Helios and Matheson Analytics (HMNY): TheStreetSweeper Demands Correction

by Sonya Colberg, Senior Editor - 9/26/2017 10:36:24 AM

The stock price of Helios and Matheson Analytics (HMNY) has more than tripled in less than two weeks, despite disclosure issues that could spark unwanted SEC scrutiny.

TheStreetSweeper believes that HMNY has spurred the stock rally in part by tweaking an acquisition CEO’s background while failing to disclose its own CEO’s leadership in a failed company.

New York-based HMNY has not responded to our request for comment, while acquisition company MoviePass has responded. However, investors may find HMNY’s viewpoint here.

Meanwhile, consider the issues indicating HMNY is fooling stockholders:

*Unstated: Purple Ridden Down

You won’t find it in company SEC filings, but HMNY’s CEO Ted Farnsworth served as president/CEO/CFO/sole director of Purple Beverage Company. Mr. Farnsworth spoke in 2008 about an ultimately unfortunate financing effort and “ongoing efforts to grow the business, as well as our commitment to all of our stockholders who allow us to make Purple a success.”

But here is how successful Purple actually became ... a zero:

(Source: Reuters)

The functional beverage company continued to post SEC filings for two years after its December 2007 merger with Red Carpet Entertainment.

HMNY investors should have been advised of Mr. Farnsworth’s leadership in this failed company.

Instead, the company’s SEC filings emphasize his speaking engagements and his work as founder/chairman of Highlander Companies, Millennial Hotel Group and iCrowd Hotels, plus the company’s RedZone map associated company Zone.

The company website contains even less information about the man who became HMNY’s CEO in January:

(Source: Company website)

So his limited experience is disclosed … and absolutely nothing on Purple.

By not mentioning Mr. Farnsworth and his Purple background, the company has neglected to fully inform stockholders … and it could get unwanted attention from the Securities and Exchange Commission.

*Mitch Lowe: Not A Netflix Cofounder

We’re calling for HMNY to correct discrepancies in SEC filings – and preferably to issue a clarifying press release – regarding Mitch Lowe, CEO of MoviePass.

HMNY stock has rocketed on the company’s announcements surrounding acquisition of a majority stake in MoviePass.

But HMNY’s SEC filings repeatedly refer to Mr. Lowe as a Netflix co-founder.

Sept. 14, 2017 SEC filing: “Mitch Lowe, co-founder of Netflix…former president of RedBox and current CEO of MoviePass.”

Aug. 15, 2017 SEC filing: The company also links Mr. Lowe in conjunction with HMNY’s announced plans to acquire 51% of MoviePass and the service’s new $9.95 plan:

“MoviePass is led by Netflix co-founder and former Redbox president Mitch Lowe.”

Yet the 2002 Netflix prospectus refers to him this way:

 J. Mitchell Lowe has served as our Vice President of Business Development since February 1998 and was a consultant to Netflix from October 1997 to February 1998.

Numerous media outlets mentioned Mr. Lowe’s supposed founding role … which undoubtedly added to HMNY’s hysterical price bump.

Though HMNY perpetuates the exaggerations, in an email this morning to TheStreetSweeper, Mr. Lowe indicated the error surprises him.

“You are absolutely right. I do not know why outlets continue to say that. I make it clear that I was a co-founding executive at Netflix.”

Links to his Twitter handle, speakers’ page and website refer to him as “co-founding executive of Netflix,” or “on the founding exec team of Netflix.”

*Interviews Promoted In 10-Qs

Along with press releases promoting the MoviePass deal and Mr. Lowe’s overstated experience, HMNY took the highly unusual step of posting media interviews in of all places … 10-Q and DEF 14A filings.

First, in a 10-Q – which is supposed to disclose financial information regarding statements, market risk, legal proceedings, senior securities defaults and so forth -  HMNY posted transcripts of interviews conducted on Fox channel’s “Morning With Maria,” and CNN’s “CNN Money.”

(Source: Fox)

In the Fox interview with Maria Bartiromo, the anchor introduced the guests:

“Joining us right now is the CEO of MoviePass, co-founder of Netflix and former president of Redbox, Mitch Lowe, is with us. Along with Helios and Matheson Analytics chairman and CEO, Ted Farnsworth. Great to see you both. Thanks so much for joining us.”

In the CNN interview with Maggie Lake, Mr. Lowe was again referred to as a Netflix cofounder:

Maggie Lake: “I do want to move quickly over to a Netflix and the fact that you are a cofounder and what you saw over there right now.”

