UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended: March 31, 2016

 

 

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ___________

 

Commission file number:      0-22945        

 

 

HELIOS AND MATHESON ANALYTICS INC.

  (Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

 

13-3169913

(I.R.S. Employer Identification No.)

 

 

Empire State Building, 350 5 th Avenue,

New York, New York 10118

(Address of Principal Executive Offices)

(212) 979-8228

(Registrant’s Telephone Number,

Including Area Code)

   

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐     

Non-accelerated filer ☐

Smaller reporting company ☒

 

 

(Do not check if a smaller reporting company)  

                  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

 

 

As of May 16, 2016, there were 2,330,438 shares of common stock, with $.01 par value per share, outstanding.

 

 
 
 

 

HELIOS AND MATHESON ANALYTICS INC.

 

INDEX

 

 

Part I. FINANCIAL INFORMATION

  3

   

ITEM 1. FINANCIAL STATEMENTS

    3

Condensed Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015   

   3

Condensed Consolidated Statement of Operations and Comprehensive Income/(loss) for the three months ended March 31, 2016 (unaudited) and 2015

     4

Condensed  Consolidated Statement of Cash Flows for the three months ended March 31, 2016 and 2015 (unaudited)  5
Notes to Condensed Consolidated Financial Statements      6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  14
ITEM 4. CONTROLS AND PROCEDURES 14
   
PART II. OTHER INFORMATION 15
   
ITEM 1.   LEGAL PROCEEDINGS 15
ITEM 1A. RISK FACTORS 15
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 15
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4.   MINE SAFETY DISCLOSURE 15
ITEM 5.   OTHER INFORMATION 15
ITEM 6.   EXHIBITS 15
   
SIGNATURES   16

 

 
2
 

 

Part I. Financial Information 

Item 1. Financial Statements 

 

 

HELIOS AND MATHESON ANALYTICS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

March 31,

   

December 31,

 
   

2016

   

2015

 

ASSETS

 

(unaudited)

         

Current Assets:

               

Cash and cash equivalents

  $ 1,096,428     $ 898,477  

Accounts receivable- less allowance for doubtful accounts of $29,853 at March 31, 2016, and $42,203 at December 31, 2015

    1,181,029       1,386,155  

Unbilled receivables

    98,464       295,473  

Prepaid expenses and other current assets

    162,939       208,642  

Prepaid expenses and other current assets - Related Party - less allowance of $344,041 at March 31, 2016, and December 31, 2015

    8,948       8,948  

Total current assets

    2,547,808       2,797,695  

Property and equipment, net

    46,244       47,885  

Security Deposit-Related Party- less allowance of $2,000,000 at March 31, 2016 and December 31, 2015

    -       -  

Deposits and other assets

    155,356       93,197  

Total assets

  $ 2,749,408     $ 2,938,777  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current Liabilities:

               

Accounts payable and accrued expenses

  $ 1,021,282     $ 1,060,792  

Total current liabilities

    1,021,282       1,060,792  

Commitments and Contingencies

    -       -  

Shareholders' equity:

               

Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of March 31, 2016, and December 31, 2015

    -       -  

Common stock, $.01 par value; 30,000,000 shares authorized; 2,330,438 issued and outstanding as of March 31, 2016 and December 31, 2015

    23,304       23,304  

Paid-in capital

    37,855,740       37,855,740  

Accumulated other comprehensive loss - foreign currency translation

    (120,156 )     (120,712 )

Accumulated deficit

    (36,030,762 )     (35,880,347 )

Total shareholders' equity

    1,728,126       1,877,985  

Total liabilities and shareholders' equity

  $ 2,749,408     $ 2,938,777  

 

 

See accompanying notes to condensed consolidated financial statements.

 
3
 

 

HELIOS AND MATHESON ANALYTICS INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)  

 

 

   

Three Months Ended

 
   

March 31,

 
   

2016

   

2015

 
   

(unaudited)

   

(unaudited)

 
                 

Revenues

  $ 2,029,444     $ 2,493,512  

Cost of revenues

    1,454,948       1,872,261  

Gross profit

    574,496       621,251  

Operating expenses:

               

Selling, general & administrative

    719,602       562,913  

Depreciation & amortization

    3,314       3,065  
      722,916       565,978  

(Loss)/income from operations

    (148,420 )     55,273  

Other income:

               

Interest income-net

    1,006       2,817  
      1,006       2,817  

(Loss)/income before income taxes

    (147,414 )     58,090  

Provision for income taxes

    3,000       3,000  

Net (loss)/income

    (150,414 )     55,090  

Other comprehensive income - foreign currency adjustment

    556       (3,930 )

Comprehensive income/(loss)

  $ (149,858 )   $ 51,160  
                 

Net income/(loss) per share

               

Basic & diluted

  $ (0.06 )   $ 0.02  

Dividend per share

  $ -     $ -  

 

 

See accompanying notes to condensed consolidated financial statements. 

 

 
4
 

 

HELIOS AND MATHESON ANALYTICS INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  

 

 

   

Three Months Ended March 31,

 
   

2016

   

2015

 
                 

Cash flows from operating activities:

               

Net (loss)/income

  $ (150,414 )   $ 55,090  

Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:

               

Depreciation and amortization

    3,314       3,065  

Provision for doubtful accounts

    12,350       (10,858 )

Changes in operating assets and liabilities:

               

Accounts receivable

    192,776       (477,064 )

Unbilled receivables

    197,009       36,159  

Prepaid expenses and other current assets

    45,703       (27,643 )

Accounts payable and accrued expenses

    (39,511 )     89,839  

Deposits

    (62,159 )     -  

Net cash (used in)/provided by operating activities

    199,068       (331,412 )

Cash flows from investing activities:

               

Purchase of property and equipment, net

    (1,673 )     -  

Net cash used in investing activities

    (1,673 )     -  

Effect of foreign currency exchange rate changes on cash and cash equivalents

    556       (3,930 )

Net increase/(decrease) in cash and cash equivalents

    197,951       (335,342 )

Cash and cash equivalents at beginning of period

    898,477       1,225,518  

Cash and cash equivalents at end of period

  $ 1,096,428     $ 890,176  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period for income taxes

  $ 1,263     $ 971  

 

 

See accompanying notes to condensed consolidated financial statements 

 

 
5
 

 

HELIOS AND MATHESON ANALYTICS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1)    GENERAL:

 

These condensed consolidated financial statements should be read in conjunction with the financial statements contained in Helios and Matheson Analytics Inc.’s (“Helios and Matheson” or the “Company”) Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) and the accompanying consolidated financial statements and related notes thereto. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the Company's Form 10-K for the year ended December 31, 2015.

