drive more subscribers to the platform and have experienced increased retention levels as our platform matures.

Our Growth Strategy

We believe that we are at the very 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 variety, flexible access 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 are:

Our Business Model

We drive our business model with three core activities:

Grow Our Paid Subscriber Base

We are still in the early stages of growth. As of December 31, 2019, we had 315,789 paid subscribers, a small fraction of the $199 billion global PayTV market. We plan to continue to attract more users with a highly compelling OTT streaming value proposition that allows users to access the most comprehensive live sports offering, as well as the most relevant channels for news and entertainment, at a significantly lower price relative to traditional PayTV. We believe our success in growing our subscriber base is due to our data-driven digital marketing efforts and our broadening customer demographics. We believe international expansion represents a large opportunity to grow our subscriber base. We plan to invest in our international strategy over time and become a global business in the long term.

We have both Free Trial Users, who have created an account and are within the 7-day free trial period, and Paid Subscribers (“subscribers”), who have a paid subscription and from whom we have collected payment for the current cycle.

We have grown our Paid subscriber base significantly over the past several years and ended 2019 with 315,789 paid subscribers, up 37% year over year.

Grow Engagement & Retention

We intend to increase user engagement and hours streamed by offering more content that is easier to find and discover on our platform, including more News and Entertainment. By increasing the available content on our platform and making it easily accessible, we have diversified the type of content streamed, resulting in higher customer engagement and retention.

Monthly active users (MAUs) refers to the total count of subscribers that have consumed content for greater than 10 seconds in the last 30 days from the period-end indicated. In December 2019, our monthly active users (MAUs) watched 123 hours across the platform on average, and those who streamed primarily on connected TVs watched an average of 144 hours. Content hours per MAU is a key metric and our users (paid and trial/free) streamed 298.7 million hours in 2019, a 210% increase year over year.

We have identified the following three key drivers that we believe have helped us increase our subscriber engagement:

Engagement is the leading indicator of retention for our subscribers. We have continued to increase subscriber engagement, which has resulted in an increased average number of content hours per MAU, representing an increase from 34 hours in the first quarter of 2018 to 123 hours in the fourth quarter of 2019.

Further, we believe that the consistent improvements we have driven in engagement have led to an increased retention rate amongst our subscribers.

Increase Monetization

We expect to continue to grow Average Revenue Per User (“ARPU”), which is our subscription revenue and ad revenue divided by average daily paid subscribers in the relevant period, by growing hours streamed and enhancing our advertising monetization capabilities. Advertising-based content is our fastest growing segment, and we are increasing the monetization of these hours by expanding our advertising capabilities. We intend to continue to leverage our data and analytics to deliver relevant advertising and improve the ability of our advertisers to optimize their campaigns and measure their results.

ARPU increased 42% YoY to $53.80 in 2019. Our 2 main sources of revenue are Subscription revenue and Advertising revenue, both of which have seen continuous growth since 2017. Our subscription ARPU increased to $49.37 while advertising ARPU grew to $4.43.

We believe that additional attachments to the basic package such as premium content packages as well as services which include Cloud DVR will be a key driver of increasing ARPU for our existing and future subscriber base, and we have already seen the number of attachments grow significantly.

Key Factors Affecting Performance

Intellectual Property

Our intellectual property is an essential element of our business. We rely on a combination of patent, trade secret, trademark, copyright and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectual property rights. We also license certain third-party technology for use in conjunction with our products.

We believe that our continued success depends on hiring and retaining highly capable and innovative employees, especially as it relates to our engineering base. It is our policy that our employees and independent contractors involved in development are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for third parties to obtain and use without consent intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

Patents and Patent Applications

As of May 29, 2020, we had two issued U.S. patents, four non-provisional U.S. patent applications, one U.S. design patent application, 18 granted international design patent registrations, six international patent applications, and one international Patent Cooperation Treaty patent application pending. The issued patents expire in 2038, and the international design registrations have expiration dates ranging from 2035 to 2045. The table below summarizes our issued patents and patent applications pending as of May 29, 2020:

Although we actively attempt to utilize patents to protect our technologies, we believe that none of our patents, individually or in the aggregate, are material to our business. We will continue to file and prosecute patent applications when appropriate to attempt to protect our rights in our proprietary technologies. However, there can be no assurance that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, or that such patents will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable.

Trademarks

We also rely on several registered and unregistered trademarks to protect our brand. As of May 29, 2020, we had three trademarks registered globally. “fuboTV” is a registered trademark in the United States and the European Union.

Employees

As of May 29, 2020, we had 208 full-time employees. None of our employees are represented by a union. We consider our relations with our employees to be good.

Government Regulation

Our business operations are subject to various domestic and foreign laws and regulations covering a wide variety of subject matters. These laws and regulations include general business regulations and laws, as well as regulations and laws specific to providers of streaming services. In particular, our business is subject to foreign and domestic laws and regulations applicable to companies providing streaming services over the Internet. Both domestic and international jurisdictions vary widely as to how, or whether, existing laws governing areas such as personal privacy and data security, consumer protection, payment processing or sales and other taxes and intellectual property apply to the Internet and e-commerce, and these laws are continually evolving. We are also are subject to 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. The United States and foreign governments have enacted and are considering regulations that could significantly restrict industry participants’ ability to collect, use and share personal information, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies. Our content providers also are subject to a wide range of government regulations that may vary by jurisdiction. We seek to comply with all laws and regulations currently applicable to our business as well as those that arise in the future.

Recent Developments

Reverse Stock-Split and increase in Authorized Share Capital

On February 28, 2019, the Company effectuated a 1-for-30 reverse stock split, and post-split, increased the authorized Stock, par value $0.0001 per share, to 400 million shares of common stock. The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

Digital Likeness Development Agreement

On July 31, 2019, and as amended January 25, 2020 , the Company entered into a joint venture and revenue share agreement called the Digital Likeness Development Agreement (the “Agreement”) among the Company, FaceBank, Inc., and professional boxing promoter and retired professional boxer, Floyd Mayweather, concerning the development of the hyper-realistic, computer generated ‘digital likeness’ of the face and body of Mr. Mayweather (“Virtual Mayweather”), for global exploitation in commercial applications.

Pursuant to the terms of the Agreement, the Company and FaceBank, Inc. agreed to develop Virtual Mayweather, which is planned to be available for broad commercial purposes, based on the mutual agreement of Mr. Mayweather and the Company, including but not limited to, feature films, television commercials, award shows, live concerts, print advertisements, outdoor/public advertisements, endorsements, photographic and modeling engagements, video games, virtual reality, augmented reality, social media and other holographic public appearances.

Under the terms of the Agreement, the Company is responsible for the advance funding of all technology related costs and animation services (collectively, “Virtual Mayweather Production Costs”) required to develop, produce and maintain Virtual Mayweather as a usable digital asset, readily deployable into animation production workflows as may be required by Virtual Mayweather profit-making activity. Virtual Mayweather will also be available, at Mr. Mayweather’s sole discretion, for Mr. Mayweather’s personal use, subject to the terms of the Agreement. Notwithstanding the foregoing, Mr. Mayweather will be responsible for any and all costs associated with his personal use of Virtual Mayweather.

Under the terms of the Agreement, the Company agreed to pay a cash fee of $250,000, upon execution of the Agreement, to Mr. Mayweather, plus a 5-year option to purchase 280,000 shares of Company common stock at an exercise price of $7.20 per share. In addition, revenues will be split as follows:

The term of the Agreement commenced on July 31, 2019 and will continue until July 31, 2024, unless extended by mutual agreement of the parties. The Company also has an option to extend the Agreement, for an additional five year term, if either (a) the cash proceeds paid to Mr. Mayweather in connection with the Agreement are equal to or greater than $5,000,000 during the final year of the Agreement, or (b) the cash proceeds paid to Mr. Mayweather in connection with the Agreement are equal to or greater than $15,000,000 during the entire term of the Agreement, either by third parties or by the Company or its affiliates.

The Agreement provides that the Company will be responsible for the marketing, license, distribution and implementation of applications and the usage of Virtual Mayweather. All uses, application and deployments of Virtual Mayweather must be approved, in advance, by Mr. Mayweather or his designated representatives.

Pursuant to the terms of the Agreement, FaceBank, Inc. is entitled to, and agreed to, utilize Virtual Mayweather in connection with various promotional initiatives intending to demonstrate to a global audience the diverse opportunities for usage of Virtual Mayweather, as well as the usage of digital likeness that may be enjoyed by consumers, prospective joint venture partners, and business development prospects of FaceBank, Inc. FaceBank, Inc. is controlled by John Textor, the Company’s former Chief Executive Officer and a current member of the Company’s Board of Directors, and a significant stockholder of the Company.

On January 25, 2020, the Company entered into an amended Digital Likeness Development Agreement with Floyd Mayweather (the “Amended Agreement”) which supersedes the Agreement, dated July 31, 2019. All terms of the Agreement remain the same except for the following:

Facebank AG Share Exchange and Purchase Agreement

On August 15, 2019, the Company acquired 100% of the issued and outstanding capital stock of Facebank AG, a privately-owned Swiss corporation (the “Facebank AG”), in exchange for 2,500,000 shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company pursuant to a Share Exchange and Purchase Agreement, dated April 15, 2019 (the “Share Exchange Agreement”), between the Company and the sole shareholder of Facebank AG (the “Selling Stockholder”). Facebank AG is a Swiss holding company which owns a 11.2% minority interest in Nexway AG (“Nexway AG”) and had entered into a binding agreement to acquire an aggregate 62.3% majority interest in Nexway AG, no later than August 31, 2019. Nexway AG is a Karlsruhe-based and Germany-listed digital software and solutions company, which provides a subscription-based platform for the monetization of intellectual property, principally for entertainment, games and security software companies, through its proprietary merchant presence in 180 different countries. Facebank AG also owns 100% of StockAccess Holdings SAS (“SAH”), a French joint stock company and investor in the global luxury, entertainment and celebrity focused industries that directly or indirectly holds control investments in multiple other material subsidiaries, including 8+ Holdings LLC and P8H Inc, in the United States, and Highlight Finance Corp., in the British Virgin Islands (“HFC”). The Company purchased Facebank AG, principally to secure a global distribution network for the Company’s digital human applications and entertainment properties, which includes access to Nexway’s existing customer list of 14 million active subscribers, the considerably greater reach of Nexway’s custodial access to its clients’ customer lists, and the ability to conduct business directly in roughly 180 countries.

Pursuant to the Share Exchange Agreement, the Company agreed to be bound, in all respects as borrower, by the bond obligations of SAH, Nexway SAS (the 100% owned French subsidiary of Nexway AG) and HFC. Notwithstanding the principal repayment requirements and terms of the Bonds, Company agreed to pre-pay at least EUR 9,500,000 of the outstanding principal of the SAH Bond by March 31, 2020, which was paid through a debt refinancing of FBNK Finance SarL, one of the Company’s subsidiaries.

