10-Q 1 form10-q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File Number: 001-39590

 

fuboTV Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Florida

 

26-4330545

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

     

1290 Avenue of the Americas, New York, NY

 

10104

(Address of Principal Executive Offices)   (Zip Code)

 

(212) 672-0055

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share   FUBO   New York Stock Exchange

 

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. 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
  Emerging growth company    

 

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 Exchange Act). Yes ☐ No

 

As of April 30, 2022, there were 185,081,994 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 

 

 

 

 

 

fuboTV Inc.

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 1
   
Item 1. Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 1
     
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited) 2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited) 3
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited) 4
     
  Notes to Condensed Consolidated Financial Statements (unaudited) 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 32
     
Item 4. Controls and Procedures 33
     
PART II - OTHER INFORMATION 33
   
Item 1. Legal Proceedings 34
     
Item 1A. Risk Factors 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 72
     
Item 3. Defaults Upon Senior Securities 73
     
Item 4. Mine Safety Disclosures 73
     
Item 5. Other Information 73
     
Item 6. Exhibits 73
     
SIGNATURES 75

 

i

 

 

BASIS OF PRESENTATION

 

As used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless expressly indicated or the context otherwise requires, references to “fuboTV Inc.,” “fuboTV,” “we,” “us,” “our,” “the Company,” and similar references refer to fuboTV Inc., a Florida corporation and its consolidated subsidiaries.

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project,” “contemplate,” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions, or projections. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth, and our objectives for future operations, including related to investment in our technologies and data capabilities, subscriber acquisition strategies, expansion of our gaming business and other adjacent markets, and expansion internationally.

 

We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors” of this Quarterly Report. These risks are not exhaustive. Other sections of this Quarterly Report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.

 

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

 

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. You should read this Quarterly Report in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022 (the “Annual Report”).

 

ii

 

 

RISK FACTORS SUMMARY

 

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report. Material risks that may affect our business, operating results and financial condition include, but are not limited to, the following:

 

Our actual operating results may differ significantly from our guidance.

 

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

 

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

 

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

 

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

 

If we fail to effectively manage our growth, our business, operating results, and financial condition may suffer.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The gaming industry is heavily regulated and our failure to obtain or maintain applicable licensure or approvals, or otherwise comply with applicable requirements, could be disruptive to our business and could adversely affect our operations.

 

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

 

iii

 

 

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

 

There can be no assurance that we will be able to compete effectively or generate sufficient returns on our recently expanded sports wagering operations and launch of Fubo Sportsbook.

 

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

 

Our shareholders will be subject to extensive governmental oversight, and if a shareholder is found unsuitable by a gaming authority, that shareholder may not be able to beneficially own, directly or indirectly, certain of our securities.

 

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

 

We may be unable to successfully expand our international operations and our international expansion plans, if implemented, will subject us to a variety of economic, political, regulatory and other risks arising from our international operations.

 

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

 

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

 

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

 

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

 

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

 

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

 

iv

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

fuboTV Inc.

Condensed Consolidated Balance Sheets

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

 

           
   March 31,   December 31, 
   2022   2021 
   (Unaudited)     
ASSETS         
Current assets          
Cash and cash equivalents  $450,922   $374,294 
Cash reserved for users   731    579 
Accounts receivable, net   33,598    34,308 
Prepaid and other current assets   35,344    19,324 
Total current assets   520,595    428,505 
           
Property and equipment, net   7,253    6,817 
Restricted cash   5,112    5,112 
Intangible assets, net   207,757    218,186 
Goodwill   627,632    630,269 
Right-of-use assets   41,010    37,755 
Other non-current assets   46,401    43,134 
Total assets  $1,455,760   $1,369,778 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable  $50,473   $56,460 
Accrued expenses and other current liabilities   219,032    219,579 
Notes payable   5,251    5,113 
Deferred revenue   42,991    44,296 
Warrant liabilities   -    3,548 
Long-term borrowings - current portion   3,607    3,668 
Current portion of lease liabilities   6,201    4,633 
Total current liabilities   327,555    337,297 
           
Convertible notes, net of discount   392,217    316,354 
Deferred income taxes   2,028    2,431 
Lease liabilities   37,151    34,129 
Other long-term liabilities   8,562    8,686 
Total liabilities   767,513    698,897 
           
COMMITMENTS AND CONTINGENCIES (Note 14)   -      
           
Redeemable non-controlling interest   1,725    - 
           
Stockholders’ equity:          
Common stock par value $0.0001: 400,000,000 shares authorized; 182,677,189 and 153,950,895 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively   18    16 
Additional paid-in capital   1,837,195    1,691,206 
Accumulated deficit   (1,137,335)   (1,009,293)
Non-controlling interest   (11,313)   (11,220)
Accumulated other comprehensive income (loss)   (2,043)   172 
Total stockholders’ equity   686,522    670,881 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY  $1,455,760   $1,369,778 

 

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

 

1

 

 

fuboTV Inc.

