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FUBOTV INC. /FL Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q/A)

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09/15/2020 | 02:39pm EDT

The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying related notes included in this Quarterly Report on Form 10-Q and our audited financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K/A for the year ended December 31, 2019, as filed with the Securities and Exchange Commission (the "SEC") on August 10, 2020 (the "Annual Report").

The results of our operations for the three and six months ended June 30, 2020 are not readily comparable against the results of our operations in the comparable prior year three and six month period ended June 30, 2019 as a result of our acquisitions of fuboTV Pre-Merger and Facebank AG, and our acquisition of and then deconsolidation of Nexway AG and its subsidiaries.



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. (the "Name Change") and as of May 1, 2020, the Company's trading symbol was changed to "FUBO." The Company has filed a Notice of Corporate Action (the "Action") with FINRA regarding the Name Change. The Action is pending FINRA approval at this time.

Unless the context otherwise requires, "fuboTV," "we," "us," "our," and the "Company" refers to fuboTV and its subsidiaries on a consolidated basis, and "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 FaceBank Group, Inc. prior to the Merger and its subsidiaries prior to the closing of the Merger.

Merger with fuboTV Inc Pre-Merger

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary ("Merger Sub") merged with and into fuboTV Pre-Merger, whereby fuboTV Pre-Merger continued as the surviving corporation and became our wholly-owned subsidiary pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020, by and among us, Merger Sub and fuboTV Pre-Merger (the "Merger Agreement" and such transaction, the "Merger").

In accordance with the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), all of the capital stock of fuboTV Pre-Merger was converted into the right to receive shares of our newly-created class of Series AA Convertible Preferred Stock, par value $0.0001 per share (the "Series AA Preferred Stock"). Each share of Series AA Preferred Stock is entitled to 0.8 votes per share and shall only be convertible immediately following the sale of such shares on an arms'-length basis either pursuant to an exemption from registration under Rule 144 promulgated under the Securities Act or pursuant to an effective registration statement under the Securities Act. Until the time we are able to uplist to a national securities exchange, the Series AA Preferred Stock benefits from certain protective provisions that would require us to obtain the approval of a majority of the shares of outstanding Series AA Preferred Stock, voting as a separate class, before undertaking certain matters.

Prior to the Merger, the Company was, and after the Merger continues to be, a character-based virtual entertainment company, and a leading developer of digital human likeness for celebrities and consumers, focused on applications in traditional entertainment, sports entertainment, live events, social networking, mixed reality (AR/VR) and artificial intelligence. As a result of the Merger, fuboTV Pre-Merger, a leading live TV streaming platform for sports, news, and entertainment, became a wholly-owned subsidiary of the Company.

In connection with the Merger, on March 11, 2020, the Company and HLEE Finance S.a r.l. ("HLEE") entered into a Credit Agreement, dated as of March 11, 2020, pursuant to which HLEE provided the Company with a $100.0 million revolving line of credit (the "Credit Facility"). The Credit Facility is secured by substantially all the assets of the Company. On July 8, 2020, the Company entered into a Termination and Release Agreement with HLEE Finance to terminate the Credit Agreement. The Company did not draw down on the Credit Agreement during its term. See Notes Payable footnote for more information about the Credit Facility.

On March 19, 2020, FaceBank Pre-Merger, Merger Sub, Evolution AI Corporation ("EAI") and Pulse Evolution Corporation ("PEC" and collectively with EAI, Merger Sub and FaceBank Pre-Merger, the "Initial Borrower") and FB Loan Series I, LLC ("FB Loan") entered into a Note Purchase Agreement (the "Note Purchase Agreement"), pursuant to which the Initial Borrower sold to FB Loan senior secured promissory notes in an aggregate principal amount of $10.1 million (the "Senior Notes"). The Company received proceeds of $7.4 million, net of an original issue discount of $2.7 million. In connection with the FB Loan, FaceBank Pre-Merger, fuboTV Pre-Merger and certain of their respective subsidiaries granted a lien on substantially of their assets to secure the obligations under the Senior Notes. The Company made a $7.5 million payment on the Note Purchase Agreement on May 28, 2020 and paid the remaining balance of $2.6 million on July 3, 2020.