SAH is the borrower under EUR 20,000,000 bond (USD $22,209,000¹) (“SAH Bond”) issued and outstanding with 100% ownership interest of SAH pledged under the SAH Bond, and SAH currently being in compliance with all the terms and obligations under the SAH Bond issuance conditions.

Nexway SAS is the borrower under EUR 12,000,000 bond (USD $13,325,400) (“Nexway Bond”), of which EUR 7,500,000 is issued and outstanding, with 100% ownership interest of Nexway SAS pledged under the Nexway Bond, and Nexway SAS currently being in compliance with all the terms and obligations under Nexway Bond.

HFC is the borrower under EUR 15,000,000 (USD $16,656,750) term bond facility issued and outstanding (“HFC Bond”), HFC is currently being in compliance with all the terms and obligations under the HFC Bond issuance conditions. HFC holds (i) as the secured creditor a $10,000,000 loan facility owed to HFC by SAH subsidiary, P8H Inc., as the borrower, (ii) 998,114 shares of common stock of the Company, and (iii) other assets.

¹ All USD equivalents in the above under the heading ” Facebank AG Share Exchange and Purchase Agreement” are based on an Euro/USD exchange rate of 1.11045 on August 15, 2019.

On August 15, 2019, the Share Exchange Agreement, as amended, was consummated. Pursuant to the Share Exchange Agreement, on August 15, 2019, the Company agreed to be bound, in all respects as borrower, by the existing bond obligations of SAH, Nexway AG and HFC.

Facebank AG as set forth in the Share Exchange Agreement, had entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) on August 15, 2019, with The Native SA, a publicly traded Swiss ecommerce and digital media company (“Native”) to acquire an aggregate 62.3% majority interest in Nexway AG from Native.

Prior to entry into the Asset Purchase Agreement and as a condition precedent of entry into the Asset Purchase Agreement, 45,565 shares of Nexway AG had already been transferred by Native to StockAccess Holdings SAS (“SAH”) a wholly owned subsidiary of Facebank AG, which directly or indirectly holds control investments in multiple other material subsidiaries, including Highlight Finance Corp. in the British Virgin Islands (“HFC”).

On September 19, 2019, the Asset Purchase Agreement was consummated pursuant to Native transferring 287,855 shares in Nexway AG to Facebank AG, in exchange for a purchase price of EUR 3,543,750 consisting of EUR 2,000,0000 in cash and 3 bonds of SAH maturing on April 1, 2024, ISIN DE000A2RY4P4 of EUR 500,000 par value each with an aggregate par value of EUR 1,500,000 and EUR 1,543,750 including accrued interest (the “Purchase Price”). The Purchase Price was paid prior to August 31, 2019, and pursuant to the Asset Purchase Agreement 35,000 shares of HFC were transferred to Facebank AG prior to August 31, 2019, as part of the assets being purchased thereunder.

Pursuant to the closing of the Asset Purchase Agreement on September 19, 2019, Facebank AG held a total of 333,420 shares of Nexway AG representing 62.3% ownership interest in Nexway AG.

Name Change to FaceBank Group, Inc.

On September 6, 2019, the Company filed Articles of Amendment (the “Articles of Amendment”) to the Articles of Incorporation of the Company with the Florida Department of State, Division of Corporations. The Articles of Amendment provide for a change in the Company’s name from Pulse Evolution Group, Inc. to FaceBank Group, Inc. (the “Name Change”). The Company was notified by the Financial Industry Regulatory Administration (“FINRA”) that the market effective date for the Name Change was September 30, 2019. Beginning September 30, 2019, our trading symbol was changed to “FBNK” and as a result of the Name Change the Company’s common stock received the following new CUSIP number: 30310Y107. On May 1, 2020, our trading symbol was again changed, to reflect the Merger, to FUBO.

Merger with fuboTV Inc.

On April 1, 2020, pursuant to the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020 (the “Merger Agreement”) fuboTV became a wholly-owned subsidiary of FaceBank. In accordance with the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) all of the capital stock of fuboTV was converted into the right to receive shares of a newly created class of Series AA Convertible Preferred Stock of FaceBank, par value $0.0001 per share (the “Series AA Preferred Stock”). The aggregate number of FaceBank common stock equivalent shares to be issued to fuboTV shareholders as a result of the Merger was 32,324,362 shares of Series AA Preferred Stock, each of which is convertible into two (2) shares of FaceBank common stock, par value $0.0001 per share (“FaceBank Common Stock”), for a total of 64,648,726 shares of FaceBank Common Stock on an as-converted basis. In addition, at the Effective Time, each outstanding option to purchase shares of common stock of fuboTV was assumed by FaceBank and converted into an option to acquire FaceBank Common Stock. The aggregate number of options to acquire FaceBank Common Stock as a result of the foregoing is 8,051,098, which are exercisable at a weighted average price of $1.32 per share.

Each share of Series AA Preferred Stock is entitled to 0.8 votes per preferred share, and is convertible into two (2) shares of FaceBank Common Stock, only in connection with a bona fide transfer to a third party. The Series AA Preferred stock will benefit from certain protective provisions which, among others, require FaceBank to obtain the approval of a majority of the shares of outstanding Series AA Preferred Stock, voting as a separate class before undertaking certain actions. The effect of the Merger and the terms of the Series AA Preferred Stock is to initially establish an approximate two-thirds majority ownership of FaceBank on a common equivalent basis for the pre-Merger fuboTV shareholders while preserving a majority voting interest for the pre-Merger FaceBank shareholders.

Pursuant to the Merger Agreement the parties agreed that Board of Directors of FaceBank would be expanded to seven (7) members comprised of (i) John Textor, (ii) David Gandler, (iii) three (3) members to be selected by FaceBank and (iv) two (2) members to be selected by fuboTV. Pursuant to the Merger Agreement, the parties also agreed that immediately following the Effective Time, the Chief Executive Officer of FaceBank would be David Gandler, and the executive chairman of the Board of Directors of FaceBank would be John Textor.

In connection with the closing of the Merger, the Board of Directors of FaceBank approved the establishment of the FaceBank 2020 Equity Incentive Plan (the “Plan”). Pursuant to the Merger Agreement, FaceBank created an incentive option pool of 12,116,646 shares of FaceBank Common Stock under the Plan.

In connection with execution and delivery of the Merger Agreement, each of the officers and directors of fuboTV and certain other shareholders of fuboTV, and certain shareholders of the Company executed and delivered lock-up agreements, with a term commencing at the Effective Time and continuing for a period of 180 days after the closing date of the Merger, with respect to the shares of the Company owned by them or to be acquired by them in the Merger, as applicable.

Preferred Stock Designations

On March 20, 2020, FaceBank amended its Articles of Incorporation to withdraw, cancel and terminate the previously filed (i) Certificate of with respect to 5,000,000 shares of its Series A Preferred Stock, par value $0.0001 per share, (ii) Certificate of Designation with respect to 1,000,000 shares of its Series B Preferred Stock, par value $0.0001 per share, (iii) Certificate of Designation with respect to 41,000,000 shares of its Series S Preferred Stock, par value $0.0001 per share and (iv) Certificate of Designation with respect to 1,000,000 shares of its Series X Preferred Stock, par value $0.0001 per share. Upon the withdrawal, cancelation and termination of such designations, all shares previously designated as Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series X Preferred Stock were returned to the status of authorized but undesignated shares of Preferred Stock, par value $0.0001 per share of FaceBank (the “Termination of Prior Designations Amendment”).

On March 20, 2020, FaceBank filed an amendment to its Articles of Incorporation to designate 35,800,000 of its authorized preferred stock as “Series AA Convertible Preferred Stock” pursuant to a Certificate of Designation of Series AA Convertible Preferred Stock (the “Series AA Preferred Stock Certificate of Designation”). The Series AA Preferred Stock has no liquidation preference. The Series AA Preferred Stock is entitled to receive dividends and other distributions as and when paid on the Common Stock on an as converted basis. Each share of Series AA Preferred Stock is initially convertible into two shares of Common Stock, subject to adjustment as provided in the Certificate of Designation with respect to the Series AA Preferred Stock and shall only be convertible immediately following the sale of such shares on an arms’-length basis either pursuant to an exemption from registration under Rule 144 promulgated under the Securities Act or pursuant to an effective registration statement under the Securities Act. Each share of Series AA Preferred Stock shall have 0.8 votes per share (the Voting Rate”) on any matter submitted to the holders of the Common Stock for a vote and shall vote together with the Common Stock on such matters for as long as the Series AA Preferred Stock is outstanding. The Voting Rate shall be subject to adjustment in the event of stock splits, stock combinations, recapitalizations reclassifications, extraordinary distributions and similar events.

In addition to the voting rights described above, until the earlier of such time as (i) no shares of Series AA Preferred Stock remain issued and outstanding and (ii) the Common Stock is listed on Nasdaq or the New York Stock Exchange, without first obtaining the affirmative vote or written consent of a majority of the Series AA Preferred Stock, voting as a separate class, and with each share of Series AA Preferred Stock having one vote, FaceBank may not (i) amend or repeal the Certificate of Designation with respect to the Series AA Preferred Stock, (ii) amend or repeal any provision of, or add any provision to, FaceBank’s Articles of Incorporation, (iii) undertake (x) any Affiliated Transaction (as defined in Section 607.0901(1)(b) of the Florida Business Corporation Act (the “FBCA”) with any “interested shareholder” (as defined in Section 607.0901(1)(k) of the FBCA, provided that, for purposes of this restriction, the words and number “10 percent” shall be replaced with “50 percent”), or “affiliate” (as defined in Section 607.0901(1)(a) of the FBCA) of such interested shareholder or (y) any Affiliated Transaction (as defined in the FBCA) with any “interested shareholder” (as defined in Section 607.0901(1)(k) of the FBCA) or “affiliate” (as defined in Section 607.0901(1)(a) of the FBCA) of such interested shareholder without the approval of such Affiliated Transaction by a majority of the disinterested and independent members of the Board of Directors of FaceBank, (iv) issue any capital stock or other equity securities of FaceBank or instruments or securities convertible into capital stock or other equity securities of FaceBank, other than (A) the issuance of shares of Common Stock pursuant to the exercise or settlement of stock options that were assumed in connection with the transaction by which the Series AA Preferred Stock was initially issued, (B) the granting of stock options or issuance of shares of Common Stock underlying such stock options, not to exceed ten percent (10%) of the capital stock of FaceBank, on a fully diluted basis, that is outstanding as of the initial issuance date of the Series AA Preferred Stock, and pursuant to a plan, agreement or arrangement approved by the Board of Directors of FaceBank), (C) any issuance of Conversion Shares (as defined below); and (D) any sale of shares of Common Stock at a price of $10.00 or more per share (subject to equitable adjustments for stock splits, stock combinations, recapitalizations, reclassifications, extraordinary distributions and similar events following the initial issuance date of the Series AA Preferred Stock ); provided, however, that, notwithstanding the foregoing, no consent shall be required in the case of a sale of shares of Common Stock at price of less than $10.00 per share (a “Permitted Stock Sale”) if, upon the closing of such Permitted Stock Sale FaceBank issues and distributes to the holders of the then-outstanding holders of its capital stock a number of shares of Common Stock equal to two times (2x) the number of shares of Common Stock that are sold in such Permitted Stock Sale (the “Distributed Shares”), with such Distributed Shares to be distributed to the holders of the then-outstanding shares of capital stock on a pro rata basis based on their percentage ownership of the then outstanding shares of capital stock (on an as converted to Common Stock basis, (v) undertake any liquidation of FaceBank, (vi) undertake any bankruptcy proceeding or other form of voluntary receivership of FaceBank, (vii) undertake any merger or acquisition transaction in which FaceBank is a constituent party or a subsidiary of FaceBank is a constituent party, except any such merger or acquisition involving FaceBank or a subsidiary in which the shares of capital stock of FaceBank outstanding immediately prior to such merger or acquisition continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or acquisition, at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation, (viii) increase the number of members of FaceBank’s Board of Directors to more than seven (7) or (viii) any redemption by FaceBank of any shares of Common Stock or preferred stock. In addition, until the earlier of such time as (i) no shares of Series AA Preferred Stock remaining issued and outstanding and (ii) the Common Stock is listed on Nasdaq or The New York Stock Exchange, the Series AA Preferred Stock, voting as a separate class, and with each share of Series AA Preferred Stock having one vote on such matter shall have the right to elect any replacement of any of the three directors designated by fuboTV and added to the Board of Directors of FaceBank pursuant to the closing of the transactions as contemplated in the Merger Agreement.