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2022 and 2021

(Unaudited)

(in thousands, except share and per share amounts)

 

           
  

For the Three Months Ended

March 31,

 
   2022   2021 
Revenues          
Subscription  $219,168   $107,114 
Advertising   23,152    12,606 

Wagering

   (301)   - 
Total revenues   242,019    119,720 
Operating expenses          
Subscriber related expenses   245,661    113,307 
Broadcasting and transmission   20,297    10,551 
Sales and marketing   46,186    22,143 
Technology and development   21,425    11,438 
General and administrative   32,229    18,154 
Depreciation and amortization   11,462    9,209 
Total operating expenses   377,260    184,802 
Operating loss   (135,241)   (65,082)
           
Other income (expense)          
Interest expense and financing costs   (3,770)   (2,454)
Amortization of debt discount   (600)   (2,512)
Change in fair value of warrant liabilities   (1,701)   (585)
Other income (expense)   92    (18)
Total other expense   (5,979)   (5,569)
Loss before income taxes   (141,220)   (70,651)
Income tax benefit   403    465 
Net loss   (140,817)   (70,186)
Less: Net loss attributable to non-controlling interest   93    76 
Net loss attributable to common stockholders  $(140,724)  $(70,110)
           
Other comprehensive income (loss)          
Foreign currency translation adjustment   (2,215)   - 
Comprehensive loss  $(142,939)  $(70,110)
           
Net loss per share attributable to common stockholders          
Basic and diluted  $(0.89)  $(0.59)
Weighted average shares outstanding:          
Basic and diluted   157,503,479    118,584,166 

 

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

 

2

 

 

fuboTV Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2022 and 2021

(Unaudited)

(in thousands, except share and per share amounts)

 

                                    
   Common Stock  

Additional

Paid-In

   Accumulated   Noncontrolling  

Accumulated

Other

Comprehensive

  

Total

Stockholders’

 
   Shares   Amount   Capital   Deficit   Interest   Loss   Equity 
Balance at December 31, 2021  - 153,950,895   $16   $1,691,206  - $(1,009,293)  $(11,220)  $172   $670,881 
Issuance of common stock/At-the-market offering, net of offering costs   27,443,580    2    203,794    -    -    -    203,796 
Reclassification of the equity components of the 2026 Convertible Notes to liability upon adoption of ASU 2020-06   -    -    (87,946)   12,682    -    -    (75,264)
Exercise of stock options   349,847    -    443    -    -    -    443 
Exercise of common stock warrants   540,541    -    10,249    -    -    -    10,249 
Delivery of common stock underlying restricted stock units   -392,326    -    -  -  -    -    -    - 
Stock-based compensation   -    -    19,449    -    -    -    19,449 
Foreign currency translation adjustment   -    -    -    -    -    (2,215)   (2,215)
Net loss attributable to non-controlling interest   -    -    -    -    (93)   -    (93)
Net loss   -    -    -    (140,724)   -    -    (140,724)
Balance at March 31, 2022   -182,677,189   $    18   $  1,837,195  - $(1,137,335)  $(11,313)  $     (2,043)  $         686,522 

 

                                                   
               Additional                   Total 
   Preferred stock   Common Stock   Paid-In   Treasury Stock   Accumulated   Noncontrolling   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Shares   Amount   Deficit   Interest   Equity 
Balance at December 31, 2020   23,219,613   $406,665    92,490,768   $9   $853,824    (800,000)  $-   $(626,456)  $(11,094)  $622,948 
Conversion of Series AA Preferred Stock   (23,219,613)   (406,665)   46,439,226    5    406,660    -    -    -    -    - 
Exercise of common stock warrants   -    -    536,825    -    15,803    -    -    -    -    15,803 
Recognition of debt
discount on 2026
Convertible Notes
   -    -    -    -    88,059    -    -    -    -    88,059 
Exercise of stock options   -    -    1,082,964    -    776    -    -    -    -    776 
Issuance of treasury stock in connection with acquisition   -    -    -    -    8,538    623,068    -    -    -    8,538 
Stock based compensation   -    -    -    -    9,374    -    -    -    -    9,374 
Other   -    -    -    -    (5)   -    -    -    -    (5)
Net loss attributable to non-controlling interest   -    -    -    -    -    -    -    

-

    (76)   (76)
Net loss   -    -    -    -    -    -    -    (70,110)   -   (70,110)
Balance at March 31, 2021   -   $-    140,549,783   $   14   $  1,383,029    (176,932)  $      -   $(696,566)  $(11,170)  $ 675,307 

 

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

 

3

 

 

fuboTV Inc.

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2022 and 2021

(Unaudited)

(in thousands, except share and per share amounts)

 

           
  

For the Three Months Ended

March 31,

 
   2022   2021 
Cash flows from operating activities          
Net loss  $(140,817)  $(70,186)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   11,462    9,209 
Amortization of gaming licenses and market access fees   866    - 
Stock-based compensation   19,449    9,374 
Amortization of debt discount   600    2,512 
Deferred income tax benefit   (403)   (465)
Change in fair value of warrant liabilities   1,701    585 
Amortization of right-of-use assets   901    251 
Accrued interest on notes payable   -    125 
Other adjustments   (180)   (5)
Changes in operating assets and liabilities of business, net of acquisitions:          
Cash reserved for users   (152)   - 
Accounts receivable, net   687    (473)
Prepaid expenses and other assets   (16,177)   (2,419)
Accounts payable   (5,746)   (8,528)
Accrued expenses and other liabilities   1,987    3,625 
Deferred revenue   (1,297)   2,771 
Lease liabilities   434    (243)
Net cash used in operating activities   (126,685)   (53,867)
           
Cash flows from investing activities          
Cash portion paid for acquisition   -    (1,740)
Purchases of property and equipment   (857)   (639)
Capitalization of internal use software   (1,026)   - 
Purchase of intangible assets - gaming   (700)   - 
Payments for market access and license fee deposits   (3,312)   - 
Net cash used in investing activities   (5,895)   (2,379)
           
Cash flows from financing activities          
Proceeds from the issuance of common stock / At-the-market offering, net of offering costs   203,765    - 
Proceeds from convertible note, net of issuance costs   -    389,946 
Proceeds from exercise of stock options   443    776 
Proceeds from the exercise of common stock warrants   5,000    812 
Repayments of notes payable and long-term borrowings   -    (6,574)
Net cash provided by financing activities   209,208    384,960 
           
