UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A10-Q

(Amendment No. 1)

(Mark One)

For the quarterly period ended September 30, 2018March 31, 2020

For the transition period from _____________ to _____________

Commission File Number:000-55353

Pulse EvolutionFaceBank 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 August 13, 2019,July 2, 2020, there were 23,444,31838,684,136 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Pulse EvolutionEXPLANATORY NOTE

FaceBank Group, Inc. (formerly known(the “Company” or “FaceBank”) is filing this quarterly report on Form 10-Q after the May 15, 2020 deadline (the “Original Due Date”) applicable for the filing of a Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) in reliance on the 45-day extension provided by an order issued by the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions From Specified Provisions of the Exchange Act of 1934 and Certain Rules Thereunder dated March 4, 2020 (Release No. 34-88318), as Recall Studios,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 Quarterly Report within the prescribed time period due to the global COVID-19 pandemic. As a result of the pandemic, management’s full efforts have been focused on operating its business and evaluating available funding. The Company has been following the recommendations of local health authorities 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, 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.

FaceBank Group, Inc.)

INDEX

EXPLANATORY NOTEFORWARD-LOOKING STATEMENTS

As used in this Quarterly Report, unless expressly indicated or the context otherwise requires, references to “FaceBank,” “we,” “us,” “our,” “the Company,” and similar references refer to FaceBank Group, Inc. and its consolidated subsidiaries, including fuboTV Inc., or fuboTV.

This Amendment No. 1 (this “Amendment”)Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act of 1933, and the Securities Exchange Act of 1934, as amended. 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 about:

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 the section titled “Risk Factors” in our Annual Report on Form 10-Q10-K as filed with the Commission under the Exchange Act. 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 fiscal quarter ended September 30, 2018, amends Pulse Evolution Group, Inc.’s (formerly Recall Studios, Inc.) (the “Company”)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, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These 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. The forward-looking statements in this Quarterly Report do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of July 6, 2020. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q forto reflect events or circumstances after the fiscal quarter ended September 30, 2018, which was originally fileddate 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 Securities and Exchange Commission on November 10, 2018 (the “Original Filing”).

In connection with the preparation of the Company’s condensedaudited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, the Company identified inadvertent errors2019 included in the accounting for deferred tax liabilities relating to the Company’s acquisition of Evolution AI Corporation (“Evolution AI”) in August 2018.our Annual Report on Form 10-K.

This Amendment is being filed solely to restate the financial statements (i) for the accounting error described above and as further described in Notes 1 and 3 to the financial statements and (ii) for measurement period adjustments also related to the Company’s acquisition of Evolution AI and as further described in Notes 1, 3 and 5. These adjustments had no effect on earnings or cash flows for any of the periods presented. No changes were made to Item 4. Controls and Procedures as our disclosure controls and procedures were already not considered effective.

Generally, no changes have been made to the Original Filing other than (i) to add the information as described above, (ii) to update the cover page to this Amendment, and (iii) to provide updated certifications. This Amendment should be read in conjunction with the Original Filing. This Amendment speaks as of the date of the Original Filing and does not modify or update in any way the disclosures made in the Original Filing, except as required to reflect the revisions discussed above.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this quarterly report on Form 10-Q. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this quarterly report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, for the fiscal year ended December 31, 2017, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other reports that we file with the Securities and Exchange Commission (the “SEC”). You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this quarterly report on Form 10-Q, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Recall Studios,FaceBank Group, Inc.

Condensed Consolidated Balance Sheets

(unaudited, in $thousands, except for 2018share and rounded to nearest thousand for 2017, except per share information)

* Derived from audited information.

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

Recall Studios,FaceBank Group, Inc.

Condensed Consolidated Statements of Operations

(unaudited,unaudited; in $thousands except for 2018share and rounded to nearest thousand for 2017, except per share information)

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

Recall Studios,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,unaudited; in $thousands, except for 2018share and rounded to nearest thousand for 2017, except per share information)

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

Recall Studios,FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements For the
Nine Months Ended September 30, 2018 and 2017

(Unaudited)

Note 1 -– Organization and BasisNature of OperationsBusiness

Nature of BusinessIncorporation

We are a market leader in the emerging virtual human likeness space, and the foremost developer of hyper-realistic digital humans - computer generated assets that appear to be human and can perform in live shows, virtual reality, augmented reality, holographic, 3D stereoscopic, web, mobile, interactive and artificial intelligence applications.