On March 26, 2020, the Company amended its Articles of Incorporation to designate 35,800,000 of its authorized preferred stock as “Series AA Convertible Preferred Stock” pursuant to a Certificate of Designation of Series AA Convertible Preferred Stock (the “Series AA Preferred Stock Certificate of Designation”). FaceBank issued shares of its Series AA Convertible Preferred Stock as consideration in the merger transaction with fuboTV pursuant to an Agreement and Plan of Merger and Reorganization dated as of March 19, 2020 by and among FaceBank, fuboTV Acquisition Corp., a wholly-owned subsidiary of FaceBank and fuboTV.

Credit and Security Agreement

The Company and HLEE Finance S.a.r.l. (“HLEEF”) entered into a Credit Agreement dated as of March 11, 2020 (the “Credit Agreement”) pursuant to which HLEEF agreed to extend a revolving credit facility to the Company in an aggregate principal amount of up to $100,000,000. The loans under the revolving credit facility are available in four Tranches, subject to certain conditions precedent as further described in detail in the Credit Agreement. The interest rate on all Tranche I, Tranche II, Tranche III and Tranche IV loans shall be equal to 10% per annum. The maturity date of all amounts outstanding under the Credit Agreement is March 11, 2022. The Credit Agreement contains certain restrictions on the ability of FaceBank to incur or permit indebtedness in excess of $50,000,000, subject to certain exceptions, to make loans in excess of $250,000 to directors or officers of FaceBank or to any subsidiary other than fuboTV and to declare and pay any distributions, subject to certain exceptions. In connection with the Credit Agreement, FaceBank entered into a Security Agreement with HLEEF dated March 11, 2020 (the “HLEEF Security Agreement”) pursuant to which FaceBank granted to HLEEF as security for the prompt and complete payment and performance of all of the obligations under the Credit Agreement and the related promissory note, a security interest in all substantially all assets of FaceBank.

As of the date of this filing, the Company has not made any borrowings under the Credit Agreement.

Note Purchase Agreement

On March 19, 2020, FaceBank, Merger Sub, Evolution AI Corporation (“Evolution”) and Pulse Evolution Corporation (“Pulse” and collectively with Evolution, Merger Sub and FaceBank, the “Borrower”) and FB Loan Series I, LLC (“FB Loan”) entered into a Note Purchase Agreement dated as of March 19, 2020 (the “Note Purchase Agreement”) pursuant to which Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10,050,000 (the “Senior Note”).

Interest on the Senior Note shall accrue until full and final repayment of the principal amount of the Senior Note at a rate of fifteen percent (15%) per annum. On the first business day of each calendar month in which the Senior Note is outstanding, beginning on April 1, 2020, Borrower shall pay in arrears in cash to FB Loan accrued interest on the outstanding principal amount of the Senior Note. The maturity date of the Senior Note is July 17, 2020. The Borrower may prepay or redeem the Senior Note in whole or in part without penalty or premium.

The Senior Note is subject to mandatory prepayment in the following amounts and at the following times:

(i) Casualty and Other Insurance Proceeds. Within five (5) business days after any loan party or any subsidiary receives any Major Casualty Proceeds (as defined in the Note Purchase Agreement), an amount equal to one hundred percent (100%) of such Major Casualty

Proceeds;

(ii) Asset Disposition Proceeds. Within five (5) business days after any loan Party or any subsidiary receives the proceeds of any Asset Disposition (as defined in the Note Purchase Agreement), the Borrower shall prepay the Senior Note in an amount equal to one hundred percent (100%) of the net cash proceeds of such Asset Disposition.

(iii) Financing Proceeds. Within five (5) business days after any loan party or any subsidiary receives the proceeds of any financings whether by the issuance of debt (other than the Specified Debt (as defined in the Note Purchase Agreement) or sale of capital stock, the Borrower shall prepay the Senior Note in an amount equal to one hundred percent (100%) of then cash proceeds of such financing

(iv) Signing Date Loan Proceeds. Within two (2) Business Days after Borrower receives payments under the Signing Date Loan Agreement, referring to a $10 million intercompany loan between the Company and its subsidiary fuboTV as defined in the FB Loan agreements, the Borrower shall prepay the Senior Note in an amount equal to one hundred percent (100%) of the amount of such payment.

(v) Extraordinary Receipts. Within five (5) business days of the receipt by any loan party or any subsidiary of any Extraordinary Receipt (as defined in the Note Purchase Agreement), in an amount equal to the net cash

proceeds of such Extraordinary Receipt.

The Senior Note is subject to optional redemption by the holder thereof upon the occurrence of any of the following events:

(i) a Change of Control (as defined in the Note Purchase Agreement) (and concurrent with the closing of any such transaction); or

(ii) a sale of all or substantially all of the Borrower and its Subsidiaries’ assets.

Pursuant to the Note Purchase Agreement, Borrower agreed, among other things that:

(i) FaceBank shall file a registration statement with the Securities and Exchange Commission regarding the purchase and sale of the 784,617 shares (the “Shares”) issued and sold pursuant to the FB Loan and any shares of capital stock issuable upon exercise of the warrant to purchase 3,269,231 shares of Common Stock (the “Warrant”) which was issued and sold pursuant to the FB Loan at an initial exercise price of $5.00 per share, subject to adjustment . The consideration paid by FB Loan for the Shares and the Warrant is the execution and delivery of the Note Purchase Agreement.

(ii) FaceBank shall have filed an application to list FaceBank’s Common Stock for trading on the NASDAQ exchange, on or before the date that is thirty (30) days following the closing date of the Note Purchase Agreement, such date having been extended as further detailed below; and

(iii) on the closing date of the Merger, FaceBank shall cause fuboTV and each subsidiary of fuboTV to join the Note Purchase Agreement, become an issuer of the Senior Notes and a Borrower under the Note Purchase Agreement and the related documents and assume all obligations in connection therewith.

Until such time as payment in full of the Senior Note and all other related obligations under the Note Purchase Agreement, the Borrower agreed to be subject to certain restrictions set forth in the Note Purchase Agreement with respect to (i) the incurrence of indebtedness, (ii) the creation or existence of liens, (iii) the payment of dividends and other distributions with respect to capital stock, (iv) the making of loans or advances, (v) the making of investments, (vi) the ability to merge, consolidate, sell or lease assets, subject to certain customary exceptions, (vii) the creation of subsidiaries or the acquisition of minority interests in any person or entity, (viii) the amendment of organizational documents, (ix) the entry into any agreement that would restrict the ability to perform obligations under the Note Purchase Agreement, (x) the making of certain capital expenditures and the entry into certain capitalized leases, (xi) the ability to engage in affiliate transactions, (xii) the creation of additional negative pledges, (xiii) any change of fiscal year or significant change in accounting treatment, (xiv) the disposition of assets other than in the ordinary course of business and (xv) the modification of the Merger Agreement or the Signing Date Loan Agreement.

Events of Default under the Note Purchase Agreement and the Senior Note include but are not limited to: (i) the Merger not being consummated on or before May 1, 2020, (ii) the occurrence of a Change of Control (as defined in the Note Purchase Agreement, (iii) any Collateral Document (as defined in the Note Purchase Agreement) ceasing to be in full force and effect, (iv) the failure by Borrower to comply with certain covenants in the Note Purchase Agreement and related documents, (v) any representation or warranty made by any loan party in the Note Purchase Agreement or related document having been untrue when made, (vi)default in the payment of principal, interest or fees accrued or payable in connection with the Senior Note, (vii) failure by any loan party or subsidiary to pay within fifteen (15) days of when due any obligation exceeding $100,000, (viii) the occurrence of certain insolvency events or proceedings, (ix) the entry of certain judgments against Borrower, (x) the suspension of trading of FaceBank’s Common Stock by the Securities and Exchange Commission, the principal market on which it is traded or FINRA or otherwise halted for any reason, (xi) the occurrence of an event of default under the Signing Date Loan Agreement and (xii) the occurrence of any Material Adverse Effect (as defined in the Note Purchase Agreement).

On the closing date of the sale of the Senior Note to FB Loan, Borrower paid to FB Loan as a closing fee, the amount of $2,550,000, which FB Loan netted from the proceeds of the Senior Note.

In connection with the Note Purchase Agreement and the Secured Note, the Borrowers and FB Loan entered into a Security Agreement dated as of March 19, 2020 (the “Security Agreement”) pursuant to which the Borrowers granted, pledged and collaterally assigned to FB Loan a security interest in substantially all the assets of Borrower as collateral for the prompt and complete payment and performance when due of all obligations under the Note Purchase Agreement and the Secured Note.

As additional security for the prompt and complete payment and performance when due of all obligations under the Note Purchase Agreement and the Secured Note:

(i) FaceBank and FB Loan entered into a Collateral Assignment of Loan Agreement dated as of March 19, 2020 pursuant to which FaceBank granted to FB Loan a lien on and security interest in all of its right, title and interest in, to and under the Signing Date Loan Agreement (the “Signing Date Loan Collateral Assignment”).