Net increase in cash, cash equivalents and restricted cash   76,628    328,714 
Cash, cash equivalents and restricted cash at beginning of period   379,406    136,221 
Cash, cash equivalents and restricted cash at end of period  $456,034   $464,935 
           
Supplemental disclosure of cash flows information:          
Interest paid  $6,647   $327 
Non-cash financing and investing activities:          
Conversion of Series AA preferred stock to common stock  $-   $406,665 
Issuance of treasury stock in connection with acquisitions  $-   $8,538 
Reclassification of the equity components of the 2026 Convertible Notes to liability upon adoption of ASU 2020-06  $75,264   $- 
Cashless exercise of warrants  $5,249   $14,991 
Accrued expenses - At-the-market offering  $19   $- 

 

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

 

4

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 - Organization and Nature of Business

 

Incorporation

 

fuboTV Inc. (“fuboTV” or the “Company”) was incorporated under the laws of the State of Florida in February 2009 under the name York Entertainment, Inc. The Company changed its name to FaceBank Group, Inc. on September 30, 2019. On August 10, 2020, the Company changed its name to fuboTV Inc. and as of May 1, 2020, the Company’s trading symbol was changed from “FBNK” to “FUBO.” The Company’s common stock was approved for listing on the New York Stock Exchange (“NYSE”) in connection with a public offering in October 2020 and commenced trading on the NYSE on October 8, 2020.

 

Unless the context otherwise requires, “fuboTV,” “we,” “us,” “our,” and the “Company” refers to fuboTV and its subsidiaries on a consolidated basis.

 

Nature of Business

 

The Company is focused on developing its technology-driven IP in sports, movies, and live performances. The Company is principally focused on offering consumers a leading live TV streaming platform for sports, news, and entertainment through fuboTV. The Company’s revenues are almost entirely derived from the sale of subscription services and the sale of advertisements in the United States.

 

The Company’s subscription-based streaming services are offered to consumers who can sign-up for accounts through which the Company provides basic plans with the flexibility for consumers to purchase incremental features that include additional content or enhanced functionality (“Attachments”) best suited for them. Besides the website, consumers can also sign-up via some TV-connected devices. The fuboTV platform provides 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.

 

During the year ended December 31, 2021, the Company launched a business-to-consumer online sports wagering business (“Online Sportsbook”) in the states of Iowa and Arizona. The Company is planning to launch in additional states during 2022 and 2023. During the three months ended March 31, 2022, the Company paid $3.3 million for gaming licenses pursuant to market access agreements with third parties in various states (See Note 7).

 

Note 2 - Liquidity, Going Concern and Management Plans

 

The accompanying unaudited condensed 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 had cash and cash equivalents of $450.9 million, working capital of $193.0 million and an accumulated deficit of $1,137.3 million as of March 31, 2022. The Company incurred a net loss of $140.8 million for the three months ended March 31, 2022. Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses.

 

As discussed further in Note 13, during the three months ended March 31, 2022, the Company received net proceeds of approximately $203.8 million (after deducting $4.2 million in commissions and expenses) from sales of 27,443,580 shares of its common stock, at a weighted average gross sales price of $7.58 per share pursuant to an At-The-Market Sales Agreement with its sales agents, Evercore Group L.L.C., Needham & Company, LLC and Oppenheimer & Co. Inc., effective August 13, 2021 (the “Sales Agreement”).

 

5

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The Company’s current cash and cash equivalents provide us with the necessary liquidity to continue as a going concern for at least one year from the date of issuance of these financial statements.

 

In addition to the foregoing, the Company cannot predict the long-term impact on its development timelines, revenue levels and its liquidity due to the worldwide spread of COVID-19. Based upon the Company’s current assessment, it does not expect the impact of the COVID-19 pandemic to materially impact the Company’s operations. However, the Company is continuing to assess the impact the spread of COVID-19 may have on its operations.

 

Note 3 - Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The Company’s consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly-owned subsidiaries and non-wholly owned subsidiaries where the Company has a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of such interim results.

 

The results for the unaudited condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s Annual Report.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. Those estimates and assumptions include allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business acquisitions, useful lives of property and equipment and intangible assets, recoverability of goodwill and intangible assets, accruals for contingent liabilities, valuation of warrants, convertible notes, and equity instruments issued in share-based payment arrangements and accounting for income taxes, including the valuation allowance on deferred tax assets.

 

Segment and Reporting Unit Information

 

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is determined to be the CODM. The CODM reviews financial information and makes resource allocation decisions at the consolidated group level. The Company has two operating segments as of March 31, 2022 and December 31, 2021, streaming and wagering.

 

6

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Significant Accounting Policies

 

For a detailed discussion of the Company’s significant accounting policies, see Note 3 to the consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report. Except for the accounting for the 2026 Convertible Notes discussed in Note 10 and Licensed Content below, there were no significant changes to the Company’s accounting policies during the three months ended March 31, 2022.

 

Licensed Content

 

During the three months ended March 31, 2022, the Company entered into various license agreements to obtain rights to certain live sports events. Costs incurred in acquiring certain rights to live sporting events are accounted for in accordance with ASC 920, Entertainment—Broadcasters (“ASC 920”). Program rights, including advances, are capitalized and amortized on a straight-line basis over the shorter of the license period or estimated period of use which often corresponds with the live sports season. Program rights and the related liabilities are recorded at the gross amount of the liabilities when certain conditions are met, including when the license period begins, the cost of the program is known or reasonably determinable and the program is accepted and available for airing.

 

Cash flows for licensed content are presented within operating activities in the condensed consolidated statements of cash flows.