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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 the Effective Time, there was $23.8 million outstanding under the AMC Agreement. 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 fuboTV Pre-Merger are senior to the liens in favor of FB Loan and the Company securing the Senior Notes.



Nature of Business


The Company is a leading digital entertainment company, combining fuboTV Pre-Merger's direct-to-consumer live TV streaming, or vMVPD, platform with FaceBank Pre-Merger's technology-driven IP in sports, movies and live performances. We expect that this business combination will create a content delivery platform for traditional and future-form IP. We plan to leverage FaceBank Pre-Merger's IP sharing relationships with leading celebrities and other digital technologies to enhance its already robust sports and entertainment offerings.

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

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



Corporate Information


Our headquarters are located at 1330 Avenue of the Americas, New York, NY 10019, and our telephone number is (212) 672-0055. You can access our websites, including historical financial information pertaining to fuboTV Pre-Merger, at https://fubo.tv, https://ir.fubo.tv, https://facebankgroup.com and https://ir.facebankgroup.com. Information contained on our websites is not part of this Quarterly Report on Form 10-Q and is not incorporated by reference in this Quarterly Report on Form 10-Q.

Components of Results of Operations



Revenues, net



Subscription


Subscription revenues consist primarily of subscription plans sold through the Company's website and third-party app stores.



Advertisements


Advertisement revenue consist primarily of fees charged to advertisers who want to display ads ('impressions") within the streamed content.



Software licenses, net


Software license revenue consists of revenue generated from the sale of software licenses at one of our subsidiaries, Nexway eCommerce Solutions.



Other


Other revenue consists of a contract to sub-license rights to broadcast certain international sporting events to a third party.



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Subscriber Related Expenses

Subscriber related expenses consist primarily of affiliate distribution rights and other distribution costs related to content streaming.

Broadcasting and Transmission

Broadcasting and transmission expenses consist primarily of the cost to acquire a signal, transcode, store, and retransmit it to the subscribers.



Sales and Marketing


Sales and marketing expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, agency costs, advertising campaigns and branding initiatives.



Technology and Development


Technology and development expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, technical services, software expenses, and hosting expenses.



General and Administrative


General and administrative expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, corporate insurance, office expenses, professional fees, as well as travel, meals, and entertainment costs.

Depreciation and amortization

Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets.



Other income/(expense)


Other income/(expense) primarily consists of issuance gains/losses and the change in fair value of financial instruments, interest expense and financing costs on our outstanding borrowings, unrealized gains/losses on equity method investments, and the loss recorded on the deconsolidation of a subsidiary.



Income tax benefit


The Company's deferred tax liability and income tax benefit relates to our amortizable of finite-lived intangible assets.



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Results of Operations for the three and six months ended June 30, 2020 and 2019
(in thousands):



                                          Three Months Ended             Six Months Ended
                                               June 30,                      June 30,
                                         2020            2019           2020           2019
Revenues, net
Subscriptions                         $    39,511     $        -     $   39,511     $        -
Advertisements                              4,323              -          4,323     $        -
Software licenses, net                          -              -          7,295     $        -
Other                                         338              -            338              -

Total Revenues                        $    44,172     $        -     $   51,467     $        -

Operating expenses:
Subscriber related expenses                53,087              -         53,087              -
Broadcasting and transmission               9,492              -          9,492              -
Sales and marketing                         7,577            111         11,256            324
Technology and development                  9,551              -          9,551              -
General and administrative                 17,338            693         33,862          1,517
Depreciation and amortization              14,417          5,158         19,637         10,316

Total operating expenses                  111,462          5,962        136,885         12,157

Operating loss                            (67,290 )       (5,962 )      (85,418 )      (12,157 )

Other income (expense):
Interest expense and financing
costs                                     (13,325 )         (454 )      (15,906 )         (900 )
Loss on deconsolidation of Nexway               -              -        (11,919 )            -
Loss on issuance of common stock,
notes, bonds and warrants                    (602 )            -        (24,655 )            -
Change in fair value of warrant
liability                                   4,966              -          4,600              -
Change in fair value of subsidiary
warranty liability                             18          1,124              3          3,601
Change in fair value of shares
settled liability                          (1,485 )            -         (1,665 )            -
Change in fair value of derivative
liability                                    (823 )          890           (526 )        1,018
Change in fair value of Panda
interests                                    (148 )            -           (148 )            -
Unrealized gain on equity method
investment                                  2,614              -          2,614              -
Other expense                              (1,010 )            -         (1,446 )            -