We believe that digital humans will be ubiquitous in society, culture and industry. In the last decade, hyper-realistic digital humans have performed in movies such as The Curious Case of Benjamin ButtonFaceBank Group, Inc. (the “Company” or on stage such as the virtual performance of a digital Tupac Shakur at the Coachella Valley Music Festival. We expect that, in years to come, digital humans will not only perform for audiences on stage and in film, but they will also represent individual consumers as digital likeness avatars, in realistic and fantasy form, appearing and interacting on the consumer’s behalf in electronic and mobile communication, social media, video game, virtual reality, and augmented reality. The Company’s long-term goal is to be the ‘face’ of artificial intelligence, to provide a human form to interactive artificially intelligent computer beings that will be common in society, providing useful information and services to people in diverse industries, such as education, health care, telecommunications, defense, transportation and entertainment.

Our leadership team is currently focused on applications of digital humans in entertainment. We believe the entertainment industry provides us with attractive near-term opportunities to put digital humans to work in proven performance-oriented business models, while also allowing us to use the visibility of our globally recognized celebrities to showcase our digital human technologies and their applications across other industries. Accordingly, our current business plan is to generate revenues from our digital human representations of three of the world’s best-known late celebrities - Michael Jackson, Elvis Presley and Marilyn Monroe - in full length entertainment experiences, brand marketing events and digital products. The Company has a long-term agreement with Company shareholder, the Estate of Michael Jackson, to share in the revenues of any commercial use of the digital likeness of Michael Jackson. The Company is also in negotiations regarding the amendment and re-instatement of rights agreements relating to the intellectual property of two other Company shareholders, the Estate of Marilyn Monroe and Authentic Brands Group / Elvis Presley Enterprises.

We believe our specific business opportunity will be driven by the rapid evolution of the methods by which people access information and content through various forms of interactive electronic media. We believe that we are moving toward a world in which we will simply ask a computer a question and we will be given an answer, by a hyper-realistic digital human who possesses a universe of accurate and relevant information. Through our continued development of the world’s most advanced human animation technology, and our collaboration with the larger community of artificial intelligence pioneers, we expect that we will do more than just put a face on ‘AI.’ We intend to build your most knowledgeable teacher, your most trusted advisor, and in a digital world that reveals more possibilities each day, maybe even your best friend.

Company History

Recall Studios, Inc.“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, both names relating toOn September 30, 2019, the Company’s then principal business of feature film entertainment. Effective November 29, 2017, the Company’s corporate name was changed to Recall Studios,FaceBank Group, Inc.

Merger with fuboTV Inc.

On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”) merged with and into fuboTV Inc., a Delaware corporation (“fuboTV”), whereby fuboTV continued as the surviving corporation and itsbecame 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 15).

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 12). 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 “BTOP.“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.

On August 8, 2018,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 July 6, 2020, there are no amounts outstanding under the Credit Facility, and the Company entered into an agreementdoes not intend to acquire 99.7%draw down on this Credit Facility. See Note 8 of Evolution AI Corporation (EAI), a private corporation incorporated in the State of Florida in November 2017. EAI owned approximately 58% of Pulse Evolution Corporation (“Pulse”) (OTC Pink: PLFX), a corporation incorporated in the State of Nevada. The Company acquired its ownership interest in EAI by issuing Preferred X stock for a total consideration valued at $211,500,000.

The financial statements as of September 30, 2018 reflect the assets and liabilities acquired from EAI and Pulse, including Goodwill and the Non-Controlling interest arising from the business combination.

Recall Studios, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements Forfor more information about the Credit Facility.

Nine Months Ended September 30,

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 8 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 2017

(Unaudited)

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.