 

2)    CONTROLLED COMPANY:

 

The Board of Directors has determined that Helios and Matheson meets the definition of a “Controlled Company” as defined by Rule 5615(c) of the NASDAQ Listing Rules. A “Controlled Company” is defined in Rule 5615(c) as a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company. Certain NASDAQ requirements do not apply to a “Controlled Company”, including requirements that: (i) a majority of its Board of Directors must be comprised of “independent” directors as defined in NASDAQ’s rules; and (ii) the compensation of officers and the nomination of directors be determined in accordance with specific rules, generally requiring determinations by committees comprised solely of independent directors or in meetings at which only the independent directors are present.

 

3)    INTERIM FINANCIAL STATEMENTS:

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position as of March 31, 2016, the consolidated results of operations, and cash flows for the three months ended March 31, 2016 and 2015.

 

The condensed consolidated balance sheet at December 31, 2015 has been derived from the audited financial statements at that date, but certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from these financial statements pursuant to the SEC’s rules and regulations. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Form 10-K filed by the Company for the year ended December 31, 2015.

 

For the three months ended March 31, 2016, the Company reported a net loss of approximately $150,000 and for the three months ended March 31, 2015, the Company reported net income of approximately $55,000. The Company continues to focus on revenue growth by seeking to expand its client base and by providing a Flexible Delivery Model to clients, which allows for dynamically configurable “right shoring” of service delivery based on client needs. The Company also keeps a tight rein on discretionary expenditures and SG&A to enhance its competitiveness.

 

In management's opinion, cash flows from operations combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months.

 

4)    STOCK BASED COMPENSATION:

 

The Company has a stock based compensation plan, which is described as follows:

 

On March 3, 2014, the Board of Directors terminated the Company’s 1997 Stock Option and Award Plan and approved and adopted the Helios and Matheson Analytics Inc. 2014 Equity Incentive Plan (the “2014 Plan”) which the Company’s stockholders approved at the annual stockholders meeting on May 5, 2014. There were no shares outstanding under the 1997 Stock Option and Award Plan. The 2014 Plan sets aside and reserves 400,000 shares of the Company’s common stock for grant and issuance in accordance with its terms and conditions. Persons eligible to receive awards from the 2014 Plan include employees (including officers and directors) of the Company and its affiliates, consultants who provide significant services to the Company or its affiliates, and directors who are not employees of the Company or its affiliates (the “Participants”). The 2014 Plan permits the Company to issue to Participants qualified and/or non-qualified options to purchase the Company’s common stock, restricted common stock, performance units, and performance shares. The 2014 Plan will terminate on March 3, 2024. The Company’s Board of Directors is responsible for administration of the 2014 Plan and has the sole discretion to determine which Participants will be granted awards and the terms and conditions of the awards granted. Through the date of filing of this Form 10-Q, no awards have been granted under the 2014 Plan.

 

 
6
 

 

5)     NET INCOME/(LOSS) PER SHARE :

 

The following table sets forth the computation of basic and diluted net income/(loss) per share for the three months ended March 31, 2016 and 2015:

 

   

Three Months Ended

 
   

March 31,

 
   

2016

   

2015

 

Numerator for basic net income/(loss) per share

               
                 

Net income/(loss) available to common stockholders

  $ (150,414 )   $ 55,090  
                 

Numerator for diluted net income/(loss) per share

               

Net income/(loss) available to common stockholders & assumed conversion

  $ (150,414 )   $ 55,090  
                 
                 

Denominator:

               

Denominator for basic and diluted income/(loss) per share - weighted-average shares

    2,330,438       2,330,438  
                 

Basic and diluted income/(loss) per share:

               

Net income/(loss) per share

  $ (0.06 )   $ 0.02  

 

 

6)    CONCENTRATION OF CREDIT RISK:

 

The revenues of the Company’s top four customers represented approximately 94% of the revenue earned for the three months ended March 31, 2016. The revenues of the Company’s top three customers represented approximately 91.42% of revenues for the three months ended March 31, 2015. No other customer represented greater than 10% of the Company’s revenues for such periods. The Company continues its effort to broaden its customer base in order to mitigate this risk.

 

 

7)    COMMITMENTS:

 

The Company’s commitments at March 31, 2016, are comprised of the following:

   

Contractual Obligations

  		 

 

Payments Due by Period

 
 

 

Total

   

Less Than 1 Year

   

1 - 3 Years

   

3 - 5 Years

   

More Than 5

Years

 

Operating Lease Obligations

                                       

Rent (1)

    186,148       166,990       19,157       -       -  

Total

  $ 186,148     $ 166,990     $ 19,157     $ -     $ -  

 

 

(1)

The Company leases office space in New York and the Company’s Indian subsidiary leases office space in Bangalore. The lease term expires on April 30, 2017 at New York and on October 4, 2017 at Bangalore.

   
  The Company’s Indian subsidiary also had a lease at Capital Towers in Chennai, India for its offshore development center which expired on December 31, 2015 and has been extended on a month to month basis.

 

The Company’s office lease is subject to escalations based on increases in real estate taxes and operating expenses, all of which are charged to rent expense. Rent expense for the three months ended March 31, 2016 and 2015 was approximately $90,900 and $59,200, respectively.

 

As of March 31, 2016, the Company does not have any “Off Balance Sheet Arrangements”.

 

 
7
 

 

8)    PROVISION FOR INCOME TAXES

 

The provision for income taxes as reflected in the consolidated statement of operations and comprehensive income/(loss) varies from the expected statutory rate primarily due to a provision for minimum state taxes and the recording of adjustments to the valuation allowance against deferred tax assets. Internal Revenue Code Section 382 (the “Code”) places a limitation on the utilization of Federal net operating loss and other credit carry-forwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percent change in ownership occurs. During 2006, Helios and Matheson Information Technology Ltd. (“Helios and Matheson Parent”) acquired a greater than 50 percent ownership of the Company. Accordingly, the actual utilization of the net operating loss carry-forwards for tax purposes are limited annually under the Code to a percentage (currently about four and a half percent) of the fair market value of the Company at the date of this ownership change. The Company maintains a valuation allowance against additional deferred tax assets arising from net operating loss carry-forwards since, in the opinion of management; it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

 

9)    TRANSACTIONS WITH RELATED PARTIES

 

The Company did not have any transactions with related parties during the three months ended March 31, 2016.

