MoviePass parent company wants to spin it off into a separate company

MoviePass
CEO Mitch Lowe and Helios and Matheson Chief Executive Ted
Farnsworth
MoviePass/Reuters

On Tuesday, MoviePass parent company Helios and Matheson
Analytics (HMNY) announced a “preliminary
plan” to spin off MoviePass into a separate
public company.

The announcement comes just days after the New York Attorney
General’s office announced that it was investigating Helios and
Matheson to determine whether the company misled investors,

a claim the company denied. It also comes days before a
crucial shareholders meeting set to take place on November 1,
when Helios and Matheson will seek authorization for a 1-for-500
reverse stock split —
a move some investors are against.

“For many years, HMNY has been focused on data analytics, and in
that capacity we own assets like Zone Technologies which provides
a safety and navigation app for iOS and Android users and a
global security concierge service,” Helios and Matheson CEO Ted
Farnsworth said in a statement on the spin-off. “Since we
acquired control of MoviePass in December 2017, HMNY largely has
become synonymous with MoviePass in the public’s eye, leading us
to believe that our shareholders and the market perception of
HMNY might benefit from separating our movie-related assets from
the rest of our company.”

Helios and Matheson has a long and complicated history as a
Nasdaq-listed company. Before the Farnsworth-MoviePass era, the
New York outpost of Helios and Matheson was controlled by an
Indian company (Helios and Matheson Information Technology),

which stands accused of defrauding at least 5,000 creditors in
India, including banks and senior citizens. The company was
involved in many facets of information technology consulting.

HMIT in India began to extricate itself from the US business in
2016 when HMNY merged with Farnsworth’s money-losing startup,
Zone Technologies. Zone Technologies created a “a
GPS-driven, real-time crime and navigation map application.”
However the app has not been updated since April and does not
appear to function as intended.

At present, MoviePass effectively comprises the entirety of
Helios and Matheson’s business. But the Nasdaq listing of Helios
and Matheson has been crucial to MoviePass, as it has allowed the
movie-ticket subscription app to fund hundreds of millions in
losses by selling new shares of stock to the public.

Now Helios and Matheson seeks to spin off MoviePass into another
publicly listed company.

Here’s the plan, according to Helios and Matheson:

“HMNY is endeavoring to create MoviePass Entertainment Holdings
as a separate publicly traded holding company that would contain
the following four assets: (i) the shares of common stock of
MoviePass Inc. (“MoviePass”), the nation’s leading movie theater
subscription service, held by HMNY, which currently comprise
approximately 92% of the outstanding shares (excluding options
and warrants) of MoviePass, (ii) the membership interests of
MoviePass Films LLC (“MoviePass Films”), HMNY’s movie production
company partnered with Emmett Furla Oasis Films, held by HMNY,
equal to 51% of the outstanding membership interests of MoviePass
Films, (iii) the membership interests of MoviePass Ventures LLC
(“MoviePass Ventures”), an acquirer and owner of economic
interests in completed films, held by HMNY, equal to 100% of the
outstanding membership interests of MoviePass Ventures, and (iv)
Moviefone™, a multimedia media information and advertising
service.”

If permitted to do so under applicable Delaware law, HMNY plans
to distribute a minority of the outstanding shares of MoviePass
Entertainment common stock as a dividend to stockholders of HMNY
as of a record date that is yet to be determined, with HMNY
retaining control of MoviePass Entertainment upon any such
distribution. Holders of any outstanding convertible notes issued
by HMNY in November 2017 and January 2018 and certain warrants of
HMNY, as of the applicable record date, would be entitled to
participate in any distribution of MoviePass Entertainment shares
to the extent required by the terms of such notes and warrants.
As previously reported in a Current Report on Form 8-K filed by
HMNY on October 4, 2018, all the convertible notes issued by HMNY
in June 2018 have been cancelled.”

Developing…