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Stockholders’ Equity
 12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
Stockholders’ Equity

Note 15 - Stockholders’ Equity

 

Authorized Share Capital

 

The Company amended its articles of incorporation on January 9, 2019 to increase the authorized share capital to 400 million shares of common stock.

 

Preferred Stock Designations

 

On March 20, 2020, FaceBank Pre-Merger amended its Articles of Incorporation to withdraw, cancel and terminate the previously-filed (i) Certificate of Designation of with respect to 5,000,000 shares of its Series A Preferred Stock, par value $0.0001 per share, (ii) Certificate of Designation with respect to 1,000,000 shares of its Series B Preferred Stock, par value $0.0001 per share, (iii) Certificate of Designation with respect to 41,000,000 shares of its Series C Preferred Stock, par value $0.0001 per share and (iv) Certificate of Designation with respect to 1,000,000 shares of its Series X Preferred Stock, par value $0.0001 per share. Upon the withdrawal, cancelation and termination of such designations, all shares previously designated as Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series X Preferred Stock were returned to the status of authorized but undesignated shares of the Company’s Preferred Stock, par value $0.0001 per share.

 

 

On March 20, 2020, in connection with the Merger, FaceBank Pre-Merger filed an amendment to its Articles of Incorporation to designate 35,800,000 of its authorized preferred stock as “Series AA Convertible Preferred Stock” pursuant to a Certificate of Designation of Series AA Convertible Preferred Stock (the “Series AA Preferred Stock Certificate of Designation”). The Series AA Convertible Preferred Stock (the “Series AA Preferred Stock”) has no liquidation preference. The Series AA Preferred Stock is entitled to receive dividends and other distributions as and when paid on the Common Stock on an as converted basis. Each share of Series AA Preferred Stock is initially convertible into two shares of Common Stock, subject to adjustment as provided in the Series AA Preferred Stock Certificate of Designation and shall only be convertible immediately following the sale of such shares on an arms’-length basis either pursuant to an exemption from registration under Rule 144 promulgated under the Securities Act or pursuant to an effective registration statement under the Securities Act. Each share of Series AA Preferred Stock shall have 0.8 votes per share (the “Voting Rate”) on any matter submitted to the holders of the Common Stock for a vote and shall vote together with the Common Stock on such matters for as long as the Series AA Preferred Stock is outstanding. The Voting Rate shall be subject to adjustment in the event of stock splits, stock combinations, recapitalizations reclassifications, extraordinary distributions and similar events.

 

Common Stock Activity

 

Year ended December 31, 2021

 

In January and February 2021, 9,807,367 shares of Series AA Preferred Stock converted into 19,614,734 shares of common stock. On March 1, 2021, we consummated an offer to exchange the remaining outstanding shares of Series AA Preferred Stock for two shares of our common stock per share of Series AA Preferred Stock (the “Exchange Offer”). As a result of the Exchange Offer, 13,412,246 shares of Series AA Preferred Stock, representing 100% of the outstanding shares of Series AA Preferred Stock, were exchanged for 26,824,492 shares of our common stock.

 

On February 26, 2021, the Company issued 623,068 shares of its common stock (treasury stock) in connection with the Vigtory Acquisition.

 

As disclosed in Note 2, on August 13, 2021, the Company entered into the “Sales Agreement” with Evercore Group L.L.C., Needham & Company, LLC and Oppenheimer & Co. Inc., as sales agents (each, a “manager” and together, the “managers”), under which the Company may, from time to time, sell shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $500.0 million through the managers (the “Offering”).

 

Subject to the terms and conditions of the Sales Agreement, each manager will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon the Company’s instructions. The Company will pay the managers a commission for their services in acting as agents in the sale of common stock at a commission rate of up to 3% of the gross sales price of the shares of the Company’s common stock sold through them pursuant to the Sales Agreement. The Company is not obligated to, and cannot provide any assurances that it will, make any sales of the shares under the Sales Agreement. The Offering of shares of common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

 

During the year ended December 31, 2021, the Company received net proceeds of $140.4 million (after deducting $3.5 million in commissions and expenses) from sales of 5,338,607 shares of its common stock, at a weighted average gross sales price of $26.96 per share pursuant to the Sales Agreement.

 

On December 1, 2021, the Company issued 287,768 shares of its common stock, and 176,932 shares of treasury stock in connection with the Edisn Acquisition.

 

On December 6, 2021, the Company issued 5,690,669 shares its common stock in connection with the Molotov Acquisition.

 

During the year ended December 31, 2021, the Company retired 166,599 shares of its restricted common stock in connection with a separation agreement with one of its executives.

