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, 2014

 

 

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	13-3169913
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
Empire State Building, 350 5th Avenue,	(212) 979-8228
New York, New York 10118	(Registrant’s Telephone Number,
(Address of Principal Executive Offices)	Including Area Code)

 

 

HELIOS AND MATHESON INFORMATION TECHNOLOGY INC.

(Former name, former address and former fiscal year, if changed since last report)

 

---

 

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 1, 2014, 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
Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	3
Consolidated Statement of Operations and Comprehensive Income/(loss) for the three months ended March 31, 2014 and 2013	4
Consolidated Statement of Cash Flows for the three months ended March 31, 2014 and 2013	5
Notes to 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	14
Item 1. Legal Proceedings	14
Item 1A. Risk Factors	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Defaults Upon Senior Securities	14
Item 4. Mine SafEty Disclosure	14
Item 5. Other Information	14
Item 6. Exhibits	15
SIGNATURES	16

 

 

Part I. Financial Information 

Item 1. Financial Statements 

 

HELIOS AND MATHESON ANALYTICS INC.

CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2014				2013
		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	912,687			$	660,278
Accounts receivable- less allowance for doubtful accounts of $34,212 at March 31, 2014, and $28,213 at December 31, 2013			1,534,411				2,147,436
Unbilled receivables			192,688				143,126
Prepaid expenses and other current assets			185,480				147,448
Total current assets			2,825,266				3,098,288
Property and equipment, net			47,774				50,071
Security Deposit			2,000,000				2,000,000
Deposits and other assets			78,520				78,520
Total assets		$	4,951,560			$	5,226,879
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	822,959			$	830,948
Total current liabilities			822,959				830,948
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of March 31, 2014, and December 31, 2013			-				-
Common stock, $.01 par value; 30,000,000 shares authorized; 2,330,438 issued and outstanding as of March 31, 2014 and December 31, 2013			23,304				23,304
Paid-in capital			37,855,740				37,855,740
Accumulated other comprehensive loss - foreign currency translation			(72,455	)			(77,032	)
Accumulated deficit			(33,677,988	)			(33,406,081	)
Total shareholders' equity			4,128,601				4,395,931
Total liabilities and shareholders' equity		$	4,951,560			$	5,226,879

 

See accompanying notes to consolidated financial statements.

 

  

HELIOS AND MATHESON ANALYTICS INC.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

 

		Three Months Ended
		March 31,
		2014				2013
		(unaudited)				(unaudited)
Revenues		$	2,934,386			$	3,202,831
Cost of revenues			2,398,905				2,528,410
Gross profit			535,481				674,421
Operating expenses:
Selling, general & administrative			618,540				568,838
Depreciation & amortization			2,250				2,472
			620,790				571,310
(Loss)/income from operations			(85,309	)			103,111
Other income(expense):
Interest income-net			2,838				730
			2,838				730
(Loss)/income before income taxes			(82,471	)			103,841
Provision for income taxes			3,000				3,000
Net (Loss)/income			(85,471	)			100,841
Other comprehensive Income - foreign currency adjustment			4,577				31
Comprehensive Income/(loss)		$	(80,894	)		$	100,872
Net (Loss)/income per share
Basic & Diluted		$	(0.04	)		$	0.04
Dividend per share		$	0.08			$	0.09

 

See accompanying notes to consolidated financial statements. 

 

 