(ii) FaceBank and Merger Sub entered into a Collateral Assignment of Merger Agreement Documents dated as of March 19, 2020 with FB Loan pursuant to which FaceBank and Merger Sub granted to FB Loan a lien on and security interest in all of its right, title and interest in, to and under the Merger Agreement and all agreements, documents or instruments delivered in connection therewith (the “Merger Agreement Collateral Assignment”); and

(iii) the Borrowers entered into a Trademark Security Agreement dated as of March 19, 2020 pursuant to which Borrowers granted to FB Loan a security interest in their entire right, title and interest in and to each trademark owned by Borrower together with related goodwill and other rights and all products and proceeds of the foregoing (the “Trademark Assignment”)

Amendment to Note Purchase Agreement

On April 21, 2020, the Company entered into an amendment (the “Amendment”) to the Note Purchase Agreement, dated as of March 19, 2020 (the “Note Purchase Agreement”), by and among FaceBank, fuboTV Inc., a Delaware corporation (f/k/a FuboTV Acquisition Corp.) (“fuboTV”), Evolution AI Corporation (“Evolution”), a Florida corporation, Pulse Evolution Corporation, a Nevada corporation (“Pulse”, and collectively with FaceBank, fuboTV and Evolution, the “Borrower”), and FB Loan Series I, LLC (“FB Loan”), a Delaware limited liability company.

Pursuant to the Note Purchase Agreement, the Borrower agreed, among other things that (i) FaceBank shall file a registration statement with the U.S. Securities and Exchange Commission (the “Commission”) regarding the purchase and sale of 784,617 shares (the “Shares”) of FaceBank’s common stock, par value $0.0001 per share (the “Common Stock”) and any shares of capital stock issuable upon exercise of a warrant to purchase 3,269,231 shares of Common Stock (the “Warrant Shares”); and (ii) FaceBank shall have filed an application to list FaceBank’s Common Stock for trading on the NASDAQ exchange, on or before the date that is thirty (30) days following the closing date of the Note Purchase Agreement. Pursuant to the Amendment, the covenants set forth in (i) and (ii) above were replaced with the following:

(i) If FaceBank decides to register any of its securities either for its own account or the account of a security holder or holders on any registration form (other than Form S-4 or S-8), FaceBank shall include in such registration all of the Shares and the Warrant Shares (collectively, the “Registrable Securities” and such registration of the Registrable Securities, a “Piggyback Registration”); provided, however, that if a Piggyback Registration does not occur on or prior to May 25, 2020, FaceBank shall file a registration statement with the Commission to register the Registrable Securities and to permit or facilitate the sale and distribution of the Registrable Securities on or prior to May 25, 2020; and

(ii) FaceBank shall have initiated the process to list its capital stock for trading on a national exchange (e.g., NYSE or Nasdaq) on or before the date that is thirty (30) days following March 19, 2020.

Counterpart Agreement

On April 30, 2020, the Company entered into a counterpart agreement (the “Counterpart Agreement”) with AMC Networks Ventures LLC (“AMC”) delivered pursuant to that certain Credit and Guaranty Agreement, dated as of April 6, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among fuboTV Inc., a Delaware corporation and a wholly-owned subsidiary of FaceBank (“fuboTV”), certain subsidiaries of fuboTV, as guarantors, the lenders from time to time party thereto, and AMC, as administrative agent and collateral agent.

Pursuant to the Counterpart Agreement, FaceBank guaranteed the obligations of fuboTV under the Credit Agreement. There is currently $23,750,000 in aggregate principal amount outstanding under the Credit Agreement.

Joinder Agreement

On April 30, 2020, fuboTV and Sports Rights Management, LLC, a Delaware limited liability company and wholly-owned subsidiary of fuboTV (“SRM”), entered into a joinder agreement (the “Joinder Agreement”) in favor of FB Loan Series I, LLC (“FB Loan”), a Delaware limited liability company, in connection with that certain Note Purchase Agreement, dated as of March 19, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”), by and among FaceBank, fuboTV Acquisition Corp.), a Delaware corporation (“Merger Sub”), Evolution AI Corporation (“Evolution”), a Florida corporation, Pulse Evolution Corporation, a Nevada corporation (“Pulse”, and collectively with FaceBank, Merger Sub and Evolution, the “Borrowers”), and FB Loan. The Joinder Agreement is effective as of April 2, 2020.

Pursuant to the Joinder Agreement, (a) fuboTV joined the Note Purchase Agreement, became an issuer of notes and a borrower thereunder, assumed all obligations of the Borrowers in connection therewith, and granted a lien on substantially all of its assets to secure its obligations under the Note Purchase Agreement and any notes issued pursuant thereto and (b) SRM guaranteed the obligations of the Borrowers and fuboTV under the Note Purchase Agreement and any notes issued pursuant thereto and granted a security interest in substantially all of its assets to secure its guaranty obligations. The Borrowers have previously issued notes in an aggregate principal amount of $10,050,000 pursuant to the Note Purchase Agreement.

Guaranty Agreement

On April 30, 2020, in connection with the Joinder Agreement, SRM entered into a guaranty agreement (the “Guaranty Agreement”) in favor of FB Loan, pursuant to which SRM guaranteed the obligations of Borrower under fuboTV under the Note Purchase Agreement. The Guaranty Agreement is effective as of April 2, 2020. The aggregate principal amount of notes issued pursuant to the Note Purchase Agreement and currently outstanding is $10,050,000.

Purchase Agreement

On May 11, 2020, the Company entered into Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”), pursuant to which the Company sold an aggregate of 1,058,435 shares (the “Purchased Shares”) of the Company’s common stock at a purchase price of $7.00 per share (the “Purchase Price”), which is based on 0.8 of the rounded 30-day trailing volume-weighted average price within three business days of the signing of the Purchase Agreements, for an aggregate of $7,409,045.00. In connection with the Purchase Agreements, the Company issued warrants to purchase the Company’s common stock, each with an exercise price equal to the Purchase Price (the “Warrants”), to the Investors to purchase, in the aggregate, 1,058,435 shares of the Company’s common stock. There were no underwriting discounts or commissions.

Waivers

On May 11, 2020, certain holders of the Series AA Convertible Preferred Stock (the “Acting Shareholders”) of the Company, acting by written consent pursuant to Section 607.0704 of the Florida Business Corporation Act, approved a waiver of certain anti-dilution rights under the Certificate of Designation of Series AA Convertible Preferred Stock of the Company in connection with the sale and issuance of the Purchased Shares and the Warrants. As of such date, the Acting Shareholders collectively held 16,270,570 shares, or 50.34%, of the Company’s outstanding shares of Series AA Convertible Preferred Stock.

On May 21, 2020, certain holders of the Company’s Series AA Convertible Preferred Stock (the “Acting Shareholders”), acting by written consent pursuant to Section 607.0704 of the Florida Business Corporation Act, approved a waiver of certain anti-dilution rights under the Certificate of Designation of Series AA Convertible Preferred Stock of the Company in connection with the sale and issuance of an aggregate of up to 3,227,280 shares of the Company’s common stock and warrants to purchase an aggregate of up to 3,227,280 shares of the Company’s common stock in an unregistered offering. As of such date, the Acting Shareholders collectively held 17,315,836 shares, or 53.57%, of the Company’s outstanding shares of Series AA Convertible Preferred Stock.

Senior Note Prepayment and Second Amendment to Note Purchase Agreement

On May 28, 2020, the Borrower delivered to FB Loan $7,500,000 in partial repayment of the Senior Note. Also on May 28, 2020, the parties to the Note Purchase Agreement, as amended, entered into a Consent and Second Amendment to Note Purchase Agreement (the “Second Amendment”). Pursuant to the terms of the Second Amendment:

Prior Transactions

Acquisition of Evolution AI

On August 8, 2018, the Company entered into a share exchange agreement to acquire 100% of Evolution AI Corporation (“EAI”), which included EAI’s principal asset consisting of a 58%  interest in Pulse Evolution Corporation (“PEC”). Pursuant to the terms of the closing agreement, the Company became a 99.7% owner of EAI. The Company acquired its ownership interest in EAI by issuing 1 million shares of its Series X Convertible Preferred Stock which had an aggregate fair value of $211.5 million. Prior to, and subsequent to the foregoing acquisition, the Company has continually and actively conducted the same business of developing technology for virtual reality through the operations of Recall Studios, Inc., a Nevada corporation and a subsidiary of the Company. Further, prior to and after the foregoing acquisition, each EAI and PEC have actively conducted and continue to conduct operations focusing on developing technology for virtual reality and virtual entertainment. Accordingly, both before and after the foregoing Acquisition, each the Company, EAI and PEC operated and continue to operate in the same virtual reality industry and engaged in the foregoing acquisition to expand their presence in the industry. Prior to the foregoing acquisition each the Company, EAI and PEC conducted development stage operations which were material business operations and each had assets including, but not limited to, their virtual reality and virtual entertainment technologies, were actively being developed.

The Company accounted for the transaction as a business combination using the acquisition method of accounting based on ASC 805 — Business Combinations, which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their fair value as of the date control is obtained. The Company determined that it was the accounting acquirer under ASC 805. This determination was primarily based on existing management of the Company retaining 4 of the 5 seats on the Board, the provisions of the voting rights agreement entered between the Company and John Textor the principal selling stockholder of EAI, and company management continuing to operate the business in their key roles following the business combination.

Brick Top and Southfork Share Exchange Agreement

Effective August 8, 2018, the Company entered into a Share Exchange Agreement (the “BTH and SV Exchange Agreement”) with Brick Top Holdings, Inc. a Florida corporation (“Brick Top”) owned by Alexander Bafer and Southfork Ventures, Inc. a Florida corporation (“Southfork”) owned by Chris Leone, the Company’s then Chief Operating Officer and Director, pursuant to which the Company agreed to acquire up to all of the shares of Series A preferred stock of the Company held by Brick Top and Southfork, in exchange for the issuance of shares of Company common stock to Brick Top and Southfork. The closing of the share exchange contemplated by the BTH and SV Exchange Agreement occurred on August 8, 2018. On such date, the Company issued (i) 2,725,000 shares of Company common stock in exchange for receipt of 3,750,000 shares of Series A preferred shares from Brick Top, and (ii) 908,333 shares of Company common stock in exchange for receipt of 1,250,000 shares of Series A preferred shares from Southfork. This transaction was structured to simplify the capital structure of the Company, and to ensure voting rights were proportional and equitable among all shareholders after the EAI acquisition was completed.

