MoviePass Parent Names Consultant as Interim CFO

Helios and Matheson Analytics March 22 announced the appointment of Robert Damon as CFO, replacing Stuart Benson, who resigned from the parent of the MoviePass theatrical ticket subscription service March 15 to take another job.

Robert Damon

Benson’s departure followed the disclosure HMNY had incorrectly recognized about $5.9 million in revenue from MoviePass subscriptions that had been suspended.

Damon, who has worked as a consultant to HMNY for a year, was chief accounting officer for SFX Entertainment for three years through 2016. Previously,  he was Katz Media Group CFO for 17 years.

HMNY earlier this month revised its third-quarter net loss to $146.6 million — nearly 7% more than a loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.

CEO Ted Farnsworth and Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or suspended.

“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.

 

 

MoviePass Lost More Money Than Originally Reported

In another blow to fiscally-challenged theatrical ticket subscription service MoviePass, parent Helios and Matheson Analytics March 12 issued a revised financial statement revealing the service lost millions more than originally reported.

HMNY said its revised third-quarter (ended Sept. 30, 2018) net loss topped $146.6 million — nearly 7% more than a net loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.

HMNY attributed the error to overstatement of subscription revenue, including $700,000 of revenue from terminated MoviePass subscriptions by Costco; false recognition of about $5.9 million of revenue from certain suspended subscriptions that had not yet been consented to by subscribers.

The company also identified a non-cash error related to the accounting of derivative securities, which resulted in an understatement of net loss of approximately $2.9 million. HMNY said the error underscored a “material weakness” relating to subscription management.

CEO Ted Farnsworth and CFO Stuart Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or in a suspended state.

“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.

HMNY, which had its stock delisted by Nasdaq for failing to meet the $1 minimum share value, has struggled to sustain the MoviePass business  model that enabled subscribers daily access to a theatrical screening for $9.95 monthly fee.

 

Shareholder Lawsuits Filed Against MoviePass Owner

As expected, two shareholder class action lawsuits have been filed against Helios and Matheson Analytics, parent of ticket subscription service MoviePass, alleging officers in the company engaged in a “scheme to deceive the market and a course of conduct that artificially inflated the company’s stock price, and operated as a fraud or deceit on acquirers of the company’s common stock.”

HMNY is 92% owner of MoviePass which enables subscribers daily (now three times monthly) access to a theatrical screening for $9.95 monthly fee.

The cases include Chang v. Helios and Matheson Analytics Inc., 18-cv-06965, and Braxton v. Benson, 18-cv-07242 – both filed this month in U.S. District Court, Southern District of New York.

Defendants named include Ted Farnsworth, CEO of HMNY, and Stuart Benson, CFO.

In recent weeks as shareholders have jettisoned HMNY stock – now worth pennies despite a 1-for-250 shares reverse stock split – as financial disclosures reveal an untenable business model that borders on a pyramid scheme.

HMNY this week said its ability to continue as a “going concern” remains in doubt without additional funding.

During the same time law firms specializing in securities litigation have flooded the market soliciting potential plaintiffs against HMNY.

Plaintiff Jeffrey Chang claims the Farnsworth and Benson (Mitch Lowe, CEO of MoviePass, was not named in the suit) as officers of a publicly traded company had a responsibility to “disseminate prompt, accurate and truthful information” regarding the HMNY fiscal condition.

Instead, the complaint alleges Farnsworth, Benson (and Lowe) misrepresentations and omissions during the class period violated these specific requirements and obligations.

Specifically, the complaint alleges the executives are liable for making knowingly false statements through so-called “group-published” information. To buttress its case, the filing included every HMNY/MoviePass press release since it acquired majority control of the ticket service on Aug. 15, 2017.

Chang seeks a jury trial and unspecified compensatory damages and legal costs.

A HMNY representative was not immediately available for comment.