Going ConcernNature of Business

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

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

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

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Liquidity, Going Concern and Management Plans

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that itthe 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. As reflected in the condensed consolidated financial statements, the

The Company had cash of $0.1 million, a working capital deficiency of $31.4 million and an accumulated deficit of $18,295,687$140.1 million at September 30, 2018March 31, 2020 and incurred afuboTV had net loss of $173.7 million for the nine monthsyear ended September 30, 2018December 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 $7,142,257business and utilized net cash usedexecute its longer-term business plan. These obligations include liabilities assumed in operating activities of $2,461,968.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 thethese financial statements are issued. In addition, the Company’s independent public accounting firm in its audit report to the financial statements included in the 2017 Annual Report expressed substantial doubt about the Company’s ability to continue as a going concern. 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 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 estimatesbelieves that the current funds on handCompany has access to capital resources through potential issuances of debt and raising capital through proceeds from the sale of common stock subscriptions will be sufficient to continue operations through 2018.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 in its ability to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity securities for cash, to operate its business. Management is also monetizing the Company’s intellectual property and seeks to increase operational revenues through its myriad applications which are available on various platforms. No assurance can be given that any future financing will be available or operational revenues, 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 stock holders,stockholders, in the case orof an equity financing.

Restatement

In connection withaddition to the preparation offoregoing, based on the Company’s condensed consolidated financial statements as of and for the fiscal year ended December 31, 2018,current assessment, the Company identified an error whereby, the deferred tax liabilitydoes not expect any material impact on a temporary tax difference between taxits long-term development timeline and accounting basis on intangible assets had not been recognized. This error resulted in an understatement of the deferred tax liability and goodwill by $37.0 million.

This Amendment is being filed solely to restate the condensed consolidated financial statements (i) for the accounting error described above and (ii) for measurement period adjustments also relatedits liquidity due to the Company’s acquisitionworldwide spread of Evolution AI.

A reconciliationa novel strain of coronavirus (“COVID 19”). However, the previously reported condensed consolidated balance sheet asCompany is continuing to assess the effect on its operations by monitoring the spread of September 30, 2018COVID-19 and the restated September 30, 2018 condensed consolidated balance sheet is as follows:

Recall Studios, Inc.

Notesactions implemented to combat the Condensed Consolidated Financial Statements Forvirus throughout the

Nine Months Ended September 30, 2018 and 2017

(Unaudited)

world.

Note 2 -3 – Summary of Significant Accounting Policies

ReclassificationsPrinciples of Consolidation

The accompanying unaudited condensed consolidated financial statements include certain reclassificationsthe accounts, as of amountsMarch 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 December 31, 2017United 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 (the “Commission”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements in order to conform toreflect all adjustments, consisting of normal recurring adjustments (except for the September 30, 2018 presentation. There were no changes to total assets, total liabilities or total stockholders’ equity.Nexway deconsolidation), considered necessary for a fair presentation of such interim results.

Reverse Stock Split

In January 2017,The results for the Company effected a 1-for-10,000 reverse stock splitunaudited condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any future interim period. The unaudited condensed consolidated balance sheet at 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, 2019 and notes thereto included in the Company’s common stock. All shares and per-share amounts have been retroactively restated as ofAnnual Report on Form 10-K filed with the earliest periods presented to reflect the stock split.

SEC on May 29, 2020.

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Use of Estimates

The preparation of financial statements in conformity with generally 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 depreciableallocating the fair value of purchase consideration issued in business acquisitions, useful lives of property and equipment,intangible assets, analysis of impairments of recorded goodwill,intangible assets, accruals for potential liabilities, assumptions made in valuing derivative liabilities and assumptions made in valuing stock instruments issued for services.

Principles of Consolidation

The Company’s consolidated subsidiaries and/or entities are as follows:

The accompanying financial statements are consolidated and include the accounts of the Company and its majority owned subsidiaries. The consolidated accounts include 100% of the assets and liabilities of our majority owned subsidiaries, and the ownership interests of minority investors are recorded as a minority interest. All inter-company balances and transactions have been eliminated. York Productions, LLC and York Productions II, LLC are currently inactive. On June 15, 2017, Recall Studios, Inc. entered into a Purchase and Sale Agreement with Metropolitan Sound + Vision LLC, a South Carolina limited liability company. Pursuant to the Agreement, the Company agreed to sell to Metro all of the shares of common stock of S&G Holdings, Inc., a Tennessee corporation doing business as High Five Entertainment owned by the Company, which constitute 75% of the issued and outstanding shares of S&G. The assets, liabilities and results of operations of S&G have been reclassified to discontinued operations for financial statement presentation in 2017.