 

Warrants

 

A summary of the Company’s outstanding warrants as of December 31, 2021, are presented below (in thousands, except share and per share amounts):

   Number of Warrants   Weighted Average
Exercise Price		  

Total

Intrinsic
Value

   Weighted
Average
Remaining
Contractual Life
 (in years)		 
Outstanding as of December 31, 2020   2,535,528   $8.22   $50,560    1.0 
Exercised   (1,962,841)  $7.72   $-    - 
Expired   (7,143)  $-   $-    - 
Outstanding and exercisable as of December 31, 2021   565,544   $9.96   $3,546    0.1 

 

During the year ended December 31, 2021, the Company issued 1,598,234 shares of its common stock in connection with the exercise of 1,962,841 warrants.

 

During the year ended December 31, 2020, the Company issued 5,843,600 shares of its common stock with a fair value of approximately $27.3 million for the exercise of 7,003,005 common stock warrants and received cash of $1.7 million.

  

Year ended December 31, 2020

 

On January 1, 2020, the Company entered into the first amendment to a joint business development agreement and issued 200,000 shares of its restricted common stock with a fair value of $1.8 million in exchange for business development services. During the year ended December 31, 2020, the Company issued 636,289 shares of common stock with a fair value of $5.5 million in exchange for consulting services. In addition, the Company issued 62,500 shares of its common stock with a fair value of approximately $0.6 million in exchange for services rendered in connection with the Company’s amended Digital Likeness Development Agreement by and among Floyd Mayweather, the Company and FaceBank, Inc., effective as of July 31, 2019, as amended (the “Mayweather Agreement”).

 

On February 20, 2020, the Company issued 300,000 shares of its common stock to an officer of the Company at a fair value of $2.7 million, or $9.00 per share.

 

During the three months ended March 31, 2020, the Company issued 200,000 shares of its common stock with a fair value of $1.6 million as compensation to service providers for services rendered.

 

 

The Company raised approximately $2.3 million through issuances of an aggregate of 795,593 shares of its common stock in private placement transactions during the three months ended March 31, 2020 with investors.

 

On July 2, 2020, the Company entered into a Purchase Agreement with Credit Suisse Capital LLC, pursuant to which the Company sold 2,162,163 shares of the Company’s common stock at a purchase price of $9.25 per share for an aggregate purchase price of $20.0 million.

 

In October 2020, the Company sold 19,706,708 shares of its common stock in a public offering at $10.00 per share generating approximately $181.0 million in proceeds, net of offering costs.

 

Between May 11, 2020 and June 8, 2020, the Company entered into Purchase Agreements, pursuant to which the Company sold an aggregate of 3,735,922 shares of the Company’s common stock at a purchase price of $7.00 per share and issued warrants to the Investors covering a total of 3,735,922 shares of the Company’s common stock for an aggregate purchase price of $26.1 million.

 

The Company raised approximately $0.5 million through issuances of an aggregate of 170,391 shares of its common stock in private placement transactions during the three months ended June 30, 2020 with investors.

 

Between August 20, 2020 and August 28, 2020, the Company entered into Purchase Agreements, pursuant to which the Company sold an aggregate of 5,212,753 shares of the Company’s common stock at a purchase price of $9.25 per share and issued warrants to the Investors covering a total of 1,303,186 shares of the Company’s common stock for an aggregate purchase price of $48.2 million.

 

During the year ended December 31, 2020, the Company issued 70,500 shares of its common stock with a fair value of approximately $0.3 million in connection with the issuance of convertible notes.

 

During the year ended December 31, 2020, the Company issued 18,209,498 shares of its common stock in exchange for 9,104,749 shares of the Company’s Series AA Preferred Stock.

 

During the year ended December 31, 2020, the Company issued 900,000 shares of its common stock with a fair value of approximately $9.1 million or $10.00 per share in connection with a note purchase agreement with FB Loan.

 

During the year ended December 31, 2020, the Company has issued 2,753,819 shares of its common stock in exchange for 17,950,055 shares of its subsidiary PEC, respectively. The interests exchange in PEC were previously recorded within noncontrolling interests and the transactions were accounted for as a reduction of $2.0 million of noncontrolling interests for the carrying value of those noncontrolling interests at the date of exchange with an offsetting increase in Additional paid-in capital, during the year ended December 31, 2020.

 

Stock-based compensation

 

The Company’s 2020 Equity Incentive Plan, as amended (the “2020 Plan”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to its employees, directors and consultants. As of December 31 2021, there are 10,436,701 shares available for issuance under the Plan.

