FuboTV Inc 8-K/A, filed Aug 14, 2020
FuboTV Inc. (FUBO)
About this 8-K/A
FuboTV Inc filed this 8-K/A on August 14, 2020, reporting on events of April 1, 2020.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 3)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 2020
fuboTV Inc.
(Exact name of registrant as specified in its charter)
| Florida | 000-55353 | 26-4330545 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1330 Avenue of the Americas
New York, NY 10019
(Address of principal executive offices)
(212) 672-0055
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter) [ ]
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. [ ]
EXPLANATORY NOTE
On April 7, 2020, fuboTV, Inc., a Florida corporation (formerly known as FaceBank Group, Inc.) (“fuboTV” or the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) reporting, among other items, that on April 1, 2020, the Company completed its acquisition of fuboTV Inc., a Delaware corporation (“fuboTV Pre-Merger”) by the merger of fuboTV Acquisition Corp., the Company’s wholly-owned subsidiary, with and into fuboTV Pre-Merger (the “Merger”), whereby fuboTV Pre-Merger continued as the surviving corporation. On June 17, 2020 (the “Original Due Date”), the Company filed Amendment No. 1 to Current Report on Form 8-K/A (“Amendment No. 1”) to provide (i) the audited financial statements of fuboTV Pre-Merger as of and for the years ended December 31, 2019 and 2018, as required by Item 9.01(a) (the “2019 fuboTV Financial Statements”) and (ii) the unaudited pro forma combined financial statements of the Company and fuboTV Pre-Merger for the year ended December 31, 2019, as required by Item 9.01(b) (the “2019 Pro Forma Financial Statements” and, together with the 2019 fuboTV Financial Statements, the “2019 Financial Statements”). The 2019 Financial Statements were excluded from the Original Form 8-K in reliance on the instructions to Item 9.01.
On the Original Due Date, the Company filed a Current Report on Form 8-K (the “COVID 8-K”) with the U.S. Securities and Exchange Commission (the “SEC”) to avail itself of a 45-day extension to file on a Current Report on Form 8-K/A (i) the separate historical unaudited consolidated financial statements of fuboTV Pre-Merger for the three months ended March 31, 2020 and 2019, as required by Item 9.01(a) (the “Q1 fuboTV Financial Statements”), and (ii) the unaudited pro forma combined financial statements of the Company and fuboTV Pre-Merger for the three months ended March 31, 2020, as required by Item 9.01(b) (the “Q1 Pro Forma Financial Statements” and together with the Q1 fuboTV Financial Statements, the “Q1 Financial Statements”), in reliance on an order issued by the SEC pursuant to Section 36 of the Securities Exchange Act of 1934 Granting Exemptions From Specified Provisions of the Exchange Act of 1934 and Certain Rules Thereunder dated March 4, 2020 (Release No. 34-88318), as modified and superseded by a new SEC order issued on March 25, 2020 (Release No. 34-88465) (collectively, the “Order”). As disclosed in the COVID 8-K, the Company was unable to include the Q1 Financial Statements in Amendment No. 1 within the prescribed time period due to the global COVID-19 pandemic. As a result of the pandemic, management’s full efforts have been focused on operating its business and evaluating available funding. The Company has been following the recommendations of local health authorities to minimize exposure risk for its employees, including temporarily closing its offices and requiring its employees to work remotely to the extent possible. As a result, the Company’s books and records were not easily accessible, resulting in delays in preparation and completion of its financial statements. These unforeseen circumstances resulted in the Company being unable to file the Q1 Financial Statements during the prescribed period without undue hardship and expense to the Company. As such, the Company filed Amendment No. 2 to Current Report on Form 8-K/A (“Amendment No. 2”) to further supplement the Original Form 8-K and Amendment No. 1 to provide the Q1 Financial Statements within 45 days of the Original Due Date in reliance on the Order.
In connection with the preparation of the Company’s condensed consolidated interim financial statements as of and for the quarter ended June 30, 2020, the Company identified an inadvertent error in the accounting for goodwill relating to the Company’s acquisitions of Nexway AG and Facebank AG. Upon further evaluation, the Company determined that goodwill amounting to $79.7 million should not have been impaired at December 31, 2019. Accordingly, on August 10, 2020, the Company filed (i) an Amendment No. 1 to its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2019 to restate its previously issued consolidated financial statements and the related disclosures for the fiscal year ended December 31, 2019 and (ii) an Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 2020 to restate its previously issued unaudited condensed consolidated financial statements and the related disclosures for the three months ended March 31, 2020 (collectively, the “Restatement”).
As a result of the Restatement, the Company is filing this Amendment No. 3 to Current Report on Form 8-K/A to restate the 2019 Pro Forma Financial Statements and the Q1 Pro Forma Financial Statements. The Restatement did not impact the 2019 fuboTV Financial Statements or the Q1 fuboTV Financial Statements; as such, they are not included herein.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The restated unaudited pro forma combined financial statements of the Company and fuboTV Pre-Merger for (i) the year ended December 31, 2019 and (ii) the three months ended March 31, 2020 are filed herewith as Exhibit 99.1 and are incorporated herein by reference.