HELIOS AND MATHESON ANALYTICS INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Three Months Ended March 31,
		2014				2013
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income/(loss)		$	(85,471	)		$	100,841
Adjustments to reconcile net income/(loss) to net cash from operating activities, net of acquired assets:
Depreciation and amortization			2,250				2,472
Provision for doubtful accounts			(6,000	)			5,999
Loss on sale of fixed assets			39
Changes in operating assets and liabilities:
Accounts receivable			619,025				(599,117	)
Unbilled receivables			(49,562	)			(40,596	)
Prepaid expenses and other assets			(38,032	)			(14,031	)
Accounts payable and accrued expenses			(7,989	)			(60,753	)
Net cash from operating activities			434,260				(605,185	)
Cash flows from investing activities:
Purchase of Property and Equipment (net of sales)			7				(2,454	)
Net cash from investing activities			7				(2,454	)
Cash flows from financing activities:
Dividend Paid			(186,435	)			(209,739	)
Net cash from financing activities			(186,435	)			(209,739	)
Effect of foreign currency exchange rate changes on cash and cash equivalents			4,577				31
Net increase/(decrease) in cash and cash equivalents			252,409				(817,347	)
Cash and cash equivalents at beginning of period			660,278				2,861,733
Cash and cash equivalents at end of period		$	912,687			$	2,044,386
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes - net of refunds		$	4,252			$	1,381

 

See accompanying notes to consolidated financial statements

 

 

HELIOS AND MATHESON ANALYTICS INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

1)     GENERAL:

 

These 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, 2013 filed with the Securities and Exchange Commission (“SEC”) and the accompanying financial statements and related notes thereto. The accounting policies used in preparing these financial statements are the same as those described in the Company's Form 10-K for the year ended December 31, 2013.

 

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 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, 2014, the consolidated results of operations for the three month periods ended March 31, 2014 and 2013 and cash flows for the three month periods ended March 31, 2014 and 2013.

 

The consolidated balance sheet at December 31, 2013 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, 2013.

 

For the three month period ended March 31, 2014, the Company reported a net loss of approximately ($85,000) and for the three month period ended March 31, 2013, the Company reported net income of approximately $101,000. The Company continues to focus on revenue growth by expanding its existing client market share and 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”). 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 Compensation Committee of the Company’s Board of Directors has been appointed as the committee 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 equity has been granted under the 2014 Plan.

 

 

5)     NET INCOME 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, 2014 and 2013: 

		Three Months Ended
		March 31,
		2014				2013
Numerator for basic net income/(loss) per share
Net income/(loss) available to common stockholders		$	(85,471	)		$	100,841
Numerator for diluted net income/(loss) per share
Net income/(loss) available to common stockholders & assumed conversion		$	(85,471	)		$	100,841
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		$	(0.04	)		$	0.04

 

 

 

6)     CONCENTRATION OF CREDIT RISK:

 

The revenues of the Company’s top three customers represented approximately 85.2% of the revenues for the three month period ended March 31, 2014. The revenues of the Company’s top three customers represented approximately 86.6% of revenues for the same period in 2013. 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)     CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

 

The Company’s commitments at March 31, 2014, 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)		$	484,207			$	157,040			$	314,080			$	13,087			$	-
Total		$	484,207			$	157,040			$	314,080			$	13,087			$	-

 

⁽¹⁾ The Company has a New York facility with a lease term expiring April 30, 2017.

 

 

As of March 31, 2014, the Company does not have any “Off Balance Sheet Arrangements”.

 

 

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 PERSONS

 

In September 2010, the Company entered into a Memorandum of Understanding with Helios and Matheson Parent (the “HMIT MOU”) pursuant to which Helios and Matheson Parent has agreed to make available to the Company facilities of dedicated Off-shore Development Centers (“ODCs”) and also render services by way of support in technology, client engagement, management and operating the ODCs for the Company. The Company has furnished Helios and Matheson Parent a security deposit of $2 million, classified as a non-current asset on the balance sheet, to cover any expenses, claims or damages that Helios and Matheson Parent may incur while discharging its obligation under the HMIT MOU and also to cover the Company’s payable to Helios and Matheson Parent. Helios and Matheson Parent has been providing recruitment services to Helios and Matheson Analytics Inc. and has not charged a fee for these services. For the purpose of strengthening our client relationships, Helios and Matheson Parent also provides knowledge transition free of cost to clients and volume/business commitment based discounts. The investment made by Helios and Matheson Parent in this regard during the three months ended March 31, 2014 is approximately $27,996. The amount payable to Helios and Matheson Parent for services rendered under the HMIT MOU was $12,096 and $91,469 for the three months ended March 31, 2014 and 2013, respectively and is included as a component of cost of revenue. All payments to Helios and Matheson Parent under the MOU are made after collections are received from clients. The amount paid to Helios and Matheson Parent for services rendered under the HMIT MOU was $0 and $63,648 for the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014, the Company has a receivable from Helios and Matheson Parent in the amount of $182,626 which represents amount paid on behalf of Helios and Matheson parent. As of March 31, 2014, the amount paid on behalf of Helios and Matheson Parent is reported as an offset of accounts payable to Helios and Matheson Parent.

