HMNY Helios and Matheson Analytics Inc (CE)

NONE OF THE ACTION ITEMS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE ACTION ITEMS, NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A PROXY

This Information Statement has been filed with the Securities and Exchange Commission (the “Commission” or the “SEC”) and is being furnished by our Board of Directors (the “Board”) to the holders of record at the close of business on September [   ], 2016 (the “record date”) of our outstanding capital stock, pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 228(e) of the Delaware General Corporation Law, referred to in this Information Statement as the “DGCL”.

The cost of preparing, printing and mailing this Information Statement will be paid by us. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending this Information Statement to the beneficial owners of our Common Stock.

This Information Statement informs stockholders that on June 24, 2016 and August 30, 2016 our Board, and on September 2, 2016 and September 21, 2016 the Majority Stockholder, adopted and approved (i) the Merger Agreement, including the issuance of our Common Stock in connection therewith, (ii) the Plan Amendment, (iii) the Forward Split, (iv) the Note Financing, (v) the Reverse Split, and (vi) the Certificate Amendment. Section 252(c) of the DGCL requires the Merger Agreement to be adopted by a majority of the outstanding stock of the Company entitled to vote thereon, while Section 228(a) of the DGCL requires the remaining Action Items to be approved by holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. The Majority Stockholder holds 1,743,040 shares of our issued and outstanding Common Stock, equal to approximately 75% of the voting power of our outstanding capital stock as of the record date.

Accordingly, all necessary corporate approvals to effectuate the Action Items have been obtained.  We are not seeking approval from our remaining stockholders.  This Information Statement is furnished solely for the purpose of informing our stockholders, in the manner required by the Exchange Act and the DGCL, of the approval of the Action Items.  Pursuant to Section 14(c) of the Exchange Act and Rule 14c-2 promulgated pursuant thereto, the Action Items, to the extent stockholder approval is required by the DGCL or the rules of the Nasdaq Stock Market, will not be effective until 20 days after the date this Information Statement is mailed to each of our stockholders , unless a later date is required or permitted by the Merger Agreement.  The Action Items are expected to become effective on or after _____________, 2016 or such later date as all conditions and requirements to effectuate each of the Action Items are satisfied.

Our stockholders as of the record date are being furnished copies of this Information Statement.  This Information Statement is first being mailed or furnished to our stockholders on or about ____________, 2016.

QUESTIONS AND ANSWERS ABOUT

THIS INFORMATION STATEMENT AND THE MERGER

Q. Why did I receive this Information Statement?

A. The Exchange Act and the DGCL require us to provide you with information regarding the Action Items, even though your vote is neither required nor requested to approve the Action Items.

Q. Why am I not being asked to vote on the Action Items?

A. The Board unanimously adopted, approved and recommended the approval of the Action Items and determined that the Action Items are advisable and in our best interests and in the best interests of our stockholders. The Action Items have also been approved by the written consent of the Majority Stockholder. Such approval is sufficient under the DGCL, and no further approval by our stockholders is required. Therefore, your vote is not required and is not being sought. We are not asking you for a proxy and you are requested not to send us a proxy.

Q. What do I need to do now?

A. Nothing. This Information Statement is provided to you solely for your information and does not require or request you to do anything.

FORWARD-LOOKING STATEMENTS

This Information Statement contains or incorporates both historical and “forward-looking” statements. Words such as “anticipates,” “believes,” “expects,” “intends,” “future” and similar expressions identify forward-looking statements. Any such forward-looking statements in this Information Statement reflect the current views of the Company and Zone Technologies, Inc. with respect to future events and financial performance and are subject to a variety of factors that could cause actual results to differ materially from historical results or from anticipated results expressed or implied by such forward-looking statements. There may be events in the future that cannot be accurately predicted. Examples of these risks include, without limitation:

The forward-looking statements are not guarantees of future performance, events or circumstances, and actual results may differ materially from those contemplated by the forward-looking statements. Forward-looking statements speak only as of the date of this Information Statement (or such earlier date as may be specified herein), are based on current assumptions and expectations, and are subject to the factors above, among other things, and involve risks, events, circumstances, uncertainties and assumptions, many of which are beyond our ability to control or predict. You should not place undue reliance on these forward-looking statements. We do not intend to, and do not undertake an obligation to, update these forward-looking statements in the future to reflect future events or circumstances, except as required by applicable securities laws and regulations. For more information, see the section titled “Where You Can Obtain More Information” beginning on page 50. The results presented for any period may not be reflective of results for any subsequent period.

You should carefully read and consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf, and all future written and oral forward-looking statements attributable to or about us, Zone, the combined company, the Merger and the other Action Items, or any other matters, are expressly qualified in their entirety by the foregoing cautionary statements.

SUMMARY TERM SHEET

The following summary highlights selected information about the Merger Agreement, the Related Transactions, the Note Financing and the Certificate Amendment and may not contain all of the information that is important to you. Accordingly, we encourage you to read carefully this entire Information Statement, its annexes and the documents referred to in this Information Statement, in particular the Merger Agreement, which is attached to this Information Statement as Annex A.

Unless we otherwise indicate or unless the context requires otherwise, all references in this Information Statement to “the Company,” “Helios” “we,” “our” and “us” refer to Helios and Matheson Analytics Inc., a Delaware corporation, together with its wholly-owned subsidiaries.

Parties to the Merger

The parties to the Merger are:

Helios and Matheson Analytics Inc.

Empire State Building

350 5th Avenue

New York, New York 10018

Telephone: (212) 979-8228

We are engaged in the business of providing high quality IT services and solutions to Fortune 1000 companies and other large organizations.

Zone Technologies, Inc.

801Brickell Avenue, Suite 900

Miami, Florida 33131

Telephone:

Zone Technologies, Inc., also referred to as “Zone”, is the developer of the proprietary “RedZone Maps”, a GPS-driven, real-time crime and navigation map application the goal of which is to enhance personal safety worldwide by providing users with real time crime data and a platform for alerting other users to criminal and other safety related occurrences in a navigation map format.

Zone Acquisition, Inc.

Empire State Building

350 5th Avenue

New York, New York 10018

Telephone: (212) 979-8228

Zone Acquisition, Inc., also referred to as the “Sub”, is our wholly-owned subsidiary which will merge with and into Zone at the Effective Time of the Merger, with Zone surviving the Merger as a wholly-owned subsidiary of Helios.

The Merger Agreement and the Merger (Page 8)

The Agreement and Plan of Merger was approved by our Board at a meeting held on June 24, 2016. On August 25, 2016 the Company entered into the Waiver and First Amendment to Agreement and Plan of Merger (the “Merger Agreement Amendment”) and on September 21, 2016 the Company entered into the Acknowledgment of Satisfaction of Condition and Second Amendment to Agreement and Plan of Merger (the “Second Merger Agreement Amendment”). The Majority Stockholder adopted the Agreement and Plan of Merger, the Merger Agreement Amendment and the Second Merger Agreement Amendment by written consent in lieu of a meeting on September 21, 2016. In this Information Statement, we refer to the Agreement and Plan of Merger, the Merger Agreement Amendment and the Second Merger Agreement Amendment as the “Merger Agreement”. Pursuant to the Merger Agreement, each of the outstanding 10,000,000 shares of common stock of Zone will be converted at the effective time of the Merger into the right to receive a 0.174 share of our Common Stock for each outstanding share of common stock of Zone, for an aggregate of 1,740,000 shares of our Common Stock (the “Merger Consideration”).

Reasons for Entering into the Merger Agreement (Page 12)

The Board believes the Merger is necessary and advisable in order to expand the Company’s technology portfolio, facilitate the Company’s ability to obtain financing and maintain flexibility in today’s competitive and rapidly changing information technology sector. The Board believes that the Merger will enable Zone to become a fully integrated big data and artificial intelligence company for real-time crime data aggregation. Moreover, the Board believes that the Merger and the Financing will facilitate the global expansion of Zone’s RedZone Maps mobile application by leveraging the Company’s artificial intelligence capabilities and deep learning and analytics expertise to further expand Zone’s crime mapping capabilities and will enable the use of Zone’s technology to monitor social chatter on all social media platforms internationally and instantaneously retrieve real-time crime data from around the world.

Opinion Regarding the Fairness of the Transaction (Page 30)

On August 17, 2016, in connection with the Merger, Simon Financial, Inc., referred to as Simon, rendered its oral opinion to the Board, confirmed in writing by delivery of Simon’s written opinion dated August 23, 2016, to the effect that, as of that date and based upon and subject to the qualifications, limitations and assumptions stated therein, the Merger Consideration payable pursuant to the Merger Agreement was fair, from a financial point of view, to the Company’s stockholders.

The full text of Simon’s written opinion, which describes the assumptions made, procedures followed, matters considered, exceptions to the opinion and limitations on the scope of the review undertaken by Simon in connection with its opinion, is included as Annex E to this Information Statement and is incorporated herein by reference. The summary of Simon’s written opinion set forth in this Information Statement under the caption titled “Opinion Regarding the Fairness of the Transaction” beginning on page 30 is qualified in its entirety by reference to the full text of Simon’s opinion. Simon presented its opinion to the Board in connection with its evaluation of the Merger Consideration from a financial point of view. Simon’s opinion does not address any other aspects or implications of the Merger and does not constitute a recommendation of the Merger or any other matter.

The Plan Amendment (Page 14)

As a condition to completing the Merger, we must amend the Company’s 2014 Equity Incentive Plan such that the number of shares available for issuance pursuant to awards thereunder, in total, shall equal 1,125,000 immediately upon the effective time of the Merger.

The Forward Split (Page 16)

As a condition to completing the Merger, we must effect a forward split of the issued and outstanding and authorized Common Stock at a ratio of 2:1 or such other ratio mutually agreed upon by the Company and Zone; provided, however, that no forward split shall be effected if a forward split would cause the market price of the Common Stock to be less than the minimum price required for listing on the Nasdaq Capital Market.

The Note Financing (Page 18)

On September 7, 2016 (the “Closing Date”), pursuant to a Securities Purchase Agreement entered into by the Company and two accredited investors (collectively, the “Buyers”), one being an institutional investor (the “Investor”) and the other being the Company’s placement agent, Palladium Capital Advisors, LLC (the “Placement Agent”), the Company completed a private offering (the “Note Financing”) of $4,381,075 in principal amount of Senior Secured Convertible Notes (the “Notes”). The Investor paid the purchase price for the Notes it purchased by paying $1 million to the Company in cash and issuing to the Company a promissory note in the principal amount of $3 million. The Placement Agent accepted a Note in the principal amount of $80,000 as payment for the cash portion of its commission in that amount owed by the Company. The Note Financing was made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder.

The Certificate Amendment (Page 22)

Pursuant to the terms of the Securities Purchase Agreement executed in conjunction with the Note Financing, the Company agreed to take the action necessary to increase the Company’s authorized shares of Common Stock from 30 million to 100 million.

The Reverse Split (Page 24)

Although the Company has no immediate plans to consolidate the shares of its Common Stock currently outstanding, the Majority Stockholder has approved a one-time reverse split of the Common Stock if the Board determines, in its sole and absolute discretion, that the Reverse Split is in the best interests of the Company and its stockholders.

Effect of the Merger on Our Current Stockholders (Page 8)

Assuming that the Buyers do not convert the Notes into Common Stock prior to the Merger, then immediately following the Merger, Zone’s stockholder(s) will own approximately 43% of the issued and outstanding shares of Common Stock and the Company’s pre-Merger stockholders will own approximately 57% of the issued and outstanding Common Stock.