Sale of S&G Holdings

On June 15, 2017, Recall Studios, Inc. entered into a Purchase and Sale Agreement (the “Agreement”) with Metropolitan Sound + Vision LLC (Metro), a South Carolina limited liability company. Pursuant to the Agreement, the Company agreed to sell to Metro all of the shares of common stock of S&G Holdings, Inc. (“S&G”), a Tennessee corporation doing business as High Five Entertainment owned by the Company, which constituted 75% of the issued and outstanding shares of S&G (the “Transaction”). Pursuant to the Agreement, at the closing of the Transaction, the Company delivered to Metro 100% of the issued and outstanding shares of common stock of S&G owned by the Company, and Metro was required to pay for such stock as follows: an initial payment of $10,000 at the closing, and thereafter, at the end of each fiscal quarter, beginning at the end the third fiscal quarter of 2017, Metro agreed to pay the Company 5% of gross revenues collected during each quarter by Metro via the exploitation of S&G’s assets, up to a lifetime maximum of $590,000. The Agreement required Metro to use its best professional efforts to generate revenue from the exploitation of S&G’s assets, and if the Company has not received a total of at least $265,000 of the $590,000 lifetime maximum purchase price from Metro before July 1, 2022, the Company has the right to repurchase the stock and assets of the S&G from Metro for $10,000 . Both prior and after the Transaction, the Company has continually and actively conducted the same business of developing technology for virtual reality through the operations of Recall Studios, Inc., a Nevada corporation and a subsidiary of the Company.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our worldwide corporate headquarters and executive offices are located at 1330 Avenue of the Americas in New York, New York, where we occupy approximately 23,000 square feet of office space under various leases that expires between February 14, 2021 and August 14, 2027 and provides for rental payments of $144,782 per month.

We also maintain office space at 5550 Glades Road, Suite 516, Boca Raton, Florida 33431 under a one-year rental agreement, which commenced on April 1, 2014, providing for rental payments of $3,000 per month. This lease is now on a month-to-month basis.

In addition, on February 14, 2019, the Company entered into a lease for new offices in Jupiter, Florida. The lease has an initial term of 18 months commencing March 1, 2019 until August 31, 2020 with a base annual rent of $89,437. The Company has an option to extend the lease for another year until August 31, 2021 for an annual rent of $94,884 and a second option for a further annual extension until August 31, 2022 for an annual rent of $97,730.

Item 3. Legal Proceedings.

The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Legal expenses associated with any contingency are expensed as incurred. In connection with closed litigation on two separate matters that resulted in judgments against PEC, a majority interest of which was subsequently purchased by the Company, we have accrued $524,000 which remains on the balance sheet as a liability at December 31, 2019 and 2018. The Company, on behalf of its subsidiary, is in settlement discussions with the parties.

On August 27, 2018, plaintiff, Scott Meide, filed a pro se (unrepresented by counsel) complaint in the United States District Court for the Middle District of Florida, Jacksonville Division, against Pulse Evolution Corporation, now a majority-owned subsidiary of FaceBank, naming its former officers among others as defendants. FaceBank’s position is that the pro se Complaint is defamatory, without merit in fact or law and represents an extortive attempt to coerce payment under threat of reputational harm. FaceBank’s subsidiaries and affiliates filed a motion to dismiss on September 25, 2018. On July 24, 2019, all counts of the complaint were dismissed in favor of FaceBank’s subsidiaries and affiliates. Mr. Meide was afforded the opportunity to file an amended complaint for a portion of his claims, and such amendment was filed on September 24, 2019. On October 6, 2019, Judge Marcia Morales Howard ordered Mr. Meide’s amended complaint stricken, describing the filing as insufficient and having failed to identify facts necessary to support its allegations, and offering Mr. Meide “one final opportunity to properly state his claims” with an amended complaint. Mr. Meide’s third attempt to submit a sufficient complaint was filed on November 1, 2019. On November 22, 2019 FaceBank’s subsidiaries and affiliates filed a motion to dismiss the second amended complaint. On December 31, 2019 Mr. Meide filed an opposition to the motions to dismiss. On January 9, 2020, the court struck Mr. Meide’s opposition and on February 3, 2020 issued an order requiring Mr. Meide to show cause why the case should not be dismissed. Mr. Meide was given until March 6, 2020 to respond to the motions to dismiss filed by FaceBank’s subsidiaries and affiliates. Mr. Meide’s apparent final opportunity to oppose the defendant’s motions to dismiss was filed on March 2, 2020. FaceBank believes Mr. Meide’s most recent filing is a near carbon copy of prior arguments and filings that have either been dismissed or were stricken and that Mr. Meide’s final amended complaint will be dismissed. FaceBank plans to the ask the court for an award of sanctions and attorney fees in connection with Mr. Meide’s filing of a frivolous lawsuit.

On June 25, 2018, prior to our acquisition of a majority interest in PEC, an office space vendor filed a complaint against such company (Case#: CIV1802192) in the Superior Court of the State of California, Marin County asserting breach of contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, and negligent misrepresentation. The Company’s subsidiary then responded with affirmative defenses on September 27, 2018. The Company reached an out of court settlement on December 19, 2018 with the vendor and the case was dismissed on January 24, 2019. During the year ended December 31, 2019, the Company issued 18,935 shares of its common stock, at a fair value of approximately $0.1 million or $6.90 per share, in connection with this lease settlement.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is quoted on the OTCQB tier of the OTC Markets under the symbol, “FUBO.” Between September 30, 2019 and April 30, 2020, our common stock was quoted on the OTC Pink tier of the OTC Markets under the symbol “FBNK,” and prior to September 30, 2019, our stock symbol was “DGLF.” Trading in OTC stocks can be volatile, sporadic and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock. Our stock has been thinly traded and there can be no assurance that a liquid market for our common stock will ever develop.

The following table sets forth the range of high and low bid prices for our common stock for the periods indicated. The information reflects inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

On May 28, 2020, the closing sale price for our common stock was $11.83. As of May 29, 2020, there were approximately 294 record holders, an unknown number of additional holders whose stock is held in “street name” and 34,848,495 shares of common stock issued and outstanding.

Recent Sales of Unregistered Securities

Issuance of Common Stock for Cash

In March 2019, the Company raised $1.1 million in a private placement transaction by issuing 93,910 shares of its common stock for $11.28 per share to a Hong Kong-based family office group. The Company contemporaneously issued warrants to purchase an additional 200,000 shares of common stock to the investor in this transaction. The warrants feature an exercise price of $11.31 per share, and may be exercised at any time prior to March 31, 2020. The warrants were determined to be equity instruments and are therefore classified within stockholders’ equity in accordance with ASC 815.

The Company raised an additional $2.5 million through issuances of an aggregate of 1,028,497 shares of its common stock in private placement transactions during the year ended December 31, 2019 to several other investors.

During the year ended December 31, 2018, the Company issued 623,578 shares of common stock for proceeds of $3.2 million.

Issuance of Common Stock for Services

During the year ended December 31, 2019, the Company issued 15,009 shares of its common stock at a fair value of approximately $0.1 million or $6.72 per share for services rendered.

During the year ended December 31, 2019, the Company issued 20,000 shares of its common stock at a fair value of approximately $200,000 or $10.00 per share in connection with a consulting agreement.

Issuance of Common Stock for Cancellation of a Consulting Agreement

During the year ended December 31, 2019, the Company issued 2,000 shares of its common stock at a fair value of approximately $13,000 or $6.59 per share in connection with the cancellation of a consulting agreement.

Issuance of Common Stock and Options for Employee Services

During the year ended December 31, 2018, the Company issued an aggregate of 407,943 shares of fully vested common stock with an aggregate fair value of $3.3 million to various non-employees for services.

On February 1, 2018, the Company granted options to purchase 16,667 shares of common stock to Alex Bafer, the Company’s Chief Executive Officer from February 1, 2018 until August 8, 2018. The options have a 10-year term and an exercise price of $28.20. The fair value of the options on the grant date was $470,000.

Issuance of Common Stock for Acquisition

During the year ended December 31, 2019, the Company issued 2,500,000 shares of its common stock, at a fair value of approximately $19.95 million, or approximately $7.98 per share, related to its acquisition of Facebank AG and Nexway.

During the year ended December 31, 2019, the Company issued 2,503,333 shares of its common stock in exchange for 40,991,276 shares of its subsidiary PEC. The interests exchange in PEC were previously recorded within noncontrolling interests and the transaction was accounted for as a reduction of $4.0 million of noncontrolling interests for the carrying value of those noncontrolling interests at the date of exchange with an offsetting increase in additional paid-in capital.

Issuance of Common Stock for Settlement of Lease Dispute

During the year ended December 31, 2019, the Company issued 18,935 shares of its common stock, at a fair value of approximately $0.1 million or $6.90 per share, to settle a lease dispute.

Issuance of Common Stock for Commitment Fee

During the year ended December 31, 2018 pursuant securities purchase agreements with Auctus Fund, the Company issued 3,072 shares to Auctus as a commitment fee at a fair value of $63,000.

Issuance of Common Stock upon Conversion of Note Payable

During the year ended December 31, 2019, the Company issued 16,666 shares of its common stock with a fair value of $50,000, or $3.00 per share, upon the contractual conversion of principal of a convertible note payable.

During the year ended December 31, 2018, the Company issued 4,333 shares of common stock for $18,000 upon the contractual conversion of principal of a convertible note payable.

Issuance of Common Stock to Satisfy Investment Obligation

On October 24, 2019, the Company satisfied its obligations under its investment agreement with Panda Productions (HK) Limited by issuing 175,000 common shares, in lieu of its obligation to fund an additional $1.0 million in cash. On October 24, 2019, the fair value of the 175,000 shares was approximately $1.9 million or $10.96 per share, and the additional $0.9 million was recorded as a loss on investment during the year ended December 31, 2019.

Issuance of Common Stock for Cashless Exercise of Warrants

During the year ended December 31, 2018, the Company issued 15,606 shares of common stock upon the cashless exercise of 3,008 common stock purchase warrants. The Company recorded a $94,000 loss for 10,492 shares issued in excess of the contractual number of shares stipulated in the warrant.

Issuance of Common Stock Upon Exchange of Series A Preferred Stock

During the year ended December 31, 2018 the Company issued 3,633,333 shares of common stock upon the exchange of 5,000,000 shares of Series A Preferred Stock pursuant to the terms of the certificate of designation of the Series A Preferred Stock. The quantity of common stock issued took into consideration the elimination of the preferential voting rights of the Series A preferred Stockholders.

Issuance of Common Stock Upon Conversion of Series B Preferred Stock

During the year ended December 31, 2018 the Company issued 66,667 shares of common stock upon the contractual conversion of 1,000,000 shares of Series B Convertible Preferred Stock pursuant to the terms of the certificate of designation of the Series B Convertible Preferred Stock.

Issuance of Common Stock Upon Conversion of Series C Convertible Preferred Stock

During the year ended December 31, 2018 the Company issued 94,966 shares of common stock upon the contractual conversion of 1,424,491 shares of Series C Convertible Preferred Stock pursuant to the terms of the certificate of designation of the Series C Convertible Preferred Stock.

