Item
1.01
|
Entry
Into a Material Definitive Agreement.
|
Convertible
Note Financing
On June 21, 2018 (the
“Subscription Date”), pursuant to a securities purchase agreement (“SPA”) entered into by Helios and Matheson
Analytics Inc. (the “Company,” “we,” “our” and “us”) and the institutional investors
party to the SPA (the “Buyers”), the Company agreed to sell and issue to the Buyers 20,500 shares of Series A Preferred
Stock of the Company (the “Preferred Stock”) and Series B-2 senior secured convertible notes in the aggregate principal
amount of $164,000,000 (which includes an approximate 15.0% original issue discount) (the “Convertible Notes”), for
total consideration consisting of an aggregate cash payment to the Company of $20,500,000 and secured promissory notes payable
by the Buyers to the Company (the “Investor Notes”) in an aggregate principal amount of $139,400,000 (collectively,
the “Financing”). The date on which the Preferred Stock and the Convertible Notes will be issued is referred to in
this Current Report on Form 8-K (this “Current Report”) as the “Closing Date.”
Unless earlier converted
or redeemed, the Convertible Notes will mature on the second anniversary of the Closing Date. The Company is required to redeem
the Convertible Notes at the option of the Buyers (i) from and after 7 months from the date of any prepayment by the Buyers in
connection with the Investor Notes; (ii) if the Company completes a subsequent public or private offering of debt or equity securities,
including equity-linked securities (subject to certain excluded issuances); (iii) upon a cash prepayment of any promissory note
issued to the Company as payment of all, or any part, of the purchase price of any note or convertible note issued by the Company;
(iv) upon the exercise of an option or right to subscribe for common stock or convertible securities of the Company; (v) upon
the occurrence of an Event of Default, including a Bankruptcy Event of Default (each, as defined in the Convertible Notes); or
(vi) in the event of a Change of Control (as defined in the Convertible Notes). Except for a redemption following an Event of
Default, which may be paid with cash or shares of the Company’s common stock at the election of the Buyers, the Company
will be required to redeem the Convertible Notes with cash. The Convertible Notes and the shares of common stock into which the
Convertible Notes may be converted (collectively, the “Conversion Shares”) are sometimes referred to in this Current
Report as the “Securities.” All amounts outstanding under the Convertible Notes will be secured by the Investor Notes
and all proceeds therefrom. The Convertible Notes will not be secured by, and the Investors will not have a lien on, any assets
of the Company other than the Investor Notes.
As
a condition to closing the Financing, MoviePass Inc. (“MoviePass”) will be obligated to guaranty the obligations arising
under the Convertible Notes pursuant to the form of Guaranty attached as an exhibit to the SPA (the “MoviePass Guaranty”).
The
Company is permitted to use the net proceeds from the sale of the Convertible Notes for general corporate purposes, transaction
expenses and, subject to the rules of the Nasdaq Stock Market (“Nasdaq”), for acquisitions.
In accordance with
terms of the SPA, the Company is obligated to convene a special meeting of its stockholders (i) not later than October 18, 2018,
to approve, to the extent required by Nasdaq Listing Rule 5635, the issuance of all shares of common stock of the Company that
may be issued pursuant to the terms of the Convertible Notes, and (ii) not later than July 18, 2018, to approve a reverse stock
split of the common stock of the Company.
The
Preferred Stock
Dividends
The
Preferred Stock will not accrue dividends.
Conversion
The
Preferred Stock will not be convertible into common stock.
Voting
Rights
Each holder of Preferred
Stock will be entitled to the whole number of votes equal to the number of shares of the Company’s common stock equal to
the purchase price of the Preferred Stock then held by such holder (calculated as the portion of the aggregate purchase price
for all of the Preferred Stock attributable to the shares of Preferred Stock then held by such holder); divided by $0.312 (which
is equal to the last Nasdaq closing bid price of the common stock preceding the execution of the SPA). However, the amount of
votes with respect to the Preferred Stock held by any Buyer, when aggregated with any other voting securities of the Company held
by such Buyer, will not exceed 19.9% of the outstanding voting power of the Company calculated as of the Subscription Date (or
such greater percentage allowed by Nasdaq without any stockholder approval requirements).
