Helios and Matheson Analytics (HMNY): Shaking Down Shareholders

by Sonya Colberg, Senior Editor - 9/20/2017 9:08:35 AM

Helios and Matheson Analytics (HMNY) is an information technology company hooked on acquiring unprofitable technology, which it then mercilessly promotes.

The New York company merged with Zone Acquisition in November 2016, which ignited additional losses.

The stock has rocketed by 90% and is now TheStreetSweeper sees a riskier investment than ever:

*Financial Fumes

HMNY has been running on fumes …  $54.98 million in the red.

It’s burning $5 million in two quarters. At the end of June, HMNY had just $1.4 million in available cash.

Here’s how dire the situation was, in management’s opinion:

“In management's opinion, there is substantial doubt about the Company’s ability to continue as a going concern through one year after the issuance of the accompanying financial statements.”

Losses are growing exponentially. Investors endured a stunning $-1.97 loss in June:

(Source: Company SEC filings)

Later, in the unlikely event the stock holds, we will delve into the company's top financiers which have been known to back losers.

Regardless, the inability to make money – and we don’t believe it will ever be profitable -  has forced HMNY to hurt shareholders, as shown below …

*Dilute and Destroy

HMNY’s apparent mission? Casual destruction of shareholders’ value.

Convertible notes have financed operations and acquisitions for the past year. At the end of June, HMNY raised around $15 million, grabbing $9.1 million in proceeds along the way.

Further dilution appears to be ahead ... and that won't be the end of it. The company filed registration earlier this month for the resale of 9.08 million shares at prices ranging from $2.675 to $3.25.  This effort is for selling stockholders.

At best, the company would receive around $6 million if warrants are exercised, but the bulk of the offering – 6.7 million shares or nearly $18 million will go to selling shareholders.

The potential watering down of shares is partially due to HMNY’s rollup fever…

*Rollup Fever

The company needed to file the stock registration for conversion so HMNY could finance its most recent acquisition … MoviePass.

Rolling up companies is risky business which we’ve seen over the years hurt many shareholders. Companies find themselves bogged down with unexpected expenses and difficulties folding in different operations.

And the MoviePass acquisition –a 51% stake for $27 million primarily through issuing stock and a note - in August is a particularly worrisome purchase.

The mystery is why would HMNY acquire this unprofitable company in a business completely unrelated to the below recent HMNY ventures?

*RedZone, a thus-far revenue-devoid GPS app to alert drivers to crime areas to avoid. It is a free app available in the Apple and Google stores.

RedZone has seen a decline in popularity. The download ranking has dropped by 90% since June.

 

(Source: App Annie, TheStreetSweeper)

*A licensing agreement with Is It You, a facial recognition technology with as yet unproven revenue capabilities.

*Trendit Ltd., acquired in May, is a crowd behavior, migration and trends recognition technology that HMNY hopes will help track terrorists.

We believe this acquisition pattern is risky, unfocused and indicates a lack of conviction in the core business.

 

*Conclusion

HMNY has become a rollup, promote and search-and-destroy-shareholders machine.

The stock is up on promotions and extremely unstable. We expect a 50% drop short-term, soon followed by another double-digit drop.

* Important Disclosure: The owners of TheStreetSweeper hold a short position in HMNY and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to streetsweepereditor@yahoo.com.

 

 

 

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