 

Net Loss Per Share

 

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

 

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

 

           
   Three Months Ended March 31, 
   2022   2021 
Basic loss per share:          
Net loss  $(140,817)  $(70,186)
Less: net loss attributable to non-controlling interest   93    76 
Net loss attributable to common stockholders  $(140,724)  $(70,110)
           
Shares used in computation:          
Weighted-average common shares outstanding   157,503,479    118,584,166 
Basic and diluted loss per share  $(0.89)  $(0.59)

 

7

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their inclusion would have been anti-dilutive:

   As of March 31, 
   2022   2021 
Warrants to purchase common stock   3    1,822,271 
Stock options   16,004,772    15,488,783 
Unvested restricted stock units   5,877,591    1,131,543 
Convertible notes variable settlement feature   6,966,078    6,966,078 
Total   28,848,444    25,408,675 

 

Recently Adopted Accounting Standards

 

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by eliminating the requirement to separately account for an embedded conversion feature as an equity component in certain circumstances. A convertible debt instrument will be reported as a single liability instrument with no separate accounting for an embedded conversion feature unless separate accounting is required for an embedded conversion feature as a derivative or under the substantial premium model. The ASU simplifies the diluted earnings per share calculation by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. Further, the ASU requires enhanced disclosures about convertible instruments. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception.

 

The Company adopted the ASU 2020-06 on January 1, 2022 using the modified retrospective method. Upon adoption at January 1, 2022, the Company made certain adjustments in its condensed consolidated balance sheets as related to the 2026 Convertible Notes (see Note 10) which consists of an increase of $75.3 million in Convertible notes, net of discount, a net decrease of $87.9 million in Additional paid-in capital and a net decrease of $12.6 million in Accumulated deficit. Additionally, from January 1, 2022, as related to the 2026 Convertible Notes (see Note 10) we will no longer incur non-cash interest expense for the amortization of debt discount related to the previously separated equity component.

 

After adoption, the Company accounts for the 2026 Convertible Notes as single liability measured at amortized cost. The Company did not elect the fair value option. The Company will apply the if converted methodology in computing diluted earnings per share if and when profitability is achieved.

 

The following table summarizes the adjustments made to the Company’s condensed consolidated balance sheet as of January 1, 2022 as a result of applying the modified retrospective method in adopting ASU 2020-06:

 

  

As Reported

December 31, 2021

  

ASU 2020-06

Adjustments

  

As Adjusted

January 1, 2022

 
2026 Convertible Notes  $316,354   $75,264   $391,618 
Additional paid-in capital  $1,691,206   $(87,946)  $1,603,260 
Accumulated deficit  $(1,009,293)  $12,682   $(996,611)

 

Under the modified retrospective method, the Company does not need to restate the comparative periods in transition and will continue to present financial information and disclosures for periods before January 1, 2022 in accordance with guidance under ASC 470-20, Debt: Debt with Conversion and Other Options (ASC 470-20). The adoption did not impact previously reported amounts in the Company’s condensed consolidated statements of operations, cash flows and the basic and diluted net loss per share amounts.

 

8

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

In March 2019, the FASB issued ASU 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials, to align the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film for a film in a film group and account for any changes prospectively. In addition, this guidance requires an entity to test for impairment a film or license agreement within the scope of ASC 920-350 at the film group level, when the film or license agreement is predominantly monetized with other films and/or licensed agreements. The Company adopted this ASU in January 2022, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

 

Recently Issued Accounting Standards

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The ASU sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company adopted this ASU in January 2022 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

 

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change.

 

Note 4 – Acquisitions

 

Molotov S.A.S

 

On December 6, 2021, the Company acquired approximately 98.5% of the equity interests in Molotov S.A.S (“Molotov”), a television streaming platform located in France, for €101.7 million or $115.0 million (“Molotov Acquisition”). The consideration paid in cash totaled €14.4 million or $16.3 million, and the issuance of 5.7 million shares of the Company’s common stock with a fair value of approximately $98.8 million. Molotov is included in the streaming segment.

 

The Molotov Acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, which requires recognition of assets acquired and liabilities assumed at their respective fair values on the date of acquisition.

 

During the three months ended March 31, 2022, the Company continued finalizing its purchase price allocation of the assets acquired and liabilities assumed in the December 6, 2021 acquisition of Molotov based on new information obtained about facts and circumstances that existed as of the acquisition date. During the three months ended March 31, 2022, the Company recorded preliminary measurement period adjustments to its acquisition date goodwill to record the non-controlling interest of $1.8 million for the remaining 1.5% of Molotov’s equity interest and adjustments to right of use assets, lease liabilities, accounts payable, and accrued expenses based on additional information obtained about conditions that existed as of the acquisition date. The Company expects to finalize the purchase price allocation of these assets and liabilities, and consideration transferred, as soon as practicable. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

 

Any necessary adjustments will be finalized within one year from the date of acquisition (in thousands):

 Schedule of Assets Acquired and Liabilities Assumed

Assets acquired:    
Cash  $818 
Accounts receivable, net   1,752 
Prepaid and other current assets   6,273 
Property and equipment, net   738 
Other non-current assets   2,643 
Intangible assets   18,429 
Goodwill   127,971 
Right-of-use assets   4,566 
Total assets acquired  $163,190 
      
Liabilities assumed:     
Accounts payable  $15,724 
Accrued expenses and other current liabilities   21,628 
Deferred revenue   812 
Long-term borrowings - current portion   3,662 
Lease liabilities   4,566 
Total liabilities assumed  $

46,392

 
      
Redeemable non-controlling interest   1,752 
Net assets acquired  $115,046 

 

9

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Goodwill, which is not deductible for tax purposes, primarily represents the benefits expected to result from the assembled workforce of Molotov. The Company allocated the goodwill to its streaming segment.