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FUBOTV INC. | ||
| Date: August 14, 2020 | By: | /s/ David Gandler |
| David Gandler | ||
| Chief Executive Officer | ||
Exhibit 99.1
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
fuboTV-FaceBank Merger and Name Change
On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of fuboTV Inc., a Florida corporation (formerly known as FaceBank Group, Inc.) (“fuboTV” or the “Company”), merged with and into fuboTV Inc., a Delaware corporation (“fuboTV Pre-Merger”), whereby fuboTV Pre-Merger continued as the surviving corporation and became a wholly-owned subsidiary of the Company 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 the Company, Merger Sub and fuboTV Pre-Merger (the “Merger”).
Following the Merger, the Company’s trading symbol was changed to “FUBO,” and on August 10, 2020, the Company changed its name from FaceBank Group, Inc. to fuboTV Inc. (the “Name Change”). The Company has filed a Notice of Corporate Action (the “Action”) with FINRA regarding the Name Change. As of August 14, 2020, the Action is pending FINRA approval.
Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refers to the combined company post-Merger – fuboTV (formerly known as FaceBank Group, Inc.) and its subsidiaries on a consolidated basis. “fuboTV Pre-Merger” refers to fuboTV Inc., a Delaware corporation, prior to the Merger, and “fuboTV Sub” refers to fuboTV Inc., a Delaware corporation, and the Company’s wholly-owned subsidiary, following the Merger. “FaceBank Pre-Merger” refers to the Company (formerly known as FaceBank Group, Inc.) and its subsidiaries prior to the closing of the Merger.
Debt Agreements Related to the fuboTV-FaceBank Merger
On March 11, 2020, FaceBank Pre-Merger and HLEE Finance S.a r.l. (“HLEE”) entered into a Credit Agreement, dated as of March 11, 2020, pursuant to which HLEE provided FaceBank Pre-Merger with a $100,000,000 revolving line of credit (the “Credit Facility”). The Credit Facility was secured by substantially all the assets of the Company. On July 8, 2020, the Company terminated the Credit Facility. As of July 8, 2020, there were no amounts outstanding under the Credit Facility.
On March 19, 2020, FaceBank Pre-Merger, Merger Sub, Evolution AI Corporation (“Evolution”) and Pulse Evolution Corporation (“PEC” and collectively with Evolution, Merger Sub and FaceBank Pre-Merger, the “Initial Borrower”) and FB Loan Series I, LLC (“FB Loan”) entered into a Note Purchase Agreement dated as of March 19, 2020, as amended (the “Note Purchase Agreement”) pursuant to which Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10,050,000 (the “Senior Notes”). On April 2, 2020, fuboTV and Sports Rights Management, LLC, a Delaware limited liability company and a wholly-owned subsidiary of fuboTV (“SRM”), also joined the Note Purchase Agreement as borrowers (fuboTV, SRM and the Initial Borrower, collectively, the “Borrower”). In connection with the Merger, the proceeds of $7.4 million, net of an original discount of $2.65 million, were sent directly to fuboTV Pre-Merger pursuant to the Signing Date Loan Agreement described below. As of July 31, 2020, the Company had repaid the Senior Notes in full ($10.05 million) plus accrued interest.
Interest on the Senior Notes accrued at a rate of 17.39% until full and final repayment of the principal amount of the Senior Notes. On the first business day of each calendar month in which the Senior Notes were outstanding, beginning on April 1, 2020, the Borrower was obligated to pay in arrears in cash to FB Loan accrued interest on the outstanding principal amount of the Senior Notes. Pursuant to the Note Purchase Agreement, the maturity date of the Senior Notes was the earlier to occur of (i) July 8, 2020 and (ii) the date the Borrower received the proceeds of any financing. Each Borrower’s obligations under the Senior Notes were secured by substantially all of the assets of each such Borrower pursuant to a Security Agreement, dated as of March 19, 2020, by and among Borrower and FB Loan (the “Security Agreement”).
In addition, in connection with the Note Purchase Agreement, the Company issued (i) 900,000 shares of its common stock and (ii) a warrant to purchase 3,269,231 shares of its common stock at an exercise price of $5.00 per share to FB Loan. The warrant expires on March 19, 2025.
Immediately following the execution and delivery of the Merger Agreement, FaceBank Pre-Merger and fuboTV Pre-Merger entered into a Loan and Security Agreement, dated as of March 19, 2020 (the “Signing Date Loan Agreement”), whereby FaceBank Pre-Merger advanced to fuboTV Pre-Merger a junior secured term loan in the aggregate principal amount of $10,000,000 (the “Signing Date Loan”) on the terms set forth in the Signing Date Loan Agreement using the net proceeds of the Senior Notes and other cash on hand. Interest on the Signing Date Loan accrued at a rate of 11% per annum. Interest is payable in arrears on the first business day of each calendar month commencing with the calendar month beginning on April 1, 2020. The maturity date for the Signing Date Loan was July 8, 2020. This loan was repaid in full prior to the maturity date. Pursuant to the Signing Date Loan Agreement, fuboTV Pre-Merger granted to FaceBank Pre-Merger a junior security interest in substantially all of its assets as security for the payment of all obligations under the Signing Date Loan Agreement, the Signing Date Loan and the other transaction documents executed in connection therewith.
