Desperate for cash and facing the real risk of trading while insolvent, online movie rental company Quickflix has seen a sudden exit of directors including former Telstra executive Justine Milne who jumped on board the struggling Company last year.Exclusively tipped by SmartHouse, Quickflix is now facing questions about the legitimacy of their subscription numbers after we last week exposed how the Company was counting consumers who were given a free or $1 subscription voucher as subscribers.
Yesterday Quickflix announced to the ASX that CEO Chris Taylor, non-executive director and deputy chairman Justin Milne and non-executive director Susan Hunter had resigned from the board.
Taylor claims he will leave the Company in March 2013, when founder Stephen Langsford will assume the role.
One observer claims that “Taylor is staying on essentially for the sake of appearances”.
Last Friday US TV Group HBO, who invested over $10M into Quickflix, walked away from the struggling company. HBO executive Henry McGee announced he was quitting the Quickflix board immediately and that he would not be putting himself forward for nomination in 2013.
Currently Quickflix is trying to find a white knight investor, however questions are now being asked as to what information the directors who quit the board had prior to them tendering their resignation.
There is also concern over the forward liabilities the WA based Company may have with Hollywood studios and whether these forward liabilities have been taken into account in assessing the current financial liability of the Company, who admitted earlier this month that they were burning through $3.2M dollars a month.
Last year Quickflix failed to raise $10M in capital which they claimed was needed to fund the business, which recently struck deals with several TV companies to deliver content to a new generation of Smart TVs.
Perth entrepreneur Stephen Langsford, who now appears to be running the Company after being deserted by his other directors, has not returned calls to SmartHouse or ChannelNews.
In their announcement yesterday Quickflix said the existing directors are in the process of appointing another director to the board, which will be announced “in due course”, and that “negotiations continue with regard to the future funding of the company. The directors and management are currently pursuing several options and working through a restructuring plan to reduce costs and capital requirements.”
Quickflix, who has never returned a profit and are now bleeding money, will struggle to raise capital in the current market said a senior industry executive “One has to seriously question as to whether the Company is close to trading while insolvent. Directors simply cannot resign and expect themselves to be absolved from any liability. There are serious questions to be answered about subscription numbers and the current cash position of the Company” said the executive.
According to ASX filings the Company has been spending $3 million a quarter, while revenue is less than $1.5M. On this basis observers claim the Company could run out of cash in days unless they are able to attract an investor.