 

The preliminary estimated useful lives and fair value of the intangible assets acquired are as follows:

 Schedule of Estimated Useful Lives and Fair Value of the Intangible Assets Acquired

  

Estimated
Useful Life

(in Years)

   Fair Value 
         
Customer relationships   2   $9,271 
Tradenames   2    679 
Software and technology   6    8,479 
           
Total       $18,429 

 

Note 5 - Revenue from Contracts with Customers

 

Disaggregated revenue

 

The following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues (in thousands):

 

   2022   2021 
   Three Months Ended March 31, 
   2022   2021 
Subscriptions  $219,168   $107,114 

Advertising

   23,152    12,606 

Wagering

   (301)   - 
Total revenue  $242,019   $119,720 

 

The following tables summarize subscription revenue and advertising revenue by region for the three months ended March 31, 2022 and 2021:

 

  

For the three months ended

March 31,

 
   2022   2021 
United States and Canada   236,774    119,617 
Rest of world   5,546    103 
Total subscription and advertising revenue   242,320    119,720 

 

Contract balances

 

There were no losses recognized related to any receivables arising from the Company’s contracts with customers for the three months ended March 31, 2022 and 2021.

 

For the three months ended March 31, 2022 and 2021, the Company did not recognize material bad-debt expense and there were no material contract assets recorded on the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

 

10

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The contract liabilities primarily relate to upfront payments and consideration received from customers for subscription services. As of March 31, 2022 and December 31, 2021, the Company’s contract liabilities totaled $43.0 million and $44.3 million, respectively, and are recorded as deferred revenue on the accompanying condensed consolidated balance sheets.

 

Transaction price allocated to remaining performance obligations

 

The Company does not disclose the transaction price allocated to remaining performance obligations since subscription and advertising contracts have an original expected term of one year or less.

 

Note 6 - Property and equipment, net

 

Property and equipment, net, is comprised of the following (in thousands):

 

  

Useful Lives

(Years)

   March 31, 2022   December 31, 2021 
Buildings  20   $732   $732 
Furniture and fixtures  5    385    361 
Computer equipment  3-5    3,890    3,856 
Leasehold improvements  Term of lease    5,146    4,495 
Property and Equipment, gross       10,153    9,444 
Less: Accumulated depreciation       (2,900)   (2,627)
Total property and equipment, net      $7,253   $6,817 

 

Depreciation expense totaled $0.4 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

 

Note 7 - Intangible Assets and Goodwill

 

Intangible Assets

 

The table below summarizes the Company’s intangible assets at March 31, 2022 and December 31, 2021 (in thousands):

 

   Useful  

Weighted

Average

Remaining

   March 31, 2022 
  

Lives

(Years)

  

Life

(Years)

  

Intangible

Assets

  

Accumulated

Amortization

  

Net

Balance

 
Customer relationships  2   1.7   $32,810   $(25,200)  $7,610 
Tradenames  2 - 9   7.0    38,865    (8,600)   30,265 
Software and technology  3 - 9   6.6    196,736    (41,363)   155,373 
Gaming licenses and market access fees  2 - 5   4.3    15,701    (1,192)   14,509 
Total          $284,112   $(76,355)  $207,757 

 

   Useful  

Weighted

Average

Remaining

   December 31, 2021 
  

Lives

(Years)

  

Life

(Years)

  

Intangible

Assets

  

Accumulated

Amortization

  

Net

Balance

 
Customer relationships  2   2.2   $32,965   $(21,105)  $11,860 
Tradenames  2-9   7.2    38,876    (7,455)   31,421 
Software and technology  3-9   8.7    195,852    (35,572)   160,280 
Gaming licenses and market access fees  2-5   4.8    14,951    (326)   14,625 
Total          $282,644   $(64,458)  $218,186 

 

11

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The intangible assets are being amortized over their respective original useful lives, which range from two to nine years. The Company recorded amortization expense of $12.1 million and $9.1 million for the three months ended March 31, 2022 and 2021.

 

The estimated future amortization expense associated with intangible assets (excluding gaming licenses and market access fees) is as follows (in thousands):

 

  

Future

Amortization

 
Year ended December 31, 2022 (Nine months remaining)   27,468 
Year ended December 31 2023   35,496 
Year ended December 31 2024   30,502 
Year ended December 31 2025   28,969 
Year ended December 31 2026   28,651 
Thereafter   56,671 
Total  $207,757 

 

Prepaid Market Access Agreements

 

During the three months ended March 31, 2022, the Company paid $3.3 million for gaming licenses pursuant to market access agreements in states where the market access is pending regulatory approval as of March 31, 2022. The $3.3 million is included in other non-current assets on the accompanying consolidated balance sheet as of March 31, 2022.

 

Goodwill

 

The following table is a summary of the changes to goodwill for the three months ended March 31, 2022 (in thousands):

 

Balance - December 31, 2021  $630,269 
Molotov purchase accounting adjustment   (497)
Foreign currency translation adjustment   (2,140)
Balance - March 31, 2022  $627,632 

 

Goodwill includes an accumulated impairment charge of $148.1 million related to the historical Facebank reporting unit.

 

12

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 8 - Accounts Payable, Accrued Expenses and Other Long-Term Liabilities

 

Accounts payable, accrued expenses and other long-term liabilities are presented below (in thousands):

 

   March 31, 2022   December 31, 2021 
Affiliate fees  $171,915   $177,692 
Broadcasting and transmission   17,128    15,179 
Selling and marketing   14,574    17,750 
Accrued compensation   9,027    12,107 
Payroll taxes   1,313    - 
Legal and professional fees   6,597    7,316 

Sales Tax

   30,007    27,316 

Deferred royalty

   10,842    10,510 
Accrued interest   1,736    5,057 
Subscriber related   3,672    3,601 
Other   11,256    8,197 
Total  $278,067   $284,725 

 

Note 9 - Income Taxes

 

The Company recorded income tax benefits primarily associated with the net reduction of the valuation allowance recorded against deferred tax assets of $0.4 million and $0.5 million during the three months ended March 31, 2022 and 2021, respectively.