Prior to the Merger, fuboTV Pre-Merger and its subsidiaries were party to a Credit and Guaranty Agreement, dated as of April 6, 2018 (the “AMC Agreement”), with AMC Networks Ventures LLC as lender, administrative agent and collateral agent (“AMC Networks Ventures”). fuboTV Pre-Merger previously granted AMC Networks Ventures a lien on substantially all of its assets to secure its obligations thereunder. The AMC Agreement survived the Merger and, as of June 30, 2020, there was $22.5 million outstanding under the AMC Agreement, excluding consideration of debt discount costs. In connection with the Merger, the Company guaranteed the obligations of fuboTV Pre-Merger under the AMC Agreement on an unsecured basis. The liens of AMC Networks Ventures on the assets of the Company were senior to the liens in favor of FB Loan and the Company securing the Senior Notes and the Signing Date Loan, respectively.
Accounting Treatment of fuboTV-FaceBank Merger
The following unaudited pro forma combined financial information was prepared using the acquisition method of accounting under accounting principles generally accepted in the United States (“GAAP”) and gives effect to the Merger. The Merger Agreement will be accounted for as an acquisition, with FaceBank Pre-Merger being deemed the acquiring company for accounting purposes.
FaceBank Pre-Merger was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) FaceBank Pre-Merger’s shareholders owned approximately 57% of the voting common shares of the combined company immediately following the closing of the Merger. Assuming the exercise of all vested stock options as of the closing of the transaction, FaceBank Pre-Merger’s shareholders owned 54% of the voting common interest and (ii) directors appointed by FaceBank Pre-Merger will hold a majority of board seats in the combined company.
Pro Forma Financial Information
The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet as of March 31, 2020 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2020 and the year ended December 31, 2019 based upon the combined historical financial statements of fuboTV Pre-Merger and FaceBank Pre-Merger after giving effect to the Company’s acquisition of fuboTV Pre-Merger on March 31, 2020.
The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 and for the year ended December 31, 2019 give pro forma effect to the acquisition of fuboTV Pre-Merger as if it had occurred on January 1, 2019, which is the earliest year for which pro forma financial statements are required to be presented. The unaudited pro forma combined balance sheet as of March 31, 2020 gives pro forma effect to the acquisition of fuboTV Pre-Merger as if it had occurred on March 31, 2020.
fuboTV Pre-Merger’s assets and liabilities will be measured and recognized at their fair values as of the transaction date, and combined with the assets, liabilities and results of operations of the Company after the consummation of the Merger.
The unaudited pro forma condensed combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed and have been made solely for the purpose of providing unaudited pro forma combined financial information. There can be no assurances that the final valuations will not result in material changes to the preliminary estimated purchase price allocation. The unaudited pro forma combined consolidated financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Merger or any integration costs. Additionally, the unaudited pro forma combined consolidated statement of operations does not include certain nonrecurring charges resulting directly from the Merger as described in the accompanying notes.
The unaudited pro forma condensed combined financial information is preliminary and has been prepared for illustrative purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had FaceBank Pre-Merger and fuboTV Pre-Merger been a combined company during the specified periods. The actual results reported in periods following the transaction may differ significantly from those reflected in this pro forma financial information presented herein for a number of reasons, including, but not limited to, differences between the assumptions used to prepare this pro forma financial information.