Management Following the Merger (Page 28)

Following the Merger, our Board will be comprised of five persons, two of which we will appoint and two of which will be appointed by Zone. The Merger Agreement provides that the fifth director will be designated by a majority in interest of the investors in the Capital Raising Transaction, as defined in the Merger Agreement. Theodore Farnsworth, Zone’s Chief Executive Officer, will be one of the directors appointed by Zone and will be named Chairman of the Board. Carl Schramm will be the second director appointed by Zone. The Company will appoint Prathap Singh and G. K. Muralikrishna as directors.

Parthasarathy (Pat) Krishnan, our Chief Executive Officer and Interim Chief Financial Officer, is expected to retain those positions following the Merger. Upon completion of the Merger, Mr. Farnsworth will remain Chief Executive Officer of Zone, as our subsidiary, and Mr. Krishnan is expected to be appointed as the Chief Technology Officer of Zone.

Biographical information relating to the post-Merger directors and officers is included at page 28 below.

Conditions to Closing the Merger (Page 9)

Several conditions must be met by the Company and Zone (or waived) before the Merger can be consummated. These conditions include approval of the Merger Agreement and the Related Transactions by our stockholders and Zone’s stockholders; we must have consummated the Capital Raising Transaction (as defined in the Merger Agreement) and effected the Plan Amendment and the Forward Split; we must have received approval of the Nasdaq Capital Market to list the Common Stock to be issued in the Merger and the Capital Raising Transaction (as defined in the Merger Agreement); the Nasdaq Hearings Panel must have rendered a final decision that will continue our listing on Nasdaq; we and Zone must be satisfied with the results of our due diligence investigations no later than September 16, 2016; the listing of our Common Stock on Nasdaq will not have been suspended; and we must have received, no later than August 23, 2016, an opinion of a financial advisor that the exchange ratio in the Merger and certain other transactions will be fair to us and to our stockholders.

As set forth in this Information Statement, the Merger Agreement and the Related Transactions have been approved by the Majority Stockholder.

On August 23, 2016 we received an opinion from Simon Financial, Inc. that based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Merger Consideration payable pursuant to the Merger Agreement was fair, from a financial point of view, to the Company’s stockholders and on September ____, 2016, Zone acknowledged and agreed that the Note Financing satisfied the Capital Raising Transaction condition.

Termination of the Merger Agreement (Page 9)

The Merger Agreement contains certain termination rights for each of us and Zone, including the right of each party to terminate the Merger Agreement if the Merger has not been consummated by November 15, 2016. Neither we nor Zone is permitted to solicit, initiate or knowingly encourage submission or announcement of any inquiries or offers that constitute or would reasonably be expected to lead to any “Acquisition Proposal” (as defined in the Merger Agreement). However, prior to the receipt of, in the case of Zone, approval of Zone’s stockholders, or, in our case, the approval of our stockholders, Zone’s board of directors or our Board, as applicable, may participate in negotiations or discussions with any third party that has made a bona fide, unsolicited Acquisition Proposal that the applicable board determines in good faith, after consultation with its outside legal counsel and financial advisors, constitutes or could reasonably be expected to result in a Superior Proposal (as defined in the Merger Agreement). Each party has the right to terminate the Merger Agreement if the other party enters into an acquisition agreement with respect to a Superior Proposal under certain circumstances further described in the Merger Agreement.

Termination Fees and the Payment of Expenses

In the event that Zone terminates the Merger Agreement on the basis of a Superior Proposal entered into by Zone, Zone must pay a $750,000 termination fee, and if we terminate the Merger Agreement on the basis of a Superior Proposal entered into by us, we must pay to Zone a $750,000 termination fee.

If Zone were to terminate the Merger Agreement due to the breach or failure, by us or by Sub, of our respective representations, warranties, covenants or agreements included in the Merger Agreement, if we are unable to cure the breach or failure and a failure of a condition results, we will be required to pay to Zone an amount in cash (which in no event will exceed $500,000) equal to Zone’s actual Expenses (as defined in the Merger Agreement) incurred in connection with the Merger Agreement and the transactions contemplated thereby.

Tax Effect of the Merger on our Stockholders (Page 12)

The Merger has been structured to be treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended. However, neither we nor Zone has received an opinion from a tax expert or a ruling from any taxing authority regarding the possible income tax consequences of the Merger to our stockholders.

Accounting Treatment of the Merger (Page 12)

The Merger will be accounted for as a purchase transaction for financial accounting purposes.

RISKS RELATING TO THE MERGER

There is no guarantee that the Merger will be completed. Failure to complete the Merger could negatively impact our stock price and our future business and financial results.

The Merger is subject to several material conditions. We cannot guarantee that these conditions will be satisfied or waived and that the Merger will be completed.

If the Merger is not completed, our business, prospects, financial condition and stock price may be adversely affected. Additionally, if the Merger is not completed and the Merger Agreement is terminated in certain circumstances described in the Merger Agreement where we accept an unsolicited superior offer, we may be required to pay to Zone a termination fee of $750,000. In addition, we have already incurred significant transaction expenses in connection with the Merger, which may have an adverse effect on our financial position if the Merger Agreement is terminated and we are unable to recoup such expenses from Zone. Risks arising in connection with the failure of the Merger, including the diversion of management’s attention from conducting our business and pursuing other opportunities during the pendency of the Merger, may have an adverse effect on our business, operations, financial results and stock price. In addition, we could be subject to litigation related to any failure to consummate the Merger or any related action that could be brought to enforce a party’s obligation under the Merger Agreement.

The Merger involves risks associated with acquisitions and integrating the acquired business and the intended benefits of the Merger may not be realized.

The Merger involves risks associated with acquisitions and integrating the acquired business into our existing operations, including, but not limited to, the failure of Zone to perform as well as we anticipate and unexpected costs, delays, and challenges may arise in integrating Zone’s business into our existing operations.

Even if we successfully integrate Zone’s business into our operations, it may not be possible to realize the full benefits we anticipate or we may not realize these benefits within the expected timeframe. If we fail to realize the benefits we anticipate from the Merger, then our business, results of operations, and financial condition may be materially and adversely affected.

We have incurred significant transaction costs in connection with the Merger.

We have incurred significant costs in connection with the Merger including legal, accounting, financial consulting, and related fees. We may incur additional costs to retain key employees. We may also incur fees and costs related to formulating integration plans. We may be unable to realize efficiencies with the Merger that would allow us, over time, to offset the costs incurred in connection with the Merger.

The market price of our Common Stock may decline as a result of the Merger.

The market price of our Common Stock may decline as a result of the Merger if, among other things, we are unable to achieve growth in earnings or if the aggregate transaction costs related to the Merger are greater than expected. The market price also may decline if we do not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by the investment community or if the effect of the Merger on our financial results is not consistent with the expectations of the investment community.

1. THE MERGER AGREEMENT AND THE MERGER

The Merger Agreement

On July 7, 2016 (the “Signing Date”), we, Sub and Zone entered into the Merger Agreement, pursuant to which Sub will merge with and into Zone, with Zone surviving as our wholly owned subsidiary (the “Merger”), subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement.

At the effective time of the Merger (the “Effective Time”), all the issued and outstanding shares of Zone’s common stock (excluding any Dissenting Shares as defined in the Merger Agreement) will be converted into the right to receive shares of our Common Stock, in the ratio of a 0.174 share of our Common Stock for each share of Zone common stock (subject to proportionate adjustment for forward or Reverse Splits and adjustments to ensure that our post-Effective Time capital structure is consistent with the Post-Merger Capitalization as defined in the Merger Agreement) (the “Exchange Ratio”), for an aggregate of 1,740,000 shares of our Common Stock (the “Merger Consideration”).

Provided that the Buyers do not convert the Notes into shares of Common Stock prior to the Merger, we currently anticipate that, immediately after giving effect to the Merger, the Merger Consideration will represent approximately 43% of the issued and outstanding shares of our Common Stock and our pre-Merger stockholders would hold shares of our Common Stock representing approximately 57% of our issued and outstanding Common Stock.

If, prior to the Merger, the Buyers were to convert the entire principal amount of the Notes into shares of our Common Stock at the conversion price of $8.075 per share, the Company would issue to the Buyers 542,548 shares of our Common Stock (excluding the conversion of any interest accrued on the Notes prior to the Merger) which would represent approximately 12% of our issued and outstanding Common Stock, without giving effect to the Buyers’ beneficial ownership limitations under the Notes. In that event, immediately after giving effect to the Merger, the Merger Consideration would represent approximately 38% of our issued and outstanding Common Stock and our pre-Merger stockholders would hold shares of Common Stock representing approximately 50% of our issued and outstanding Common Stock.

If, prior to the Merger, the Buyers were to convert the entire principal amount of the Notes into shares of our Common Stock at the Buyers’ alternate right of conversion floor price under the Notes of $4.00 per share, the Company would issue to the Buyers 1,095,269 shares of our Common Stock (excluding the conversion of any interest accrued on the Notes prior to the Merger), which would represent approximately 21% of our issued and outstanding Common Stock, without giving effect to the Buyers’ beneficial ownership limitations under the Notes. In that event, immediately after giving effect to the Merger, the Merger Consideration would represent approximately 34% of our issued and outstanding Common Stock and our pre-merger stockholders would hold shares of Common Stock representing approximately 45% of our issued and outstanding Common Stock.

We, together with Zone and Sub, each made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants to conduct the respective businesses of our company and Zone in the ordinary course, subject to certain exceptions, during the interim period between the Signing Date and the Effective Time.

Conditions to Closing the Merger

The obligation of the parties to consummate the Merger is subject to a number of closing conditions, including, among other customary conditions:

As set forth in this Information Statement, the Merger Agreement and the Related Transactions have been approved by the Majority Stockholder.

On August 23, 2016 we received an opinion from Simon Financial, Inc. that based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Merger Consideration payable pursuant to the Merger Agreement was fair, from a financial point of view, to the Company’s stockholders and on September ____, 2016, Zone acknowledged and agreed that the Note Financing satisfied the Capital Raising Transaction condition.

Termination Rights

Prior to the Effective Time, as defined in the Merger Agreement, we or Zone may terminate the Merger Agreement for a number of reasons, including the following:

Termination Fees and Expenses

In the event that Zone terminates the Merger Agreement on the basis of a Superior Proposal entered into by Zone, Zone must pay to us a $750,000 termination fee, and if we terminate the Merger Agreement on the basis of a Superior Proposal entered into by us, we must pay to Zone a $750,000 termination fee.

If Zone were to terminate the Merger Agreement due to the breach or failure, by us or by Sub, of our respective representations, warranties, covenants or agreements included in the Merger Agreement, which breach or failure to perform is not cured within 30 days of our receipt of a written notice from Zone of such breach or failure to perform, and the breach or failure to perform would result in a failure of certain conditions which we or Sub must satisfy in conjunction with the consummation of the Merger, we will be required to pay to Zone an amount in cash (which in no event will exceed $500,000), by wire transfer of immediately available funds, equal to Zone’s actual Expenses (as defined in the Merger Agreement) incurred in connection with the Merger Agreement and the transactions contemplated thereby.

Appointment of Directors and Officers

At the Effective Time, Zone and the Majority Stockholder will each have the right to designate two directors to our Board. The Merger Agreement provides that the fifth director will be designated by a majority in interest of the investors in the Capital Raising Transaction, as defined in the Merger Agreement. Theodore Farnsworth, Zone’s Chief Executive Officer, will be one of the directors appointed by Zone and will be named Chairperson of the Board. Carl Schramm will be the second director appointed by Zone. The Company will appoint Prathap Singh and G. K. Muralikrishna as directors.

Parthasarathy (Pat) Krishnan, our Chief Executive Officer and Interim Chief Financial Officer, is expected to retain those positions following the Merger. Upon completion of the Merger, the Chief Executive Officer and controlling stockholder of Zone, Theodore Farnsworth, will remain Chief Executive Officer of Zone, as our subsidiary, and Pat Krishnan is expected to be appointed as the Chief Technology Officer of Zone.