Issuance of Series X Convertible Preferred Stock for Business Acquisition

During the year ended December 31, 2018 the Company issued 1,000,000 shares of Series X Convertible Preferred stock to the selling stockholders as consideration in the acquisition of Evolution AI. During the first quarter of 2019, concurrent with the increase in the number of authorized common shares effective upon an amendment to the Company’s Certificate of Incorporation, the series X Convertible Preferred shares automatically converted into an aggregate of 15,000,000 shares of common stock.

Issuance of Common Stock for Purchase of Asset

In November 2018, the Company acquired Namegames LLC pursuant to an agreement dated February 1, 2018 and issued 23,360 shares of common stock with an aggregate issuance date fair value of $658,000 (Note 4).

Item 6. Selected Financial Data.

Not required for smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.

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

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 $83.0 million. We recognized $74.4 million of impairments related to goodwill and $8.6 million of impairments related to the intangible assets acquired in connection with our acquisitions of Nexway and Facebank AG.

Other Income/Expense

During the year ended December 31, 2019 other expenses totaled $9.8 million compared to other expenses of $0.2 million for the year ended December 31, 2018. The $9.6 million increase to other expenses was primarily related to $13.5 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 $117.8 million and $13.1 million, respectively.

Liquidity and Going Concern

Cash Flows (in thousands)

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 $135.8 million at December 31, 2019. The Company recorded a net loss of $117.8 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.

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 $117.8 million, adjusted for non-cash expenses of $107.8 million including, $83.0 million of impairment charges recorded for goodwill and 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, $13.5 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.

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 2 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.

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 recognized an impairment charge totaling $74.4 million, in connection with its acquisition of FaceBank AG and Nexway. 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.

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:

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:

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 3 in the accompanying consolidated financial statements for a discussion of recent accounting policies.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 8. Financial Statements and Supplementary Data.

The financial statements required by this Item 8 are included elsewhere in Annual Report on Form 10-K beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2019.

Report of Management on Internal Controls over Financial Reporting. 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. As of December 31, 2019, management has not completed an effective assessment of the Company’s internal control over financial reporting based on the 2013 Committee of Sponsoring Organizations (COSO) framework. Management has concluded that as of December 31, 2019, our internal control over financial reporting was not effective to detect the inappropriate application of U.S. GAAP. Management identified the following material weaknesses set forth below in our internal control over financial reporting:

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management necessarily applied its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

On May 28, 2020, the parties to the Note Purchase Agreement, as amended, entered into a Consent and Second Amendment to Note Purchase Agreement (the “Second Amendment”). Pursuant to the terms of the Second Amendment:

The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Second Amendment, filed as Exhibit 10.64 hereto, and incorporated by reference into this Item 9B.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

Set forth below is the name, age, and positions held by our executive officers and directors:

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified.

Set forth below is a brief description of the background and business experience of our current executive officers and directors.

Executive Officers

David Gandler was appointed as our Chief Executive Officer and Director in April 2020. He previously served as President and Chief Executive Officer of fuboTV Pre-Merger and as a member of fuboTV Pre-Merger’s board of directors from March 2014 to April 2020. Prior to joining fuboTV, Mr. Gandler served as Vice President, Ad Sales at DramaFever, a video streaming service acquired in 2016 by Warner Bros. Entertainment Inc., from 2013 to 2014. Prior to 2013, Mr. Gandler held positions at Scripps Networks Interactive, Inc., Time Warner Cable and Telemundo, a division of NBCUniversial Media, LLC. Mr. Gandler received a B.A. degree in economics from Boston University. Mr. Gandler brings our board his considerable experience in the digital media industry as well as the operational insight and expertise he has accumulated as our Chief Executive Officer.

Edgar Bronfman, Jr., joined the Company’s Board of Directors in May 2020 following the Merger, bringing decades of experience in media and technology. Since October 2017, Mr. Bronfman has served as chairman of Waverley Capital LLC, a media-focused venture capital firm, of which he is also a co-founder and general partner. Since 2014, Mr. Bronfman has served as managing partner of Accretive, LLC, a private equity firm. Mr. Bronfman served in various roles at Warner Music Group, a multinational entertainment and record label, most recently serving as chief executive officer from March 2004 to August 2011 and as a member of the board of directors from March 2004 to May 2013, including serving as chairman of the board of directors from March 2004 to January 2012. Mr. Bronfman served on the boards of directors of IAC InterActive Corp, a media and internet company, from February 1998 through October 2019 and Accretive Health, Inc. (now known as R1 RCM Inc.), a healthcare management company, from October 2006 until February 2016. Mr. Bronfman has also served as executive chairman of Global Thermostat Operations, LLC, a company designed to develop and commercialize technology for the direct capture of carbon dioxide, since 2010 and has served on the boards of Insureon Holdings, LLC since 2012 and Everspring Inc. since 2014. Mr. Bronfman is Chairman of the Board of Endeavor Global, Inc., a member of the board of trustees of the NYU Elaine A. and Kenneth G. Langone Medical Center, a member of the Board of the Council of Foreign Relations, Vice President of the Ann L. Bronfman Foundation and Director of the Clarissa and Edgar Bronfman Jr. Foundation. Mr. Bronfman’s qualifications to serve on the Board include his experience as a member of senior management of various public and global companies, which gives him particular insight into business strategy, leadership, marketing, consumer branding and international operations. The Board also considered his high level of financial literacy and insight into the media, entertainment and technology industries as well as his private equity experience.

John Textor has served as member of the Board of Directors since August 2018 and currently serves as our Head of Studio and Chief Financial Officer. Mr. Textor also served as our Executive Chairman from April 2020 to May 2020 and as Chief Executive Officer from August 2018 to April 2020. Mr. Textor has served as Managing Partner of Wyndcrest Holdings, a technology focused private holding company, since 1996.  Through his activities with Wyndcrest, from 1996 to 2017, Mr. Textor led early investments in Art Technology Group, a leading internet personalization company, co-founded and became the leading shareholder of Virtual Bank, an internet bank and private wealth management company; acquired and served as Chairman of Sims Snowboards, the world’s second leading snowboard brand, acquired and served as Co-Chairman of Digital Domain, a leading Hollywood visual effects company, and founded Pulse Evolution Corporation, our majority owned subsidiary and a globally recognized pioneer in the development of hyper-realistic digital humans for live shows, virtual reality, augmented reality, holographic, 3D stereoscopic, web, mobile, interactive and artificial intelligence applications, on May 31, 2013. From May 2015 until July 2017, he served as Chief Financial Officer of PEC, and from January 2015 until July 2017, Mr. Textor served as Chief Executive Officer of PEC. Mr. Textor is a graduate of Wesleyan University. Mr. Textor brings to our Board his considerable experience in the strategic planning and growth of technology companies and entertainment properties, which qualifies him to serve as a director of our company.

Jordan Fiksenbaum was appointed as President on February 1, 2019, and since June 2017, he has served as Chief Executive Officer of Pulse Evolution Corporation, a wholly-owned subsidiary of the Company, since June 2017. Prior to joining Pulse Evolution, Mr. Fiksenbaum was the founder and Chief Executive Officer of Pop Experience from January 2015 until May 2017. From January 2014 until September 2014, Mr. Fiksenbaum served as Vice President of Marketing/PR-Resident 7Show Division of Cirque du Soleil. Mr. Fiksenbaum has been working professionally in the live entertainment industry for over 30 years, now bringing to the Company his relevant experience in senior management including strategic planning, operations, sales, marketing, promotions, event programming, and ticketing. While at Cirque du Soleil, he was responsible for the marketing, sales and public relations initiatives of nine resident shows, including launching Michael Jackson One in Las Vegas, which features an appearance of the holographic likeness of Michael Jackson. Within the theatre industry, Mr. Fiksenbaum worked on numerous award-winning productions, including The Phantom of the Opera, Ragtime, Disney’s the Lion King, Wicked, Les Misérables and Spamalot.

Non-Employee Directors

Alexander Bafer has served as a member of the Board of Directors since 2009. Between August 2018 and April 2020, Mr. Bafer served as our Executive Chairman, and between February 2018 and August 2018, he served as our Chief Executive Officer and Chairman of the Board. In addition, Mr. Bafer served as our Chief Executive Officer, Chief Financial Officer and a member of our Board of Directors from 2009 to 2016 and from April 2017 to January 2018. He also served as our Chief Development Officer and Chairman of the Board of Directors from 2016 to January 2018. Mr. Bafer successfully led the organization and development of numerous startup companies, having also achieved a number of successful exits. He led the transformation of our Company from a film entertainment and production company into a forward-looking entertainment technology and mixed reality company. Mr. Bafer is a graduate of St. John’s University.

Pär-Jörgen Pärson joined our Board of Directors in May 2020. Since 2004, Pär-Jörgen Pärson has been a General Partner of Northzone, a venture capital firm, where his primary areas of focus are disruptive businesses in consumer internet, health, and fintech. Before joining Northzone, Mr. Pärson ran his own investment firm and was a consultant at McKinsey & Company. Until April 1, 2020, Mr. Pärson served on the board of directors of fuboTV Pre-Merger. In addition, Mr. Pärson serves on the Board of Directors of Spring Health Inc, a health tech company, Noquo Foods AB, a Swedish foodtech startup, Sourcepoint Inc, a media tech company, Neverthink OY, an online video service, and Activate Inc, a media tech company. Previously, Mr. Pärson served on the board of directors of (i) Spotify AB, the subscription music streaming service, from 2008 to 2017, (ii) payments company iZettle AB (which was acquired by PayPal) from 2011 to 2016, (iii) Avito AB, an online classifieds service (acquired by Naspers in 2016) from 2011 to 2016, (iv) Qapital Insight AB, a fintech company, from 2013 to 2018, (v) Widespace AB, an adtech business, from 2012 to 2018, and (vi) Jukely Inc, a live music subscription service, from 2014 to 2020. Mr. Pärson holds an M.B.A. from the Stockholm School of Economics. Mr. Pärson’s qualifications to serve on the Board include his prior service on the board of directors of fuboTV Inc., his experience as a member of the board of directors of consumer internet and media companies, through which he has valuable insight into business strategy, leadership, and international operations, and his venture capital experience.

Board of Directors

Our business and affairs are managed under the direction of our board of directors. Our board of directors currently consists of Messrs. Gandler, Bronfman, Textor, Bafer and Pärson. The size of our board of directors is currently set at seven and we currently have two (2) vacancies.

