Helios and Matheson (HMNY) Becomes an Investor’s Nightmare

Matheson Analytics (NASDAQ:HMNY) investors’ dream has just become a nightmare. In a Form 8-K filed with the SEC today, Matheson disclosed that an additional capital raise might be necessary to offset its monthly cash deficit. In reaction, HMNY shares are falling nearly 30% to $1.50.

Let’s take a closer look at the warning sign:

We will need proceeds from sales of our common stock pursuant to our Equity Distribution Agreement with Canaccord Genuity, or other sources of capital, starting in May 2018. Further, if we use all or a portion of the anticipated net proceeds from sales of our common stock pursuant to our Equity Distribution Agreement with Canaccord Genuity for acquisitions of other companies or financial interests in additional movies (through our subsidiary, MoviePass Ventures), we will need additional capital to offset our monthly cash deficit. In 2018, we expect our cash deficit from month to month will vary significantly based on the amount of movie tickets MoviePass is required to purchase for its subscribers during the month, the amount we spend on acquiring financial interests in additional movies through MoviePass Ventures, the amount we may spend on any other types of acquisitions, and our ability to develop the MoviePass business model in the near term generally, including developing and growing sources of revenue other than subscription revenue. Because the length of time and costs associated with the development of the MoviePass and MoviePass Ventures business model is highly uncertain, we are unable to estimate the actual funds we will require. If we are unable to obtain sufficient amounts of additional capital, whether through our Equity Distribution Agreement or otherwise, 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.

Maxim analyst Nehal Chokshi noted, “We estimate that HMNY still needs to raise an additional $80M in capital, above and beyond the ~$30M anticipated to have been raised early within the Jun Q. We presume the next raise will not occur until HMNY has demonstrated that the company can control the abusive subs and put the company on a path towards gross profit breakeven for the subscription business.”


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