The names, ages and biographies of the post-merger officers and directors is included in this Information Statement in the section titled “Management following the Merger”.

Voting and Support Agreements of Certain of Our Company Stockholders and Zone Stockholder

Concurrently with the execution of the Merger Agreement the Majority Stockholder and the controlling stockholder of Zone, Theodore Farnsworth, entered into voting and support agreements, pursuant to which such stockholders have agreed to vote in favor of or consent in writing to the Merger and the Related Transactions, as applicable (the “Voting Agreements”).

Under the Voting Agreements, Mr. Farnsworth and the Majority Stockholder also agreed not to transfer, sell, offer to sell, exchange, assign, pledge or otherwise dispose of or encumber any Zone common stock or our Common Stock, respectively, held by such holder (unless, with respect to any proposed transfer of the Zone common stock, we have approved) prior to (i) the Merger becoming effective; (ii) the termination of the Merger Agreement in accordance with its terms; (iii) or a voluntary termination of such holder’s Voting Agreement by the holder following (A) any increase in the Merger Consideration in the case of stockholders of our company party to a Voting Agreement or a decrease in the Merger Consideration in the case of stockholders of Zone party to a Voting Agreement; (B) any change to the form of Merger Consideration; or (C) the first anniversary of the date of such holder’s Voting Agreement; whichever occurs first.

Interests of Our Chief Executive Officer in the Merger

At the Effective Time of the Merger, Pat Krishnan, our Chief Executive Officer and Interim Chief Financial Officer, will continue to serve in those positions and will be appointed as the Chief Technology Officer of Zone.

Total Company Shares Outstanding after the Merger

Provided that the Buyers do not convert the Notes into shares of Common Stock prior to the Merger, we currently anticipate that, immediately after giving effect to the Merger, the Merger Consideration will represent approximately 43% of the issued and outstanding shares of our Common Stock and our pre-Merger stockholders would hold shares of our Common Stock representing approximately 57% of our issued and outstanding Common Stock.

If, prior to the Merger, the Buyers were to convert the entire principal amount of the Notes into shares of our Common Stock at the conversion price of $8.075 per share, the Company would issue to the Buyers 542,548 shares of our Common Stock (excluding the conversion of any interest accrued on the Notes prior to the Merger) which would represent approximately 12% of our issued and outstanding Common Stock, without giving effect to the Buyers’ beneficial ownership limitations under the Notes. In that event, immediately after giving effect to the Merger, the Merger Consideration would represent approximately 38% of our issued and outstanding Common Stock and our pre-Merger stockholders would hold shares of Common Stock representing approximately 50% of our issued and outstanding Common Stock.

If, prior to the Merger, the Buyers were to convert the entire principal amount of the Notes into shares of our Common Stock at the Buyers’ alternate right of conversion floor price under the Notes of $4.00 per share, the Company would issue to the Buyers 1,095,269 shares of our Common Stock (excluding the conversion of any interest accrued on the Notes prior to the Merger), which would represent approximately 21% of our issued and outstanding Common Stock, without giving effect to the Buyers’ beneficial ownership limitations under the Notes. In that event, immediately after giving effect to the Merger, the Merger Consideration would represent approximately 34% of our issued and outstanding Common Stock and our pre-Merger stockholders would hold shares of Common Stock representing approximately 45% of our issued and outstanding Common Stock.

Material United States Federal Income Tax Consequences of the Merger to Our Stockholders

We and Zone expect that the Merger will be treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended. However, neither we nor Zone has received an opinion from a tax expert or a ruling from any taxing authority regarding the possible income tax consequences of the Merger to our stockholders.

Accounting Treatment of the Merger

The Merger will be accounted for as a purchase as that term is used under generally accepted accounting principles, for accounting and financial reporting purposes. Under purchase accounting, the assets (including identifiable intangible assets) and liabilities (including executory contracts and other commitments) of Zone as of the effective time of the Merger will be recorded at their respective fair values and added to our assets and liabilities. Any excess of purchase price over the fair values is recorded as goodwill.

Regulatory Requirements or Approvals

We are not aware of any material governmental or regulatory requirements or approvals required for completion of the Merger Agreement and the other Action Items, other than compliance with the relevant federal and state securities laws, the NASDAQ Marketplace Rules and the DGCL.

Material Agreements or Relationships

Other than the Merger Agreement and the Voting Agreements, which are discussed elsewhere in this Information Statement, there is no present or proposed material agreement, arrangement, understanding or relationship between the Company or any of its executive officers, directors, controlling persons or subsidiaries and Zone or any of its executive officers, directors, controlling persons or subsidiaries. Please see the section titled “Reasons for Entering into the Merger Agreement and Background of the Merger” for information relating to the negotiations between us and Zone leading up to the Merger.

REASONS FOR ENTERING INTO THE MERGER AGREEMENT AND

BACKGROUND OF THE MERGER

Reasons for Entering into the Merger Agreement

On June 24, 2016 our Board unanimously approved the Merger Agreement and the Related Transactions contemplated thereby and determined that the Merger Agreement and the Related Transactions are in the best interests of the Company and its stockholders.

Before reaching its decision, the Board:

The Board considered a wide variety of factors in connection with its evaluation of the Merger Agreement and the Related Transactions. In light of the complexity of those factors, the Board, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Individual members of the Board may have given different weight to different factors.

In considering the Merger Agreement and the Related Transactions, the Board considered the following factors, although not weighted or in any order of significance:

Background of the Merger

Our Board has regularly reviewed our results of operations and competitive position, as well as our strategic respective alternatives. From time to time, our Board has evaluated potential strategic transactions, including business combinations, such as the Merger, that could potentially benefit us.

Initial discussion between the Company’s and Zone’s respective management commenced in early 2016. The Company and Zone entered into a confidentiality agreement on February 15, 2016 with respect to the parties’ obligations regarding the exchange of information with respect to the evaluation of potential synergies between our company and Zone. At the time of these discussions, no particular transaction or strategic alliance was contemplated.

On February 16, 2016, our former Chief Executive Officer was introduced, by our legal counsel, to Mr. Farnsworth.

On February 17, 2016, our former Chief Executive Officer and Mr. Farnsworth held their first meeting in New York about a possible merger transaction.

We experienced a change of management in March 31, 2016 and on April 1, 2016 Mr. Krishnan was appointed as our Chief Executive Officer.

On May 13, 2016, Mr. Krishnan was introduced to Mr. Farnsworth by our legal counsel.

On May 14, 2016, Mr. Krishnan spoke by telephone to Mr. Farnsworth about a possible merger transaction.

During the period from May 14, 2016 through June 2, 2016 the Company and Zone, through their respective legal representatives, negotiated the terms of the merger transaction.

On June 3, 2016 we, Zone and the Majority Stockholder executed a term sheet with respect to the proposed merger and related financing transaction.  

During the period from June 3, 2016 through July 6, 2016 the Company and Zone, through their respective legal representatives, negotiated the terms of the Merger Agreement.

On July 7, 2016 Zone, Sub and the Company executed the Merger Agreement, following which the Company and Zone issued a joint press release, announcing the transaction, and the Company filed applicable disclosure documents with the SEC.

In early August 2016, Zone and the Company agreed that they each needed more time to complete their due diligence review of the other and that the Company needed more time to obtain the fairness opinion for the Merger. Accordingly, on August 25, 2016, the parties to the Merger Agreement executed the Merger Agreement Amendment.

In addition, on September ____, 2016 the parties executed the Second Merger Agreement Amendment, in order to acknowledge and agree that the Note Financing satisfied the financing condition of the Merger Agreement and to replace the pro forma capitalization table attached as Exhibit B to the Merger Agreement in light of the Note Financing.

2. The Plan Amendment

On March 3, 2014 our Board approved and adopted the Helios and Matheson Analytics Inc. 2014 Equity Incentive Plan (the “2014 Plan”) which initially sets aside and reserves 400,000 shares (the “Shares”) of our Common Stock for grant and issuance under the 2014 Plan, in accordance with its terms and conditions. As a condition to completing the Merger, on June 24, 2016 the Board and on September 21, 2016 the Majority Stockholder approved an amendment to the 2014 Plan such that the number of shares available for issuance pursuant to awards thereunder, in total, shall equal 1,125,000 immediately upon the effective time of the Merger.

The Company has made no awards from the 2014 Plan. The Company intends to award options in order to attract and retain the services or advice of such directors, employees, officers, agents, consultants, and independent contractors and to provide additional incentive for such persons to exert maximum efforts for the success of the Company and its affiliates. The following is a summary of the principal features of the 2014 Plan. The summary is qualified in its entirety by reference to the complete text of the 2014 Plan, as proposed to be amended. The proposed amendment to the 2014 Plan provides that Section 4.1 of the 2014 Plan shall read as follows:

4.1 Number of Shares. Subject to adjustment as provided in Section 4.2 below, the total number of Shares available for grant under the Plan shall be 1,125,000, and will include Shares that are subject to: (a) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option; (b) an Award granted hereunder but forfeited or repurchased by the Company at the original issue price; and (c) an Award that otherwise terminates without Shares being issued. Shares granted under the Plan may be either authorized but unissued Shares or treasury Shares. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan and all other outstanding but unvested Awards granted under this Plan.

Description of the 2014 Plan

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”). At this time we have 160 employees and consultants (including our executive officers, one of whom is an employee of our subsidiary) and three non-employee directors, all of whom are eligible to receive awards from the 2014 Plan. The 2014 Plan permits the Company to issue to Participants qualified and/or non-qualified options to purchase Common Stock, restricted Common Stock, performance units (comprised of, for example, Common Stock and an option to purchase Common Stock) and performance shares. The 2014 Plan will terminate on March 3, 2024. The Compensation Committee of the Board 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. At this time, there has been no determination made by the Compensation Committee regarding who will receive awards from the 2014 Plan. The 2014 Plan may be amended by the Board.

The exercise price of options granted from the 2014 Plan will be the fair market value of the Common Stock, defined in the 2014 Plan as the last quoted sales price on the date of grant, unless the option is designated as an incentive stock option and the Participant owns securities representing more than 10% of the voting power outstanding (a “10% Holder”), in which case the exercise price will be 110% of the fair market value. No option can have a term that is longer than 10 years; an incentive stock option granted to a 10% Holder cannot have a term that is longer than 5 years. Following the termination of a Participant’s employment for a reason other than death or disability, an outstanding option will terminate three months following the Participant’s separation from service. If a Participant’s employment is terminated as a result of death or disability, an outstanding option will terminate one year following the Participant’s separation from service. Upon the exercise of any option, the exercise price will be payable to us in full in cash or its equivalent. The Compensation Committee, in its sole discretion, also may permit exercise (i) by tendering previously acquired Common Stock, owned for more than six months, having an aggregate fair market value at the time of exercise equal to the total exercise price or (ii) by any other means which the Compensation Committee, in its sole discretion, determines to both provide legal consideration for the Common Stock, and to be consistent with the purposes of the 2014 Plan. As of the record date, the fair market value of a share of our Common Stock was $[ ].

Federal Income Tax Consequences of the Issuance and Exercise of Stock Options

The following discussion is only a general overview of the tax effects of awards of stock options. It is not a comprehensive discussion or analysis of the tax effect of an award granted to any individual Participant. It is the responsibility of a Participant who receives an award from the 2014 Plan to consult with his or her tax advisor to determine the tax effects of the grant of any award to him or her.