 

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carrybacks and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative losses in recent years, as a significant piece of negative evidence to overcome. At March 31, 2022 and December 31, 2021, the Company continued to maintain that a portion of its deferred tax assets do not meet the more likely than not realization threshold. Therefore, the net deferred tax assets have been partially offset by a valuation allowance.

 

Note 10 - Notes Payable, Long-Term Borrowing, and Convertible Notes

 

Notes payable, long-term borrowing, and convertible notes as of March 31, 2022 and December 31, 2021 consist of the following (in thousands):

 

Note 

Stated

Interest

Rate

  

Principal

Balance

  

Capitalized

Interest

  

Debt

Discount

  

March 31

2022

 
2026 Convertible Notes   3.25%  $402,500   $-   $(10,283)  $392,217 
Note payable   10.0%   2,700    2,515    -    5,215 
Bpi France   2.25%   2,382    -    -    2,382 

Société Générale

   0.25%   1,225    -    -    1,225 
Other   4.0%   30    6    -    36 
        $408,837   $2,521   $(10,283)  $401,075 

 

13

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 

Stated

Interest

Rate

  

Principal

Balance

  

Capitalized

Interest

  

Debt

Discount

  

December 31,

2021

 
2026 Convertible Notes   3.25%  $402,500   $-   $(86,146)  $316,354 
Note payable   10.0%   2,700    2,377    -    5,077 
BPi France   2.25%   2,422    -    -    2,422 
Société Générale   0.25%   1,246    -    -    1,246 
Other   4.0%   30    6    -    36 
        $408,898   $2,383   $(86,146)  $325,135 

 

2026 Convertible Notes

 

On February 2, 2021, the Company issued $402.5 million of convertible notes (“2026 Convertible Notes.”) The 2026 Convertible Notes bear interest from February 2, 2021, at a rate of 3.25% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The 2026 Convertible Notes will mature on February 15, 2026, unless earlier converted, redeemed, or repurchased. The net proceeds from this offering were approximately $389.4 million, after deducting a discount and offering expenses of approximately $13.1 million.

 

The initial equivalent conversion price of the 2026 Convertible Notes was $57.78 per share of the Company’s common stock. Holders may convert their 2026 Convertible Notes on or after November 15, 2025, until the close of business on the second business day preceding the maturity date or prior to November 15, 2025 under certain circumstances including:

 

  (i) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ended on March 31, 2021, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
     
  (ii) during the five-business day period after any five consecutive trading day period in which the trading price for each trading day of such five consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
     
  (iii) if the Company calls any or all of the 2026 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
     
  (iv) upon the occurrence of specified corporate events.

 

The Company may also redeem all or any portion of the 2026 Convertible Notes after February 20, 2024 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon conversion, the Company can elect to deliver cash or shares or a combination of cash or shares.

 

Previously, the Company accounted for the 2026 Convertible Notes using a cash conversion model. In accordance with ASC 470-20, the Company used an effective interest rate of 8.67% to estimate the fair value of the debt instrument, excluding the equity conversion feature, and recognized a debt discount of $90.9 million (representing the difference between the fair value and the net proceeds) with a corresponding increase to additional paid in capital. The underwriting discount and offering expenses totaling $13.1 million were allocated between the debt and equity issuance costs in proportion to the allocation of the liability and equity components of the 2026 Convertible Notes. Accordingly, equity issuance costs of $3.0 million were recorded as an offset to additional paid-in capital and total debt issuance costs of $10.1 million were recorded on the issuance date and are reflected in the condensed consolidated balance sheet as a direct deduction from the carrying value of the associated debt liability. The debt discount and debt issuance costs were being amortized through February 15, 2026, as amortization of debt discount on the accompanying condensed consolidated statement of operations and comprehensive loss.

 

14

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

As discussed in Note 3, the Company adopted ASU 2020-06 and the portion of the debt discount allocated to equity was reclassified to long-term debt. The remaining unamortized debt issuance costs will be amortized as non-cash interest expenses through the scheduled maturity of the 2026 Convertible Notes.

 

During the three months ended March 31, 2022, the Company paid $6.5 million of interest expense in connection with the 2026 Convertible Notes and recorded amortization expense of $0.6 million included in amortization of debt discount in the condensed consolidated statements of operations. The fair value (Level 2) of the 2026 Convertible Notes was $271.1 million.

 

Note payable

 

The Company has recognized, through the consolidation of its subsidiary Evolution AI Corporation (“EAI”), a $2.7 million note payable bearing interest at the rate of 10% per annum that was due on October 1, 2018 (“CAM Digital Note”). The cumulative accrued interest on the CAM Digital Note amounts to $2.5 million. The CAM Digital Note is currently in a default condition due to non-payment of principal and interest. The Company is in negotiation with such holders to resolve the matter. The outstanding balance as of March 31, 2022, including interest and penalties, is $5.2 million and is included in notes payable on the accompanying condensed consolidated balance sheet.

 

Other

 

The Company assumed, through the consolidation of its subsidiary EAI, a $30,000 note payable due to a relative of the former Chief Executive Officer, John Textor bearing interest at the rate of 4% per annum. As of March 31, 2022, the principal balance and accrued interest totaled approximately $36,000.

 

The Company assumed through the acquisition of Molotov, $3.7 million in notes bearing interest rates between 0.25% - 2.25% per annum. As of March 31, 2022, the principal balance and accrued interest totaled approximately $3.6 million.