 

 
8 
 

 

10)   SUBSEQUENT EVENTS

 

Termination of Contract by a Client

 

One of the Company’s clients has issued a notice to terminate the arrangement for use of the Offshore Development Center (ODC) provided by the Company as of May 15, 2016. This may adversely impact the Company’s revenue and margins going forward in the near term. However the Company’s subsidiary has successfully managed transition of the ODC together with all the employees working in the ODC to another company, thus ensuring that no additional expenses are incurred by the Company with respect to the ODC. For the three months ended March 31, 2016 and 2015, revenue related to this contract was approximately $613,000 and $ 578,000. For the full-year 2015 and 2014 the total revenue generated from this client was approximately $ 2.3 million and approximately $900,000 respectively. Management has plans to pursue other business opportunities to increase its revenue base but there can be no assurances that the Company will be able find other clients to make up for the annual revenue shortfall a result of the termination of this relationship.

 

 
9
 

 

Forward-Looking Statements

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 throughout and in particular in the discussion at Item 2 titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These are statements regarding financial and operating performance results and other statements that are not historical facts. The words “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar expressions are intended to identify forward-looking statements. Certain important risks, including those discussed in the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 which have been incorporated into this report by reference, could cause results to differ materially from those anticipated by some of the forward-looking statements. Some, but not all, of these risks include, among other things:

 

 

●

our capital requirements and whether or not we will be able to raise capital when we need it;

     
  ● our ability to retain our existing clients and expand our client engagements;

 

 

●

changes in local, state or federal regulations that will adversely affect our business;

 

 

●

our ability to sell our products and services;

 

 

●

whether we will continue to receive the services of certain officers and directors;

 

 

●

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and

 

 

●

other uncertainties, all of which are difficult to predict and many of which are beyond our control.

 

We do not intend to update forward-looking statements. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

 

 
10
 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

 

The following discussion and analysis of significant factors affecting the Company's operating results and liquidity and capital resources should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes.

 

Overview

 

Helios and Matheson provides a wide range of high quality information technology (“IT”) consulting solutions, custom application development and analytics services to Fortune 1000 companies and other large organizations. The Company is headquartered in New York, New York and has a subsidiary in Bangalore, India.

 

For the three months ended March 31, 2016, approximately 93.2% of the Company's consulting service revenues were generated from clients under time and materials engagements, as compared to approximately 93.4% for the three months ended March 31, 2015, with the remaining revenue generated under fixed-price engagements and recruitment process outsourcing (RPO). The Company has established standard-billing guidelines for consulting services based on the type of service offered. Actual billing rates are established on a project-by-project basis and may vary from the standard guidelines. The Company typically bills its clients for time and material services on a weekly and monthly basis. Arrangements for fixed-price engagements are made on a case-by-case basis. Consulting service revenues generated under time and material engagements are recognized as those services are provided. Revenues earned from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs.

 

The Company's most significant operating cost is its personnel cost, which is included in cost of revenues. For the three months ended March 31, 2016 and 2015, gross margin was 28.3% and 24.9%, respectively.

 

The Company actively manages its personnel utilization rates by monitoring project requirements and timetables. The Company’s utilization rate for the three months ended March 31, 2016 was approximately 96%, as compared to 96% for the three months ended March 31, 2015. As projects are completed, consultants are either re-deployed to new projects at the current client site, re-deployed or re-assigned to new projects at another client site, or are encouraged to participate in the Company’s training programs in order to expand their technical skill sets.

 

One of the Company’s clients has issued a notice to terminate the arrangement for use of the Offshore Development Center (ODC) provided by the Company as of May 15, 2016. This may adversely impact the Company’s revenue and margins going forward in the near term. However the Company’s subsidiary has successfully managed transition of the ODC together with all the employees working in the ODC to another company, thus ensuring that no additional expenses are incurred by the Company with respect to the ODC. For the three months ended March 31, 2016 and 2015, revenue related to this contract was approximately $613,000 and $ 578,000. For the full-year 2015 and 2014 the total revenue generated from this client was approximately $ 2.3 million and approximately $900,000 respectively. Management has plans to pursue other business opportunities to increase its revenue base but there can be no assurances that the Company will be able find other clients to make up for the annual revenue shortfall a result of the termination of this relationship.

 

 
11
 

 

Investments by Helios and Matheson Parent

 

On March 30, 2006, Helios and Matheson Parent, an IT services organization with its corporate headquarters in Chennai, India, purchased 409,879 shares of the Company’s common stock from Mr. Shmuel BenTov, the Company’s former Chairman, Chief Executive Officer and President and his family members, which represented approximately 43% of the Company’s outstanding common stock. In 2006, 2007, 2008, 2009 and 2010 Helios and Matheson Parent purchased additional shares of the Company’s common stock. Helios and Matheson Parent beneficially owns 1,743,040 shares of common stock, representing approximately 75% of the shares of the common stock currently outstanding. Helios and Matheson Parent is a publicly listed company on three stock exchanges in India, the National Stock Exchange (NSE), the Stock Exchange, Mumbai (BSE) and the Madras Stock Exchange (MSE).

 

Critical Accounting Policies

 

The methods, of estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company’s reports in its consolidated financial statements. The Company evaluates its estimates and judgments on an on-going basis. Estimates are based on historical experience and on assumptions that the Company believes to be reasonable under the circumstances. The Company’s experience and assumptions form the basis for its judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what is anticipated and different assumptions or estimates about the future could change reported results. The Company believes the following accounting policies are the most critical to it, in that they are important to the portrayal of its financial statements and they require the most difficult, subjective or complex judgments in the preparation of the consolidated financial statements.

 

Revenue Recognition

 

Consulting service revenues are recognized as services are provided. The Company primarily provides consulting services under time and material contracts, whereby revenue is recognized as hours and costs are incurred. Customers for consulting revenues are billed on a weekly, semi-monthly, or monthly basis. Revenues derived from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs. Any anticipated contract losses are estimated and accrued at the time they become known and estimable. Revenues from RPO services are recorded when the service is performed. Unbilled accounts receivable represents amounts recognized as revenue, based on services performed in advance of customer billings. Revenue from sales of software licenses is recognized upon delivery of the software to a customer because future obligations associated with such revenue are insignificant.