Non-Statutory Stock Options

Under the current provisions of the Internal Revenue Code, if shares of Common Stock are issued to the original holder of a non-qualified option granted and exercised under the 2014 Plan (assuming there is not an active trading market for options of the Company), the Participant will not recognize income at the time of the grant of the option. However, on exercise of the option and purchase of the Common Stock, the Participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares of Common Stock acquired at the time of exercise over the exercise price. Furthermore, upon the sale of the shares of Common Stock the Participant will recognize a short-term or long-term capital gain, or loss, as the case may be, in an amount equal to the difference between the amount the Participant received from the sale of those shares and the Participant’s tax basis in the shares (as described below). Finally, we will be entitled to expense as compensation the amount of ordinary income that the holder recognized.

If the Participant pays the exercise price entirely in cash, the tax basis of the shares of Common Stock will be equal to the amount of the exercise price paid plus the ordinary income recognized by the Holder from exercising the options. This basis should equal the fair market value of the shares of Common Stock acquired on the date of exercise. The holding period will begin on the day after the tax basis of the shares is determined.

The ordinary income received by the holder on exercise of the option is considered to be compensation from the Company. As with other forms of compensation, withholding tax and other trust fund payments will be due with respect to the exercise of the options.

Incentive Stock Options

The rule stated above is different when there has been an acquisition of our Common Stock pursuant to the exercise of an incentive stock option. The rules governing incentive stock options prevent the taxation of the options as income to the Participant at the time the option is granted or at the time the Participant exercises the option and buys the stock. The Participant incurs tax (which is at capital gains rates) only at the time of the sale of the stock the Participant purchased by exercising the option. However, in order to take advantage of the special tax treatment, there are certain restrictions relating to incentive stock options that must be met. The employee must have an option to receive shares of the corporation employing him, its parent or its subsidiary. The options must be granted within 10 years from the date that the plan is adopted by the Board of Directors or approved by the stockholders, whichever is earlier. Further, the option granted must be exercisable within 10 years from the date it is granted (five years in the case of a 10% Holder). The option price may not be less than the fair market value of the stock at the time the option is granted (110% of the fair market value in the case of a 10% Holder), and the option may not be transferred other than by death. The option may be exercised only by the employee (unless the employee dies, in which case his executor, administrator or representative would be entitled to exercise). The employee must remain an employee of the corporation from the time the option is granted until three months before the option is exercised. Once the stock has been purchased by exercise of the incentive option, it cannot be sold within two years from the date the option was granted or within one year from the date the option was exercised and the stock was purchased, whichever is later. 

3. THE FORWARD SPLIT

On June 24, 2016 the Board and on September 21, 2016 the Majority Stockholder, as a condition of the closing of the Merger, adopted and approved a resolution to effect a forward split of all issued and outstanding shares of Common Stock, at a ratio mutually agreed upon by the Company and Zone (the “Forward Split”).  The Forward Split shall be effective upon the Effective Time of the Merger; provided, however, that no forward split shall be effected if a forward split would cause the market price of the Common Stock to be less than the minimum price required for listing on the Nasdaq Capital Market.

A table illustrating the Forward Split, presuming a 2:1 ratio, is as follows:

The Board also reserves the right, notwithstanding stockholder approval and without further action by stockholders, to not proceed with the Forward Split if the Board, in its sole discretion, determines that the Forward Split is no longer in our best interests and that of our stockholders in the event the Merger does not close.  The Board may consider a variety of factors in determining whether or not to implement the Forward Split, including, but not limited to, overall trends in the stock market, recent changes and anticipated trends in the per share market price of the Common Stock, business and transactional developments, and our actual and projected financial performance.

Except for any changes as a result of the treatment of fractional shares, each stockholder of the Company will hold the same percentage of Common Stock outstanding immediately following the Forward Split as such stockholder held immediately prior to the split.

Purpose

The Board believed that it was in the best interests of the Company to implement the Forward Split as a condition to the closing of the Merger. 

Principal Effects of the Forward Stock Split

The Forward Split will have the following effects:

General Corporate Change  – (i) one share of Common Stock owned by a stockholder pre-split would be exchanged for such number of shares of Common Stock as mutually determined by the Company and Zone post-split, and (ii) the number of shares of Common Stock issued and outstanding will be increased proportionately based on the Forward Split.

As approved and effected, the Forward Stock Split will be effected simultaneously for all Common Stock.  While the intent is for the proposed forward split to affect all of the Company’s stockholders uniformly, the process of rounding up when any of the Company’s stockholders own a fractional share will result in a non-material change in each stockholder’s percentage ownership interest in the Company.

The Forward Split does not materially affect the proportionate equity interest in the Company of any holder of Common Stock or the relative rights, preferences, privileges or priorities of any such stockholder.

Fractional Shares  - Any fractional shares of Common Stock resulting from the forward split will “round up” to the nearest whole number.  No cash will be paid to any holders of fractional interests in the Company.

Authorized Shares  - The Forward Split will not change the number of authorized shares of Common Stock of the Company, as stated in the Company’s Articles of Incorporation, as amended. 

Accounting Matters  - The Forward Split will not affect the par value of Common Stock.  As a result, as of the effective time of the Forward Split, the stated capital on the Company’s balance sheet attributable to the Common Stock will be increased proportionately based on the Forward Split ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is increased.  The per share net income or loss and net book value of the Common Stock will be restated because there will be a greater number shares of Common Stock outstanding.

Procedure for Effecting the Forward Split and Exchange of Stock Certificates

Upon effectiveness of the Forward Split, each outstanding share of the Company will automatically be converted on the effective date at the applicable Forward Split ratio. It will not be necessary for stockholders to exchange their existing stock certificates.

Certain of our registered holders of Common Stock may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have stock certificates evidencing their ownership of our Common Stock.  They are, however, provided with a statement reflecting the number of shares registered in their accounts.  If a stockholder holds registered shares in book-entry form with our transfer agent, no action needs to be taken to receive post-Forward Split shares. If a stockholder is entitled to post-Forward Split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares of Common Stock held following the Forward Split.

Federal Income Tax Consequences of the Forward Split

The following is a summary of certain material federal income tax consequences of the Forward Split.  It does not purport to be a complete discussion of all of the possible federal income tax consequences of the Forward Split and is included for general information only.  Further, it does not address any state, local or foreign income or other tax consequences.  Also, it does not address the tax consequences to holders that are subject to special tax  rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, non-resident alien individuals, broker-dealers and tax-exempt entities.  The discussion is based on the provisions of the United States federal income tax law as of the date hereof, which is subject to change retroactively as well as prospectively.  This summary also assumes that the pre-split shares were, and the post-split shares will be, held as a “capital asset,” as defined in the Internal Revenue Code of 1986, as amended (i.e., generally, property held for investment).  The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder.  Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Forward Split.

No gain or loss should be recognized by a stockholder upon such stockholder’s exchange of pre-split shares for post-split shares pursuant to the Forward Split.  The aggregate tax basis of the post-split shares received in the Forward Split (including any fraction of a post-split share deemed to have been received) will be the same as the stockholder’s aggregate tax basis in the pre-split shares exchanged therefor.  The stockholder’s holding period for the post-split shares will include the period during which the stockholder held the pre-split shares surrendered in the Forward Split.

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, STOCKHOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS INFORMATION STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON BY STOCKHOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON STOCKHOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE COMPANY IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE COMPANY OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) STOCKHOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The Company’s view regarding the tax consequences of the Forward Split is not binding on the Internal Revenue Service or the courts.  Accordingly, each stockholder should consult with his or her own tax advisor with respect to all of the potential tax consequences to him or her of the Forward Split.

4. THE NOTE FINANCING

The following discussion of the Note Financing does not purport to be a complete description of the various documents described below. The discussion of documents is qualified in its entirety by reference to the full text of the documents, each of which was attached as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2016.

On September ____, 2016, Zone acknowledged and agreed that the Note Financing satisfied the Capital Raising Transaction condition included in the Merger Agreement.

On the Closing Date, pursuant to a Securities Purchase Agreement (the “SPA”) entered into by the Company and the Buyers, the Company completed the Note Financing. The Investor paid the purchase price for the Notes it purchased by paying $1 million to the Company in cash and issuing to the Company a promissory note in the principal amount of $3 million. The Placement Agent accepted a Note in the principal amount of $80,000 as payment for the cash portion of its commission in that amount owed by the Company. The Note Financing was made pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder.

On the Closing Date, the Company used $750,000 of the proceeds from the sale of the Notes to provide, through its newly formed wholly-owned subsidiary, HMNY Zone Loan LLC, a senior secured loan to Zone, secured by all of Zone’s assets, and the remainder of the proceeds for general corporate purposes.

If the Company proposes to undertake a subsequent offering of its securities, subject to certain customarily exempt securities, at any time on or prior to the later of (x) the date the Notes held by the Investor are no longer outstanding and (y) the second anniversary of the Closing Date, the Investor will have the right to subscribe for up to 50% of the securities offered.

The SPA requires the Company to reimburse the Investor for all reasonable costs and expenses incurred by the Investor or its affiliates in connection with the structuring, documentation, negotiation and closing of the Note Financing.

Investor Note

The Investor Note is payable in full on December 7, 2017. The Investor’s obligation to pay the Company the Purchase Price Balance pursuant to the Investor Note is secured by $3 million, in the aggregate, in cash, cash equivalents, any Group of Ten (“G10”) currency and any notes or other securities issued by any G10 country. The Company will receive the Purchase Price Balance upon each voluntary or mandatory prepayment of the Investor Note. An Investor may, at its option at any time after September 28, 2016, voluntarily prepay the Investor Note, in whole or in part. The Investor Note is also subject to mandatory prepayment, in whole or in part, upon the occurrence of one or more of the following mandatory prepayment events:

(1) Mandatory Prepayment upon Conversion of Note – At any time the Investor has converted $1,301,075 or more in principal amount of the Note, the Investor will be required to prepay the Investor Note, on a dollar-for-dollar basis, for each subsequent conversion of the Note.

(2) Mandatory Prepayment upon Mandatory Prepayment Notices – The Company may require the Investor to prepay the Investor Note by delivering a mandatory prepayment notice to the Investor, subject to (i) the satisfaction of certain equity conditions, and (ii) the Investor’s receipt of a valid written notice by the Company electing to effect a mandatory conversion of Restricted Principal (defined as $3 million of the principal amount of the Notes), not in excess of the Maximum Mandatory Share Amount or the Maximum Mandatory Conversion Amount (each as defined below under the heading  Conversion of the Notes ).

The Investor Note also contains certain offset rights, which if executed, would reduce the amount outstanding under the Note and the Investor Note and the cash proceeds received by the Company.

Placement Agent Warrant

In addition to issuing a Note to the Placement Agent in the principal amount of $80,000, the Company issued a 5-year warrant (the “Placement Agent Warrant”) to the Placement Agent as partial payment for its placement agent services. The Placement Agent Warrant allows the Placement Agent to purchase 9,908 shares (the “Warrant Shares”) of Common Stock at an exercise price of $9.36 per share. If, after the first anniversary of the Closing Date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Placement Agent, then the Placement Agent Warrant may also be exercised, in whole or in part, by means of a “cashless exercise”. The Placement Agent Warrant may not be exercised if, after giving effect to the exercise the Placement Agent, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the Warrant Shares. Upon not less than 61 days’ prior notice to the Company, the Placement Agent may increase or decrease the ownership limitation, provided that the ownership limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of the Warrant Shares.

The Notes

Principal Amount

The aggregate principal amount of the Notes is $4,381,075.

Maturity Date

Unless earlier converted or redeemed, the Notes mature 15 months from the date they were issued.

Interest and Payment of Interest

The Notes bear interest at a rate of 6% per annum, subject to an increase to 12% during the first 30 days following the occurrence and continuance of an Event of Default and to 18% thereafter. Interest on the Notes will be payable in arrears commencing on December 1, 2016 and quarterly thereafter, beginning on January 1, 2017 and, so long as the Equity Conditions have been satisfied, may be paid in shares of Common Stock at the Company’s option. The Company may also elect to pay interest in whole or in part in cash. Interest on the Notes is computed on the basis of a 360-day year and twelve 30-day months.

