UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q10-Q/A

(Amendment No. 1)

(Mark One)

For the quarterly period ended September 30, 2019March 31, 2020

For the transition period from _____________ to _____________

Commission File Number:000-55353

FaceBank Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(212) 537-5775672-0055

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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 [X] No [  ]

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

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

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  [X]

As of November 19, 2019,August 7, 2020, there were 26,908,60942,064,459 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

INDEX

FORWARD-LOOKING STATEMENTSEXPLANATORY NOTE

This Quarterly ReportFaceBank Group, Inc. (the “Company” or “FaceBank”) is filing this quarterly report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management’s expectations as ofafter the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-KMay 15, 2020 deadline (the “Original Due Date”) applicable for the yearfiling of a Form 10-Q for the quarter ended DecemberMarch 31, 2018, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue2020 (the “Quarterly Report”) in reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with45-day extension provided by an order issued by the U.S. Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect(the “Commission” or the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of November 19, 2019. In addition, the forward-looking statements in this Form 10-Q are made as“SEC”) under Section 36 of the dateSecurities Exchange Act of 1934 Granting Exemptions From Specified Provisions of the Exchange Act of 1934 and Certain Rules Thereunder dated March 4, 2020 (Release No. 34-88318), as modified and superseded by a new Commission order issued on March 25, 2020 (Release No. 34-88465) (collectively, the “Order”).

As disclosed in the Company’s Current Report on Form 8-K filed with the Commission on May 15, 2020, the Company was unable to file this filing, and we do not undertake, and expressly disclaims any duty,Quarterly Report within the prescribed time period due to update such statements, whether asthe global COVID-19 pandemic. As a result of new information, new developments or otherwise, exceptthe pandemic, management’s full efforts have been focused on operating its business and evaluating available funding. The Company has been following the recommendations of local health authorities in the U.S. and Europe, where one of its operating subsidiaries is located, to minimize exposure risk for its employees, including temporarily closing its offices and requiring its employees to work remotely to the extent possible. As a result, the Company’s books and records were not easily accessible, resulting in delays in preparation and completion of its financial statements. Further, the various governmental mandatory closures of businesses have precluded the Company’s personnel, particularly its senior accounting staff, from obtaining access to its European subsidiaries’ books and records necessary to prepare the Company’s financial statements that, disclosure may be required by law.once audited, comprise the essence of the Quarterly Report.

These unforeseen circumstances resulted in the Company being unable to file its Quarterly Report during the prescribed period without undue hardship and expense to the Company. As such, the Company is filing this Quarterly Report within 45 days of the Original Due Date in reliance on the Order.

In connection with the preparation of the Company’s unaudited condensed consolidated interim financial statements as of and for the quarter ended June 30, 2020, the Company identified an inadvertent error in the accounting for goodwill relating to the Company’s acquisitions of Nexway and Facebank AG. Goodwill was inadvertently impaired at December 31, 2019. Accordingly, the Company is restating herein its previously issued unaudited condensed consolidated financial statements and the related disclosures for the three months ended March 31, 2020.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Condensed Consolidated Balance Sheets

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

* Derived from audited information.

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

FaceBank Group, Inc.

Condensed Consolidated Statements of Operations

(unaudited; in thousands except for share and per share information)

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

FaceBank Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

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

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

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

FaceBank Group, Inc.

Condensed Consolidated Statements of Cash Flows

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

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

FaceBank Group, Inc.

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Condensed Consolidated Statements of Operations

(unaudited; in thousands except for share and per share information)

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

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Condensed Consolidated Statements of Stockholders’ Equity

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

For the three and nine months ended September 30, 2019

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

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Condensed Consolidated Statements of Stockholders’ Equity

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

For the three and nine months ended September 30, 2018

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

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Condensed Consolidated Statements of Cash Flows

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

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

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1 – Organization and Nature of Business

OverviewIncorporation

FaceBank Group, Inc. (formerly Pulse Evolution Group, Inc.) (the “Company” or “FaceBank”) 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 Brick Top Productions, Inc. in October 2010, and to Carolco Pictures, Inc. in January 2015. Effective November 29, 2017, the Company’s corporate name was changed to Recall Studios, Inc. On February 28, 2019, the Company’s corporate name was changed to Pulse Evolution Group, Inc. Effective September 30, 2019, the Company’s name was changed to FaceBank Group, Inc.