 

Allowance for Doubtful Accounts

 

The Company monitors its accounts receivable balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to accurately determine its accounts receivable reserve. The Company’s allowance for doubtful accounts is an estimate based on specific customer accounts as well as general reserves. The Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations. In these cases, management uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer, against amounts due, to reduce the receivable to the amount that is expected to be collected. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved. The Company also establishes a general reserve for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, the Company’s estimate, of the recoverability of amounts due the Company, could be reduced or increased by a material amount. Such a change in estimated recoverability would be accounted for in the period in which the facts that gave rise to the change became known.

 

Valuation of Deferred Tax Assets

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Company, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assesses the recoverability of deferred tax assets at least annually based upon the Company’s ability to generate, sufficient, future taxable income and the availability of effective tax planning strategies.

 

Results of Operations

 

The following table sets forth the percentage of revenues of certain items included in the Company’s Statements of Operations:

 

   

Three Months Ended

 
   

March 31,

 
   

2016

   

2015

 

Revenues

    100.0 %     100.0 %

Cost of revenues

    71.7 %     75.1 %

Gross profit

    28.3 %     24.9 %

Operating expenses

               

Operating expenses

    35.6 %     22.7 %

(Loss)/Income from operations

    (7.3 )%     2.2 %

Other Income/(expense)

    0.0 %     0.1 %

Provision for Income Tax

    0.1 %     0.1 %

Net (Loss)/Income

    (7.4 )%     2.2 %

 

 
12
 

 

Comparison of the Three Months Ended March 31, 2016 to the Three Months Ended March 31, 2015

 

Revenues . Revenues for the three months ended March 31, 2016 were approximately $2.0 million as compared to approximately $2.5 million for the three months ended March 31, 2015. The decrease was primarily attributable to a decrease in the number of onshore consultants, who are billed at a higher hourly rate, offset by an increase in offshore consultants, who are billed at a lower hourly rate.

 

Gross Profit . The resulting gross profit for the three months ended March 31, 2016 was approximately $574,000 as compared to approximately $621,000 for the three months ended March 31, 2015. As a percentage of total revenues, gross margin for the three months ended March 31, 2016 was 28.3% as compared to 24.9% for the three months ended March 31, 2015. The increase in gross margin is due to a decrease in low margin consulting revenue offset by an increase in high margin consulting and fixed price project revenue.

 

Operating Expenses. Operating expenses are comprised of selling, general and administrative (“SG&A”) expenses and depreciation and amortization. Operating expenses for the three months ended March 31, 2016 were approximately $723,000 as compared to approximately $566,000 for the three months ended March 31, 2015. This increase in operating expenses is primarily due to a change in the management wherein the Company incurred $75,000 in severance paid to the outgoing CEO of the Company. Also, the Company’s expenses towards rent and utilities increased by approximately $48,000 as the Company’s subsidiary maintained a leased facility in the current period for its ODC.

 

Taxes. Tax provision for both the three months ended March 31, 2016 and 2015 was approximately $3,000.

 

Net Income/(Loss). As a result of the above, the Company had a net loss of approximately ($150,000) or ($0.06) per basic and diluted share for the three months ended March 31, 2016 as compared to a net income of approximately $55,000 or $0.02 per basic and diluted share for the three months ended March 31, 2015.

 

Liquidity and Capital Resources

 

During the three months ended March 31, 2016 the Company’s revenue declined by approximately 19% and the Company reported a net loss of ($150,000) as compared to net income of $55,000 during the three months ended March 31, 2015. The net income resulted primarily from a decrease in low margin consulting revenue offset with an increase in high margin consulting and fixed price project revenue, an increase in Operating Expenses due to Change in the Management, and maintaining the leased facility for its ODC

 

 
13
 

 

The Company's cash balances were approximately $1.1 million at March 31, 2016 and approximately $900,000 at December 31, 2015. Net cash used by operating activities for the three months ended March 31, 2016 was approximately $199,000 compared to net cash provided by operating activities of approximately $331,000 for the three months ended March 31, 2015.

 

The Company's accounts receivable, less allowance for doubtful accounts, at March 31, 2016 and at December 31, 2015 were approximately $1.2 million and $1.4 million, respectively, representing 52 days and 52 days of sales outstanding (“DSO”) respectively. The Company has provided an allowance for doubtful accounts at the end of each of the period presented. After giving effect to this allowance, the Company does not anticipate any difficulty in collecting amounts due.

 

For the three months ended March 31, 2016, net cash used in investing activities was $1,673 as compared to $0 for the three months March 31, 2015.

 

For the three months period ended March 31, 2016, cash used by financing activities was $0 as compared to $0 for the three months ended March 31, 2015. In management's opinion, cash flows from operations combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months.

 

Off Balance Sheet Arrangements

 

As of March 31, 2016, the Company does not have any off balance sheet arrangements.

 

Contractual Obligations and Commitments

 

The Company’s commitments at March 31, 2016 are reflected and further detailed in the Contractual Obligation table located in Part I, Item 1, Note 7 of this Form 10-Q.

 

Inflation

 

The Company has not suffered material adverse effects from inflation in the past. However, a substantial increase in the inflation rate in the future may adversely affect customers’ purchasing decisions, may increase the costs of borrowing, or may have an adverse impact on the Company’s margins and overall cost structure.

 

Recent Accounting Pronouncements

 

On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 provides a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. ASU 2014-09 is effective beginning with the calendar year ended December 31, 2017. The Company has not yet assessed the impact ASU 2014-09 will have upon adoption on its financial position, results of operations or cash flows.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires that an entity’s management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. Certain disclosures are necessary in the footnotes to the financial statements in the event that conditions or events raise substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter and early application is permitted. The Company has not yet assessed the impact ASU 2014-15 will have upon adoption.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the method of adoption and the impact of adopting ASU 2016-02 on its results of operations, cash flows and financial position.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not Required.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures. As of March 31, 2016, the Company carried out an evaluation, under the supervision of and with the participation of our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of March 31, 2016, our disclosure controls and procedures were effective.

 

 
14
 

 

Changes in internal control. During the quarter covered by this report, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

None 

 

Item 1A. Risk Factors

 

We incorporate herein by reference the risk factors included under Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 that was filed with the Securities and Exchange Commission on March 28, 2016.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

 

None.