Total other income (expense)               (9,795 )        1,560        (49,048 )        3,719

Loss before income taxes                  (77,085 )       (4,402 )     (134,466 )       (8,438 )
Income tax benefit                          3,481          1,037          4,519          2,206

Net loss                              $   (73,604 )$   (3,365 )$ (129,947 )$   (6,232 )

Subsequent to June 30, 2019, the Company acquired Facebank AG, Nexway and fuboTV Pre-Merger. The results of our operations for the three and six months ended June 30, 2020 include the results of operations of those entities and also include the effects of the deconsolidation of Nexway as of March 31, 2020. Because of this, the results of operations for the three and six months ended June 30, 2020 are not comparable to the results of operations for the three and six months ended June 30, 2019.



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Revenue, net


Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, we recognized revenues of $44.2 million, primarily related to $39.5 million of subscription revenue, $4.3 million of advertising revenue and $0.3 million in other revenue. These revenues were generated entirely by fuboTV post-Merger which occurred on April 1, 2020 and there are no comparable results in the prior year.

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, we recognized revenues of $51.5 million, primarily related to $39.5 million of subscription revenue and $4.3 million of advertising revenue in connection with the second quarter acquisition of fuboTV Pre-Merger. These revenues were generated entirely by fuboTV post-Merger which occurred on April 1, 2020 and there are no comparable results in the prior year. In addition, we generated $7.3 million related to the sale of software licenses from our acquisition of Facebank AG.



Subscriber related expenses


Three and Six Months Ended June 30, 2020 and 2019

During the three and six months ended June 30, 2020, we recognized subscriber related expenses of $53.1 million due to affiliate distribution rights and other distribution costs in connection with the streaming revenue generated from the Merger on April 1, 2020.

There were no subscriber related expenses recognized during the three and six months ended June 30, 2019.




Broadcasting and transmission



Three and Six Months Ended June 30, 2020 and 2019

During the three and six months ended June 30, 2020, we recognized broadcasting and transmission expenses of $9.5 million primarily related to transmissions of our services in connection with the streaming revenue generated from the Merger on April 1, 2020.

There were no broadcasting and transmission expenses recognized during the three and six months ended June 30, 2019.



Sales and marketing


Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, we recognized sales and marketing expenses of $7.6 million as compared to $0.1 million during the three months ended June 30, 2019. The increase in sales and marketing expenses were incurred to acquire new customers to our streaming platform after the Merger on April 1, 2020.

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, we recognized sales and marketing expenses of $11.3 million as compared to $0.3 million during the six months ended June 30, 2019. The increase of $11.0 million is primarily related to the $7.5 million of sales and marketing expenses incurred to acquire new customers to our streaming platform after the Merger on April 1, 2020. The remaining increase in sales and marketing expenses were related to the costs incurred to acquire new customers of Nexway resulting from our 2019 acquisitions of Facebank AG and Nexway.




Technology and development



Three and Six Months Ended June 30, 2020 and 2019

During the three and six months ended June 30, 2020, we recognized technology and development expenses of $9.6 million in connection with the development of our streaming platform after the Merger on April 1, 2020.

There were no technology and development expenses recognized during the three and six months ended June 30, 2019.



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General and Administrative

Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, general and administrative expenses totaled $17.3 million, compared to $0.7 million for the three months ended June 30, 2019. The increase of $16.6 million was primarily related to $8.4 million of incremental general and administrative expenses as a result of the acquisition of fuboTV Pre-Merger and $6.8 million of professional services due to additional financing and acquisition activities.