 

10)   LEGAL PROCEEDINGS

 

During 2011, Rosen and Associates, P.C. asked for a payment of $23,680 for services it allegedly performed for the Company. The Company did not execute any agreement for performance of services with Rosen and Associates, P.C. On August 5, 2013 Rosen and Associates, P.C. filed a claim seeking payment for the services it allegedly performed. The next hearing is scheduled on October 27, 2014.

 

11)   DIVIDEND PAID

 

On February 3, 2014 the Company’s Board of Directors declared a dividend of $0.08 per share on the Company's common stock, amounting to a total payout of $186,435. This amount represents approximately 50% of the net profits of the Company for the year ended December 31, 2013. The dividend was paid on March 5, 2014 to shareholders of record on February 18, 2014. There can be no assurance that we will pay dividends in the future.

 

12)   SUBSEQUENT EVENTS

 

Management completed an analysis of all subsequent events occurring after March 31, 2014, the balance sheet date, through May 9, 2014, the date upon which the quarter-end consolidated financial statements were issued, and determined that all necessary disclosures have been disclosed elsewhere in these financial statements.

 

  

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 and 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, 2013 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;

 

●

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

 

●

our ability to sell our products;

 

●

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.

 

 

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, 2014, approximately 91% of the Company's consulting services revenues were generated from clients under time and materials engagements, as compared to approximately 90% for the three months ended March 31, 2013, with the remainder generated under fixed-price engagements and recruitment process outsourcing (RPO). The Company has established standard-billing guidelines for consulting services based on the types of services 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 materials services on a weekly and monthly basis. Arrangements for fixed-price engagements are made on a case-by-case basis. Consulting services revenues generated under time and materials engagements are recognized as those services are provided. Revenues 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, 2014 and 2013, gross margin was 18.3% and 21.1% respectively.

 

The Company actively manages its personnel utilization rates by monitoring project requirements and timetables. The Company’s utilization rate for the three months ending March 31, 2014 was approximately 94% as compared to 99% for the three months ending March 31, 2013. As projects are completed, consultants either are re-deployed to new projects at the current client site or 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.

 

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 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, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company 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 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 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 service is performed. Unbilled accounts receivables represent 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 specifically identified 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 give rise to the change become 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.

 

Stock Based Compensation

 

The Company uses the modified prospective application method as specified by the FASB whereby compensation cost is recognized over the remaining service period based on the grant-date fair value of those awards as calculated for pro forma disclosures as originally issued.

 

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,
		2014				2013
Revenues			100.0	%			100.0	%
Cost of revenues			81.8	%			78.9	%
Gross profit			18.3	%			21.1	%
Operating expenses			21.2	%			17.8	%
Income/(loss) from operations			( 2.9	)%			3.3	%
Net Income/(loss)			( 2.9	)%			3.2	%

 

Comparison of the Three Months Ended March 31, 2014 to the Three Months Ended March 31, 2013

 

Revenues. Revenues for the three months ended March 31, 2014 were $2.90 million compared to $3.20 million for the three months ended March 31, 2013. The decrease was primarily attributable to a decrease in consulting and RPO revenue due to a decline in discretionary spending in IT services by the Company’s major clients in the financial and banking service industry. Our clients are facing significant financial pressure due to the ongoing tough economic environment resulting in a pushback in new assignments.

