Helios & Matheson Analytics Inc.

This Form 10-Q/A for the quarter ended September 30, 2018 (this “Form 10-Q/A”) amends the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, as originally filed by Helios and Matheson Analytics Inc. (the “Company,” “we,” “our,” or “us”) with the Securities and Exchange Commission (the “SEC”) on November 15, 2018 (the “Original Filing”). This Form 10-Q/A is being filed to restate our unaudited condensed consolidated financial statements as of and for the quarter and nine months ended September 30, 2018 and to make related revisions to certain other disclosures in the Original Filing. The errors primarily relate to the overstatement of subscription revenues in the third quarter of 2018 due to (1) the erroneous recognition of approximately $0.7 million of revenue from MoviePass, Inc. (“MoviePass”) subscriptions that had been terminated through refunds of subscriptions by Costco Wholesale Corporation; and (2) the erroneous recognition of approximately $5.9 million of revenue from certain MoviePass subscriptions that were in a suspended state due to changes made to the MoviePass subscription service that had not yet been consented to by the applicable subscribers. In addition, the Company identified a non-cash error related to the accounting for derivative liabilities, which resulted in an additional understatement of net loss of approximately $2.9 million. The Company also identified the erroneous omission of a $1.6 million investment in the film Axis Sally, offset by a $1.6 million note payable, as well as the related party disclosures associated with the production of the film Axis Sally as disclosed in Note 17. Proceeds from the MoviePass Films notes are now reportedly separately from other debt activity on the cash flow statement. Further explanation regarding the restatement is set forth in Note 2 to the unaudited condensed consolidated financial statements included in this Form 10-Q/A.

On December 21, 2018, the Company received a written notice from the Staff of Nasdaq notifying the Company that the Company failed to regain compliance with Rule 5550(a)(2). As a result, Nasdaq determined that unless the Company timely requested an appeal of such determination before the Nasdaq Listing Qualifications Panel (the “Panel”), the Company’s common stock would be scheduled for delisting from The Nasdaq Capital Market and would be suspended at the opening of business on December 28, 2018. The Company timely appealed the delisting notice and appeared in front of the Panel on January 31, 2019. The Panel issued a decision on February 11, 2019 and determined to delist the Company’s common stock from The Nasdaq Capital Market. The suspension of trading in the Company’s common stock on the Nasdaq Capital Market was effective at the open of business on February 13, 2019. The Panel has also informed the Company that Nasdaq will complete the delisting by filing a Form 25 Notification of Delisting with the SEC, after the applicable appeals periods have lapsed.

On August 31, 2018, Axis Sally LLC, a subsidiary of MoviePass Films, River Bay Films, LLC (the “Lender”) and EFO, entered into a Development Loan Agreement (the “Axis Sally Loan Agreement”).  The Lender is not related to the Company, any of its subsidiaries or any of their respective affiliates. Pursuant to this agreement, the Lender loaned MoviePass Films $1,600,000 for payment of production expenses relating to the film Axis Sally, starring Al Pacino.  The Lender funded the loan as follows: $600,000 on execution, and the remaining $1,000,000 on the Lender’s receipt of repayment of a separate loan from the Lender to EFO and/or Georgia Film Fund 79, LLC (an affiliate of EFO), for the film 10 Minutes Gone made on February 26, 2018.  The loan repayment amount is $1,945,000, which includes principal and $345,000 interest.  The loan maturity date is January 15, 2019 (the “Maturity Date”) with late penalties assessed as follows: 5% if repaid within 90 days after the Maturity Date; and an additional 5% penalty applies if repayment is made after 90 days after the Maturity Date.  Pursuant to the Axis Sally Loan Agreement, EFO films has unconditionally guaranteed MoviePass Films’ payment obligations to the Lender.  The Lender will receive an onscreen Executive Producer credit on the film Axis Sally. 

In connection with the January 2019 Offering, pursuant to the terms of an engagement letter by and between the Company and the placement agent for the January 2019 Offering, the placement agent received (i) an aggregate fee equal to 8.0% of the gross proceeds received by the Company from the sale of the securities in the January 2019 Offering (except in the case of one of the purchasers with respect to which the fee will be equal to 6.0% of the gross proceeds received from such purchaser), (ii) a management fee equal to 1.0% of the gross proceeds raised in the January 2019 Offering, (iii) $0.1 million for certain expenses, and (iv) warrants to purchase up to 8.0% of the aggregate amount of shares of common stock sold in the January 2019 Offering (the “January 2019 Placement Agent Warrants”), or up to 26,666,667 shares of common stock, determined by dividing the gross proceeds of the offering by the January 2019 Unit offering price. The January 2019 Placement Agent Warrants have substantially the same terms as the Series C Warrants issued to the investors, except that the January 2019 Placement Agent Warrants have an exercise price equal to $0.020375, or 125% of the offering price per share in the January 2019 Offering, and are exercisable at any time on or after the six-month anniversary of issuance date until the fifth anniversary of the effective date of the January 2019 Offering. Palladium Capital Advisors, LLC, an independent financial advisor to the Company in connection with the January 2019 Offering, received an advisory fee of $0.1 million.

Under the Amended LLC Agreement, MoviePass Films will be managed by a board of managers consisting of five managers, of which the Company has the right to appoint three managers and EFO has the right to appoint two managers. Two of the three managers appointed by the Company will be required to meet the independence requirements of Nasdaq and will be compensated for their respective services in the amount of $2,500 per month each. The initial managers appointed by the Company are Theodore Farnsworth, the Chairman and Chief Executive Officer of the Company, and independent managers Joseph Fried and Gavriel Ralbag, who are also independent directors of the Company. The initial managers appointed by EFO are George Furla and Randal Emmett. Pursuant to the Amended LLC Agreement, the board of managers of MoviePass Films has formed a compensation committee comprised of two managers, one of whom shall be one of the Company’s independent managers and one of whom shall be one of the two managers appointed by EFO (the “MoviePass Films Compensation Committee”). The initial members of the MoviePass Films Compensation Committee of the Board are Joseph Fried and George Furla.