Conversion of the Notes

The Buyers may, at any time, elect to convert the Notes into shares of Common Stock at the Conversion Price, subject to certain beneficial ownership limitations described below. The Conversion Price is $8.075. The Company may, with the consent of the Investor, reduce the then current Conversion Price to any amount equal to or greater than the Floor Price ($4.00) for any period of time deemed appropriate by the Board.

The Buyers also have the right to convert the Notes into shares of the Common Stock at the Alternate Conversion Price, subject to certain beneficial ownership limitations described below. The Alternate Conversion Price is defined as the lowest of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, (ii) the greater of (I) the Floor Price ($4.00) and (II) 87% of the quotient of (x) the sum of the volume weighted average price of Common Stock for each of the five consecutive Trading Days ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable conversion notice, divided by (y) five.

If the Company consummates a Qualified Financing and the Equity Conditions are satisfied, the Company may require the holders of the Notes to convert all or any part of the Notes, up to the Maximum Mandatory Share Amount and the Maximum Mandatory Conversion Amount (each, a “Mandatory Conversion”). If on the fifth Trading Day immediately following a Mandatory Conversion Date and on each fifth Trading Day thereafter through and including the fifteenth Trading Day immediately following such Mandatory Conversion Date (each, a “True-Up Date”) the True-Up Price is less than the applicable Mandatory Conversion Price, the Company must deliver to the holders of the Notes an additional number of shares of Common Stock equal to the difference between the number of shares of Common Stock delivered to the holders as a result of the Mandatory Conversion and the number of shares determined by dividing the principal, interest and late charges converted by the True-Up Price. The “True-Up Price” is defined as 85% of the lowest volume weighted average price of the Common Stock on the Trading Day with the lowest volume weighted average price during the 15 consecutive Trading Days following the Mandatory Conversion.

“Mandatory Conversion Date” means the third Trading Day following the delivery by the Company of a Mandatory Conversion Notice.

“Maximum Mandatory Share Amount” with respect to any Mandatory Conversion Date means 100% of the quotient of (x) the sum of the composite aggregate daily share trading volume of the Common Stock for each Trading Day during the 5 Trading Day period ending and including the Trading Day immediately prior to the applicable Mandatory Conversion Notice Date, divided by (y) 5.

“Maximum Mandatory Conversion Amount” with respect to any Mandatory Conversion Date means the difference of (x) $500,000 less (y) the sum of each Conversion Amount converted under the applicable Note during the 5 Trading Day period ending and including the applicable Mandatory Conversion Date.

Beneficial Ownership Limitations on Conversion and Issuance

In addition to the conversion limitations describe above, the Notes may not be converted and shares of the Common Stock may not be issued under the Notes if, after giving effect to the conversion or issuance, the applicable holder of a Note together with its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding shares of Common Stock. At the Buyers’ option, the ownership limitation blocker may be raised or lowered to any other percentage not in excess of 9.99%, as applicable, except that any raise will only be effective upon 61-days’ prior notice to the Company.

Redemption of the Notes

Provided there has been no Equity Conditions Failure, the Company has the right to redeem all, but not less than all, of the amounts remaining unpaid under the Notes. The portion of the Notes subject to redemption can be redeemed by the Company in cash at a price equal to 110% of the amount being redeemed. In the event of a Change of Control, the Buyers may require the Company to redeem the Notes in cash at the Change of Control Redemption Price.

Events of Default

The Notes contain standard and customary Events of Default including but not limited to: (i) failure to register the Common Stock issuable upon conversion of the Notes within certain time periods or failure to keep the registration statement effective as required by the Registration Rights Agreement; (ii) failure to maintain the listing of the Common Stock; (iii) failure to make payments when due under the Note; (iv) breaches of covenants and (iv) bankruptcy or insolvency.

Following an Event of Default, the Buyers may require the Company to redeem all or any portion of the Notes. The redemption amount may be paid in cash or with shares of Common Stock, at the election of the Buyers, at a price equal to the Event of Default Redemption Price.

The Company must immediately redeem the Notes in cash upon the occurrence of a Bankruptcy Event of Default.

The Event of Default Redemption Price will be computed as a price equal to the greater of (i) 125% of the principal, interest and late charges to be redeemed and (ii) the product of (X) the principal, interest and late charges to be redeemed divided by the Conversion Price multiplied by (Y) the product of (1) 125% multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date preceding such Event of Default and ending on the date the Company makes the entire payment required to be made under the Note.

In addition, following an Event of Default, the holders of the Notes will have the right to convert the Notes at the “Alternate Conversion Event of Default Price” which means, with respect to any Alternate Conversion, that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii) 75% of the lowest volume weighted average price of the Common Stock for each of the 30 consecutive Trading Days ending and including the Trading Day of delivery or deemed delivery of the applicable Conversion Notice.

Fundamental Transactions

The Notes prohibit the Company from entering into specified transactions involving a change of control unless the successor entity, which must be a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market, assumes in writing all of the Company’s obligations under the Note.

New Debt

With the exception of Permitted Indebtedness the Company has agreed that for a period of 90 days following payment in full of the Notes, it will not incur any other debt.

Security and Pledge Agreements and Guaranty

The Company and HMNY Zone Loan LLC each entered into a Security and Pledge Agreement in favor of the Investor as Collateral Agent. Pursuant to such Security and Pledge Agreements, the Notes are secured by a perfected first priority security interest in the Company’s equity ownership interest in HMNY Zone Loan LLC and the Investor Note, and all of the assets of the HMNY Zone Loan LLC, subject to Permitted Liens.

HMNY Zone Loan LLC also provided a Guaranty to the Investor as Collateral Agent whereby HMNY Zone Loan LLC guarantees the punctual payment of all obligations that accrue after the commencement of any insolvency proceeding of the Company, whether or not the payment of such obligations are enforceable or allowable in the insolvency proceeding, and all fees, interest, premiums, penalties, causes of actions, costs, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any of the Note Financing documents, and agrees to pay any and all costs and expenses (including counsel fees and expenses) incurred by the Collateral Agent in enforcing any rights under the Guaranty or any other Note Financing document.

Registration Rights Agreement

Under the terms of a Registration Rights Agreement with the Investor, the Company is required to register for resale the shares of Common Stock that are issuable upon conversion of the Notes, additional shares that could be used as payment of monthly interest plus an additional number of shares so that the total number of shares of Common Stock registered equals 125% of the sum of the maximum number of shares issuable upon conversion of the Notes. The Registration Rights Agreement requires the Company to file the registration statement within 30 days after the Closing Date and to have the registration statement declared effective 90 days after the Closing Date (or 120 days after the Closing Date if the registration statement is subject to review by the Securities and Exchange Commission). The Placement Agent has waived its right to have registered the shares of Common Stock issuable upon conversion of its Note.

The Registration Rights Agreement provides for the payment of liquidated damages of one and one-half percent (1.5%) of the product of (x) the number of shares of Common Stock required by the Registration Rights Agreement to be included in the registration statement and (y) the Closing Sale Price as of the Trading Day immediately prior to the date a Registration Delay Payment, defined as the failure to file the registration statement in the time required, the failure to have the registration statement declared effective in the time required, the failure to maintain the effectiveness of the registration statement or the failure to keep current public information in the marketplace.

The Company is required to keep the registration statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales on a delayed or continuous basis at then-prevailing market prices at all times until the earlier of (i) the date as of which the holders of the Notes may sell all of the Common Stock issuable pursuant thereto without restriction pursuant to Rule 144 or (ii) the date on which all of the Common Stock covered by the registration statement shall have been sold.

Voting and Lockup Agreement

In conjunction with the Note Financing, the Majority Stockholder executed a Voting and Lockup Agreement with the Company. Pursuant to the Voting and Lockup Agreement, the Majority Stockholder agreed to vote in favor of (i) the Company’s issuance of the Notes and the Common Stock into which the Notes can be converted and (ii) the Share Increase described below. The Majority Stockholder also agreed that, for a period beginning on the Closing Date and ending on the date when all of the principal outstanding under the Notes issued to the Investor consists of Restricted Principal thereunder, the Majority Stockholder will not (i) dispose of or agree to dispose of, directly or indirectly, any securities of the Company, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company owned directly by the Majority Stockholder (including holding as a custodian) or (iii) permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, or limitation on the Majority Stockholder’s voting rights, charge or other encumbrance of any nature with respect to the Majority Stockholder’s securities in the Company or (iv) engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Majority Stockholder’s securities in the Company or (v) directly or indirectly initiate, solicit or encourage any person to take actions which could reasonably be expected to lead to the occurrence of any of the foregoing.

5. CERTIFICATE AMENDMENT

Pursuant to the terms of the SPA the Company executed in conjunction with the Note Financing, the Company agreed to, among other things, increase the Company’s authorized shares of Common Stock from 30 million to 100 million (the “Share Increase”). The Board approved, by written consent in lieu of a meeting, the Share Increase and an amendment to the Company’s Certificate of Incorporation (the “Certificate Amendment”) to effect the Share Increase on August 30, 2016 and the Majority Stockholder approved the Share Increase and the Certificate Amendment by written consent on September 2, 2016. A copy of the Certificate Amendment is attached to this Information Statement as Annex F.

The SPA also requires the Company to reserve from its duly authorized capital stock not less than the greater of (I) 6 million shares of Common Stock and (II) 200% of the maximum number of Conversion Shares issuable upon conversion of the Notes (assuming that (x) the Note is convertible at the Alternate Conversion Price as of the Closing Date, (y) interest on the Note will accrue through the fifteen month anniversary of the Closing Date and will be converted in shares of Common Stock at a conversion price equal to the Alternate Conversion Price and (z) any such conversion will not take into account any limitations on the conversion of the Note).

The Company currently has authorized capital of 30,000,000 shares of Common Stock. Of that amount, 2,330,438 shares of Common Stock are issued and outstanding on the record date, 6 million shares of Common Stock are reserved for conversion of the Notes, 1,740,000 shares of Common Stock are reserved for the Merger Consideration, 9,908 shares of Common Stock are reserved for issuance pursuant to the exercise of the Placement Agent Warrant issued in connection with the Note Financing, 21,500 shares of Common Stock are reserved for conversion of the Note issued to the Placement Agent in connection with the Note Financing and 1,125,000 shares of Common Stock will be reserved for issuance under the Plan. Once the Forward Split is effected, the Company may have limited shares of Common Stock to issue in the future. Aside from making certain that the Company has adequate shares of Common Stock available to meet the Company’s obligations under the Notes issued in the Note Financing, the Board and the Majority Stockholder have approved the Share Increase and the Certificate Amendment in order to provide the Company with flexibility to raise capital, make acquisitions, or undertake other types of stock-based transactions if and when the opportunities arise. Once the Merger is completed, the Forward Split has been effected and the Certificate Amendment has been filed with the Secretary of State of the State of Delaware, the Company will have approximately 91,859,124 shares of Common Stock available for issuance. Any future issuances of our Common Stock will cause dilution, which could be substantial, to our stockholders.

The table below illustrates, as of the record date, the effect of the transactions discussed above on the Company’s authorized shares of Common Stock before and after the Share Increase:

Possible Anti-Takeover Implications of the Authorized Share Increase

The Company has no intent or plan to employ the additional unissued authorized shares as an anti-takeover device. As indicated above, the purpose of the Share Increase is to ensure that the Company has sufficient authorized Common Stock to, among other things, meet its obligations under the Notes issued in the Note Financing and to raise capital, make acquisitions, or undertake other types of stock-based transactions if and when the opportunities arise. However, the Company’s authorized but unissued shares of Common Stock could (within the limits imposed by applicable law, regulation and NASDAQ rules) be issued in one or more transactions that could make a change of control more difficult and therefore more unlikely.