The assumptions and estimates underlying the unaudited adjustments to the pro forma combined financial statements are described in the accompanying notes, which should be read together with the unaudited pro forma combined financial statements.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2020
(UNAUDITED)
(in thousands, except per share amounts)
FACEBANK PRE-MERGER (Historical) (As Restated) | FUBOTV PRE- MERGER (Historical) | Pro Forma Adjustments | Note 4 | Pro Forma Combined | ||||||||||||||
| Assets | ||||||||||||||||||
| Cash and cash equivalents | $ | 81 | $ | 8,040 | $ | - | $ | 8,121 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts | - | 5,831 | - | 5,831 | ||||||||||||||
| Note receivable – fuboTV | 10,000 | - | (10,000 | ) | (g) | - | ||||||||||||
| Prepaid expenses and other current assets | 130 | 976 | - | 1,106 | ||||||||||||||
| Total current assets | 10,211 | 14,847 | (10,000 | ) | 15,058 | |||||||||||||
| Property & equipment, net | - | 2,042 | - | 2,042 | ||||||||||||||
| Deposits | 24 | - | - | 24 | ||||||||||||||
| Investment in Nexway at fair value | 2,374 | - | - | 2,374 | ||||||||||||||
| Financial assets at fair value | 1,965 | - | - | 1,965 | ||||||||||||||
| Intangible assets | 111,459 | - | 243,612 | (c) | 355,071 | |||||||||||||
| Goodwill | 176,595 | - | 574,120 | (a) | 750,715 | |||||||||||||
| Right-of-use assets | 37 | - | 3,845 | (b) | 3,882 | |||||||||||||
| Restricted cash | - | 1,333 | - | 1,333 | ||||||||||||||
| Other noncurrent assets | - | 397 | - | 397 | ||||||||||||||
| Total assets | $ | 302,665 | $ | 18,619 | $ | 811,577 | $ | 1,132,861 | ||||||||||
| Liabilities | ||||||||||||||||||
| Accounts payable | $ | 3,406 | $ | 51,687 | $ | - | $ | 55,093 | ||||||||||
| Accounts payable - due to related parties | 305 | 14,811 | - | 15,116 | ||||||||||||||
| Accrued expenses and other current liabilities | 4,337 | 50,249 | - | 54,586 | ||||||||||||||
| Accrued expenses and other current liabilities - due to related parties | - | 34,109 | - | 34,109 | ||||||||||||||
| Note payable, net of discount | 5,207 | - | - | 5,207 | ||||||||||||||
| Notes payable - related parties | 446 | - | - | 446 | ||||||||||||||
| Convertible notes, net of discounts | 1,962 | - | - | 1,962 | ||||||||||||||
| Shares settled liability for note payable | 7,515 | - | (7,515 | ) | (e)(ii) | - | ||||||||||||
| Profit share liability | 1,971 | - | - | 1,971 | ||||||||||||||
| Warrant liability – subsidiary | 39 | - | - | 39 | ||||||||||||||
| Warrant liability | 15,987 | - | - | 15,987 | ||||||||||||||
| Derivative liability | 389 | - | - | 389 | ||||||||||||||
| Short-term debt | - | 10,000 | (10,000 | ) | (g) | - | ||||||||||||
| Long term borrowings - current portion | - | 5,625 | 5,625 | |||||||||||||||
| Current portion of lease liabilities | 37 | - | 910 | (b) | 947 | |||||||||||||
| Deferred rent - current portion | - | 167 | (167 | ) | (b) | - | ||||||||||||
| Deferred revenue | - | 8,809 | - | 8,809 | ||||||||||||||
| Total current liabilities | 41,601 | 175,457 | (16,772 | ) | 200,286 | |||||||||||||
| Deferred income taxes | 28,679 | - | 65,613 | (a) | 94,292 | |||||||||||||
| Long-term debt, net of issuance costs | 55,130 | 18,007 | - | 73,137 | ||||||||||||||
| Lease liabilities | - | - | 4,276 | (b) | 4,276 | |||||||||||||
| Deferred rent - net of current portion | - | 1,174 | (1,174 | ) | (b) | - | ||||||||||||
| Other long-term liabilities | 1 | - | - | 1 | ||||||||||||||
| Total liabilities | 125,411 | 194,638 | 51,943 | 371,992 | ||||||||||||||
| Commitments and Contingencies | ||||||||||||||||||
| Convertible preferred stock, net of issuance costs | 463 | 247,241 | (247,241 | ) | (a) | 463 | ||||||||||||
| Shareholders’ Equity | ||||||||||||||||||
| Series AA Convertible Preferred stock | - | - | 576,100 | (a) | 576,100 | |||||||||||||
| Series A Preferred stock | - | - | - | - | ||||||||||||||
| Series B Convertible Preferred stock | - | - | - | - | ||||||||||||||
| Series C Convertible Preferred stock | - | - | - | - | ||||||||||||||
| Series D Convertible Preferred stock | ||||||||||||||||||
| Series X Convertible Preferred stock | - | - | - | - | ||||||||||||||
| Common stock | 3 | 2 | (2 | ) | (a) (e)(ii) | 3 | ||||||||||||
| Additional paid-in capital | 270,397 | 12,955 | (5,440 | ) | (a) (e)(ii) | 277,912 | ||||||||||||
| Accumulated deficit | (111,593 | ) | (436,217 | ) | 436,217 | (a) | (111,593 | ) | ||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ||||||||||||||
| Non-controlling interest | 17,984 | - | - | 17,984 | ||||||||||||||
| Total equity | 176,791 | (423,260 | ) | 1,006,875 | 760,406 | |||||||||||||
| Total liabilities, shareholders’ equity and convertible preferred stock | $ | 302,665 | $ | 18,619 | $ | 811,577 | $ | 1,132,861 | ||||||||||
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2020
(in thousands, except per share and per share amounts)
FACEBANK PRE-MERGER (Historical) (As Restated) | FUBOTV PRE- MERGER (Historical) | Pro Forma Adjustments | Note 4 | Pro Forma Combined | ||||||||||||||