 

Note 11 - Segments

 

Prior to the third quarter of 2021, the Company operated its business and reported its results through a single reportable segment. As a result of the launch of the Company’s wagering business, the Company began to operate its business and report its results through two operating and reportable segments: streaming and wagering.

 

Operating segments are components of the Company for which separate discrete financial information is available to and evaluated regularly by the chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The CODM assesses a combination of metrics such as revenue and adjusted operating expenses to evaluate the performance of each operating and reportable segment.

 

15

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The following tables set forth our financial performance by reportable segment for the three months ended March 31, 2022. Comparable information is not presented because the wagering business had not commenced operations during the three months ended March 31, 2021.

 

   Streaming   Wagering   Total 
Revenue  $242,320   $(301)  $242,019 
Adjusted operating expenses               
Subscriber related expenses   245,621    -    245,621 
Broadcasting and transmission   20,297    -    20,297 
Sales and marketing   33,818    3,488    37,306 
Technology and development   16,266    2,474    18,740 
General administrative   20,492    3,893    24,385 
Depreciation and amortization   11,356    106    11,462 
Total adjusted operating expenses  $347,850   $9,961   $357,811 
                
Stock-based compensation            $19,449 
Other expense             5,979 
Loss before income taxes  $(105,530)  $(10,262)  $(141,220)
                
Total Assets  $1,379,311   $76,449   $1,455,760 
                
Total Goodwill  $616,950   $10,682   $627,632 

 

The following tables set forth our financial performance by geographical location:

 

   Total Revenue   Total Assets 
United States   235,636    1,296,463 
Rest of world   6,383    159,297 
Total   242,019    1,455,760 

 

Note 12 - Fair Value Measurements

 

Certain of the Company’s warrants are classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other income (expense) in the condensed consolidated statements of operations.

 

As of March 31, 2022, there were no warrant liabilities outstanding.

 

The following table presents changes in Level 3 liabilities measured at fair value (in thousands) for the three months ended March 31, 2022. Unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

 

   Warrant
liabilities
 
Fair value at December 31, 2021  $3,548 
Change in fair value   1,701
Redemption   (5,249)
Fair value at March 31, 2022  $- 

 

Note 13 - Stockholders’ Equity

 

At-the-Market Sales Agreement

 

On August 13, 2021, the Company entered into an At-the-Market Sales Agreement (the “Sales Agreement”) with Evercore Group L.L.C., Needham & Company, LLC and Oppenheimer & Co. Inc., as sales agents (each, a “manager” and together, the “managers”), under which the Company may, from time to time, sell shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $500.0 million through the managers (the “Offering”).

 

16

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, the managers may sell the shares by methods deemed to be an “at-the-market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Subject to the terms and conditions of the Sales Agreement, each manager will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon the Company’s instructions. The Company will pay the managers a commission for their services in acting as agents in the sale of common stock at a commission rate of up to 3% of the gross sales price of the shares of the Company’s common stock sold through them pursuant to the Sales Agreement. The Company is not obligated to, and cannot provide any assurances that it will, make any sales of the shares under the Sales Agreement. The Offering of shares of common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

 

During the three months ended March 31, 2022, the Company received net proceeds of approximately $203.8 million (after deducting $4.2 million in commissions and expenses) from sales of 27,443,580 shares of its common stock, at a weighted average gross sales price of $7.58 per share pursuant to the Sales Agreement.

 

Warrants

 

A summary of the Company’s outstanding warrants as of March 31, 2022, are presented below (in thousands, except share and per share amounts):

 

  

Number of

Warrants

  

Weighted

Average

Exercise Price

  

Total Intrinsic

Value

  

Weighted

Average

Remaining

Contractual Life

(in years)

 
Outstanding as of December 31, 2021   565,544   $9.96   $3,546    0.1 
Exercised   (540,541)  $9.25           
Expired   (25,000)  $9.25           
Outstanding and exercisable as of March 31, 2022   3   $24,000.00   $-    - 

 

Stock-based compensation

 

During the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense as follows:

 

   2022   2021 
   For the Three Months Ended
March 31,
 
   2022   2021 
Subscriber related  $40   $14 
Sales and marketing   8,880    713 
Technology and development   2,684    2,070 
General and administrative   7,845    6,577 
Stock-based compensation expense  $19,449   $9,374 

 

Options

 

The Company provides option grants to employees, directors, and consultants under the fuboTV Inc. Equity 2020 Equity Incentive Plan, as amended (the “2020 Plan”). The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has lacked sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based primarily on the historical volatility of a publicly-traded set of peer companies with consideration of the volatility of its own traded stock price. The risk-free interest rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term. The simplified method was used because the Company does not have sufficient historical exercise data to provide a reasonable basis for an estimate of expected term.

 

17

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Stock Options

 

A summary of stock option activity for the three months ended March 31, 2022, is as follows (in thousands, except share and per share amounts):

 

   Number of Shares   Weighted Average
Exercise Price
   Total Intrinsic Value   Weighted Average Remaining Contractual Life
 (in years)
 
                 
Outstanding as of December 31, 2021   11,454,890   $6.40   $70,231    7.4 
Exercised   (349,847)  $1.27           
Forfeited or expired   (373,568)  $10.27           
Outstanding as of March 31, 2022   10,731,475   $6.44   $20,097    6.8 
                     
Options vested and exercisable as of March 31, 2022   7,066,665   $5.17   $18,857    6.1 

 

There were no options granted during the three months ended March 31, 2022.