The Board did not approve the Share Increase in response to any effort known to the Board to accumulate Common Stock or to obtain control of the Company by means of a merger, tender offer or solicitation in opposition to management. Further, the Board does not currently contemplate recommending the adoption of any other amendments to the Company’s Certificate of Incorporation that could be construed as limiting the ability of third parties to take over or effect a change of control.

The issuance in the future of additional authorized shares of Common Stock may have the effect of diluting the earnings or loss per share and book value per share, as well as the ownership and voting rights of the holders of the then-outstanding shares of Common Stock. In addition, an increase in the number of authorized but unissued shares of Common Stock may have a potential anti-takeover effect, as the Company’s ability to issue additional shares could be used to thwart persons, or otherwise dilute the stock ownership of stockholders, seeking to control the Company. The Share Increase is not part of an anti-takeover strategy.

No Effect on Authorized Preferred Stock

Pursuant to the Company’s Certificate of Incorporation, the capital stock consists of a total of 32,000,000 authorized shares, of which 30,000,000 shares, par value $0.01 per share, are designated as Common Stock and 2,000,000 shares, par value $0.01 per share, are designated as preferred stock. The proposed Share Increase would not impact the total authorized number of shares or the par value of the preferred stock.

Effect on Dividends

The payment of dividends, including the timing and amount dividends, must be made in accordance with the requirements of the DGCL. We cannot assure you that any dividends will be paid in the future on shares of Common Stock. Any declaration and payment of future dividends to holders of Common Stock will be at the discretion of the Board and will depend on many factors, including the Company’s financial condition, earnings, capital requirements, level of indebtedness, future prospects and contractual restrictions applicable to the payment of dividends and other considerations that the Board deems relevant.

Interests of Directors and Executive Officers

The Company’s directors and executive officers do not have substantial interests, directly or indirectly, in the Share Increase except to the extent of their ownership of shares of Common Stock or any other of the Company’s securities.

No Dissenters’ Rights

The Company’s stockholders are not entitled to dissenters’ rights in connection with the Share Increase.

6. THE REVERSE SPLIT

The Majority Stockholder has determined that it is in the best interests of the Company and its stockholders to give the Board the authority to effect a one-time only reverse split of the Common Stock (the “Reverse Split”), as and when the Board determines, in its sole discretion. The Majority Stockholder approved the Reverse Split in a ratio, to be determined by the Board, from 1 share-for-2 shares up to a ratio of 1 share-for-100 shares, in the written consent dated September 21, 2016. The Company currently has no plans to effect the Reverse Split. The Reverse Split was approved to provide the Board with flexibility to negotiate a future transaction that may require a change to the Company’s capital structure.

If the Board determines to implement the Reverse Split, the Company would communicate to the public, prior to the effective time of the Reverse Split, additional details regarding the Reverse Split (including the final Reverse Split ratio, as determined by the Board). The Board may reserve the right to elect not to proceed with the Reverse Split if it determines, in its sole discretion, that the Reverse Split is no longer in the best interests of the Company or its stockholders.

Certain Risks Associated with the Reverse Stock Split

There can be no assurance that following the Reverse Split the market price of the Common Stock will increase in proportion to the reduction in the number of shares of Common Stock issued and outstanding before the Reverse Split or that the market price will not decline further following the Reverse Split. The total market capitalization of the Common Stock after the Reverse Split may be lower than the total market capitalization before the Reverse Split for reasons unrelated to the Reverse Split.

Impact of the Reverse Split If Implemented

The Reverse Split would affect all of the Company’s stockholders uniformly and would not affect any stockholder’s percentage ownership interests or proportionate voting power. Furthermore, because the number of authorized shares of Common Stock will be reduced on a proportionate basis, the Reverse Split will not increase the Board’s ability to issue authorized and unissued shares (proportionately to the issued and outstanding shares) without further stockholder action. The other principal effects of the Reverse Split will be that:

Although the number of outstanding shares of Common Stock would decrease following the Reverse Split, the Board does not intend for the Reverse Split to be the first step in a ‘‘going private transaction’’ within the meaning of Rule 13e-3 of the Exchange Act.

The following table reflects the number of shares of Common Stock that would be outstanding as a result of the Reverse Split and the approximate percentage reduction in the number of outstanding shares based on approximately 2,330,438 shares of Common Stock issued and outstanding as of September ____, 2016. We currently have 27,669,562 shares of Common Stock available for issuance.

Effect of Reverse Stock Split and Potential Anti-Takeover Effect

Management does not anticipate that our financial condition, the percentage ownership of Common Stock by management, the number of our stockholders, or any aspect of our business will materially change as a result of the Reverse Split. Because the Reverse Split will apply to all issued and outstanding shares of Common Stock and outstanding rights to purchase Common Stock or to convert other securities into Common Stock, the proposed Reverse Split will not alter the relative rights and preferences of existing stockholders. However, the number of shares of Common Stock outstanding will be decreased, while the number of authorized but unissued shares will be increased.

Management does not currently plan to use the decrease in our outstanding shares to make it more difficult or to discourage a future merger, tender offer or proxy contest or the removal of incumbent management. This proposal is not the result of management’s knowledge of an effort to accumulate our securities or to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise.

Summarized in the following paragraphs are provisions included in our Certificate of Incorporation, as amended, and our bylaws that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our stockholders.

Effects of authorized but unissued Common Stock and blank check preferred stock. One of the effects of the existence of authorized but unissued Common Stock and undesignated preferred stock may be to enable our Board to make more difficult or to discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If the Board were to determine that a takeover proposal was not in our best interest, such shares could be issued by the Board without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

In addition, our Certificate of Incorporation grants our Board broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of Common Stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of the Company.

Cumulative Voting.   Our Certificate of Incorporation does not provide for cumulative voting in the election of directors which would allow holders of less than a majority of the voting stock to elect some directors.

Vacancies.  Section 223 of the Delaware General Corporation Law and our Bylaws provide that all vacancies, including newly created directorships, may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

Special Meeting of Stockholders.   A special meeting of stockholders may be called by our Board or the Chairman of our Board and at the request in writing of holders of record of a majority of our outstanding capital stock entitled to vote. The requirement that a majority of our outstanding capital stock is required to call a special meeting means that small stockholders will not have the power to call a special meeting to, for example, elect new directors.

There are no rules or practices on any stock exchange that permit such exchange to reserve the right to refuse to list or to de-list any stock which completes a Reverse Split.

Fractional Shares

Stockholders will not receive fractional post-Reverse Split shares in connection with the Reverse Split. Instead, the Board will determine, if the Reverse Split is implemented, whether fractional shares will be rounded up to the nearest whole number, rounded down to the nearest whole number or paid for in cash.

Procedure for Effecting Reverse Stock Split

If the Board decides to implement the Reverse Split, the Reverse Split will become effective at such time, if at all, as determined by the Board in its sole discretion. Beginning on the effective time of the Reverse Split, each certificate representing pre-Reverse Split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of post-Reverse Split shares of Common Stock.

Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following discussion is a general summary of certain U.S. federal income tax consequences of the Reverse Split that may be relevant to U.S. Holders (as defined below) of our Common Stock, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder (the “Treasury Regulations”), judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (“IRS”), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of our Common Stock. We have not sought and will not seek an opinion of counsel or any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Reverse Split.

This discussion is limited to holders that hold our Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income tax consequences relevant to such holders’ particular circumstances, including the impact of the tax on net investment income imposed by Section 1411 of the Code. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:

If an entity treated as a partnership for U.S. federal income tax purposes holds our Common Stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our Common Stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED AS TAX ADVICE. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT ARISING UNDER OTHER U.S. FEDERAL TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

For purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of our Common Stock that for U.S. federal income tax purposes is or is treated as: (1) an individual who is a citizen or resident of the United States; (2) a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income tax regardless of its source; or (4) a trust that (a) is subject to the primary supervision of a U.S. court and the control of one of more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (b) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

The Reverse Split should constitute a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder generally should not recognize gain or loss upon the Reverse Split, except with respect to cash received in lieu of a fractional share of our Common Stock. A U.S. Holder’s aggregate tax basis in the shares of our Common Stock received pursuant to the Reverse Split should equal the aggregate tax basis of the shares of our Common Stock surrendered (excluding any portion of such basis that is allocated to any fractional share of our Common Stock), and such U.S. Holder’s holding period in the shares of our Common Stock received should include the holding period in the shares of our Common Stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of our Common Stock surrendered to the shares of our Common Stock received pursuant to the Reverse Split. Holders of shares of our Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

Information Reporting and Backup Withholding. A U.S. Holder (other than corporations and certain other exempt recipients) may be subject to information reporting and backup withholding when such holder receives cash in lieu of a fractional share of our Common Stock pursuant to the Reverse Split. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and such holder does not provide its taxpayer identification number in the manner required or otherwise fails to comply with applicable backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the U.S. Holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.

Management following the Merger

The following table sets forth the names and ages of our directors and executive officers following the Merger. The Merger Agreement provides that the fifth director will be designated by a majority in interest of the investors in the Capital Raising Transaction, as defined in the Merger Agreement. Biographical information about our directors and executive officers following the Merger is included below.

Theodore Farnsworth

An expert in strategic development, marketing and consumer relations, Mr. Farnsworth has utilized these assets and skills building companies throughout his 30-year career. He has owned and operated numerous companies with proprietary products with recognized brand names that he actively helped to develop. Currently, he is Chairman and Founder of the Highlander Companies, Millennial Hotel Group and iCrowd Hotels.

Challenging his entrepreneurial spirit, Mr. Farnsworth first developed the idea for the RedZone Map application while on a visit to Israel. His driver warned that there were border issues and unmarked areas in which they could not safely travel, although an unknowing traveler could easily fall prey to unintended risk. Having developed a knowledge of safe environments through his real estate holdings, it was a natural fit, as, unfortunately, in today’s world, peril is not limited to one particular geography. The fact that it is all around us led to the creation and implementation of a program to help mitigate the threat of danger.

Mr. Farnsworth is a private investor in numerous ventures and an equity partner in a company owning a portfolio of office buildings in markets across the U.S., majority leased to the Federal government’s Government Services Administration.

His entrepreneurial expertise has been sought for many speaking engagements and feature articles in numerous publications, including Forbes, Fortune, Investor’s Business Daily, The Wall Street Journal and The New York Times . Over thirteen years ago, Mr. Farnsworth founded the charitable Far West Haiti Mission, providing education, housing and work incentives, and additionally founded a school for the blind at the Mission.

Carl J. Schramm

Carl J. Schramm is an American economist and entrepreneur, since the summer of 2012 University Professor in the School od Information Studies at Syracuse University, and from 2002 to 2011 the president of the Ewing Kauffman Foundation where under his leadership it became the world’s premier organization dedicated to encouraging entrepreneurship and understanding the role innovation and new firm formation play in economic growth. In 2012 he was a visiting scientist at MIT. In the spring semesters of 2013 and 2014 he was the inaugural Ciocca Family Visiting Professor in Innovation and Entrepreneurship at UC Davis. He is a director at the Berkeley Research Group and on the board of the Tusher Center for Intellectual Property at UC Berkeley. In 2003 he was a Batten Fellow at the University of Virginia with a focus on Technology Transfer and the Role of the Entrepreneur.