Pursuant to the Merger, the shareholders of fuboTV Pre-Merger received shares of our Series AA Preferred Stock as consideration. See “Description of Capital Stock—Series AA Preferred Stock.” Pursuant to the Certificate of Designation of the Series AA Preferred Stock, holders of a majority of the outstanding shares of our Series AA Preferred Stock are entitled to appoint up to three (3) directors to our Board of Directors. Mr. Gandler and Mr. Pärson are two of the directors appointed by the holders of our Series AA Convertible Preferred Stock, and such holders have the right to appoint one additional director. The Certificate of Designation of the Series AA Preferred Stock also requires the consent of the holders of a majority of the outstanding shares of our Series AA Preferred Stock prior to an increase of the size of our board of directors above seven directors.

Background and Qualifications of Directors

When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Board of Directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. As more specifically described in the biographies set forth above, our directors possess relevant knowledge and experience in the finance, accounting and business fields generally, which we believe enhances the Board’s ability to oversee, evaluate and direct our overall corporate strategy.

Committees of our Board of Directors

Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors, nor are we required to establish or maintain an audit committee or other committee of our board of directors.

Our board currently consists of Messrs. Textor, Bafer, Mr. Pärson and Bronfman (Chair). We do not currently have any board committees and traditionally operate by unanimous consent.

Candidates for director nominees are reviewed in the context of the current composition of the board and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the board and the Company, to maintain a balance of knowledge, experience and capability.

The board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

Through their own business activities and experiences each of directors have come to understand that in today’s business environment, development of useful products and identification of undervalued real estate, along with other related efforts, are the keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current and proposed business activities.

Director Compensation

In 2019, we did not have any non-employee directors. None of our directors received additional compensation for their services as a director.

On April 29, 2020, the board approved the appointment of Edgar Bronfman, Jr. as Executive Chairman of the Board, effective as of April 29, 2020 (the “Start Date”). In connection with Mr. Bronfman’s appointment, the Company and Mr. Bronfman entered into a letter agreement dated as of April 29, 2020, pursuant to which Mr. Bronfman agreed to serve as the Executive Chairman of the Board (the “Letter Agreement”). Pursuant to the Letter Agreement, Mr. Bronfman’s employment with the Company is for an indefinite period and is terminable by either Mr. Bronfman or the Company upon 30 days’ advance written notice. Pursuant to the Letter Agreement, Mr. Bronfman received a stock option covering 1,875,000 shares of the Company’s common stock on the Start Date (the “Option Award”). The Option Award has an exercise price of $8.76 per share and a term of seven years, will generally vest in equal annual installments over a period of four years, in each case subject to earlier vesting upon the achievement of certain stock price milestones, and is subject to the terms of the Company’s 2020 Equity Incentive Plan and a stock option agreement thereunder. In the event Mr. Bronfman’s employment with the Company is terminated by the Company without cause, by Mr. Bronfman following the Company’s material breach of any agreement between Mr. Bronfman and the Company or due to Mr. Bronfman’s death or disability, any outstanding portion of the Option Award that remains unvested as of the date of such termination of employment will remain outstanding and eligible to vest in accordance with the terms of the applicable stock option agreement. In addition, any unvested portion of the Option Award that remains outstanding as of the date of a change in control of the Company will immediately vest in full and become exercisable. In addition to the Option Award, Mr. Bronfman will receive an annual base salary of $95,000, which may increase if he chairs or serves other Board committees. He will be eligible to receive an annual equity award on generally the same terms as non-employee directors of the Company.

On May 21, 2020, we established our Outside Director Compensation Policy (the “Compensation Policy”) to set forth guidelines for the compensation of our non-employee directors for their service on our Board of Directors.

Also on May 21, 2020, Pär-Jörgen Pärson joined the board pursuant to a vote by the holders of the Company’s Series AA Convertible Preferred Stock. In connection with his election to the Board, Mr. Pärson was granted an option to purchase 50,381 shares of the Company’s common stock (the “Initial Award”) in accordance with the Compensation Policy and subject to the Company’s 2020 Equity Incentive Plan (the “Plan”) and standard option award agreement thereunder. The Initial Award will vest in 36 equal, monthly installments beginning on the grant date, provided that Mr. Pärson continues to serve as a Service Provider (as defined in the Plan) through the applicable vesting date. In addition, any unvested potion of the Initial Award that remains outstanding as of the date of a change of control of the Company will immediately vest in full and become exercisable. In addition to the Initial Award, in accordance with the Compensation Policy, Mr. Pärson will receive an annual cash retainer of $45,000 for his board service, which may increase if he chairs or serves on other board committees. He will be eligible to receive an annual equity award in accordance with the Compensation Policy.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely upon our review of copies of such forms received by us, we believe that, except as hereinafter disclosed, during the fiscal year ended December 31, 2019, any required Form 3s, 4s and 5s were timely filed: Mr. Textor failed to file a Form 3 and Mr. Gupta failed to timely file a Form 3.

Item 11. Executive Compensation.

2019 Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to each of our “named executive officers,” as such term is defined in Item 402(m)(2) of Regulation S-K. Because the summary compensation table relates to the named executive officers as of December 31, 2019, it does not include compensation for our post-merger management team. See “Item 10. Directors, Executive Officers and Corporate Governance—Director Compensation” above and “—Mr. Gandler’s.Employment Agreement” below.

(1) Mr. Textor became an executive officer on August 8, 2018.

(2) Represents an annual salary of $500,000 of which $198,925 has been accrued from August 8, 2018 until December 31, 2018. Mr. Textor is also entitled to receive an annual bonus of $100,000 which has been accrued on a pro rata basis.

(3) Mr. Bafer became an executive officer in February 2018. He was appointed Chief Executive Officer in February 2018. On August 8, 2018, he resigned as Chief Executive Officer and assumed the role of Executive Chairman. The accrued salary of Mr. Bafer is reflected within the table.

(4) Represents the fair value of (i) Stock Option of 8,334 granted on February 1, 2018 as Chief Executive Officer from February 1, 2018 until August 8, 2018, and (ii) Stock Option of 8,333 granted on February 1, 2018 as Executive Chairman of the Board. These options are fully vested and have a 10-year term expiring February 2028 and have an exercise price of $28.20 per share.

Narrative Disclosure to Summary Compensation Table

Except as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from the Company with respect to any named executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.

Textor Employment Agreement

In connection with the closing of the Exchange, the Company entered into an employment agreement as of August 8, 2018 with Mr. Textor (the “Textor Employment Agreement”). Pursuant to the terms of the Textor Employment Agreement, the Company agreed to employ Mr. Textor as the Company’s Chief Executive Officer. The term of the Textor Employment Agreement begins as of August 8, 2018 and continues until termination of employment as set forth in the Textor Employment Agreement. In exchange for Mr. Textor’s services as Chief Executive Officer, the Company agreed to pay Mr. Textor an annual base salary of $500,000, subject to annual increases as determined in the sole discretion of the Compensation Committee or the full Board if no Compensation Committee exists. In addition, Mr. Textor is also eligible to receive equity awards, and an annual target bonus payment equal, as a percentage of his base salary, to that received by all other C-suite executives, subject to a minimum bonus of $100,000 per year. Subject to the minimum bonus, the bonus will be determined based on the achievement of certain performance objectives of the Company as established by the Compensation Committee.

The Company may terminate Mr. Textor’s employment at any time for Cause (as hereinafter defined) or without Cause. Mr. Textor may resign at any time, either with Good Reason (as hereinafter defined) or without Good Reason. In the event of Mr. Textor’s death or total disability during the term of the Textor Employment Agreement, Mr. Textor’s employment will terminate on the date of death or total disability.

Upon termination of Mr. Textor’s employment by the Company, whether with Cause or without Cause, or by Mr. Textor with Good Reason or without Good Reason:

Upon termination of Mr. Textor’s employment by the Company without Cause, or by Mr. Textor with Good Reason, in addition to the payments set forth in (a) through (c) above, the Company will pay Mr. Textor (i) an amount equal to his base salary (other than bonus) as determined as of the date of termination, and (ii) any unvested incentive awards then held by Mr. Textor will immediately vest in full.

Upon termination of Mr. Textor’s employment by the Company with Cause, or by Mr. Textor without Good Reason, in addition to the payments set forth in (a) through (c) above, any unvested incentive awards then held by Mr. Textor will be immediately forfeited.

Pursuant to the terms of the Textor Employment Agreement, a termination for “Cause” means a termination based upon:

As used in the Textor Employment Agreement, Good Reason means the occurrence, without Mr. Textor’s express written consent, of any of the following:

The Textor Employment Agreement contains covenants regarding Mr. Textor’s non-competition and non-solicitation of employees for 12 months.

Bafer Agreements

Bafer Termination and Release Agreement

Concurrent with the closing of the Exchange, the Company and Mr. Bafer entered into that certain Termination and Release Agreement dated as of August 8, 2018 (the “Bafer Termination Agreement”). In connection with the Exchange and as provided in the Closing Agreement, Mr. Bafer resigned his position as Chief Executive Officer on August 8, 2018. Pursuant to the terms of the Bafer Termination Agreement, the employment agreement dated as of July 25, 2016 between the Company and Mr. Bafer (the “2016 Bafer Agreement”) was terminated effective immediately in connection with Mr. Bafer’s resignation; provided, however, that (i) the provisions of Article 4 and Article 6 (other than Sections 6.7 and 6.8) remain in full force and effect, and (ii) the parties agreed that the Company owes Mr. Bafer certain past due payments pursuant to the 2016 Bafer Agreement and other instruments between the parties, which amounts remain owed to Mr. Bafer until paid. The Bafer Termination Agreement contains customary representations and warranties that the Company and Mr. Bafer have made to each other.

Bafer Executive Chairman Agreement

Concurrent with the closing of the Exchange, the Company entered into an Agreement for Executive Chairman of Board of Directors effective August 8, 2018 (“Bafer Executive Chairman Agreement”). The Bafer Executive Chairman Agreement has a term of one year from August 8, 2018 and will continue thereafter for as long as Mr. Bafer is elected as Chairman of the Board. In exchange for Mr. Bafer’s services as Chairman of the Board, the Company agreed to pay Mr. Bafer an annual base salary of $500,000, subject to annual increases as determined in the sole discretion of the Compensation Committee or the full Board if no Compensation Committee exists. In addition, Mr. Bafer is also eligible to receive equity awards, and an annual target bonus payment equal, as a percentage of his base salary, to that received by all other C-suite executives, subject to a minimum bonus of $100,000 per year. Subject to the minimum bonus, the bonus will be determined based on the achievement of certain performance objectives of the Company as established by the Compensation Committee.

Mr. Bafer may be removed as Chairman by the majority vote of the Company’s stockholders. The parties agree, however, that if the Bafer Executive Chairman Agreement is terminated at any time, whether by majority vote of the Company’s shareholders or otherwise, Mr. Bafer will be entitled to a lump sum payment equal to the then current base salary.