 

Gross Profit. The resulting gross profit for the three months ended March 31, 2014 was $535,000 as compared to $674,000 for the three months ended March 31, 2013. As a percentage of total revenues, gross margin for the three months ended March 31, 2014 was 18.3% compared to 21.1% for the three months ended March 31, 2013. The reduction in gross margin is due to a reduction in revenue from high margin consulting and fixed price 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, 2014 were $621,000 as compared to the 2013 period of $571,000. The increase is primarily an increase in health insurance cost.

 

Taxes. Tax provision for the three months ended March 31, 2014 was $3,000 compared to $3,000 for the three months ended March 31, 2013.

 

Net Income/(Loss). As a result of the above, the Company had a net loss of ($85,000) or ($0.04) per basic and diluted share for the three months ended March 31, 2014 as compared to net income of $101,000 or $0.04 per basic and diluted share for the three months ended March 31, 2013.

 

Liquidity and Capital Resources

 

The Company believes that its business, operating results and financial condition have been affected by the economic crisis and ongoing economic uncertainty which continue to impact the IT and analytics spending of its clients. A significant portion of the Company’s major clients are in the financial services industry that continues to be under considerable pressure as a result of the economic conditions in the financial markets. Spending on IT consulting and analytics services is largely discretionary, and the Company has experienced a pushback of new assignments and high margin projects from existing clients. During the three months ended March 31, 2014 the Company’s revenues declined by approximately 8% and the Company reported a net loss of ($85,000) as compared to net income of $101,000 during the same period in 2013. The net loss resulted primarily from a decline in high margin projects and RPO services revenue.

 

The Company's cash balances were approximately $912,000 at March 31, 2014 and $660,000 at December 31, 2013. Net cash provided by operating activities for the three months ended March 31, 2014 was approximately $434,000 compared to net cash used by operating activities of approximately $605,000 for the three months ended March 31, 2013.

 

The Company's accounts receivable, less allowance for doubtful accounts, at March 31, 2014 and at December 31, 2013 were approximately $1.5 million and $2.1 million, respectively, representing 47 days and 52 days of sales outstanding (“DSO”) respectively. The increase in DSO at December 31, 2013 was temporary and the overdue amounts have already been collected. The Company has provided an allowance for doubtful accounts at the end of each of the periods presented. After giving effect to this allowance, the Company does not anticipate any difficulty in collecting amounts due.

 

For the three month period ended March 31, 2014 cash from investing activities was only $8 as compared to ($2,500) of cash used by investing activities for the three months March 31, 2013.

 

For the three month period ended March 31, 2014, cash used by financing activities was ($186,000) as compared to ($210,000) for the three months ended March 31, 2013. On February 3, 2014 the Company’s Board of Directors declared a dividend of $0.08 per share on the Company's common stock, amounting to a payout of $186,435. Cash used in financing activities in 2014 and 2013 consisted of the dividends paid to shareholders.

 

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, 2014, the Company does not have any off balance sheet arrangements.

 

Contractual Obligations and Commitments

 

The Company’s commitments at March 31, 2014 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 affects 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

 

None.

 

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, 2014, we carried out an evaluation, under the supervision of and with the participation of our President and 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, 2014, our disclosure controls and procedures were effective.

 

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

 

The Company’s legal proceedings at March 31, 2014 have been disclosed in Part I, Item 1, Note 10 of this Form 10-Q. There were no material developments in the legal proceedings during the quarter ended March 31, 2014.

 

Item 1A. Risk Factors

 

We incorporate herein by reference the risk factors included under Item 1A. of our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on March 3, 2014.

 

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

 

3.1.1

Certificate of Amendment to Certificate of Incorporation of the Registrant, 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 Registrant, 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 previously filed with SEC on March 31, 2010.

 

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, 2014 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.

 

 

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.

 

 

 

	By:	/s/ Divya Ramachandran
Date: May 9, 2014		Divya Ramachandran
		Chief Executive Officer and President
	By:	/s/ Umesh Ahuja
Date: May 9, 2014		Umesh Ahuja
		Chief Financial Officer and Secretary

 

 

 

 

     

 

 

 

 

     

 

 

 

 

 

 

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