The assets, liabilities and results of operations of Evolution AI Corporation have been consolidated from the date of acquisition and included in financial statement presentation as of September 30, 2018. The accompanying consolidated financial statements also include the accounts of Pulse Evolution Corporation (Pulse), from the date of acquisition until September 30, 2018. Pulse accounts includes its wholly owned subsidiaries including Pulse Entertainment Corporation, The Kopp Initiative, LLC, Pulse Digital Human Labs, Pulse Japan and Pulse Biologic, After-August Inc, EPLS, all of which had no activity during the period ended. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fair Value of Financial Instruments

The Company follows the Financial Accounting Standards Board (FASB) Accounting Standards Codification for disclosures about fair value of its financial instruments and to measurewhen estimating the fair value of its financial instruments. The FASB Accounting Standards Codification establishes aequity instruments issued in share-based payment arrangements and fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the fair value hierarchy are described below:

Recall Studios, Inc.

Notes to the Condensed Consolidated Financial Statements For the

Nine Months Ended September 30, 2018 and 2017

(Unaudited)

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, other assets, accounts payable and accrued payroll, approximate their fair values because of the short maturity of these instruments. The carrying values of notes payable and convertible notes approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates.

The carrying amount of the Company’s derivative liability of $2,393,891 as of September 30, 2018 and $1,867,000 as of December 31, 2017 was based on Level 3 measurements. The carrying amount of the Company’s warrant liability of $3,714,541 as of September 30, 2018 and $0 as of December 31, 2017 was also based on Level 3 measurements.

Non-Controlling Interest

Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the Company’s majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance. All Non-controlling interest was eliminated as part of the sale of S&G Holdings, Inc., a Tennessee corporation doing business as High Five Entertainment in 2017. Non-Controlling interest as of September 30, 2018 reflects 42% of the common stock of Pulse Evolution Corporation that the Company did not own. Non-Controlling of Evolution AI Corporation of 0.3% was excluded as its impact was deemed insignificant to the financial statements as a whole.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the related asset. Computers are depreciated over five years. Furniture and fixtures are depreciated over seven years. Impairment is reviewed on an annual basis and no impairment charge was necessary at September 30, 2018 or December 31, 2017.

Acquired & Licensed Technologymethod investees.

The Company acquired technology assets asSignificant Accounting Policies

For a result of its acquisition of EAI and Pulse. Amortization is provideddetailed discussion about the Company’s significant accounting policies, see the Company’s Annual Report on a straight-line basis overForm 10-K filed with the estimated useful life of 12 years of the related assets. Impairment is reviewedSEC on an annual basis and no impairment charge was necessary at September 30, 2018.May 29, 2020.

Revenue RecognitionLoss Per Share

The Company’s Recall Studios subsidiary produces software applications for third-parties on a consulting basis. Effective January 1, 2018, the Company retroactively adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers, which has no material impact on revenue reported on the years presented within these financial statements. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

The Company adopted ASC 606, Revenue from Contracts with Customers, which requires that upon revenue being generated, the Company will disaggregate revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Recall Studios, Inc.

Notes to the Condensed Consolidated Financial Statements For the

Nine Months Ended September 30, 2018 and 2017

(Unaudited)

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by FASB ASC 718 where the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB ASC 718 where the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Options and warrants granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options and warrants vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option and warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes- Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Income (Loss) Per Share

Basic income (loss)loss per share is computed by dividing net income (loss)loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) net loss per common share reflectsexcludes the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss)impact of the Company. In computing diluted income (loss) per share, the treasuryCompany’s convertible notes, convertible preferred stock, method assumes that outstandingcommon stock options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants.

For the nine months ended September 30, 2018, the dilutive impact of 239 warrants, Series C Preferred stock that can convert into 2,524,982 shares of common stock, Series X Preferred stock that can convert into 450,000,000 shares of common stock and notes that can convert into 5,276,810 shares of common stock have been excluded because their impact on the loss per share is anti-dilutive.

For the nine months ended September 30, 2017, the dilutive impact of a note payable that can convert into 13 shares of common stock and warrants exercisable into 239 shares of common stock have been excluded because their impact on the income per share is anti-dilutive. For the nine months ended September 30 2017, the calculation of diluted earnings per share included convertible Series B Preferred stock that can convert into 2,000,000 shares of common stock, convertible Series C Preferred stock that can convert into 2,848,982 shares of common stock, and notes that can convert into 2,541,748 shares of common stock.effect would be anti-dilutive.