 

During the years ended December 31, 2021, 2020 and 2019 the Company recognized stock-based compensation expense as follows:

 

   2021   2020   2019 
   Years Ended December 31, 
   2021   2020   2019 
Subscriber related  $71   $32   $- 
Sales and marketing   8,171    2,395    - 
Technology and development   14,068    5,446    - 
General and administrative   41,486    43,866    1,118 
Total Stock-Based Compensation Expense  $63,796   $51,739   $1,118 

 

Options

 

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

 

During the year ended December 31, 2021, the Board of Directors approved a modification to stock option and restricted stock award grants to employees who terminated from the Company. The modifications accelerated the vesting of unvested stock options and restricted stock awards as of the termination date and provided the option holders with an additional months post-termination to exercise their stock options. The modifications resulted in incremental stock-based compensation expense of $13.9 million during the year ended December 31, 2021.

 

 

A summary of stock option activity for the year ended December 31, 2021, is as follows (in thousands, except share and per share amounts):

 

   Number of Shares   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted Average Remaining Contractual Life
(in years)		 
Outstanding as of December 31, 2020   13,450,565   $5.45   $303,036    8.1 
Granted   220,099   $21.52           
Exercised   (1,990,261)  $1.52           
Forfeited or expired   (225,513)  $7.06           
Outstanding as of December 31, 2021   11,454,890   $6.40   $70,231    7.4 
                     
Options vested and exercisable as of December 31, 2021   6,711,404   $4.71   $51,167    6.8 

 

 

The following was used in determining the fair value of stock options granted during the years ended December 31, 2021 and 2020:

 

   Years ended December 31 
   2021   2020 
Dividend yield   -%   -%
Expected price volatility   44.8% - 45.2%   44.4%-57.3%
Risk free interest rate   0.6% - 1.1%   0.23%-0.58%
Expected term (years)   5.8 - 6.1 years    5.3 - 7.5 years 

 

There were no options granted during the year ended December 31, 2019.

 

The outstanding stock options as of December 31, 2020 were adjusted from the previously reported amount in the Annual Report to exclude certain option grants subject to discretionary performance conditions, for which a grant date had not occurred as of December 31, 2020.

 

On October 8, 2020, the Company awarded the CEO an option which vests based upon the achievement of certain predetermined goals for each of the five years in the performance period related to stock price, revenue, gross margin, subscribers, new markets launched and new revenue streams between January 1, 2021 and December 31, 2025, which are described in the Company’s annual operating plan. On a given Determination Date (subsequent to the Company’s calendar year end), the Company’s Board of Directors (the “Board”) will review actual performance against the predetermined metrics and determine, in its sole discretion, the amount of any vesting that occurs on a given Determination Date. Any such vesting is subject to the CEO’s continuation in service with the Company through such Determination Date. The Board may determine vesting at, above, or below 20% of the shares subject to the performance option. All shares may be eligible for vesting until the Determination Date following the 2025 calendar year. Because the number of shares to be earned on each Determination Date is subject to the discretion of the Board, the compensation expense is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered and based on the number of shares expected to be earned. As of December 31, 2021, no portion of the option had vested, and during the year ended December 31, 2021, the Company recognized $5.4 million of stock-based compensation expense related to the option. Upon each subsequent Determination Date in 2022, 2023, 2024, and 2025, stock-based compensation expense will be remeasured and adjusted to reflect the grant date fair value.

 

 

As of December 31, 2021, the estimated value of unrecognized stock-based compensation expense related to unvested options was $25.8 million to be recognized over a period of 2.2 years.

 

During the year ended December 31, 2020, 1,418,532 options to purchase shares of the Company’s common stock were exercised for cash of $2.2 million.

 

Non-employees

 

During the year ended December 31, 2020, the Company granted options to purchase 280,000 shares of the Company’s common stock at an exercise price of $7.20 per share. These options have a fair value of $1,031,000, a five-year term and expires on December 21, 2024. These options were immediately vested as of the grant date. During the year ended December 31, 2021, 280,000 options were exercised in exchange for 222,962 shares of the Company’s common stock. These options are not included in the table above.

 

As part of the Merger, the Company also assumed 343,047 options granted to non-employees with a weighted average exercise price of $0.23 (included in table above). Stock-based compensation expense related to unvested non-employee options was immaterial for the year ended December 31, 2020.

 

Other than the options assumed as described above, there were no options granted to non-employees during the year ended December 31, 2021.