Merger with fuboTV Inc.

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and itsour wholly-owned subsidiary (“Merger Sub”) merged with and into fuboTV Inc., a Delaware corporation (“fuboTV”), whereby fuboTV 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 (the “Merger Agreement” and such transaction, the “Merger”) (See Note 16).

In accordance with the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), all of the capital stock of fuboTV was converted into the right to receive shares of our newly-created class of Series AA Convertible Preferred Stock, par value $0.0001 per share (the “Series AA Preferred Stock”) (See Note 13). Each share of Series AA Preferred Stock is entitled to 0.8 votes per share and is convertible into two (2) shares of our common stock, only in connection with a bona fide transfer to a third party pursuant to Rule 144. Until the time we are able to uplist to a national securities exchange, the Series AA Preferred Stock benefits from certain protective provisions that, for example, 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.

As a result of the Merger, fuboTV, a leading live TV streaming platform for sports, news, and entertainment, became a wholly-owned subsidiary of the Company. Before the Merger, Facebank Group was and continues to be a character-based virtual entertainment company, and a leading developer of digital human likeness for celebrities and consumers, focused on applications in traditional entertainment, sports entertainment, live events, social networking, mixed reality (AR/VR) and artificial intelligence. Following the Merger, we operate our business under the name “fuboTV” and we are in the process of changing the name of FaceBank Group, Inc. to fuboTV, Inc. On May 1, 2020, the Company’s trading symbol was changed to FBNK.“FUBO”. Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refers to FaceBank and its subsidiaries on a consolidated basis, and fuboTV Pre-Merger refers to fuboTV Inc. prior to the Merger.

In connection with the Merger, on March 11, 2020, FaceBank and HLEE Finance S.a r.l. (“HLEE”) entered into a Credit Agreement, dated as of March 11, 2020, pursuant to which HLEE provided FaceBank with a $100,000,000 revolving line of credit (the “Credit Facility”). The Credit Facility is secured by substantially all the assets of FaceBank. As of August 10, 2020, there are no amounts outstanding under the Credit Facility, and the Company does not intend to draw down on this Credit Facility. See Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements for more information about the Credit Facility.

On March 19, 2020, FaceBank, Merger Sub, Evolution AI Corporation (“EAI”) and Pulse Evolution Corporation (“PEC” and collectively with EAI, Merger Sub and FaceBank, 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 $10,050,000 (the “Senior Notes”). The Company received proceeds of $7.4 million, net of an original issue discount of $2.65 million. In connection with the FB Loan, FaceBank, fuboTV and certain of their respective subsidiaries granted a lien on substantially of their assets to secure the obligations under the Senior Notes. See Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements for more information about the Note Purchase Agreement.

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 $24.9 million outstanding under the AMC Agreement, net of debt issuance costs. In connection with the Merger, FaceBank guaranteed the obligations of fuboTV under the AMC Agreement on an unsecured basis. The liens of AMC Networks Ventures on the assets of fuboTV are senior to the liens in favor of FB Loan and FaceBank securing the Senior Notes.

Nature of Business

The Company is a leading digital human technologyentertainment 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’ IP sharing relationships with leading celebrities and other digital technologies to enhance its already robust sports and entertainment offerings.

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

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

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Restatement for Correction of an Error

In connection with the preparation of the personal digital likeness assets,Company’s condensed consolidated interim financial statements as of celebrities and consumers, for usethe quarter ended June 30, 2020, the Company identified an inadvertent error in artificial intelligence, entertainment, personal productivitythe accounting for goodwill relating to the Company’s acquisition of Nexway and social networking.Facebank AG. Goodwill was inadvertently impaired at December 31, 2019. Upon further evaluation, the Company determined that goodwill amounting to $79.7 million should not have been impaired. Accordingly, the Company should have allocated $51.2 million towards the loss on deconsolidation of Nexway during the three months ended March 31, 2020, which would have resulted in a loss on deconsolidation of Nexway of $11.9 million. The Company is restating herein its previously issued condensed consolidated financial statements and the related disclosures for the three months ended March 31, 2020.