The following table sets forthcommon share equivalents are excluded from the computationcalculation of basic and diluted earnings per share:weighted average common shares outstanding because their inclusion would have been anti-dilutive:

Recall Studios,Deferred Tax Liability

The following is a rollforward of the Company’s deferred tax liability from January 1, 2020 to March 31, 2020 (in thousands):

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements For the

Nine Months Ended September 30, 2018 and 2017

(Unaudited)

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black- Scholes-Merton models, when the number of shares issuable is fixed, and a Binomial Lattice model, when the number of shares issuable is variable, to value the derivative instruments at inception and on subsequent valuation dates through the September 30, 2018 reporting date.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities on issuance and in subsequent periods, is evaluated at the end of each reporting period.

Recently Issued Accounting PronouncementsStandards

In May 2014,August 2018, the Financial Accounting Standards Board (FASB)FASB issued Accounting Standards Update (ASU)ASU No. 2014- 09, Revenue from Contracts with Customers. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.2018-13”). The amendments in ASU 2014-09 will require that companies recognize revenue2018-13 modify the disclosure requirements on fair value measurements based on the value of transferred goods or services as they occurconcepts in the contract.Concepts Statement, including the consideration of costs and benefits. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments andamendments on changes in judgmentsunrealized gains and assets recognized from costs incurredlosses, the range and weighted average of significant unobservable inputs used to obtaindevelop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or fulfill a contract. ASU 2014-09 isannual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for interim and annual periodsall entities for fiscal years beginning after December 15, 2017.2019, and interim periods within those fiscal years. Early adoption is permitted, onlyincluding adoption in annual reportingan interim period. The Company is currently evaluating ASU 2018-13 and its impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.2020, with early adoption permitted. The Company has adopted ASU 2014-09 inis currently evaluating the first quarterimpact of 2018. The adoption of ASU 2014-09 is not expected to have a material impactthis standard on the Company’sits condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016- 02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Note 4 – Investments

Nexway

The Company ishad an equity investment of 62.3% in Nexway AG (“Nexway”), which it acquired on September 16, 2019. The equity investment in Nexway was a controlling financial interest and the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.Company consolidated its investment in Nexway under ASC 810, Consolidation.

On June 20, 2018,March 31, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation-Stock Compensation (Topic 718): ImprovementsCompany relinquished 20% of the total Nexway shareholder votes associated with its investment, which reduced the Company’s voting interest in Nexway to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.)37.6%. UnderAs a result of the new standard, companies willCompany’s loss of control in Nexway, the Company deconsolidated Nexway as of March 31, 2020 as it no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant date under ASC 718 and forgo revaluing the award after this date. The Company has chosen to early adopt this standard.a controlling financial interest.

Effective January 1, 2018,As of March 31, 2020, the fair value of the Nexway shares owned by the Company retroactively adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers, which has no material impact on revenue reported on the years presented within these financial statements. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligationsis approximately $2.4 million, calculated as follows (dollars in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 - Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.thousands, except per share value):

Recall Studios,

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements For the

Nine Months Ended September 30, 2018 and 2017

(Unaudited)

There was no impact onThe deconsolidation of Nexway resulted in a gain of approximately $39.2 million calculated as follows:

Panda Interests

In March 2019, the Company entered into an agreement to finance and co-produce Broadway Asia’s theatrical production of DreamWorks’ Kung Fu Panda Spectacular Live at the Venetian Theatre in Macau, Hong Kong (“Macau Show”). The Company determined the fair value of the profits interest to be approximately $1.7 million as of the date of this transaction and $2.0 million as of March 31, 2020 and December 31, 2019.

The table below summarizes the Company’s financial statements as a result of adopting ASC 606profits interest at March 31, 2020 and December 31, 2019 (in thousands except for unit and per unit information):

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 5 – Intangible Assets

The table below summarizes the Company’s intangible assets at March 31, 2020 (in thousands):

Amortization expense for the three months ended March 31, 2020 and 2019 was $5.2 million in each period, ended September 30, 2018 and year ended December 2017.respectively.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present orThe estimated future consolidated financial statement presentation or disclosures.amortization expense associated with intangible assets is as follows (in thousands):

Note 3 - Acquisition6 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of Evolution AIMarch 31, 2020 and associated GoodwillDecember 31, 2019 consist of the following (in thousands):

FaceBank Group, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 7 – Related Parties

Amounts owed to and due from related parties as of March 31, 2020 and December 31, 2019 consist of the following (in thousands):