Redemption
From
and after the time when the first 15% of the aggregate principal amount of any Convertible Note is paid or converted in accordance
with the terms of the Convertible Notes, the Company will have the right to redeem all or a portion of the Preferred Stock held
by the holder of that Convertible Note at a price per share equal to the par value of the Preferred Stock ($0.01 per share). The
holder(s) of the Preferred Stock may require the Company to redeem some or all the shares of Preferred stock at any time at a
price per share equal to the par value of the Preferred Stock ($0.01 per share).
Transfer
Each
holder of the Preferred Stock will not be permitted to transfer such holder’s Preferred Stock prior to the time when at
least 15% of the aggregate principal amount of such holder’s Convertible Note has been converted or paid.
Liquidation Preference
Upon any liquidation, dissolution or winding up of the Company, the holder(s) of the shares of Preferred
Stock will be entitled to receive in cash out of the assets of the Company, before any amount is paid to the holders of any junior
stock, an amount per share of Preferred Stock equal to 100% of the stated value per share (which is equal to $0.01) plus $0.01.
The
Convertible Notes
At
the Closing, the Convertible Notes will be issued to the Buyers in consideration of the Investor Notes. The aggregate initial
principal amount of the Convertible Notes is $164,000,000 (which includes an approximate 15.0% original issue discount). Upon
issuance, (i) $24,600,000 in principal amount of the Convertible Notes will consist of “Unrestricted Principal”, meaning
principal that may be converted at any time and is not subject to netting against any Investor Notes as further described below,
and (ii) the balance of the principal amount under the Convertible Notes upon issuance, equal to $139,400,000, will consist entirely
of “Restricted Principal”, which is defined as that portion of the principal amount of a Convertible Note that equals
the outstanding principal amount of a corresponding Investor Note. The principal amount of each Investor Note is subject to reduction
through prepayments by the applicable Buyer of the Investor Note given by the Buyer to the Company or, upon maturity or redemption
of the Convertible Notes, by netting the amount owed by the Buyer under such Investor Note against a corresponding amount of Restricted
Principal to be canceled under the Buyer’s Convertible Note. Each prepayment under the Investor Notes will convert a corresponding
amount of Restricted Principal under the Convertible Notes into “Unrestricted Principal” that may be converted into
common stock.
The
Convertible Notes will bear interest at a rate of (i) 5.25% per annum with respect to any Restricted Principal, and (ii) 10% per
annum with respect to any Unrestricted Principal
Payment
of Interest
Interest
on the Convertible Notes will be capitalized on each quarterly interest payment date starting July 1, 2018 by adding the
interest to the then outstanding principal amount of the Convertible Notes. Interest may also be paid by inclusion in the
“Outstanding Amount”, which is defined in the Convertible Notes as the principal amount to be converted or
redeemed, accrued and unpaid interest with respect to such principal amount, accrued and unpaid late charges, if any, and the
“Make-Whole Amount.” The “Make-Whole Amount” is defined as the amount of any interest that, but for a
conversion or redemption, would have accrued with respect to the Outstanding Amount of principal being redeemed or converted
under the Convertible Notes, for the period from the applicable date of conversion or redemption date through the maturity
date of the Convertible Notes. No Make-Whole Amount will be payable under the Convertible Notes with respect to any portion
of Restricted Principal after the cancellation of such Restricted Principal pursuant to netting under the Convertible Notes,
the Investor Notes or the Master Netting Agreement (as defined below), as applicable. In the event of an event of default
interest under the Convertible Notes may be increased to 15% during the first 30 days following the occurrence and
continuance of an event of default and to 18% thereafter (the “Default Rate”).
