Item
8.01 Other Events.
The
Company announced today that it has postponed its proposed public offering of shares of its common stock and warrants to purchase
shares of its common stock previously announced on July 10, 2018, pending the Nasdaq Capital Market completing its review of the
Company’s listing of additional shares notification submitted in connection with the offering and an evaluation of market
conditions at such time.
The
following is an update to the disclosure made by the Company under Item 7.01 of its Current Report on Form 8-K filed on June 21,
2018.
As
of June 30, 2018, we had approximately $13.7 million in available cash and approximately $32.2 million on deposit with our merchant
and fulfillment processors for a total of approximately $45.9 million. The funds held by these processors represent a portion
of the payments received for annual and other extended term MoviePass subscription plans and future ticket fulfillment, which
we classify as current assets on our balance sheet and which we expect to be disbursed to us or utilized during 2018. Our average
monthly cash deficit has been approximately $26.9 million per month from September 30, 2017 to June 30, 2018 inclusive of our
processor deposits. Due to our greater than anticipated subscriber growth in June 2018, our cash deficit for the month of June
2018 is expected to be approximately $45.0 million and we anticipate our cash deficit for the month of July 2018 will be at least
$45.0 million due to significant subscriber growth, increased theater attendance during the summer months and strong box office
results of recently released films. As the MoviePass subscriber base increases rapidly, and as we increase our investments in
movies through MoviePass Ventures and MoviePass Films, and make other acquisitions, our monthly cash deficit will continue to
increase in the coming months.
We will continue to
require significant proceeds from sales of our debt or equity securities, including common stock pursuant to our ATM Offering,
among other sources of capital. Furthermore, to the extent we use any net proceeds from sales of our securities for acquisitions
of other businesses or financial interests in additional movies (through our subsidiaries, MoviePass Ventures or MoviePass Films),
we will need additional capital to offset our monthly cash deficit to the extent resulting from those further investments. For
these reasons, on July 2, 2018, the Company filed, and on July 5, 2018, the Securities and Exchange Commission declared effective,
a registration statement on Form S-3 for a maximum offering amount of $1.2 billion of our debt and equity securities.
Beginning May 9, 2018
and through July 5, 2018, the Company has issued shares of common stock in the ATM Offering pursuant to the Equity Distribution
Agreement, and its November 2017 convertible notes following receipt of prepayments under corresponding November 2017 investor
notes. Accordingly, during the period from May 9, 2018 through July 9, 2018, the Company has issued approximately 111.6 million
shares of its common stock and received gross cash proceeds of approximately $57.1 million from sales of its common stock pursuant
to the Equity Distribution Agreement. In addition, during the same period, the Company received gross proceeds of approximately
$28.1 million with respect to funding of the November 2017 investor notes and issued approximately 69.8 million shares with respect to the conversion of its November 2017 convertible notes inclusive of shares related to the make-whole
interest provisions of those notes.
Our
access to additional equity capital will depend, in part, on our ability to obtain the requisite stockholder approval at a special
meeting of stockholders, as described in our definitive proxy statement filed with the SEC on July 5, 2018, to increase our authorized
common stock, to effect a reverse stock split and to issue shares of common stock pursuant to the convertible notes we issued
to an institutional investor in January 2018 (the “Special Meeting Proposals”). As of July 10, 2018, we had 268,749,677
shares outstanding out of our currently authorized 500,000,000 shares of common stock. If we are unable to obtain the requisite
stockholder approval of the Special Meeting Proposals, our access to additional equity capital, including through our ATM Offering,
will be significantly diminished, until or unless we are able to obtain such approval. In that case, we would be reliant on seeking
non-convertible debt capital, which may not be available on acceptable terms, if at all, or voluntary prepayments from our institutional
investors under the investor notes payable to us that we hold totaling $226 million in aggregate principal amount.
If
we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned growth
or otherwise alter our business model, objectives and operations, which could harm our business, financial condition and operating
results.
Forward
Looking Statements
All statements in this
Current Report that are not historical facts should be considered “Forward Looking Statements” within the meaning of
the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements
can be identified by use of words such as “believe,” “expect,” “may,” “will,” “should,”
“seek,” “approximately,” “intend,” “plan,” “estimate,” “project,”
“continue” or “anticipates” or similar expressions or words, or the negatives of those expressions or words.
Forward-looking statements include, but are not limited to, statements regarding our expectations and beliefs regarding the future
growth of MoviePass and our monthly cash deficits. Such statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. Some, but not all, of these risks include, among other
things: our capital requirements and whether or not we will be able to raise capital as needed; our ability to obtain the requisite
stockholder approval to increase our authorized common stock, effect a reverse split and issue shares pursuant to our January 2018
convertible notes; an increase in MoviePass subscriber usage rates; an increase MoviePass’ cost per ticket; our ability to
continue to obtain cost savings from technological measures we implement to promote the fair use of the MoviePass subscription
product; our ability to successfully develop the business model of MoviePass; our ability to integrate the operations of MoviePass
and other acquired businesses into our operation; our ability to retain our existing clients and market and sell our services to
new clients; and the risk factors set forth in the periodic reports we file with the Securities and Exchange Commission including
our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and subsequent quarterly reports.
This Current Report
does not constitute an offer to sell or the solicitation of an offer to buy our common stock, nor will there be any sale of our
common stock in any state or other jurisdiction in which such offer, solicitation or sale is not permitted. A final prospectus
supplement dated April 18, 2018 and accompanying prospectus relating to the offering of common stock pursuant to the Equity Distribution
Agreement with Canaccord Genuity has been filed with the SEC and is available for free on the SEC’s website at www.sec.gov.