Mitch Lowe: “Sure. Yeah.”

TheStreetSweeper asked Mr. Lowe why he didn’t just correct the media outlets but he didn’t respond.

**

Second, a DEF 14A is a proxy statement typically used to give investors enough information to make an informed vote at the company’s annual meeting.

But HMNY used the DEF 14A filing on Sept. 25 to post another interview promoting itself and MoviePass - this one by Pipeline Data. After Seeking Alpha ran the piece, Pipeline’s HMNY-long Mark Gomes posted scores of times about HMNY on Twitter.

* Former Director of SEC Sanctioned MedBox

Meanwhile, HMNY needs to keep investors thoroughly informed about Mr. Lowe’s background, including his association up until four months ago, with troubled Medbox.

Mr. Lowe told TheStreetSweeper:

“As to Medbox I served on the Board of Directors from April 2014 to earlier this year. While there as one of three independent board members I helped identify incorrect accounting practices by the founder and made them public.”

The Securities and Exchange Commission filed charges against the California marijuana vending machine company Medbox and its founder Vincent Mehdizadeh, alleging he masterminded a scheme to inflate revenues and manipulate the stock. The SEC also alleged CEO Bruce Bedrick chose to stay with the company and knowingly signed SEC filings or releases that misstated revenues and misrepresented the true nature of Medbox’s transactions with a sham “private investment firm.” The SEC alleged Mehdizadeh created that sham firm called “New-Age Investment Consulting,” installed his girlfriend as apparent CEO and used the setup to funnel money to Medbox and himself. (Read the SEC complaint here) Mr. Lowe and other officers and directors were named in shareholder derivative actions which were settled.

Mehdizadeh and Medbox, which has changed its name to Notis Global, have settled the SEC charges, changed management and restated financial statements. Between August 2012 and December 2014, Medbox traded from $2.50 to $205. The company now trades Over-The-Counter as NGBL at well under 1 penny per share.

(Source: Yahoo Finance)

*Promotions

Meanwhile, along with the company’s promotional efforts and exaggerations, HMNY stock is clipping along on social media. For example, Poised To Triple is suddenly tweeting about HMNY:

The promoter has tweeted about HMNY nearly 30 times in four days … after two years of silence on Twitter:

 

(Source: Twitter)

*Glitchy Rollout

The much-touted $9.95 subscription quickly turned into a giant headache for MoviePass.

Bloomberg reports:

Just eight days into the new offer, MoviePass announced a delay of two to three weeks in delivering the cards. Some theaters allowed users to enter with e-tickets, but that led to the service being activated for some customers even if they couldn’t use it, fueling complaints when renewal requests were sent.

To add to the struggles, a glitch temporarily brought down the company’s computer network, leading to longer delays, while an internet-only customer-service system caused a revolt among some subscribers.

Meanwhile, movie goers can find options everywhere. Just a few sites offering special discount packages include:

* Google                *Retailmenot        * AAA

*Groupon              *Sam’s Club           *Regal Cinemas

*Dealflicks             * Costco                 *AMC

*Fandango            * LivingSocial

* MoviePass: Shaky, Unsustainable

MoviePass pays full price for tickets but the country’s biggest theater chain, AMC, slams MoviePass.  AMC quickly pushed back and blocked users from purchasing e-tickets in Boston and Denver.

AMC appears to be threatening to file suit against MoviePass.

AMC stated: “We are actively working now to determine whether it may be feasible to opt out and not participate in this shaky and unsustainable program.”

Mr. Lowe said his company subsidizes ticket buyers and will lose money, but will prove its value to movie theaters and studios, hopefully sharing additional profits.

AMC appears unconvinced.

“From what we can tell, by definition and absent some other form of other compensation,” AMC stated, “MoviePass will be losing money on every subscriber seeing two movies or more in a month.”

*Conclusion

People are buying the stock partially because they think the MoviePass CEO was a founder of a multi-billion-dollar company. He wasn’t. He worked as a Netflix vice president and consultant. However, until recently he was a director of SEC-troubled Medbox, which HMNY failed to disclose.

At the same time, HMNY’s chief executive isn’t owning up to his role as former president-CEO-sole director at Purple, a beverage company that took stockholders for a ride to zero.

We’re calling for a public correction, as well as corrected SEC filings.

At this point, this non-transparent, money-losing company deserves to watch its stock plummet by 50% ... later followed by a double-digit decline.

 

* 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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