Conversion
of the Convertible Notes
The
Buyers may elect, at any time after the Company obtains approval by its stockholders to either increase its authorized shares
of common stock or effect a reverse stock split, to convert the Convertible Notes into shares of the Company’s common stock
at the Conversion Price, subject to certain beneficial ownership limitations described below. The “Conversion Price”
is $1.00 per share (subject to anti-dilution adjustment as described in the Convertible Notes).
Beneficial
Ownership Limitations on Conversion and Issuance
The
Convertible Notes may not be converted and shares of the Company’s common stock may not be issued under the Convertible
Notes if, after giving effect to the conversion or issuance, the Buyer together with its affiliates would beneficially own more
than 4.99% or 9.99%, as elected by the Buyer, of the Company’s outstanding shares of common stock. At the Buyer’s
option, the ownership limitation blocker may be raised or lowered to any other percentage not in excess of 4.99% or 9.99%, as
elected by the Buyer, except that any raise will only be effective upon 61-days’ prior notice to the Company.
Redemption
of the Convertible Notes
Provided
there has been no Equity Conditions Failure (as defined in the Convertible Notes) and no senior convertible bridge notes issued
by the Company on November 7, 2017 (the “November Notes”), convertible notes issued by the Company on January 11,
2018 (the “January Notes”), or shares of the Preferred Stock remain outstanding or any Unrestricted Principal remains
outstanding under the Convertible Notes, the Company will have the right to redeem all, but not less than all, of the Outstanding
Amount remaining unpaid under the Convertible Notes. The portion of the Convertible Notes subject to redemption can be redeemed
by the Company in cash at a price equal to 115% of the amount being redeemed. Under the Convertible Notes, the Company may reduce,
on a dollar for dollar basis, the Restricted Principal by the surrender for cancellation of such portion of the corresponding
Investor Notes equal to the amount of Restricted Principal included in the redemption.
The
Buyers have the right to require the Company to redeem the Convertible Notes (i) at the option of the Buyers from and after 7
months from the date of any prepayment by the Buyers in connection with the Investor Notes; (ii) if the Company completes a subsequent
public or private offering of debt or equity securities, including equity-linked securities (subject to certain excluded issuances);
(iii) upon a cash prepayment of any promissory note issued to the Company as payment of all, or any part, of the purchase price
of any note or convertible note issued by the Company; (iv) upon the exercise of an option or right to subscribe for common stock
or convertible securities of the Company; (v) upon the occurrence of an Event of Default, including a Bankruptcy Event of Default
(as defined in the Convertible Notes); or (vi) in the event of a Change of Control. Except for a redemption required by an Event
of Default, which may be paid with cash or shares of the Company’s common stock at the election of the Buyers, the Company
will be required to redeem the Convertible Notes with cash.
Events
of Default
The
Convertible Notes contain customary events of default including but not limited to: (i) a suspension from trading or a failure
to maintain the listing of the Company’s common stock for a period of 5 trading days; (ii) after a conversion by the Buyer,
the failure by the Company to deliver the common stock for a period of 5 trading days; (iii) the failure to reserve a number of
shares of the Company’s common stock to permit a Buyer to fully convert the principal, interest, late charges, if any, and
Make-Whole Amounts under the Convertible Notes, to the extent required by the Convertible Notes; (iv) the failure by the Company
or any subsidiary to make payments when due under the Convertible Notes; (v) upon a conversion by the Buyer, the failure by the
Company to remove a restrictive legend from shares of the Company’s common stock if permitted by the applicable securities
laws; (vi) breaches of covenants; (vii) bankruptcy or insolvency; (viii) the failure to pay indebtedness when due; and (ix) the
failure of the grant of the security interest in the Investor Notes to create a first priority lien against the Investor Notes.
As
indicated above, following an event of default, the Buyers may require the Company to redeem all or any portion of the Convertible
Notes. The redemption amount may be paid in cash or with shares of the Company’s common stock, at the election of the Buyers,
at a price equal to the Event of Default Redemption Price (as defined in the Convertible Notes).