 

Item 3. Defaults Upon Senior Securities 

 

None.

 

Item 4. Mine Safety Disclosure 

 

Not Applicable.

 

Item 5. Other Information 

 

None.

 

 

Item 6 . Exhibits

 

(a)          Exhibits

 

 

3.1

Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the form 10-K, as previously filed with the SEC on March 31, 2010.

 

 

3.1.1

Certificate of Amendment to Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.3 to the Form 10-Q for the period ended March 31, 2011 as filed with the SEC on May 13, 2011.

 

 

3.1.2

Certificate of Amendment to Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.4 to the Form 10-Q for the period ended June 30, 2011 as filed with the SEC on August 15, 2011.

 

 

3.2

Bylaws of Helios and Matheson Analytics Inc., incorporated by reference to Exhibit 3.2 to the form 10-K, as filed with the SEC on March 31, 2010.

 

 

10.1

Form of Indemnification Agreement dated February 5, 2016 between the Company and each of Divya Ramachandran, Shri S. Jambunathan, Viraj Patel, Kishan Grama Ananthram and Sanjay Chaturvedi, incorporated by reference to Exhibit 10.1 to the form 8-K, as filed with the SEC on March 10, 2016. †

 

 

10.2*

Separation and Mutual Release Agreement dated March 31, 2016 between the Company and Divya Ramachandran (Portions of this exhibit were redacted pursuant to a confidentiality treatment request). †

 

 

31.1

Certification of Principal Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

 

 

31.2

Certification of Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

 

 

32.1

Certification of the Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

Certification of the Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101

The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets; (ii) consolidated statements of Operations and Comprehensive income/(loss); (iii) consolidated statements of cash flows; and (iv) the notes to the financial statements.

 

 

*

Filed herewith.

 

†

Management contract or compensation plan.

 

 

 
15
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

 

 

 

 

 

 

 

 

Date: May 16, 2016

By:

/s/ Parthasarathy Krishnan

 

 

 

Parthasarathy Krishnan

 

 

 

President, Chief Executive (Principal Executive Officer) and Interim Chief Financial Officer (Principal Financial Officer)

 

 

 

 

 

 

 

 16

 

Exhibit 10.2

   

 

SEPARATION AND MUTUAL RELEASE AGREEMENT

This Separation and Mutual Release Agreement (this “ Agreement ”) is made and entered into as of March 31, 2016, by and between Divya Ramachandran (“ Employee ” or “ You ”), on the one hand, and Helios and Matheson Analytics Inc., a Delaware corporation (the “ Company ” or “ Employer ”), and Helios and Matheson Information Technology Ltd, an Indian corporation (“ HMIT ”), on the other hand. Employee, HMIT and the Company are sometimes each referred to herein as a “ Party ” and collectively, as the “ Parties ”.

WITNESSETH:

 

WHEREAS , Employee and the Company are parties to that certain Employment Agreement, dated as of July 12, 2010 and executed on May 20, 2010 (the “ Employment Agreement ”);

WHEREAS, HMIT and its wholly-owned subsidiary, Helios & Matheson Inc., a Delaware corporation, collectively own approximately 75% of the issued and outstanding common stock of the Company; and

WHEREAS , Employee and the Company desire to separate from their business relationship as provided herein;

NOW, THEREFORE , in consideration of the premises and mutual promises herein contained, it is agreed as follows:

Effective at 11:59 pm ET on March 31, 2016 (the “Separation Date”), Employee shall resign from her employment with the Company, and Employee’s employment with the Company, including any and all offices held by Employee with the Company or, if applicable, any of its subsidiaries, is hereby terminated.

 

Effective at 11:59 pm ET on March 31, 2016 Employee’s position as a member of the Board of Directors of the Company will end as a result of Employee’s resignation. Furthermore, on the Separation Date, Employee will deliver to the Company an executed resignation letter, in the form attached hereto as Exhibit A . In addition, Employee shall transmit emails to a pre-approved list of employees and current clients of the Company in accordance with drafts prepared with and approved by the Board of Directors of the Company prior to the Separation Date. Disclosure regarding Employee’s separation hereunder shall be disclosed in a Current Report on Form 8-K, and such disclosure shall include the language attached hereto as Exhibit B .

 

Section 7 of the Employment Agreement (Non-Competition) is hereby amended and restated in its entirety in the form attached hereto as Exhibit C . Section 9 of the Employment Agreement is hereby amended and restated to read in its entirety as follows:

 

“This Agreement is entered into and shall be interpreted, enforced and governed by the law of the State of New York. Venue for any legal action hereunder shall be in the state or federal courts located in the Borough of Manhattan in the City of New York, New York. In any proceeding to enforce this Agreement, the prevailing Party shall be entitled to costs and reasonable attorneys’ fees. The provisions of this Agreement are severable, and if any part of it is found to be unlawful or unenforceable, the other provisions of this Agreement shall remain fully valid and enforceable to the maximum extent consistent with applicable law. ”

For the avoidance of doubt, Sections 3 (Confidentiality), 4 (Non-Disclosure), 5 (Possession), 6 (Ownership), and 8 (Injunctive Relief) of the Employment Agreement shall remain in effect without modification in accordance with the terms thereof (the foregoing enumerated sections of the Employment Agreement, together with Sections 7 and 9 of the Employment Agreement as amended by this Agreement, are referred to herein collectively as the “Surviving Provisions”).

All provisions of the Employment Agreement other than the Surviving Provisions shall have no further effect as of the execution of this Agreement.

This Agreement shall control in the event of any conflict between the Employment Agreement (as amended hereby) and this Agreement.

Employee represents and warrants that she does not have exclusive knowledge of any passwords needed to access Employer’s computer systems, accounts or any other password protected material, device or information belonging to Employer.

 

 
1
 

 

The Parties understand and agree that neither the making of this Agreement nor the fulfillment of any condition or obligation of this Agreement constitutes an admission of any liability or wrongdoing by any of the Parties.

 

This Agreement supersedes any and all other agreements, written or oral, which may exist between or among any of the Parties concerning Employee’s separation from the Company, including without limitation any representations made to Employee by any executive officer or director of the Company or HMIT.

 

Employee Acknowledgments.

 

You have been advised by the Company to consult with the attorney of Employee’s choice prior to signing this Agreement.