In addition to the restatement of the financial statements, certain information within the following notes to the financial statements have been restated to reflect the correction of a misstatement discussed above as well as to add disclosure language as appropriate:

Note 5 – Investments

Note 7 – Intangible Assets and Goodwill

The financial statement misstatements reflected herein in did not impact cash flows from operations, investing, or financing activities in the Company’s consolidated statements of cash flows for any period previously presented.

Reverse Stock Split and Increase in Authorized Share CapitalComparison of restated financial statements to financial statements as previously reported

On January 9, 2019,The following tables compare the Company amended its certificateCompany’s previously issued Consolidated Balance Sheets and Consolidated Statement of incorporation to increase the authorized numberOperations as of shares of its $0.0001 par value per share common stock to 400 million shares. The Company also effectuated a 1-for-30 reverse stock split of its common stock on February 28, 2019. All share and per share amounts for all periods presented are retroactively restated for the effectthree months ended March 31, 2020 to the corresponding restated consolidated financial statements for those respective years.

Restated consolidated balance sheets and consolidated statements of operations as of and for the reverse stock split. All of the outstanding shares of Series X Preferred Stock also automatically converted into an aggregate of 15,000,000 shares of common stock on February 28, 2019.three months ended March 31, 2020 are as follows:

Note 23 – 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 of $5.9$0.1 million, a working capital deficiency of $49.2$31.4 million and an accumulated deficit of $37.6$111.6 million at September 30, 2019. The Company incurred a $13.1 millionMarch 31, 2020 and fuboTV had net loss of $173.7 million for the nine monthsyear ended September 30,December 31, 2019. The Company expects to continue incurring losses in the foreseeable future and will need to raise additional capital to fund its operations, meet its obligations in the ordinary course of business and execute its longer-term business plan. These obligations include liabilities assumed in an acquisition that are in arrears and payable on demand. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that these financial statements are issued. The unaudited 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 commercialize its productsattract and services, competing technological andretain subscribers, develop new technologies that can compete in a rapidly changing market developments,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 orof 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.

Note 34 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts, as of March 31, 2020, of the Company and its 99.7%-owned operating subsidiary EAI, which, until the Merger, was the Company’s principal operating subsidiary; inactive subsidiaries York Production LLC and York Production II LLC; wholly-owned subsidiaries Facebank AG, StockAccess Holdings SAS (“SAH”) and FBNK Finance Sarl (“FBNK Finance”); its 70.0% ownership in Highlight Finance Corp. (“HFC”); and its 76% ownership in Pulse Evolution Corporation (“PEC”). All significant inter-company 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 (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”(the “Commission”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments (except for the Nexway deconsolidation), considered necessary for a fair presentation of such interim results.

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Notes to the Unaudited Condensed Consolidated Financial Statements

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, 20192020 or for any future interim period. The unaudited condensed consolidated balance sheet at September 30,December 31, 2019 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, 20182019 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on June 10, 2019.

May 29, 2020.

Principles of Consolidation

FaceBank Group, Inc.

The Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significantNotes to the entity. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as Noncontrolling interests in the Company’sUnaudited Condensed Consolidated Balance Sheets and Condensed ConsolidatedFinancial Statements of Stockholders’ Equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net earnings (loss) attributable to noncontrolling interests in the Company’s Condensed Consolidated Statements of Operations.

The accompanying unaudited consolidated financial statements include the accounts of the Company, and its 99.7% owned principal operating subsidiary Evolution AI Corporation (“EAI”), 62.3% majority-owned operating subsidiary Nexway AG (“Nexway”), wholly-owned subsidiaries Facebank AG and StockAccess Holdings SAS (“SAH”), 70.0% majority-owned operating subsidiary Highlight Finance Corp. (“HFC”), inactive subsidiaries York Production LLC and York Production II LLC and its 54% majority owned subsidiary, Pulse Evolution Corporation (“PEC”). All inter-company balances and transactions have been eliminated in consolidation. All subsidiaries acquired are consolidated from the date of acquisition.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAPgenerally accepted accounting principles 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. Actual results could differ from those estimates. ThoseThe significant estimates and assumptions include allocating the fair value of purchase consideration issued in business acquisitions, investments, depreciableuseful lives of property and equipment,intangible assets, analysis of impairments of recorded goodwill and other long-termintangible assets, accruals for potential liabilities, assumptions made in valuing derivative liabilities and assumptions made when estimating the fair value of equity instruments issued in share-based payment arrangements and deferred income taxes and related valuation allowance.

fair value of equity method investees.

Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, see the Company’s Annual Report on Form 10-K filed with the SEC on June 10, 2019.May 29, 2020.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. There were no cash equivalents as of September 30, 2019 and December 31, 2018.

Fair value of financial instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable.

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Notes to the Unaudited Condensed Consolidated Financial Statements

Long-term investments

As described in Note 5 to these condensed consolidated financial statements, effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this new guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.

For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments that qualify for the measurement alternative at cost, but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.

For equity investments that result in the Company having significant influence, but not control, of an entity, the Company applies the equity method of accounting.

Loans for which the Company has the intent and ability to hold for the foreseeable future or until maturity are classified as held for investment and accounted for at cost, adjusted for unamortized premiums and discounts, net of allowance for loan losses.

As of September 30, 2019, the Company’s long-term investments consist of its investment in Panda Productions (HK) Limited (“Panda”) and an equity investment in shares and a term loan to P8H, Inc. (“Paddle8”). Refer to Note 5 for further information on the Company’s long-term investments.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are reported at realizable value, net of allowances for contractual credits and doubtful accounts. The Company records allowances for doubtful accounts receivable based upon expected collectability. The reserve is generally established based upon an analysis of its aged receivables. Additionally, if necessary, a specific reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability to meet its financial obligations, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. The Company also regularly reviews the allowance by considering factors such as historical collections experience, credit quality, age of the accounts receivable balance and current economic conditions that may affect a customer’s ability to pay. If actual bad debts differ from the reserves calculated, the Company records an adjustment to bad debt expense in the period in which the difference occurs.

Concentrations

For the nine months ended September 30, 2019, no customer accounted for more than 10% of sales and accounts receivable.

Sequencing

On July 30, 2019, the Company adopted a sequencing policy under ASC 815-40-35 whereby in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.

LeasesLoss Per Share

Effective January 1, 2019,Basic loss per share is computed by dividing net loss available to common stockholders by the Company accounts for its leases under ASC 842,Leases. Under this guidance, arrangements meetingweighted average number of common shares outstanding during the definitionperiod. Diluted net loss per common share excludes the potential impact of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interestconvertible notes, convertible preferred stock, common stock options and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. The adoption of ASC 842 did not have anwarrants because their effect on the Company’s condensed consolidated results of operations or cash flows, due to the leases having a term of less than one year.

In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less, if any, from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

FaceBank Group, Inc.

(Formerly Pulse Evolution Group, Inc.)

Notes to the Unaudited Condensed Consolidated Financial Statements

The Company continues to account for leases in the prior period financial statements under ASC Topic 840.

Revenue from Contracts with Customers

The Company recognizes 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 towould be entitled in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. The following five steps are applied to achieve that core principle:anti-dilutive.

The Company recognized revenue from contracts with customers of approximately $5.8 million during the three- and nine-months ended September 30, 2019, primarily from the sale of software licenses. Revenue from the sale of software licenses are recognized as a single performance obligation at the point in time that the software license is delivered to the customer.

The following presents our revenuescommon share equivalents are excluded from contracts with customers disaggregated by major business activity (in thousands):the calculation of weighted average common shares outstanding because their inclusion would have been anti-dilutive:

Foreign Currency Translation and Transactions

Assets and liabilities of foreign subsidiaries having non-U.S. dollar functional currencies are translated at exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the period. The gains or losses resulting from translating foreign currency financial statements into U.S. dollars, net of taxes, if any, are reported as a separate component of Accumulated Other comprehensive income (loss) within stockholders’ equity. Gains or losses resulting from foreign currency transactions are included in Other income (expense) in the Company’s Condensed Consolidated Statements of Operations. As the acquisition of Nexway occurred on September 19, 2019, foreign currency translation and transactions costs were deemed immaterial.

Deferred tax liabilityTax Liability

The Company recognized $1.2 million of deferred tax liabilities related to the Facebank AG acquisition, and $0.5 million related to the Nexway acquisition during the three months ended September 30, 2019, and $36.9 million of deferred tax liabilities related to the EAI acquisition during the year ended December 31, 2018. The following is a rollforward of the Company’s deferred tax liability from January 1, 20192020 to September 30, 2019March 31, 2020 (in thousands):