The
Company must immediately redeem the Convertible Notes in cash upon the occurrence of a Bankruptcy Event of Default (as defined
in the Convertible Notes).
The
Event of Default Redemption Price will be computed as a price equal to the greater of (i) 125% of the Outstanding Amount to be
redeemed and (ii) the product of (X) the Outstanding Amount to be redeemed divided by the Conversion Price multiplied by (Y) the
product of (1) 125% multiplied by (2) the greatest closing sale price of the Company’s common stock on any trading day during
the period commencing on the date preceding such event of default and ending on the date the Company makes the entire payment
required to be made under the Convertible Notes.
In
addition, following an event of default, the Buyers will have the right to convert the Convertible Notes at the “Alternate
Conversion Event of Default Price” which means, with respect to each such conversion, that price which shall be the lowest
of (i) the applicable Conversion Price as in effect on the date of the conversion, and (ii) the greater of (A) the Default Floor
Price (which means (i) at any time prior to the Stockholder Approval Date (as defined in the SPA), the Floor Price (as defined
in the Convertible Notes) (initially, $1.00) or (ii) at any time on or after the Stockholder Approval Date, $0.0624 (or such lower
price as mutually determined by the Company and the Buyers in writing, subject to the prior consent of Nasdaq)), and (B) 75% of
the lowest volume weighted average price of the Company’s common stock for each of the 30 consecutive trading days ending
and including the trading day of delivery or deemed delivery of the applicable notice of conversion.
Fundamental
Transactions
The
Convertible Notes will prohibit the Company from entering into specified transactions involving a change of control unless the
successor entity, which must be a publicly traded corporation whose common stock is quoted on or listed for trading on an eligible
market, assumes in writing all of the Company’s obligations under the Convertible Notes.
Rights
Upon Issuance of Other Securities
After
the Stockholder Approval Date (as defined in the SPA), whenever the Company issues or sells, or is deemed to have issued or sold,
any shares of common stock (including options and convertible securities but excluding any Excluded Securities, as defined in
the SPA) for a consideration per share less than a price equal to the Conversion Price in effect immediately prior to such issuance
or sale or deemed issuance or sale (the “New Issuance Price”) (the foregoing a “Dilutive Issuance”), then,
immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance
Price. Prior to the Stockholder Approval Date (as defined in the SPA), the New Issuance Price following any Dilutive Issuance
will not be less than the Floor Price (as defined in the Convertible Notes).
Note
Purchase Agreement
The
Investor Notes will be issued as payment in full for the Convertible Notes pursuant to the terms and conditions of a note purchase
agreement entered into by the Company and each Buyer (collectively, the “Note Purchase Agreements”).
Investor
Notes
The
Investor Notes will be payable in full on the forty-second anniversary of the Closing Date, although the Buyers may
prepay the Investor Notes in whole or in part, without premium or penalty, at any time. The Investor Notes accrue interest at
an annual rate of 2.83%. The Buyers’ obligation to pay the Company the principal amount of the Investor Notes is to
be secured with cash, cash equivalents, any Group of Ten (“G10”) currency and any notes or other securities
issued by any G10 country, or certain other securities, in each case having a value equal to the principal amount of the
Investor Notes. The Investor Notes are also subject to mandatory prepayment, in whole or in part, at any time (i) if the
Company receives a conversion notice from a Buyer in which all or any part of the principal of the Convertible Notes to be
converted includes any Restricted Principal and (ii) the Buyer receives a confirmation from the Company’s transfer
agent that it has been irrevocably instructed by the Company to deliver to the Buyer the shares of the Company’s common
stock to be issued pursuant to the conversion notice. Subject to the satisfaction of certain Equity Conditions, whenever the
closing bid price of our common stock exceeds 110% of the Conversion Price of the Convertible Notes for a period of two
trading days, we have the right to force the prepayment of the Investor Notes in an aggregate amount equal to the lesser of
(x) $5 million and (y) 20% of the sum of the daily dollar trading volume of the our common stock during such prior two
trading day period (subject to reduction for any voluntary prepayments from the applicable investor in such period);
provided, that all such forced prepayments, in the aggregate, may not exceed 1/3 of the initial principal outstanding under
the Investor Notes on the closing date.