| Revenues | ||||||||||||||||||
| Revenues | $ | 7,295 | $ | 51,047 | $ | - | $ | 58,342 | ||||||||||
| Total revenues | 7,295 | 51,047 | - | 58,342 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| General and administrative | 20,203 | 3,104 | - | 23,307 | ||||||||||||||
| Amortization of intangible assets | 5,217 | - | 9,069 | (d) | 14,286 | |||||||||||||
| Subscriber related expenses | - | 58,001 | - | 58,001 | ||||||||||||||
| Broadcasting and transmission | - | 9,230 | - | 9,230 | ||||||||||||||
| Sales and marketing | - | 7,713 | - | 7,713 | ||||||||||||||
| Technology and development | - | 8,327 | - | 8,327 | ||||||||||||||
| Depreciation | 3 | 135 | - | 138 | ||||||||||||||
| Total operating expenses | 25,423 | 86,510 | 9,069 | 121,002 | ||||||||||||||
| Operating loss | (18,128 | ) | (35,463 | ) | (9,069 | ) | (62,660 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||
| Interest expense and financing costs, net | (2,581 | ) | (493 | ) | 1,055 | (e)(iii) | (2,019 | ) | ||||||||||
| Loss on deconsolidation of Nexway | (11,919 | ) | - | - | (11,919 | ) | ||||||||||||
| Loss on issuance of notes, bonds and warrants | (24,053 | ) | - | - | (24,053 | ) | ||||||||||||
| Other expense | (436 | ) | - | - | (436 | ) | ||||||||||||
| Change in fair value of subsidiary warrant liability | (15 | ) | - | - | (15 | ) | ||||||||||||
| Change in fair value of shares settled liability | (180 | ) | - | 180 | (e)(ii) | - | ||||||||||||
| Change in fair value of derivative liability | 297 | - | - | 297 | ||||||||||||||
| Change in fair value of warrant liability | (366 | ) | - | - | (366 | ) | ||||||||||||
| Total other income (expense) | (39,253 | ) | (493 | ) | 1,235 | (38,511 | ) | |||||||||||
| Income (loss) before income taxes | (57,381 | ) | (35,956 | ) | (7,834 | ) | (101,171 | ) | ||||||||||
| Provision for income taxes (income tax benefit) | (1,038 | ) | 2 | (2,443 | ) | (f) | (3,479 | ) | ||||||||||
| Net income (loss) | $ | (56,343 | ) | $ | (35,958 | ) | $ | (5,391 | ) | $ | (97,692 | ) | ||||||
| Less: net loss attributable to non-controlling interest | 873 | - | - | 873 | ||||||||||||||
| Net income (loss) attributable to controlling interest | (55,470 | ) | (35,958 | ) | (5,391 | ) | (96,819 | ) | ||||||||||
| Less Deemed dividend – beneficial conversion feature | (171 | ) | - | - | (171 | ) | ||||||||||||
| Net income (loss) attributable to common shareholders | $ | (55,641 | ) | $ | (35,958 | ) | $ | (5,391 | ) | $ | (96,990 | ) | ||||||
| Net income (loss) per share attributable to common shareholders | ||||||||||||||||||
| Basic and diluted | $ | (1.83 | ) | $ | (3.11 | ) | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||
| Basic and diluted | 30,338,073 | 900,000 | (e)(ii) | 31,238,073 | ||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
YEAR ENDED DECEMBER 31, 2019
(in thousands, except per share and per share amounts)
FACEBANK PRE-MERGER (Historical) (As Restated) | FUBOTV PRE- MERGER (Historical) | Pro Forma Adjustments | Note 4 | Pro Forma Combined | ||||||||||||||
| Revenues | ||||||||||||||||||
| Revenues | $ | 4,271 | $ | 146,530 | $ | - | $ | 150,801 | ||||||||||
| Total revenues | 4,271 | 146,530 | - | 150,801 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| General and administrative | 13,793 | 15,876 | - | 29,669 | ||||||||||||||
| Amortization of intangible assets | 20,682 | - | 36,276 | (d) | 56,958 | |||||||||||||
| Subscriber related expenses | - | 201,448 | - | 201,448 | ||||||||||||||
| Broadcasting and transmission | - | 33,103 | - | 33,103 | ||||||||||||||
| Sales and marketing | - | 37,245 | - | 37,245 | ||||||||||||||
| Technology and development | - | 30,001 | - | 30,001 | ||||||||||||||
| Impairment of intangible assets | 8,598 | - | - | 8,598 | ||||||||||||||
| Depreciation | 83 | 616 | - | 699 | ||||||||||||||
| Total operating expenses | 43,156 | 318,289 | 36,276 | 397,721 | ||||||||||||||
| Operating loss | (38,885 | ) | (171,759 | ) | (36,276 | ) | (246,920 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||
| Interest expense and financing costs, net | (2,062 | ) | (2,035 | ) | (10,553 | ) | (e)(i) | (14,650 | ) | |||||||||
| Gain (loss) on extinguishment of debt | - | 102 | - | 102 | ||||||||||||||
| Loss on investments | (8,281 | ) | - | - | (8,281 | ) | ||||||||||||
| Foreign currency loss | (18 | ) | - | - | (18 | ) | ||||||||||||
| Other expense | 726 | - | - | 726 | ||||||||||||||
| Change in fair value of subsidiary warrant liability | 4,504 | - | - | 4,504 | ||||||||||||||
| Change in fair value of derivative liability | 815 | - | - | 815 | ||||||||||||||
| Change in fair value of Panda interests | (198 | ) | - | - | (198 | ) | ||||||||||||
| Total other income (expense) | (4,514 | ) | (1,933 | ) | (10,553 | ) | (17,000 | ) | ||||||||||
| Loss before income taxes | (43,399 | ) | (173,692 | ) | (46,829 | ) | (263,920 | ) | ||||||||||
| Provision for income taxes (income tax benefit) | (5,272 | ) | 9 | (9,769 | ) | (f) | (15,032 | ) | ||||||||||