His academic career began at Johns Hopkins where he created the nation’s first research center on healthcare costs. He has founded or cofounded five companies, including HCIA and Greenspring Advisors, a merchant bank. He has served in major corporate roles including EVP of Fortis (now Assurant) and was CEO of Fortis Healthcare. He has advised major corporations including Ford, Diebold, J&J, Apple and numerous insurance and reinsurance companies. He has served as a member of the Science Advisory Board of Mars, a trustee of the Milbank Memorial Fund, and is an advisor to the John Templeton Foundation and the Templeton World Charity Foundation. He has been a member of the Singapore Prime Minister’s Research, Innovation, and Enterprise Council. He chaired the U.S. Department of Commerce’s Measuring Innovation in the 21st Century Economic Advisory Panel. He has been a director of two public companies and several startups. He is a founding member of the Board of the International Intellectual Property Commercialization Council, a U.N. recognized NGO, headquartered in Hong Kong.

Professor Schramm’s research work is focused on entrepreneurship, innovation and economic growth. He has authored, coauthored, or edited several books including Better Capitalism; Good Capitalism/Bad Capitalism; Inside Real Innovation; The Entrepreneurial Imperative, and Controlling Healthcare Costs.

Professor Schramm holds a Ph.D. in economics from Wisconsin where he was a Ford Foundation Fellow and a New York State Regents Graduate Fellow. He earned his J.D. at Georgetown. He was a Robert Wood Johnson Health Policy Fellow at the National Academies of Science. He holds five honorary degrees and the University of Rochester’s George Eastman Medal.

Prathap Singh

Prahtap Singh has served as a director of the Company since April 1, 2016. Mr. Singh is a management consultant. During his 28 years of overall professional experience, he has consulted for a number of companies in diversified sectors including IT, real estate, fast moving consumer goods, and mergers and acquisitions. For the past several years, Mr. Singh has divided his time, spending 6 months in the U.S. and 6 months in India. In doing so, Mr. Singh has gained broad experience in public relations, liaising and lobbying with the U.S. and Indian governments, gaining a deep understanding of the respective political systems, and building extensive connections with both public and private agencies. Mr. Singh has led bilateral trade delegations in his capacity as the International Business & Economic Development Coordinator for U.S. city and county governments, and also as the Vice President for the Asian Indian Chamber of Commerce, USA. These delegations have served as a business and economic development catalyst between India and the U.S.

Muralikrishna Gadiyaram

G. K. Muralikrishna co-founded Helios and Matheson Information Technology Limited (“HMIT”) in 1991 and has been a member of its board of directors since that time and has been its Chief Executive Officer since March 1991. Prior to founding HMIT, he had 15 years of senior level work experience in marketing and commercial areas. Mr. Muralikrishna is primarily responsible for giving a customer oriented focus to the organization. His strengths include team building and forging lasting relationships with institutional clients. Mr. Muralikrisha is a gold-medalist graduate in science with post-graduation in business management from the Indian Institute of Management in Ahmedabad, India.

Parthasarathy (Pat) Krishnan

Following the consummation of the merger, Mr. Krishnan will continue as the Chief Executive Officer of the Company. Mr. Krishnan has served as a director of the Company and the Chairman of our Board since April 1, 2016. Mr. Krishnan has also served as the President, Chief Executive Officer and Interim Chief Financial Officer (Principal Financial Officer) of the Company since April 1, 2016. Mr. Krishnan is a technology entrepreneur with a proven track record of creating value through start-up ideas and the ability to convert business problems into feasible technology road maps. Mr. Krishnan has developed solutions for clients that have contributed to the increase in revenue, while helping them reduce operational costs. Mr. Krishnan’s expertise includes cybersecurity, continuous authentication, image processing using cellular automata and symbolic computing, big data analytics (Hadoop), low latency computing, cloud computing, product architecture and development, market analysis, solution delivery, team building and mentoring.

From May 2013 to March 2016, Mr. Krishnan was the Chief Technology Officer and Co-Founder of Ciberoc Corporation. Ciberoc Corporation addresses cyber physical security needs using biometric authentication coupled with multifactor authentication for cloud infrastructure enterprises and financial vertical. Mr. Krishnan created solutions, mentored teams and interfaced with customers during his tenure. Mr. Krishnan has co-authored and presented papers in IEEE conferences on voice biometrics and speaker recognition. Mr. Krishnan also has six patents to his credit in data security.

From February 2006 to April 2013, Mr. Krishnan was the Chief Technology Officer of HMIT, spearheading the establishment of the managed services practice for financial clients and providing strategic direction and positioning the analytics practice.

OPINION REGARDING THE FAIRNESS OF THE TRANSACTION

Opinion of Simon Financial, Inc.

On August 18, 2016, Simon Financial, Inc., referred to in this discussion as Simon, rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Simon’s written opinion dated August 23, 2016), to the effect that, as of August 18, 2016, and based upon and subject to certain matters stated in such opinion, the Merger Consideration being paid by the Company in the Merger is fair to the Company and its stockholders from a financial point of view.

The full text of Simon’s written opinion, which sets forth the assumptions made, matters considered and limitations on the review undertaken by Simon, has been attached to this document as Appendix E. Simon’s opinion was directed to the Board and only addressed the fairness to the Company and its stockholders, from a financial point of view, of the Merger Consideration, on a pro-forma basis giving effect to the proposed Financing. We encourage our stockholders to carefully read the full text of Simon’s written opinion in its entirety. However, neither Simon’s written opinion nor the summary of its opinion and the related analyses set forth in this Information Statement are intended to be, and do not constitute, advice or a recommendation to the Board or any stockholder as to how to act or vote with respect to proposed Merger or any other matter. Furthermore, Simon’s opinion does not address the fairness of the proposed Financing to the Company or its stockholders and does not address any other aspect or implication of the proposed Merger or the Related Transactions. The summary of Simon’s opinion in this Information Statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex E to this Information Statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Simon in preparing its opinion. Simon’s opinion also does not address the relative merits of the Merger as compared to other transactions that might be available with respect to us, nor does it address our underlying business decision to effect the proposed Merger.

Pursuant to an engagement letter dated July 14, 2016, the Board retained Simon to render an opinion as to the fairness to the Company and its stockholders, from a financial point of view, of the Merger Consideration, on a pro-forma basis giving effect to the proposed Financing. Simon was selected by the Board based on Simon’s reputation and experience in the valuation of assets and business entities and its industry experience. Simon does not beneficially own nor has it ever beneficially owned any interest in the Company or Zone Technologies, Inc.

The opinion of Simon does not address the Company’s underlying business decision to effect the Merger. Simon has not been requested to, and did not, advise the Board with respect to alternatives to the Merger nor the Financing. Furthermore, Simon was not requested to, and did not negotiate the terms of the Merger or Financing on the Company’s behalf.

In connection with its fairness opinion, Simon made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things, Simon:

●      Held discussions with certain members of the Company’s management team to discuss the Merger, the Financing and the financial condition, future prospects and projected operations and performance of the Company on both a stand alone and pro-forma basis;

●      Reviewed certain publicly available financial statements and other information of the Company as filed with the Securities and Exchange Commission, including SEC Form 10K for the fiscal years ended December 31, 2012 through December 31, 2015, which was the last publicly filed 10K; SEC Form 10Q for the quarter ended June 30, 2016, the last publicly filed 10Q; and SEC Form 8K dated July 12, 2016;

●      Reviewed quarterly pro-forma income statements for 2016 Q1 and 2016 Q2 and quarterly balance sheet as of March 31, 2016 and June 30, 2016;

●      Reviewed the Company’s quarterly financial projections, pro-forma for the Merger and Financing, for 2016 Q3 through 2018 Q2 and related assumptions;

●      Reviewed the Detailed Monthly Zone projections June 2017 through June 2018;

●      Reviewed the Agreement and Plan of Merger between Helios and Matteson Analytics, Inc., Zone Acquisition, Inc. and Zone Technologies, Inc. dated July 7, 2016;

●      Reviewed the May 19, 2016 notice of intent to delist the Company’s stock from the NASDAQ Stock Market due to failure to meet NASDAQ’s minimum stockholder equity requirements;

●      Reviewed the July 25, 2016 letter from NASDAQ granting the Company’s request for continued listing on the NASDAQ Stock Market;

●      Reviewed the reported prices and trading activity of the Common Stock;

●      Reviewed certain other publicly available financial data for certain companies that Simon deems comparable to the Company; and

●      Conducted such other studies, analyses and inquiries as deemed appropriate.

Simon did not independently verify the accuracy and completeness of the information supplied to it with respect to the Company’s and Zone’s business and assets and did not assume any responsibility with respect to such information, nor did Simon independently verify the accuracy and completeness of the information supplied to it with respect to information provided on a pro forma basis giving effect to the Merger and proposed Financing. Simon did not make any independent appraisal of any of the properties or assets involved in the Merger. Simon recognizes that, as with any potential merger or acquisition, there are inherent risks that could prevent the Merger from being consummated and the Financing from being executed.

In rendering its opinion, Simon relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or which is publicly available, and did not assume any responsibility for the accuracy or completeness of such data, material and other information. In addition, Simon was advised, and has assumed, that the financial forecasts and projections provided to it by the Company have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management as to the future financial results and condition of the Company and Zone, as applicable, on both a stand-alone and pro-forma basis after giving effect to both the Merger and Financing. Simon was not engaged to assess the reasonableness or achievability of such forecasts and projections or the assumptions on which they were based, and Simon expressed no opinion with respect to such forecasts, projections or assumptions.

In rendering its opinion, Simon relied upon and assumed, without independent verification, that there has been no material change in the assets, liabilities, operations, financial condition, results of operations, business, future prospects, projected operations and performance of the Company or Zone since the date of the most recent financial statements provided to Simon, and that there is no information or any facts that would make any of the information reviewed by Simon (including any forecasts, projections and assumptions described above) incomplete or misleading. Simon did not consider any aspect or implication of any transaction to which the Company is a party (other than as specifically described in the opinion with respect to the Merger and the Financing).

Furthermore, in rendering its opinion, Simon relied upon and assumed, without independent verification, that the Merger will be consummated in accordance with the terms of the Merger Agreement and that all governmental or other approvals or consents necessary for the consummation of the Merger will be obtained without any adverse effect on the Company, Zone, or the Financing or on the expected benefits of the Merger in any way material to its analysis. In addition, Simon relied upon and assumed, without independent verification, that the final forms of the documents provided to it and relied upon will not differ in any material respect from the draft documents provided to it.

Simon was not requested to make, and did not make, any physical inspection or independent appraisal of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company, Zone, or any other party, nor was Simon provided with any such appraisal. Simon did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company or Zone is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company or Zone is or may be a party or is or may be subject and Simon’s opinion made no assumption concerning, and therefore did not consider, the potential effects of any such litigation, regulatory action, claims or investigations or possible assertion of claims, or other contingent liabilities or any outcomes or damages arising out of any such matters.

Simon’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Simon as of, the date of its opinion. Simon did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring after the date of its opinion. Simon did not express any opinion as to the price or range of prices at which shares of Common Stock may trade in the public market or otherwise.

Furthermore, Simon’s opinion is predicated on certain assumptions and representations of the Company regarding the proposed Financing, since the Financing had not been consummated and the ultimate terms of the Financing were unknown as of the date of the opinion. The Company provided and Simon relied upon certain assumptions with respect to the net proceeds of the Financing, the terms of the Financing and the impact on the number of shares of the Company outstanding on a fully diluted basis taking into account the Financing (together with the other assumptions described elsewhere in the opinion, the “Assumptions”). The opinion is based in part on, and was made and delivered in reliance on, the accuracy of these Assumptions, and is only valid based on the accuracy of these Assumptions.

The opinion was prepared for the information of the Board in connection with its evaluation of the Merger and did not constitute a recommendation to the Company, the Board, or any holder of shares of the Common Stock of the Company as to whether to enter into the Merger or to take any other action. Simon’s opinion and the presentation to the Board was one of the many factors taken into consideration by the Board in making its determination to engage in the Merger. Consequently, the analyses described below should not be viewed as determinative of the opinion of the Board or the management of the Company with respect to the value of the Company or Zone or whether Company or Zone would have been willing to agree to a different Merger Consideration.