The
Investor Notes also contain certain optional “netting” rights of the Buyers which, if exercised, would reduce the
amount outstanding under the Convertible Notes and the Investor Notes by the same amount and, accordingly, the cash proceeds received
by the Company from the Buyers pursuant to the Financing. These netting rights include (i) the right of the Buyer, (A) on or after
the 30
th
calendar day after the Closing Date, or (B) at any time on or after the occurrence of an event of default
under Notes, with respect to any portion of principal under the Investor Notes, to net against any obligations of the Company
remaining under the Convertible Notes an equal amount of the obligations of the Buyer remaining under the Buyer’s Investor
Note; (ii) the right of the Buyers, on the maturity date of the Convertible Notes, to net against any obligations remaining under
the Convertible Notes an equal amount of the obligations remaining under the Investor Notes; (iii) the right of the Buyers, with
respect to any required redemption of all or any portion of the Convertible Notes, solely to the extent such portion of the Conversion
Amount (as defined in the Convertible Notes) subject to such redemption includes Restricted Principal, (iv) the right of the Buyers
to net against any obligations remaining under the Convertible Notes an equal amount of the obligations remaining under the Investor
Notes if an Event of Default occurs and is not cured; (v) the right of the Buyers to net against the unpaid principal amount of
the Convertible Notes an equal amount of the unpaid principal of the Investor Notes upon a Bankruptcy Event of Default; and (vi)
an automatic netting of obligations under the Convertible Notes equal to 75% of the Restricted Principal in exchange for the cancellation
of the principal amount of the Investor Notes outstanding on the date of a transfer by the Company of the Investor Notes to any
person without the consent of the Buyers.
Master
Netting Agreement
The
Company and the Buyers will enter into a master netting agreement (the “Master Netting Agreement”) to set forth for
each party its right to net obligations that may arise under the Note Purchase Agreement, the Investor Notes, the Convertible
Notes and the SPA (collectively, the “Underlying Agreements”) upon the occurrence of certain events, including as
described above.
MoviePass
Guaranty
As
noted above, as a condition to closing the Financing, MoviePass will be obligated to provide a Guaranty to the Buyers pursuant
to which it will (i) guarantee the punctual payment of all obligations under the Convertible Notes, including all interest, make-whole
and other amounts that accrue after the commencement of any insolvency proceeding of the Company, whether or not the payment of
such obligations are enforceable or allowable in the insolvency proceeding, and all fees, interest, premiums, penalties, causes
of actions, costs, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any
of the Financing documents, and (ii) agree to pay any and all costs and expenses (including counsel fees and expenses) incurred
by the Buyers in enforcing any rights under the MoviePass Guaranty or any other Financing document.
Voting
and Lockup Agreements
As
a condition to closing the Financing, Theodore Farnsworth, the Chief Executive Officer and Chairman of the Board of the Company,
and Helios and Matheson Information Technology Ltd. (“HMIT”), of which Muralikrishna Gadiyaram, a director of the
Company, is the chief executive officer, and its wholly-owned subsidiary, Helios & Matheson Inc. (collectively, the “Principal
Stockholders”), who collectively own approximately 1.7% of the Company’s issued and outstanding common stock as of
the Closing Date, will execute voting and lockup agreements with the Company (each a “Voting and Lockup Agreement”
and collectively, the “Voting and Lockup Agreements”). Pursuant to the Voting and Lockup Agreements, the Principal
Stockholders agree to vote in favor of or consent to the Company’s issuance of the Securities at any meeting of stockholders
or written consent of stockholders for such purpose. The Voting and Lockup Agreements also require that, for a period
beginning on the Closing Date and ending on the initial date when all of the principal outstanding under the Convertible Notes
issued to the Buyers consists of Restricted Principal thereunder, the Principal Stockholders will not (i) dispose of or agree
to dispose of, directly or indirectly, any securities of the Company (except that shares underlying equity awards granted to Mr.