 

You would not be entitled to receive certain of the consideration offered to You herein, including, without limitation, the Separation Payment (as hereinafter defined), but for Employee’s signing this Agreement.

 

Employee represents that she has consulted or has had sufficient opportunity to discuss with any person, including the attorney of her choice, all provisions of this Agreement, that she has carefully read and fully understands all the provisions of this Agreement, that she is competent to execute this Agreement, and that she is voluntarily entering into this Agreement of her own free will and accord, without reliance upon any statement or representation of the Company or its representatives.

 

On the date of this Agreement (or the next business day if this Agreement is signed after normal banking hours in the New York City), the Company shall deliver by wire transfer to the client trust account of Employee’s counsel, Smith Valliere PLLC, USD $80,000(less applicable statutory deductions), to hold in trust until specifically instructed in writing by counsel to the Company (Mitchell Silberberg & Knupp LLP) to be released to Employee (with $5,000 of the Separation Payment to be released to Employee’s counsel for Employee’s legal fees), in accordance with this Agreement on the Separation Date. The Company shall authorize its counsel to give such release instruction to Employee’s counsel promptly upon completion of Employee’s obligations under Section 1(a) on the Separation Date as follows: (i) $75,000 (less statutory deductions) to Employee (the “Separation Payment”); and (ii) $5,000 directly to Smith Valliere PLLC for Employee’s legal fees in connection with this Agreement.

 

Employee’s health insurance and all other Company benefits will terminate according to the terms of the plans. This provision is not, however, intended to waive Employee’s rights under The Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). Employee acknowledges that the Company will provide the COBRA notice, in accordance with federal guidelines, under which Employee may elect continuation of coverage.

 

Employee represents and acknowledges that in executing this Agreement, she does not rely and has not relied upon any representation or statement made by the Company or any of its agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise other than the representations contained in this Agreement.

 

 
2
 

 

Employee agrees as follows:

 

As a material inducement to the Company and HMIT to enter into this Agreement and subject to the terms of this Section 8, Employee, on behalf of herself and her heirs, administrators, representitives, executors, trustees, successors and assigns (the “Employee Releasors”), hereby irrevocably and unconditionally releases, acquits and forever discharges the Company, HMIT and all of their respective stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, divisions, subsidiaries, affiliates and all persons acting by, through, under or in concert with any of them, (collectively “Company Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown (“Claim” or “Claims”) which any of the Employee Releasors now has, owns, holds, or which any of the Employee Releasors at any time heretofore had, owned, or held against each of the Company Releasees, including, but not limited to: (a) all Claims under the Age Discrimination in Employment Act of 1967, as amended; (b) all Claims under Title VII of the Civil Rights Act of 1964, as amended; (c) all Claims under the Employee Retirement Income Security Act of 1974, as amended; (d) all Claims arising under the Americans With Disabilities Act of 1990, as amended; (e) all Claims arising under the Family and Medical Leave Act of 1993, as amended; (f) all Claims related to Employee’s employment with the Company; (g) all Claims of unlawful discrimination based on age, sex, race, religion, national origin, handicap, disability, equal pay, sexual orientation or otherwise; (h) all Claims of wrongful discharge, breach of an implied or express employment contract, negligent or intentional infliction of emotional distress, libel, defamation, breach of privacy, fraud, breach of any implied covenant of good faith and fair dealing and any other federal, state, or local common law or statutory claims, whether in tort or in contract; (i) all Claims related to unpaid wages, salary, overtime compensation, bonuses, severance pay, vacation pay, expenses or other compensation or benefits arising out of Employee’s employment with the Company; (j) all claims arising under any federal, state or local regulation, law, code or statute; (k) all claims of discrimination arising under any state or local law or ordinance; and (l) all claims relating to any agreement, arrangement or understanding that Employee has, or may have, with the Company or HMIT. Notwithstanding anything to the contrary contained in this subsection (a), the Company agrees that Employee shall remain entitled to indemnification under the Indemnification Agreement, dated as of March 4, 2016, between Employee and the Company (the “Employee Indemnification Agreement”) and any Company charter or bylaw provision regarding indemnification of officers and directors, in accordance with their respective terms; and Employee shall remain a beneficiary under any all past and current Directors and Officers Insurance policies, and notwithstanding anything to the contrary contained in this Agreement, Employee is not releasing in any way any such right to indemnification or coverage under said insurance policies. Furthermore, nothing contained in this Agreement shall, nor shall it be deemed to, remove Employee from coverage, or preclude Employee from making a claim for coverage, under any insurance policy of the Company in respect of any claims made against Employee in her capacity as an employee, officer or director of the Company by a person not party to this Agreement. To the extent the Company extends the coverage and/or reporting periods for any insurance policy covering the time period during which Employee was employed by the Company or purchases additional insurance policy or policies covering that time period, then Employee shall be a covered insured under any such policy.

 

Employee covenants and promises not to sue or otherwise pursue legal action against any of the Company Releasees, other than for breach of this Agreement or the Employee Indemnification Agreement, and further covenants and promises to indemnify and defend each of the Company Releasees from any and all such claims, demands and causes of action, including the payment of reasonable costs and attorneys’ fees relating to any claim, demand, or causes of action brought by her other than for breach of this Agreement or the Employee Indemnification Agreement. Employee agrees that should any legal action be pursued on her behalf by any person or other entity against any of the Company Releasees regarding the claims released by Employee in this Agreement, Employee will not accept recovery from such action, but will assign such recovery to the Company and agrees to indemnify the Company Releasees against such claims and assessment of damages. Employee further represents that she has filed no lawsuits against any of the Company Releasees.

 

Employee agrees that she will not disparage or criticize the Company, HMIT or their respective Board of Directors, management, products or services and will not otherwise do or say anything that could interfere in any way with the Company's or HMIT’s business interests, their respective reputations or any of their respective customer or other business relationships. The foregoing shall not prevent or otherwise impede Employee from responding truthfully to any judicial or regulatory inquiry (including inquiries from any self-regulatory organization such as NASDAQ or FINRA or similar foreign self-regulatory organization) or lawful subpoena for testimony, provided that Employee shall not solicit any such inquiry or lawful subpoena and shall provide notice to the Company promptly upon receipt thereof to the extent permitted by law.