| Net loss | $ | (38,127 | ) | $ | (173,701 | ) | $ | (37,060 | ) | $ | (248,888 | ) | ||||||
| Less: net loss attributable to non-controlling interest | 3,767 | - | - | 3,767 | ||||||||||||||
| Net loss attributable to controlling interest | (34,360 | ) | (173,701 | ) | (37,060 | ) | (245,121 | ) | ||||||||||
| Less: Deemed dividend on Series D Preferred Stock | (9 | ) | - | - | (9 | ) | ||||||||||||
| Less Deemed dividend – beneficial conversion feature | (589 | ) | - | - | (589 | ) | ||||||||||||
| Net loss attributable to common shareholders | $ | (34,958 | ) | $ | (173,701 | ) | $ | (37,060 | ) | $ | (245,719 | ) | ||||||
| Other comprehensive income (loss) | ||||||||||||||||||
| Foreign currency translation adjustment | (770 | ) | - | - | (770 | ) | ||||||||||||
| Comprehensive loss | $ | (35,728 | ) | $ | (173,701 | ) | $ | (37,060 | ) | $ | (246,489 | ) | ||||||
| Net loss per share attributable to common shareholders | ||||||||||||||||||
| Basic and diluted | $ | (1.57 | ) | $ | (10.60 | ) | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||
| Basic and diluted | 22,286,060 | 900,000 | (e)(ii) | 23,186,060 | ||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
Notes to the Unaudited Pro Forma Combined Financial Information
Note 1 — Description of Transaction and Basis of Presentation
The unaudited pro forma condensed combined financial information was prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of SEC Regulation S-X, and present the pro forma financial position and results of operations of the combined companies based upon the historical data of FaceBank Pre-Merger and fuboTV Pre-Merger. The statement of comprehensive income (loss) was not included because it is not material to FaceBank Pre-Merger and fuboTV Pre-Merger.
Description of Transaction
On April 1, 2020, Merger Sub merged with and into fuboTV Pre-Merger whereby fuboTV Pre-Merger continued as the surviving corporation and became a wholly-owned subsidiary of the Company pursuant to the terms of the Merger Agreement.
In accordance with the terms of the Merger Agreement, all of the capital stock of fuboTV Pre-Merger was converted into the right to receive 32,324,362 shares of a newly created class of Series AA Convertible Preferred Stock of the Company, par value $0.0001 per share (the “Series AA Preferred Stock”). In accordance with the terms of the Merger Agreement, at the Effective Time the Company assumed 8,051,098 stock options issued and outstanding under the fuboTV Inc. 2015 Equity Incentive Plan (the “2015 Plan”) with a weighted-average exercise price of $1.32 per share. From and after the Effective Time, such options may be exercised for shares of the Company’s common stock under the terms of the 2015 Plan.
Each share of Series AA Preferred Stock is entitled to 0.8 votes per share and is convertible into two (2) shares of the Company’s common 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 of 1933 (the “Securities Act”) or pursuant to an effective registration statement under the Securities Act. 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 the Company on a common equivalent basis for the holders of fuboTV Pre-Merger stock while preserving a majority voting interest for the holders of FaceBank Pre-Merger stock.
Basis of Presentation
The historical financial statements of FaceBank Pre-Merger and fuboTV Pre-Merger have been adjusted to give pro forma effect to events that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined consolidated statement of income, expected to have a continuing impact on the combined results.
The Company has preliminarily concluded that the transaction represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The Company has not yet completed an external valuation analysis of the fair market value of fuboTV Pre-Merger’s assets to be acquired and liabilities to be assumed. Using the estimated total consideration for the transaction, the Company has estimated the allocations to such assets and liabilities. This preliminary purchase price allocation has been used to prepare pro forma adjustments in the unaudited pro forma combined balance sheet. The final purchase price allocation will be determined when the Company has determined the final consideration and completed the detailed valuations and necessary calculations. The final purchase price allocation could differ materially from the preliminary purchase price allocation used to prepare the pro forma adjustments. The final purchase price allocation may include (i) changes in allocations to intangible assets or goodwill based on the results of certain valuations that have yet to be completed and (ii) other changes to assets and liabilities.
Under the acquisition method, Merger-related transaction costs (e.g., advisory, legal, valuation and other professional fees) are not included as consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. These costs are not presented in the unaudited pro forma combined consolidated statement of income because they will not have a continuing impact on the combined results.