Farnsworth may be sold between April 1 to April 15 of any given year, not to exceed a total of 262,500 shares, in connection with
the full or partial payment of applicable taxes or tax withholding obligations arising from the issuance of an award of common
stock or options to purchase common stock granted to Mr. Farnsworth pursuant to an Approved Stock Plan, as defined in the SPA),
or establish or increase a put equivalent position or liquidate or decrease a call equivalent position or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any
securities of the Company owned directly by the Principal Stockholders (including holding as a custodian) or (iii) permit to exist
any security interest, lien, claim, pledge, option, right of first refusal, agreement, or limitation on the Principal Stockholders’
voting rights, charge or other encumbrance of any nature with respect to the Principal Stockholders’ securities in the Company
or (iv) engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result
in a sale or disposition of the Principal Stockholders’ securities in the Company or (v) directly or indirectly initiate,
solicit or encourage any person to take actions which could reasonably be expected to lead to the occurrence of any of the foregoing.
Buyer Voting Agreements
As
a condition to closing the Financing, we required each Buyer, severally and not jointly, to execute a separate voting
agreement with the Company (each a “Buyer Voting Agreement” and collectively, the “Buyer Voting
Agreements”). Pursuant to the Buyer Voting Agreements, each Buyer will agree to vote the Preferred Stock and any shares
of common stock the Buyer owns or may acquire (together, the “Buyer Securities”) in favor of or consent to the
(i) approval of the issuance of shares of common stock upon conversion of the January Notes, to the extent required by Nasdaq
Listing Rule 5635 (the “Stockholder Approval”) (ii) Stockholder Resolutions (as defined in the January Securities
Purchase Agreement), (iii) an increase in the authorized shares of the Company from 500,000,000 to 2,000,000,000 and (iv) a
reverse stock split of the common stock of the Company in the range of 1 share-for-2 up to a ratio of 1 share-for-250 shares;
and (b) against any proposal or any other corporate action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company under the Transaction Documents (as defined in
the SPA) or the Transaction Documents (as defined in the January Securities Purchase Agreement) or which could result in any
of the conditions to the Company's obligations under the Transaction Documents (as defined in the SPA) or the Transaction
Documents (as defined in the January Securities Purchase Agreement), as applicable, not being fulfilled. The agreement to
vote the Buyer Securities described above terminates upon the receipt of the Stockholder Approval (as defined in the January
Securities Purchase Agreement).
The
Buyer Voting Agreements also require that, at any time prior to the record date for the Stockholder Meeting (as defined in
the January Securities Purchase Agreement), each Buyer will not directly or indirectly (i) offer or agree to sell, transfer, tender,
assign, hypothecate or otherwise dispose of Buyer Securities, (ii) grant a proxy or power of attorney with respect to Buyer Securities,
or (iii) create or permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation
on the Buyer’s voting rights, charge or other encumbrance of any nature whatsoever with respect to Buyer Securities, or
(iv) initiate, solicit or encourage any person to take actions which could reasonably be expected to lead to the occurrence of
any of the foregoing.
The
above discussion does not purport to be a complete description of the SPA, the Convertible Notes, the Note Purchase Agreement,
the Investor Notes, the Master Netting Agreement, the Guaranty, the Voting and Lockup Agreements and the Buyer Voting Agreements
described in this Current Report on Form 8-K (this “Current Report”) and it is qualified in its entirety by reference
to the full text of such documents, which are attached as exhibits to this Current Report and are incorporated herein by reference.