 

Market and Service Condition Based Stock Options

 

During the year ended December 31, 2021, 1,375,000 stock options with a fair value of $19.2 million were granted to an employee of the Company. The options vest on the earlier of each anniversary of the grant date or based on the achievement of pre-established parameters relating to the performance of the Company’s stock price.

 

During the year ended December 31, 2020, 3,078,297 stock options with a fair value of $20.9 million were granted to an employee of the Company. The options vest on the earlier of each anniversary of the grant date or based on the achievement of pre-established parameters relating to the performance of the Company’s stock price.

 

A summary of activity under the Plan for market and service-based stock options for the year ended December 31, 2021 is as follows (in thousands, except share and per share amounts):

 

   Number of Shares   Weighted Average
Exercise Price		   Total Intrinsic Value   Weighted
Average
Remaining
Contractual Life
(in years)		 
Outstanding as of December 31, 2020   3,078,297   $9.69   $56,351    6.3 
Granted   1,375,000   $19.59           
Outstanding as of December 31, 2021   4,453,297   $12.75   $17,933    5.7 
                     
Options vested and exercisable as of December 31, 2021   3,078,297   $9.69   $17,933    5.3 

 

Stock based compensation expense is based on the estimated value of the awards on the grant date, and is recognized over the period from the grant date through the expected vest dates of each vesting condition, both of which were estimated based on a Monte Carlo simulation model applying the following key assumptions as of the grant date:

 

   For the years ended December 31, 
   2021   2020 
Dividend yield   -    - 
Expected volatility   71.5%   76.0%-88.1% 
Risk free rate   1.3%   0.24%-0.30% 
Derived service period   2.0 years     1.6- 1.9 years 

 

 

There were no market and service-based options granted during the year ended December 31, 2019.

 

During the year ended December 31, 2020, the pre-established parameters related to the Company’s stock performance were achieved and the 3,078,297 options were fully vested. During the year ended December 31, 2020, the Company recognized $20.9 million of stock-based compensation related to its market and service-based stock options.

 

As of December 31, 2021, there was $12.0 million of unrecognized stock-based compensation expense for market and service-based stock options.

 

Time-Based Restricted Stock Units

 

A summary of the Company’s time-based restricted stock unit activity during the year ended December 31, 2021 is as follows:

   Number of Shares   Weighted Average Grant-Date
Fair Value		 
Unvested at December 31, 2020   85,000   $25.26 
Granted   2,883,340   $26.12 
Vested   (102,072)  $31.10 
Forfeited   (80,468)  $32.27 
Unvested at December 31, 2021   2,785,800   $25.73 

 

During the year ended December 31, 2021, the Company granted 2,883,240 time-based restricted stock units which generally vest annually over a four-year period, subject to the recipient’s continuation in service through each applicable vesting date. The fair value of restricted stock units is measured based on their fair value at grant date which totaled $75.3 million. During the year ended December 31, 2021, the Company issued 91,580 shares of common stock to members its Board of Directors and employees in settlement of vested restricted stock units.

 

As of December 31, 2021, the estimated value of unrecognized stock-based compensation related to restricted stock units totaled $63.5 million, had an aggregate intrinsic value of $34.3 million, and a weighted average remaining contractual term of 3.5 years.

 

Performance-Based Restricted Stock Units

 

A summary of the Company’s performance-based restricted stock unit activity during the year ended December 31, 2021 and 2020 is as follows:

 

   Number of Shares   Weighted Average Grant-Date
 Fair Value		 
Unvested at December 31, 2020   -   $- 
Granted   1,900,000   $33.87 
Unvested at December 31, 2021   1,900,000   $33.87 

 

On November 3, 2021, the Company granted 1.9 million performance-based restricted stock units (“PRSUs”) to an employee of the Company. The PRSUs will vest over a period of 5-calendar years through 2025, subject to the achievement of certain established performance metrics including Revenue, Subscribers, New Markets Launched and New Revenue Streams. The determination of the number of awards to be earned is based upon the assessment during each calendar year of the level of the achievement of the Revenue, Subscribers, New Markets Launched, and New Revenue Streams performance metrics as compared to the Company’s annual operating plan. At each reporting period, the Company will make a determination of the most likely outcome for achievement of each performance metric. This may result in a cumulative catch-up as the Company assessments are evaluated. The fair value of the PRSU’s is measured based on their grant date fair value which totaled $64.4 million.

 

 

During the year ended December 31, 2021, the Company determined that the performance metrics for 380,000 PRSUs were met, and accordingly, recognized stock-based compensation of $5.6 million. As of December 31, 2021, unrecognized stock-based compensation totaled $58.8 million.