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, general and administrative expenses totaled $33.9 million, compared to $1.5 million for the six months ended June 30, 2019. The increase of $32.4 million was primarily related to $9.2 million compensation expenses and $6.2 million other general and administrative expenses resulting from our 2019 acquisitions of Facebank AG and Nexway. In addition, we incurred an additional $8.4 million of incremental general and administrative expenses as a result of the acquisition of fuboTV Pre-Merger and $6.8 million of professional services due to additional financing and acquisition activities.



Depreciation and amortization


Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, we recognized depreciation and amortization expenses of $14.4 million compared to $5.2 million during the three months ended June 30, 2019. The increase of $9.2 million is primarily related to the amortization expenses recognized on the intangible assets acquired as part of the Merger on April 1, 2020 of $9.1 million.

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, we recognized depreciation and amortization expenses of $19.6 million compared to $10.3 million during the six months ended June 30, 2019. The increase of $9.3 million is primarily related to $9.1 of amortization expense recorded for the intangible assets acquired in connection with the Merger on April 1, 2020.



Other Income (Expense)


Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, we recognized $9.8 million of other expense (net), compared to $1.6 million of other income (net) during the three months ended June 30, 2019. The $9.8 million of other expense (net) recognized during the three months ended June 30, 2020 was primarily related to a $0.6 million loss on the issuance of common stock, notes, bonds and warrants and $13.3 million of interest expense on our outstanding borrowings. These expenses were partially offset by a $5.0 million gain in the fair value of warrant liabilities and $2.6 million unrealized gain on our equity method investment in Nexway. For the three months ended June 30, 2019, we recognized $1.6 million of other income (net) primarily related to $2.0 million of gains from the change in fair value of financial instruments, offset by $0.4 million of interest expense on our outstanding borrowings. The increase in other expenses are primarily due to the new financings which resulted in loss on issuances of financial instruments, and additional interest expenses incurred on outstanding borrowings.

Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, we recognized $49.0 million of other expense (net), compared to $3.7 million of other income (net) during the six months ended June 30, 2019. The $49.0 million of other expense (net) recognized during the six months ended June 30, 2020 was primarily related to a $24.7 million loss on issuance of common stock, notes, bonds and warrants, a $15.9 million of interest expense on our outstanding borrowings, and an $11.9 million loss on the deconsolidation of Nexway. These expenses were partially offset by a $4.6 million gain in the fair value of warrant liabilities and $2.6 million unrealized gain on our equity method investment in Nexway. For the six months ended June 30, 2019, we recognized $3.7 million of other income (net) related to a $3.6 million gain in fair value of subsidiary warrant liability and $1.0 million gain in the fair value of derivative liabilities, partially offset by $0.9 million of interest expense. The increase in other expenses are primarily due new financings which resulted in loss on issuances of financial instruments, additional interest expenses incurred on outstanding borrowings and the loss on the deconsolidation of Nexway.



Income tax benefit


Three Months Ended June 30, 2020 and 2019

During the three months ended June 30, 2020, we recognized an income tax benefit of $3.5 million, compared to $1.0 million during the three months ended June 30, 2019. The increase in income tax benefits for the three months ended June 30, 2020 was related to the amortization of the deferred tax liability established in connection with the Merger with fuboTV Pre-Merger on April 1, 2020.



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Six Months Ended June 30, 2020 and 2019

During the six months ended June 30, 2020, we recognized an income tax benefit of $4.5 million, compared to $2.2 million during the six months ended June 30, 2019. The increase for the six months ended June 30, 2020 was related to the amortization of the deferred tax liability established in connection with the Merger with fuboTV Pre-Merger on April 1, 2020.



Liquidity and Going Concern


The accompanying 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 $7.4 million, a working capital deficiency of $258.3 million and an accumulated deficit of $184.4 million as at June 30, 2020. The Company incurred a $129.9 million net loss for the six months ended June 30, 2020. The Company expects to continue incurring losses in the foreseeable future and will need to raise additional capital to fund its operations, meet its obligations in the ordinary course of business and execute its longer-term business plan. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year from the date that those financial statements are issued. The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company's future capital requirements and the adequacy of its available funds will depend on many factors, including its ability to successfully attract and retain subscribers, develop new technologies that can compete in a rapidly changing market with many competitors and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings.