Termination of Bafer Employment Agreement

Concurrent with the closing of the Exchange and Mr. Bafer’s resignation as Chief Executive Officer, the 2016 Bafer Agreement was terminated effective immediately, except as set forth in the Bafer Termination Agreement.

Previously, the Company and Mr. Bafer entered into employment agreement effective April 11, 2017, July 25, 2016 and February 1, 2018. Such agreements are no longer in effect.

Outstanding Equity Awards At 2019 Fiscal Year-end

At the end of our last completed fiscal year, our named executive officers did not have any outstanding unexercised options, stock that has not vested, or equity incentive plan awards.

Mr. Gandler’s Employment Agreement

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly owned subsidiary of FaceBank merged with and into fuboTV whereby fuboTV continued as the surviving corporation and became a wholly owned subsidiary of FaceBank pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020 (the “Merger Agreement”) by and among FaceBank, Merger Sub and fuboTV. In accordance with the terms of the Merger Agreement, FaceBank’s Board of Directors approved the appointment of David Gandler as Chief Executive Officer and the appointment of John Textor, FaceBank’s prior Chief Executive Officer, as Executive Chairman of FaceBank, each effective as of the effective time of the merger.

FaceBank and Mr. Gandler entered into an Employment Agreement dated as of April 1, 2020 pursuant to which Mr. Gandler agreed to serve as the Company’s Chief Executive Officer (the “Gandler Employment Agreement”). The Gandler Employment Agreement will continue until the earlier of (i) Mr. Gandler’s termination of employment or (ii) immediately prior to a listing of the FaceBank Common Stock on either the Nasdaq Stock Market or the New York Stock Exchange (an “Uplist”), at which time the Company and Mr. Gandler have agreed to revisit and modify the terms of the Gandler Employment Agreement by reference to other peer group companies. Pursuant to the Gandler Employment Agreement, Mr. Gandler shall receive a base salary of $500,000 per year, subject to increase, but not decrease, at the discretion of the compensation committee of the Board. In addition, the Company and Mr. Gandler have agreed that Mr. Gandler shall be eligible to receive an annual bonus in a minimum amount of $100,000 based on his meeting certain performance-based targets. Pursuant to the Gandler Employment Agreement, Mr. Gandler will receive a bonus upon the successful Uplist of the FaceBank Common Stock. Mr. Gandler is also eligible to receive equity based awards under the Company’s compensation plans. On April 1, 2020, the Company granted to Mr. Gandler, a stock option to purchase 4,846,658 shares of FaceBank Common Stock at a price of $8.124 per share pursuant to the Company’s newly adopted 2020 Equity Incentive Plan. Mr. Gandler’s option shall vest over a four year period at a rate of 1/48 per month of the total grant per month. Mr. Gandler’s stock options are subject to 100% accelerated vesting in the event of his termination without Cause or for Good Reason (each as defined in the Gandler Employment Agreement) following a change in control of the Company. Further, if Mr. Gandler’s employment is terminated without Cause or for Good Reason, he receives as severance an amount equal to his then annual base salary and accelerated vesting of any unvested equity awards. Mr. Gandler is also eligible to participate in the Company’s employee benefit plans as in effect from time to time on the same terms as generally made available to other senior executives of the Company and have other benefits provided to executives of the Company. The Gandler Employment Agreement contains standard non-compete and confidentiality provisions.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 

At May 29, 2020, we had 34,848,495 shares of our common stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our common stock as of May 29, 2020 by:

Unless otherwise indicated, the business address of each person listed is in care of 1330 Avenue of the Americas, New York, NY 10019. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

* Less than 1%.

Securities Authorized for Issuance under Equity Compensation Plans

The Company adopted the 2014 Equity Incentive Stock Plan (the “Plan”). The Plan provides for the issuance of up to 166,667 incentive stock options and nonqualified stock options to the Company’s employees, officers, directors, and certain consultants. The Plan is administered by the Company’s Board, and has a term of 10 years.

Under this plan, 16,667 stock options have been granted to Mr. Alex Bafer, in February 1, 2018.

The table below sets forth information as of December 31, 2019.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions. When such transactions arise, they are referred to our board of directors for its consideration.

Amounts owed to related parties as of December 31, 2019 and 2018 consist of the following:

Our Chairman, Mr. Bafer, advanced an unsecured, non-interest-bearing loan which is due on demand. The amounts due to John Textor, Chief Executive Officer, represent a liability assumed in the acquisition of EAI. The amounts due to other related parties also represent liabilities assumed in the acquisition of EAI.

During the year ended December 31, 2019, the Company received approximately $423,000 from related parties, including a $300,000 advance from FaceBank, Inc., a development stage company controlled by Mr. Textor, $56,000 from Mr. Bafer, $37,000 from Mr. Textor and $30,000 from other related parties. During the year ended December 31, 2019, the Company paid approximately $156,000 to related parties, including $56,000 to Mr. Bafer, $49,000 to Mr. Textor and $51,000 to other related parties.

We assumed a $172,000 note payable due to a relative of the CEO, John Textor. The note has three-month roll-over provision and different maturity and repayment amounts if not fully paid by its due date and bears interest at 18% per annum. We have accrued default interest for additional liability in excess of the principal amount. The note is currently in default.

In July 2015, we issued convertible promissory notes to Mr. Bafer, Chairman, in exchange for the cancellation of previously issued promissory notes in the aggregate of $530,000 and accrued interest of $13,000 for a total of $543,000. The notes are unsecured, bear interest of 5% per annum, matured on October 1, 2015 and are convertible into shares of common stock at a conversion price equal to the lowest closing stock price during the 20 trading days prior to conversion with a 50% discount. In October 2015, the notes matured and became past due. As a result, the stated interest of 5% increased to 22% pursuant to the term of the notes. In July 2016, the Company and Mr. Bafer agreed to extend the maturity date of these notes to August 1, 2017 and cure the default. There were no other terms changed and no additional compensation paid. On May 22, 2019, the Company issued a non-convertible promissory note to replace the convertible promissory notes. The note has a principal balance of $264,365, accrues interest at a rate of 8% per annum and matured on August 31, 2019. During the year ended December 31, 2019, Mr. Bafer was repaid $258,850 of the principal balance and approximately $46,160 of interest. As part of this transaction, the Company and Mr. Bafer agreed to transfer approx. $124,000 from his note balance to accrued payroll.

On December 28, 2016, we issued an unsecured convertible promissory note in the principal amount of $50,000 to a shareholder. The note bears interest at 3% per annum, is due on March 24, 2017, and is convertible into shares of common stock at a conversion price of $4,000 per share. The promissory note was converted into 250,000 shares of common stock.

Effective August 8, 2018, the Company entered into a Share Exchange Agreement (the “BTH and SV Exchange Agreement”) with Brick Top Holdings, Inc. a Florida corporation (“Brick Top”) owned by Alexander Bafer and Southfork Ventures, Inc. a Florida corporation (“Southfork”) owned by Chris Leone, the company’s Chief Operating Officer and Director, pursuant to which the Company agreed to acquire up to all of the shares of Series A preferred stock of the Company held by Brick Top and Southfork, in exchange for the issuance of shares of Company common stock to Brick Top and Southfork. The closing of the share exchange contemplated by the BTH and SV Exchange Agreement occurred on August 8, 2018. On such date, the Company issued (i) 2,725,000 shares of Company common stock in exchange for receipt of 3,750,000 shares of Series A preferred shares from Brick Top, and (ii) 908,333 shares of Company common stock in exchange for receipt of 1,250,000 shares of Series A preferred shares from Southfork. This transaction was structured to simplify the capital structure of the Company, and to ensure voting rights were proportional and equitable among all shareholders after the EAI acquisition was completed.

Item 14. Principal Accountant Fees and Services.

On April 23, 2020, the Company’s Board of Directors approved the appointment of L J Soldinger Associates, LLC (“Soldinger”) as the Company’s independent registered public accounting firm. The following table sets forth the fees billed or to be billed to our company for the year ended December 31, 2019 for professional services rendered by Soldinger and for the year ended December 31, 2018 for professional services rendered by Marcum LLP, our former independent registered public accounting firm.

Audit Fees

Audit fees to Soldinger were for professional services rendered for the audit of our annual financial statements for the year ended December 31, 2019. Audit fees payable to Marcum LLP were for professional services rendered for the audits of our annual financial statements for the year ended December 31, 2018.

Audit-Related Fees

During 2019 and 2018, Soldinger did not provide any assurance and related services that are reasonably related to the performance of the audit or review or our financial statements that are not reported under the caption “Audit Fees” above.

Tax Fees

As Soldinger did not provide any services to us for tax compliance, tax advice and tax planning during 2019 and 2018, no tax fees were billed or paid during those fiscal years.

All Other Fees

Soldinger did not provide any products and services not disclosed in the table above during 2019 and 2019. As a result, there were no other fees billed or paid during 2019 and 2018.

Pre-Approval Policies and Procedures

Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.

The Company’s Board reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” were pre-approved by our Company’s Board. The Board may not engage the independent auditors to perform the non-audit services proscribed by law or regulation.

PART IV

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements.

FaceBank Group, Inc.

(formerly known as Pulse Evolution Group, Inc.)

For the years ended December 31, 2019 and 2018

Index to the Consolidated Financial Statements

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

To the Shareholders and Board of Directors of

FaceBank Group, Inc. (formerly known as Pulse Evolution Group, Inc.) and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of FaceBank Group, Inc. (formerly known as Pulse Evolution Group, Inc.) and Subsidiaries (the “Company”) as of December 31, 2019, the related consolidated statement of operations, stockholders’ equity and cash flows for the year ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, incurred significant operating and cash flow losses and needs to raise additional capital to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ LJ Soldinger Associates, LLC

Deer Park, IL

May 29, 2020

We have served as the Company’s auditor since 2020.

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

To the Shareholders and Board of Directors of

FaceBank Group, Inc. (formerly known as Pulse Evolution Group, Inc.) and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of FaceBank Group, Inc. (formerly known as Pulse Evolution Group, Inc.) and Subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, incurred significant operating and cash flow losses and needs to raise additional capital to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ Marcum llp

Marcum llp

We have served as the Company’s auditor in 2019.

New York, NY

June 7, 2019

FaceBank Group, Inc.

(formerly known as Pulse Evolution Group, Inc.)

Consolidated Balance Sheets

(in thousands, except for share and per share information)

The accompanying notes are an integral part of these consolidated financial statements.

FaceBank Group, Inc.

(formerly known as Pulse Evolution Group, Inc.)

Consolidated Statements of Operations and Comprehensive Income (Loss)

( in thousands except for share and per share information)

The accompanying notes are an integral part of these consolidated financial statements.

FaceBank Group, Inc.

(formerly known as Pulse Evolution Group, Inc.)

Statements of Stockholders’ Equity (Deficit)

For the years ended December 31, 2019 and 2018

(in thousands except for share information)