This unaudited pro forma combined consolidated financial information is not intended to reflect the results which would have actually resulted had the Merger been effected on the dates indicated. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.
Note 2 — Significant accounting policies
The accounting policies used in the preparation of this unaudited pro forma condensed combined financial information are those set out in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019. Management has determined that certain adjustments, including those described in Note 4, are necessary to conform fuboTV Pre-Merger’s financial statements to the accounting policies used by the Company in the preparation of the unaudited pro forma combined financial information. The adjustment amounts are subject to change as further assessment is performed and finalized for purchase accounting. These reclassifications and adjustments have no effect on previously reported total assets, total liabilities, equity, or results of operations of the Company.
As part of the application of ASC 805, the Company will conduct a more detailed review of fuboTV Pre-Merger’s accounting policies in an effort to determine if differences in accounting policies require further reclassification or adjustment of fuboTV Pre-Merger’s results of operations, assets or liabilities to conform to the Company’s accounting policies and classifications. Therefore, the Company may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma combined financial information.
Note 3 — Preliminary purchase price allocation
Under the acquisition method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of fuboTV based on their estimated fair values as of the transaction closing date. The excess of the acquisition consideration paid over the estimated fair values of net assets acquired will be recorded as goodwill in the combined balance sheet. The allocation is dependent upon certain valuation and other studies that have not yet been finalized. Accordingly, the pro forma purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed, and such differences could be material. Transaction costs directly attributable to the Merger are not material.
The acquisition closed on April 1, 2020. The following table sets forth a preliminary allocation of the purchase price to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of fuboTV Pre-Merger using fuboTV Pre-Merger’s audited consolidated balance sheet as of March 31, 2020, with the excess recorded to goodwill:
| Cash and cash equivalents | $ | 8,040 | ||
| Accounts receivable | 5,831 | |||
| Prepaid expenses and other current assets | 976 | |||
| Property & equipment | 2,042 | |||
| Restricted cash | 1,333 | |||
| Other noncurrent assets | 397 | |||
| Right of use assets | 3,845 | |||
| Intangible assets (see below) | 243,612 | |||
| Accounts payable | (51,687 | ) | ||
| Accounts payable – due to related parties | (14,811 | ) | ||
| Accrued expenses and other current liabilities | (50,249 | ) | ||
| Accrued expenses and other current liabilities – due to related parties | (34,109 | ) | ||
| Long term borrowings - current portion | (15,625 | ) | ||
| Lease liabilities | (5,186 | ) | ||
| Deferred revenue | (8,809 | ) | ||
| Deferred income taxes | (65,613 | ) | ||
| Long-term debt, net of issuance costs | (18,007 | ) | ||
| Net liabilities acquired (a) | $ | 1,980 | ||
| Estimated merger consideration (b) | 576,100 | |||
| Estimated goodwill (b) – (a) | $ | 574,120 |
Goodwill represents excess of merger consideration over the fair value of the underlying net assets acquired. Goodwill is not amortized but assessed for impairment annually, or more frequently, if an event occurs or circumstances change. Goodwill is attributable to the assembled workforce of fuboTV Pre-Merger, planned growth in new markets, and synergies expected to be achieved from the combined operations of FaceBank Pre-Merger and fuboTV Pre-Merger.
The deferred tax liabilities represent the deferred tax impact associated with the differences in book and tax basis, including incremental differences created from the preliminary purchase price allocation and acquired net operating losses. Deferred taxes associated with estimated fair value adjustments reflect an estimated blended federal and state tax rate, net of tax effects on state valuation allowances. For balance sheet purposes, where U.S. tax rates were used, rates were based on recently enacted U.S. tax law. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, including cash needs, the geographical mix of income, and changes in tax law. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities of fuboTV Pre-Merger.
The pro forma historical net asset adjustments as shown above are further described below in Note 4.
Intangible Assets
Preliminary identifiable intangible assets in the unaudited pro forma combined financial information consist of the following:
| Intangible Assets | Approximate Fair Value | Estimated Useful Life | ||||||
| (in thousands) | (in years) | |||||||
| Software and technology | $ | 181,737 | 9 | |||||
| Customer relationships | 23,678 | 2 | ||||||
| Tradenames | 38,197 | 9 | ||||||
| Total | $ | 243,612 | ||||||
The amortization related to the identifiable intangible assets is reflected as a pro forma adjustment in the unaudited pro forma combined statement of operations based on the estimated useful lives above and as further described in Note 4. The identifiable intangible assets are preliminary and are based on management’s estimates after consideration of similar transactions. As discussed above, the amount that will ultimately be allocated to identifiable intangible assets, may differ materially from this preliminary allocation. In addition, the amortization impacts will ultimately be based upon the periods in which the associated economic benefits or detriments are expected to be derived. Therefore, the amount of amortization following the Merger may differ significantly between periods based upon the final value assigned and amortization methodology used for each identifiable intangible asset.