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




Cash Flows (in thousands)



                                              Six Months Ended June 30,
                                                 2020              2019
Net cash used in operating activities              (42,314 )        (1,548 )
Net cash used in investing activities                 (697 )          (374 )
Net cash provided by financing activities           44,073           2,042
Net increase in cash and cash equivalents            1,062             120




Operating Activities


For the six months ended June 30, 2020, net cash used in operating activities was $42.3 million, which consisted of our net loss of $129.9 million, adjusted for non-cash movements of $75.9 million. The non-cash movements included $24.7 million of losses on issuance of convertible notes, bonds and warrants, $19.6 million of depreciation and amortization expenses primarily related to intangible assets, $17.8 million stock-based compensation, $11.0 million of amortization of debt discounts, $8.6 million loss on deconsolidation of Nexway partially offset by $4.6 million of change in fair value of warrant liability and $4.5 million of deferred income tax benefits. Changes in operating assets and liabilities resulted in cash inflows of approximately $11.8 million, primarily due to a net increase in accounts payable, accrued expenses and other current liabilities of $11.7 million due to timing of payments.



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For the six months ended June 30, 2019, net cash used in operating activities was $1.5 million, which consisted of our net loss of $6.2 million, adjusted for non-cash movements of $4.3 million. The non-cash movements included $10.3 million of depreciation and amortization expenses primarily related to intangible assets, $0.5 million of amortization of debt discounts and $0.3 million of accrued interest expense related to our notes payable, partially offset by $4.6 million related to the change in fair value of our financial instruments and $2.2 million of deferred income tax benefits. Changes in operating assets and liabilities resulted in cash inflows of approximately $0.4 million, primarily consisted of increases in accounts payable and accrued expenses of $0.5 million due to timing of payments.



Investing Activities


For the six months ended June 30, 2020, net cash used in investing activities was $0.7 million, which consisted of a $10.0 million advance to fuboTV Pre-Merger, offset by net cash paid of $9.4 million for the acquisition of fuboTV Pre-Merger and $0.1 million of capital expenditures.

For the six months ended June 30, 2019, net cash used in investing activities was $0.4 million, which primarily consisted of our $1.0 million payment for our investment in Panda Productions (HK) Limited ("Panda"), offset by $0.7 million received from accredited investors for an interest in Panda.



Financing Activities


For the six months ended June 30, 2020, net cash provided by financing activities was $44.1 million. The net cash provided is primarily related to $28.9 million of proceeds received from the sale of our common stock, $23.6 million of proceeds received in connection with short-term and long-term borrowings and $3.0 million of proceeds received from the issuance of convertible notes. These proceeds were partially offset by repayments of $7.5 million in connection with the Note Purchase Agreement, $1.3 million in connection with our loan with AMC Networks Ventures, LLC, $1.1 million in connection with convertible notes and $0.9 million in connection with our Revenue Participation Agreement.

For the six months ended June 30, 2019, net cash provided by financing activities was $2.0 million. The net cash provided is primarily related to $2.2 million of proceeds received from the sale of our common stock and warrants and 0.4 million of proceeds from related parties. These proceeds were partially offset by repayments of $0.5 million of our convertible notes.

Off-Balance Sheet Arrangements

As of June 30, 2020, there were no off-balance sheet arrangements.



Critical Accounting Policies


Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements and related disclosures requires us 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. Actual results could differ from those estimates. Those estimates and assumptions include revenue recognition, allocating the fair value of purchase consideration issued in business acquisitions, investments, depreciable lives of property and equipment, analysis of impairments of recorded goodwill and other long-term assets, accruals for potential liabilities, assumptions made in valuing derivative liabilities, assumptions made when estimating the fair value of equity instruments issued in share-based payment arrangements and deferred income taxes and related valuation allowance.

There have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report.



Revenue from Customers


We recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (the "revenue standard"). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service.



49






The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the company satisfies a performance obligation

Subscription revenue is recognized at a point in time when we satisfy a performance obligation by transferring control of the promised services to the customers. Advertising revenue is recognized at a point in time when we satisfy a performance obligation by transferring control of the promised services to the advertiser, which generally is when the advertisement has been displayed.

Recently Issued Accounting Pronouncements

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

© Edgar Online, source Glimpses

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