 

During the three months ended March 31, 2021, the Company granted options to purchase 62,599 options shares of common stock with an aggregate fair value of $1.3 million. The following was used in determining the fair value of stock options granted during the three months ended March 31, 2021:

 

   March 31, 2021 
Dividend yield   0%
Expected price volatility   44.85%
Risk free interest rate   0.73%
Expected term (years)   6.1 

 

As of March 31, 2022, the estimated value of unrecognized stock-based compensation expense related to unvested options was $18.0 million to be recognized over a period of 2.0 years.

 

18

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Market and Service Condition Based Stock Options

 

A summary of activity under the Plan for market and service-based stock options for the three months ended March 31, 2022 is as follows (in thousands, except share and per share amounts):

  

Number of

Shares

  

Weighted

Average

Exercise Price

  

Total Intrinsic

Value

  

Weighted

Average

Remaining

Contractual Life

(in years)

 
Outstanding as of December 31, 2021   4,453,297   $12.75   $17,933    5.7 
Outstanding as of March 31, 2022   4,453,297   $12.75   $-    5.4 
                     
Options vested and exercisable as of March 31, 2022   3,078,297   $9.69   $-    5.1 

 

There were no market and service-based options granted during the three months ended March 31, 2022 and 2021.

 

As of March 31, 2022, there was $9.1 million of unrecognized stock-based compensation expense for market and service-based stock options.

 

Performance-Based Stock Options

 

On October 8, 2020, the Company awarded the CEO an option which vests based upon the achievement of certain predetermined goals for each of the five years in the performance period related to stock price, revenue, gross margin, an increase in the number of subscribers, the launch of new markets and, commencing in 2023, creation of new revenue streams. The Board will review attainment of such goals annually from 2021 through 2025 warranted on a given “Determination Date” (subsequent to the Company’s calendar year end) to determine if any vesting is warranted. The Board may determine vesting at, above, or below 20% of the shares subject to the performance option on a given Determination Date. All shares may be eligible for vesting until the Determination Date following the 2025 calendar year. Any such vesting is subject to the CEO’s continuation in service with the Company through the applicable Determination Date. Because the number of shares to be earned on each Determination Date is subject to the discretion of the Board, the compensation expense is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered and based on the number of shares expected to be earned. During the three months ended March 31, 2022, the Board determined that the option would vest with respect to 820,000 shares. Upon each subsequent Determination Date in 2023, 2024, 2025, and 2026 stock-based compensation expense will be remeasured and adjusted to reflect the grant date fair value.

 

19

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Modification of Options

During the three months ended March 31, 2022, the Board approved the acceleration of vesting and extended the post-termination exercisability of certain employee stock options. The Company reported $2.1 million of expense during the first quarter of 2022 as a result of the accelerated vesting of stock options.

 

Time-Based Restricted Stock Units

 

A summary of the Company’s time-based restricted stock unit activity during the three months ended March 31, 2022 is as follows:

 

   Number of Shares  

Weighted Average

Grant-Date

Fair Value

 
Unvested at December 31, 2021   2,785,800   $25.74 
Granted   1,668,269   $7.40 
Vested   (112,326)  $27.72 
Forfeited   (84,152)  $22.15 
Unvested at March 31, 2022   4,257,591   $18.56 

 

As of March 31, 2022, the estimated value of unrecognized stock-based compensation related to restricted stock units totaled $69.7 million, had an aggregate intrinsic value of $28.0 million, and a weighted average remaining contractual term of 3.5 years. For the quarter ended March 31, 2021, the estimated value of unrecognized stock-based compensation related to restricted stock units totaled $34.7 million, and had an aggregate intrinsic value of $25.0 million and a weighted average remaining contractual term of 3.7 years.

 

Performance-Based Restricted Stock Units

 

A summary of the Company’s performance-based restricted stock unit activity during the three months ended March 31, 2022 is as follows:

   Number of Shares  

Weighted Average

Grant-Date

Fair Value

 
Unvested at December 31, 2021   1,900,000   $33.87 
Vested   (280,000)  $33.87 
Unvested at March 31, 2022   1,620,000   $33.87 

 

On November 3, 2021, the Company granted 1.9 million performance-based restricted stock units (“PRSUs”) to an employee of the Company. The PRSUs will vest over a period of 5-calendar years through 2025, subject to the achievement of certain established performance metrics including revenue targets, subscriber targets, and the launching of new markets (and, with respect to 2023, the creation of one or more new revenue streams). The determination of the actual number of PRSUs that will vest each year during the five-year performance period will be determined upon the achievement of the pre-determined performance targets. Any such vesting is subject to the employee’s continuation in service with the Company through the applicable vesting date. At each reporting period, the Company will make a determination of the most likely outcome for achievement of each performance metric. This may result in a cumulative catch-up as the Company assessments are evaluated. The fair value of the PRSUs is measured based on their grant date fair value which totaled $64.4 million.

 

During the three months ended March 31, 2022, the Company issued 280,000 shares of its common stock in connection with the vesting of PRSUs.

 

Note 14 - Commitments and Contingencies

 

Leases

 

The following summarizes quantitative information about the Company’s operating leases (amounts in thousands, except lease term and discount rate):

 

20

 

 

fuboTV Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The components of lease expense were as follows:

 

   March 31, 2022   March 31, 2021 
   For the Three Months Ended 
   March 31, 2022   March 31, 2021 
Operating leases          
Operating lease cost  $1,680   $312 
Variable lease cost   50    - 
Operating lease expense   1,730    312 
Short-term lease rent expense   46    - 
Total rent expense  $1,776   $312 

 

Supplemental cash flow information related to leases were as follows:

 

   March 31, 2022   March 31, 2021 
   For the Three Months Ended 
   March 31, 2022   March 31, 2021 
         
Operating cash flows from operating leases  $347   $305 
Right of use assets exchanged for operating lease liabilities  $4,498   $- 
Weighted average remaining lease term - operating leases   11.3    6.2