Note 4 — Pro forma adjustments
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined financial information:
| (a) | Represents the elimination of the historical equity of fuboTV Pre-Merger and the initial allocation of excess purchase price to goodwill: |
| Total consideration | $ | 576,100 | (i) | |
| Less: | ||||
| Convertible preferred stock | 247,241 | |||
| Common Stock | 2 | |||
| Additional paid in capital | 12,955 | |||
| Accumulated deficit | (436,217 | ) | ||
| Identifiable intangibles assets | 243,612 | |||
| Deferred income taxes | (65,613 | ) | ||
| Goodwill – related to the Merger | $ | 574,120 |
(i) Consideration of $576.1 million represents the sum of (1) $530.1 market value ($8.20 per share as of April 1, 2020) of 64.6 million common shares, (2) $36.0 million related to the fair value of the vested portion of 8.1 million stock options outstanding prior to the Merger and (3) $10.0 million related to the effective settlement of a preexisting loan receivable from fuboTV Pre-Merger.
In accordance with the terms of the Merger Agreement, all of the capital stock of fuboTV Pre-Merger was converted into the right to receive 32,324,362 shares of the Company’s newly-created Series AA Preferred Stock each of which is convertible into two (2) shares of the Company common stock, par value $0.0001 per share, for a total of 64,648,724 shares of the Company Common Stock on an as-converted basis. In addition, each outstanding option to purchase shares of common stock of fuboTV Pre-Merger was assumed by the Company and converted into an option to acquire the Company Common Stock. As of April 1, 2020, the aggregate number of options to acquire the Company 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.
| (b) | Reflects an adjustment for the adoption of ASC 842 – Leases by fuboTV Pre-Merger to conform to the accounting policies of FaceBank Pre-Merger. the Company adopted the new leasing standard ASC 842, Leases, on January 1, 2019 while fuboTV Pre-Merger was not required to, given its status as a privately-held company. The impact of the adoption of ASC 842 had an immaterial impact on the combined statement of operations. | |
| (c) | Adjustment to record the fair value of fuboTV Pre-Merger’s identifiable intangible assets of $243.6 million. | |
| (d) | Represents the adjustments to recognize new amortization expense related to the identifiable intangible assets calculated on a straight-line basis over their estimated useful lives (see Note 3). | |
| (e) | Reflects the issuance of the FB Loan for $7.4 million of cash proceeds and the issuance of 900,000 shares of the Company’s common stock and a warrant to purchase 3,269,231 shares of the Company’s common stock at an exercise price of $5.00 per share. This transaction is directly attributable to the Merger. |
The cash proceeds of the FB Loan are allocated to the warrants and common stock based on their estimated fair value, resulting in a loss on issuance. The warrants are classified as a liability and will be marked to market at each reporting date since the warrants are not indexed to the Company’s own stock and do not qualify for equity treatment. The warrants have a five-year term and the exercise price is $5.00 per share. Inputs used to determine the preliminary fair value of the warrants as of the issuance date include: risk free rate—0.14%, expected volatility—52.6%, effective life—4.78 years and dividend yield—N/A. The fair value of the 900,000 common stock of $7.4 million was based upon the closing price of the Company’s common stock as of March 19, 2020 ($8.15 per share).
The transaction was recognized in the Company’s financial statements as of March 31, 2020 as follows:
| Fair value of warrant liability | $ | 15.6 | ||
| Fair value of common stock | 7.4 | |||
| Principal balance of Senior Notes | (10.1 | ) | ||
| Loss on issuance | $ | 12.9 |
| (i) | Reflects the interest expenses associated with the FB Loan. As the cash proceeds were allocated to the warrant liability and common stock, the adjustment to interest expense during the twelve months ended December 31, 2019 reflects the accretion of the Senior Notes to the full repayment value of $10.1 million as well as interest expense of $0.5 million assuming the Senior Notes were outstanding for the duration of its issuance term. The warrant liability will continue to be adjusted to fair value each reporting period and the change in fair value will be recorded in the statement of operations. | |
| (ii) | Reflects the issuance of the 900,000 shares of the Company’s common stock. The 900,000 shares of the Company’s common stock was recognized on the balance sheet as shares settled payable for note payable as of March 31, 2020. The Company recorded change in fair value of shares settled payable of $0.2 million during the three months ended March 31, 2020 based upon the price of $8.35 per share as of March 31, 2020. | |
| (iii) | Reflects the removal of interest expenses associated with the FB Loan for the period ended March 31, 2020. Since the term of the Senior Notes is less than twelve months and the unaudited pro forma combined statement of operations gives effect to the acquisition of fuboTV Pre-Merger as if it had occurred on January 1, 2019, the $1.1 million adjustment to interest expense during the three months ended March 31, 2020 reflects the removal of the interest expense recorded within the Company’s historical financial statements for this transaction. |
| (f) | Reflects the amortization of the deferred tax liabilities created as part of the Merger. | |
| (g) | Reflects the elimination of the $10.0 million loan provided from FaceBank Pre-Merger to fuboTV Pre-Merger in connection with the Signing Date Loan Agreement entered into on March 19, 2020. |