 

 
3
 

 

The Company and HMIT each agrees as follows:

 

As a material inducement to Employee to enter into this Agreement and subject to the terms of this Section 9, each of the Company and HMIT, on behalf of itself and each of its respective predecessors, successors, assigns, divisions, subsidiaries and affiliates (the “Company Releasors”), hereby irrevocably and unconditionally releases, acquits and forever discharges Employee and each of her heirs, administrators, representatives, executors, trustees, successors and assigns (collectively “Employees Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown, that any of the Company Releasors now has, owns, holds, or which any of the Company Releasors at any time heretofore had, owned, or held against each of the Employee Releasees. Notwithstanding anything to the contrary contained in this subsection (a), Employee agrees that the Company shall remain entitled to all of its rights, benefits and defenses under the Employee Indemnification Agreement and any Company charter or bylaw provision regarding indemnification of officers and directors, and the Surviving Provisions of the Employment Agreement, in accordance with their respective terms.

 

The Company and HMIT each covenants and promises not to sue or otherwise pursue legal action against any of the Employee Releasees, other than for breach of this Agreement, the Surviving Provisions of the Employment Agreement or the Employee Indemnification Agreement, and further covenants and promises to indemnify and defend the Employee Releasees from any and all such claims, demands and causes of action, including the payment of reasonable costs and attorneys’ fees relating to any claim, demand, or causes of action brought by the Company or HMIT other than for breach of this Agreement, the Employee Indemnification Agreement or the Surviving Provisions of the Employment Agreement. Each of the Company and HMIT agrees that should any legal action be pursued on either of their behalf by any person or other entity against any of the Employee Releasees regarding the claims released by the Company and HMIT, the Company and HMIT will not accept recovery from such action, but will assign such recovery to Employee and agrees to indemnify the Employee Releasees against such claims and assessment of damages. The Company and HMIT each further represents that it has filed no lawsuits against any of the Employee Releasees.

 

The Company and HMIT each agrees that it will not disparage or criticize Employee and will not otherwise do or say anything that could interfere in any way with Employee’s reputation or any of Employee’s business relationships. Each of the Company's and HMIT’s Board of Directors and their respective corporate officers, speaking on behalf of the Company or HMIT, shall not disparage Employee. The foregoing shall not prevent or otherwise impede the Company or HMIT from responding truthfully to any judicial or regulatory inquiry (including inquiries from any self-regulatory organization such as NASDAQ or FINRA or similar foreign self-regulatory organization) or lawful subpoena for testimony, provided that the Company and HMIT shall not solicit any such inquiry or lawful subpoena and shall provide notice to Employee promptly upon receipt thereof to the extent permitted by law.

 

If a Party determines that another Party has breached this Agreement, the non-breaching Party will notify the Party in breach of that fact in writing and the Party in breach will be afforded ten (10) days to cure the breach.

 

No waiver of any of the terms of this Agreement shall be valid unless in writing and signed by the Parties. No waiver or default of any term of this Agreement shall be deemed a waiver of any subsequent breach or default of the same or similar nature. This Agreement may not be changed except by writing signed by the Parties.

 

This Agreement shall be binding upon each of the Parties and their respective heirs, administrators, representatives, executors, trustees, successors and assigns, and shall inure to the benefit of Company Releasees and Employee Releasees and each of them, and to their heirs, administrators, representatives, executors, trustees, successors, and assigns.

 

For the same aforesaid consideration, it is further expressly agreed and understood that the Parties will promptly execute any and all documents that are reasonably necessary and appropriate to effectuate the terms of this Agreement.

 

 
4 
 

 

This Agreement is entered into and shall be interpreted, enforced and governed by the law of the State of New York. Venue for any legal action hereunder shall be in the state or federal courts located in the Borough of Manhattan in the City of New York, New York. In any proceeding to enforce this Agreement, the prevailing Party shall be entitled to costs and reasonable attorneys’ fees. The provisions of this Agreement are severable, and if any part of it is found to be unlawful or unenforceable, the other provisions of this Agreement shall remain fully valid and enforceable to the maximum extent consistent with applicable law.

 

All notices and other communications hereunder shall be in writing and shall be given by personal delivery, mailed by registered or certified mail (postage prepaid, return receipt requested), sent by facsimile transmission, sent by a nationally recognized overnight courier service to the parties at the following addresses (or at such other address for a party as is specified by like change of address) and in addition thereto shall be sent by electronic mail to the last known personal email address of Employee:

 

 

If to the Company:

 

 

 

 

 

With a copy to

(which shall not constitute notice):

Helios and Matheson Analytics Inc.

Empire State Building

350 5th Avenue

New York, New York 10118

Attention: Chief Executive Officer

 

 

 

Kevin Friedmann, Esq.

Mitchell, Silberberg & Knupp LLP

11377 W. Olympic Blvd.

Los Angeles, CA 90064

kxf@msk.com

 

If to HMIT:

 

 

 

 

 

With Copy to

(which shall not constitute notice):

 

 

 

 

 

If to Employee:

 

 

With a copy to (which shall not constitute notice):

 

Helios and Matheson Information Technology Ltd

Adwave Towers 17, South Boag Road,

Chennai 600 017 INDIA

 

 

 

 

Soby Mathews

Mathews & Peddibhotla Law Group, PC

39899 Balentine Dr., Suite 225

Newark, CA 94560

soby@mplg.us

 

To the residential address of Employee on file with the Company

 

 

 

Mark W. Smith

Smith Valliere PLLC

The Paramount Building

1501 Broadway, 12 th Floor

New York, New York 10036

msmith@svlaw.com

 

 
5
 

 

The Parties agree that the Agreement may be executed in counterparts and delivered by facsimile or email transmission of a PDF, each of which, when taken together, shall constitute a single binding instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 
6
 

 

IN WITNESS WHEREOF, the undersigned have caused this Separation and Mutual Release Agreement to be duly executed as of the date first written above.

 

 

 

  Divya Ramachandran
   
   
   

 

 

HELIOS AND MATHESON ANALYTICS INC.

   
   
   
   
  By:  
 

Printed:

  Title:

 

 

 
 

HELIOS AND MATHESON INFORMATION TECHNOLOGY, LTD.

   
   
   
   
  By:  
 

Printed:

  Title:

 

 
7
 

 

EXHIBIT A

Form of Resignation Letter

 

March 31, 2016

 

 

To The Board of Directors of Helios and Matheson Analytics Inc. (the “Company”):

 

This letter confirms that, effective at 11:59 pm ET on March 31, 2016, I hereby resign my position as a Director of the Company and, if applicable, any of its subsidiaries, and as President and Chief Executive Officer of the Company and, if applicable, any other officer position I may hold of the Company or its subsidiaries.

 

My resignation provided herein was not because of any disagreement on any matter relating to the Company’s current operations, policies or practices.

 

Sincerely,

 

 

 

 

Divya Ramachandran

 

 
 

 

Exhibit B

8-K Language

Quote from the Chairman of the Board (S.Jambunathan):

 

“During her tenure as President and CEO of HMNY and as Director prior to that, Divya has discharged her responsibilities in terms of both compliance and business in a professional manner along with her team. Apart from hard work, she has shown a lot of initiative and innovation in her duties.”

 

 

EXHIBIT C

 

Form of Amendment and Restatement of Section 7

of Employment Agreement (Non-Compete)

 

7. NON-COMPETITION

 

Employee acknowledges that its access to Employer’s Proprietary Protected Information could be of substantial value to a competitor and Wrongful Disclosure thereof could irreparably damage Employer. To that end, and in consideration of the payments made to Employee under this Agreement and the Separation and Mutual Release Agreement, dated as of March 31, 2016, between Employer and Employee, which have been negotiated by the parties, the Employee covenants that it shall not engage in Wrongful Disclosure of Employer’s Proprietary Protected Information to any competitor of Employer. Employee further agrees that for a period of 12 months immediately after Employee’s termination of employment with Employer, Employee shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in, or be employed by, associated with or render services or advice or other aid to any corporation, association, business, enterprise, person or entity that directly solicits business from, performs services for or sells products, services, software or information technology solutions of the type provided by, or under development by, or proposed to be provided by, Employer, on or before March 31, 2016 to any of Employer’s Clients and Prospects (as hereinafter defined); and Employee shall not provide any such products, services or solutions, on an “in-house” basis, as an employee of or independent contractor to any of Employer’s Clients and Prospects. Employer and Employee agree that this covenant is fair and reasonable, because the Employee has assumed a fiduciary obligation as custodian for any and all Proprietary Protected Information. Also, Employee agrees and acknowledges that any and all such Proprietary Protected Information is confidential and sensitive in nature and of substantial value to the Employer. Employee acknowledges and agrees that any use of such Proprietary Protected Information, deemed to be Wrongful Disclosure under this Agreement, or even the reasonable and well-founded appearance of Wrongful Disclosure of such Proprietary Protected Information, or even the reasonable and well-founded perception that there would be a likelihood of such Wrongful Disclosure, could cause the Employer to suffer substantial, irrevocable and catastrophic losses, to include, without limitation and by way of example only, loss of client confidence resulting in irreparable damage to Employer or to clients of Employer. For that reason, Employee Agrees to cooperate with any and all equitable remedies, to include, without limitation, injunctive relief. However, in the event a court should decline to enforce the foregoing provision, then, Employee and Employer agree that this provision should be modified to restrict Employee’s competition with Employer with respect to Employer’s Clients and Prospects to the maximum extent enforceable. However, in any event the obligation not to disclose or use Proprietary Protected Information of the Employer, without the express written permission of Employer is a continuing obligation, surviving termination of this Agreement.

 

“Employer’s Clients and Prospects” means only the following business entities:

 

 

1.

**

 

2.

**

 

3.

**

 

4.

** 1

 

Notwithstanding anything herein to the contrary, nothing in this Section 7 shall prohibit Employee from purchasing or otherwise acquiring up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national securities exchange.

 

Employee further acknowledges and agrees that, for a period of 12 months immediately following termination of employment with Employer (the “Restrictive Period”), Employee will not solicit for employment or cause others to solicit for employment, any person who is employed by Employer or its subsidiary Helios and Matheson Global Services Pvt Limited, or any client manager who is employed by Employer’s Clients and Prospects and who is or was involved in Employer’s engagement with such clients, before or during the Restrictive Period.

   

1 Information omitted pursuant to a Confidential Treatment Request filed with the SEC on May 16, 2016.

 

 

2

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 

I, Parthasarathy Krishnan, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Helios and Matheson Analytics Inc., the registrant;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

 

Date:

May 16, 2016

 

/s/ Parthasarathy Krishnan

 
     

Name: Parthasarathy Krishnan

Title: President and Chief Executive Officer 

(Principal Executive Officer)

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 

I, Parthasarathy Krishnan, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Helios and Matheson Analytics Inc., the registrant;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

 

Date:

May 16, 2016

 

/s/ Parthasarathy Krishnan

 
     

Name: Parthasarathy Krishnan

Title: Interim Chief Financial Officer 

(Principal Financial Officer)

Exhibit 32.1

 

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

 

 

In connection with the accompanying Quarterly Report on Form 10-Q of Helios and Matheson Analytics Inc. for the three month period ending March 31, 2016, I, Parthasarathy Krishnan, the Principal Executive Officer of Helios and Matheson Analytics Inc., hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

such Quarterly Report on Form 10-Q for the three month period ending March 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(2)

the information contained in such Quarterly Report on Form 10-Q for the three month period ending March 31, 2016 fairly presents, in all material respects, the financial condition and results of operations of Helios and Matheson Analytics Inc., on a consolidated basis.

 

 

 

Date:

May 16, 2016

 

/s/ Parthasarathy Krishnanan

 
     

Name: Parthasarathy Krishnan

Title: President and Chief Executive Officer 

(Principal Executive Officer)

 

 

 

 

 

 

 

 

A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document

Exhibit 32.2

 

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

 

 

In connection with the accompanying Quarterly Report on Form 10-Q of Helios and Matheson Analytics Inc. for the three month period ending March 31, 2016, I, Parthasarathy Krishnan, the Principal Financial Officer of Helios and Matheson Analytics Inc., hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

such Quarterly Report on Form 10-Q for the three month period ending March 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(2)

the information contained in such Quarterly Report on Form 10-Q for the three month period ending March 31, 2016 fairly presents, in all material respects, the financial condition and results of operations of Helios and Matheson Analytics Inc., on a consolidated basis.

 

 

 

Date:

May 16, 2016

 

/s/ Parthasarathy Krishnan

 
     

Name: Parthasarathy Krishnan

Title: Interim Chief Financial Officer 

(Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.  

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document