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. The analyses described below do not purport to be appraisals or to reflect the prices at which the businesses or securities of the Company or Zone might actually be sold. In arriving at its opinion, Simon considered the results of all of its analysis as a whole and did not attribute any particular weight to any particular analysis or factor considered by it. Further, Simon believes that the summary provided above must be considered as a whole and that selecting any portion of Simon’s analyses, without considering all of its analyses, would create an incomplete view of the process underlying Simon’s opinion. In addition, Simon may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described herein should not be taken to be Simon’s view of the actual value of the Company or Zone.

The Company has paid Simon fees of $30,000 for its services in connection with the engagement letter and has agreed to reimburse Simon for reasonable out-of-pocket expenses incurred in connection therewith. No portion of the fee is contingent upon the consummation of the Merger or the conclusions reached in the opinion. The engagement letter pursuant to which the Company engaged Simon contains provisions requiring the Company to indemnify, defend and hold harmless Simon, its employees, agents, officers, directors, subcontractors, attorneys, shareholders and other affiliates from certain costs, expenses and damages incurred in connection with any claims arising out of the engagement of Simon or the rendering of the opinions contemplated thereby.

Company-Specific Valuation Considerations

In assessing the financial fairness of the Merger Consideration to the Company and its stockholders, from a financial point of view, Simon (i) analyzed the trading value implied by the Company’s pre-Merger publicly traded equity securities, and (ii) independently valued the Common Stock of the Company, on a pro forma basis giving effect to the Merger and proposed Financing, using widely accepted valuation methodologies.

Analysis of the Company’s Publicly Traded Stock Price . As part of its analysis, Simon analyzed the trading value of the Common Stock. Simon calculated the Company’s 20 day, 30 day, and 60 day average unaffected stock price, prior to the announcement of the Merger on June 6, 2016. Simon also analyzed the 52 week low, high and average unaffected stock price, prior to the Merger announcement. Simon also analyzed the Common Stock’s trading value subsequent to the Merger announcement date.

Fundamental Valuation of the Company . Simon completed an independent, fundamental valuation of the Company, on a pro-forma basis for the Merger and the proposed Financing, using three widely accepted valuation approaches: the market multiple approach, the discounted cash flow approach, and the comparable transaction approach.

Market Multiple Approach . The market multiple approach involved the multiplication of various revenues, earnings and cash flow measures by appropriate risk-adjusted multiples. Given that Zone is a pre-revenue company, pro forma forward revenues and cash flows were capitalized, as it was determined that forward results are more representative of the Company on a pro forma, going forward basis. Multiples were determined through an analysis of certain publicly traded companies, selected on the basis of operational and economic similarity with the principal business operations of the Company. Revenue, earnings and cash flow multiples were calculated for the comparable companies based upon daily trading prices. A comparative risk analysis between the Company, on both a stand alone and pro-forma basis, and the public companies formed the basis for the selection of appropriate risk adjusted multiples for the Company. The risk analysis incorporates both quantitative and qualitative risk factors which relate to, among other things, the nature of the industry in which the Company and the comparable companies are engaged, a comparison of operating performance characteristics, as well as their stage of development.

For purposes of this analysis, Simon selected six publicly traded, information technology services companies, including the Company, for comparison to the Company on a pro forma basis. The companies included:

In order to determine the enterprise value of the Company on a pro-forma basis, a control premium of 10% was added. Because the market multiple approach is based upon publicly traded prices of equity securities and represents a minority position, a control premium was deemed appropriate, based on a review of control premiums in relevant transactions. The market multiple approach produced indications of an enterprise value for the Company, on a pro-forma basis and giving effect to the proposed Financing, in the range of $65.0 million to $70.0 million.

No company included in the market multiple analysis is identical to Company or Zone. In calculating the comparable companies, Simon made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of the Company or Zone. Mathematical analysis, such as determining the average or median, or the high or low, is not itself a meaningful method of using precedent transaction data.

Comparable Transaction Approach . The comparable transaction approach also involved multiples of revenues and cash flow. Multiples utilized in this approach were determined through an analysis of acquisitions of controlling interests in companies with operations deemed to be reasonably comparable to the Company’s principal business operations, on both a stand alone and pro-forma basis. For purposes of this analysis, Simon analyzed transactions completed between 2011 and June 2016 involving target companies involved in the IT services business and/or development of mobile applications. Given that Zone is a pre-revenue company, forward revenues and cash flows were capitalized, as it was determined that forward results are more representative of the Company on a pro forma, going forward basis. The comparable transaction approach produced indications of an enterprise value for the Company, on a pro-forma basis, in the range of $58.0 million to $71.0 million.

No transaction included in the comparable transaction analysis is identical to the Merger. In evaluating the precedent transactions, Simon made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of the Company or Zone. Mathematical analysis, such as determining the average or median, or the high or low, is not itself a meaningful method of using precedent transaction data.

Discounted Cash Flow Approach . The discounted cash flow approach utilized the Company’s pro forma projections prepared by the Company’s management, which gave effect to both the Merger and proposed Financing. The projected cash flows were analyzed on a “debt-free” basis (before cash payments to equity and interest-bearing debt investors) in order to develop an enterprise value indication for the Company on a pro forma basis. A provision for the value of the Company at the end of the forecast period, or terminal value, was also made. The present value of the interim cash flows and the terminal value was determined using a risk-adjusted rate of return or “discount rate.” The discount rate, in turn, was developed through an analysis of rates of return on alternative investment opportunities on investments in companies with similar risk characteristics to the Company. A company specific risk premium was also considered. The discounted cash flow approach produced indications of an enterprise value for the Company, on a pro-forma basis giving effect to both the Merger and proposed Financing, in the range of $64.8 million to $68.2 million.

Simon also performed sensitivity analyses on the discounted cash flow approach, assuming that the Company’s pro forma projections were not achieved. Specifically, Simon performed a sensitivity analysis assuming that the commercialization of Zone’s mobile app was delayed a quarter and the Company’s growth projections were delayed a quarter. Under this scenario, the discounted cash flow approach produced indications of an enterprise value for the Company, on a pro-forma basis giving effect to both the Merger and proposed Financing, in the range of $61.4 million to $64.6 million. Simon also performed a sensitivity analysis assuming that the commercialization of Zone’s mobile app and the Company’s growth projections were both delayed a quarter, and the Company’s pro forma operating expenses as a percentage of revenues increased. Under this scenario, the discounted cash flow approach produced indications of an enterprise value for the Company, on a pro-forma basis giving effect to both the Merger and proposed Financing, in the range of $36.1 million to $38.5 million.

Asset Approach . Simon determined that the asset approach was not appropriate for the purposes of determining the fair market value of the Company as the Company is worth more as a going concern than in liquidation.

Based on the forgoing analyses, Simon concluded that the enterprise value of the Company, on a pro-forma basis after giving effect to the Merger and proposed Financing, was $59.0 million to $65 million. After adding the proceeds from the proposed Financing and subtracting its debt as well as Merger related expenses which were not yet expensed, the total equity value of the Company on a pro forma basis, was determined to be in the range of $62.5 million to $68.5 million. Cash balances were not added back due to the assumption that cash balances were required for operations. Simon then subtracted a discount for lack of control of 9.1 percent, or the inverse of the control premium utilized, in order to arrive at a total equity value, on a pro forma and marketable, minority basis, of $60.0 million.

Lastly, Simon divided by the total number of shares of Common Stock issued and outstanding on a fully diluted basis pro forma for both the Merger and proposed Financing. In accordance with the Agreement and Plan of Merger, the Company’s shareholders will own 31.14% of the total number of shares of Common Stock issued and outstanding on a fully diluted basis upon consummation of both the Merger and proposed Financing. The per share value indication resulted in a $8.02 value per share of the Company Common Stock.

CONCLUSION

Based on the foregoing analyses, Simon concluded that the value price of the Common Stock on a stand-alone basis, based upon the unaffected publicly traded price, was between $1.11 per share and $1.31 per share.

Simon further concluded that the value of the Common Stock, on a pro-forma basis after giving effect to the Merger and proposed Financing, was $8.02 per share, based on 7,482,899 shares of the Common Stock issued and outstanding on a fully diluted basis.

On this basis, Simon concluded that the Merger Consideration being paid by the Company in the Merger is fair to the Company and its stockholders from a financial point of view.

COMPARATIVE HISTORICAL PER SHARE DATA

The following tables set forth certain historical, pro forma and pro forma equivalent per share financial information for our Common Stock and shares of Zone common stock.

The following information should be read in conjunction with (i) our audited consolidated financial statements that are included in this Information Statement, (ii) the audited financial statements of Zone that are included in this Information Statement and (iii) the financial information contained in the “Unaudited Pro Forma Condensed Consolidated Financial Statements” section of this Information Statement. The unaudited pro forma information below is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been completed as of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. In addition, the unaudited pro forma information does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Included at Annex D are unaudited pro forma condensed combined financial statements, referred to as the pro forma financial statements, of the Company and Zone that have been prepared to illustrate the effect of the Merger. Under the terms of the Merger Agreement, each outstanding share of Zone common stock at the effective time will be exchanged for 0.174 shares of our Common Stock. We expect the Merger will be accounted for under the purchase method of accounting for business combinations, with the Company being the accounting and legal acquirer.

The Company has prepared the pro forma financial statements to assist you in understanding the nature and effects of the Merger. The unaudited pro forma statements are based on the Company’s historical combined financial statements adjusted to give effect to the Merger. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2016, and for the fiscal year ended December 31, 2015 have been prepared with the assumption that the Merger was completed as of January 1, 2015. The unaudited pro forma condensed combined balance sheet as of June 30, 2016 has been prepared with the assumption that the Merger was completed as of the balance sheet date.

The unaudited pro forma statements do not necessarily reflect what the Company’s financial condition or results of operations would have been had the sale occurred on the dates indicated, or which may result in the future. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited financial information set forth in the pro forma financial statements is preliminary and subject to adjustments and modifications.

The unaudited pro forma financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company's management. An explanation of certain assumptions is set forth under the Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

The unaudited pro forma financial information should be read in conjunction with the Company’s historical Consolidated Financial Statements and Notes thereto contained in the 2015 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, as filed with the Commission.

ABOUT ZONE TECHNOLOGIES, INC.

Overview of the Global Positioning System

The Global Positioning System, or GPS, is a worldwide navigation system that enables the precise determination of geographic location using established satellite technology. GPS works anywhere in the world, 24 hours a day. The system consists of a constellation of orbiting satellites. The satellites and their ground control and monitoring stations are maintained and operated by the United States Department of Defense, which maintains an ongoing satellite replenishment program to ensure continuous global system coverage. There are no subscription fees or setup charges to use GPS; access to the system is provided free of charge by the U.S. government.

According to the website, www.GPS.gov, “the actual accuracy users of GPS technology attain depends on factors outside the government’s control, including atmospheric effects, sky blockage, and receiver quality. Real-world data from the FAA show that their high-quality GPS SPS receivers provide better than 3.5 meter horizontal accuracy.” SPS refers to a civilian GPS receiver that has no differential corrections using information broadcast from the GPS satellites alone. GPS offers different levels of accuracy, one of them being ‘standard’, or SPS; SPS tends to be correct within 100 yards.

While originally a military project, GPS is considered a dual-use technology, meaning it has significant military and civilian applications. Some of the most common civilian applications include the following:

Zone’s Business

Zone was incorporated in the state of Nevada on October 27, 2015. Zone’s corporate office is located at 801 Brickell Avenue, Suite 900, Miami, Florida 33131. Zone’s telephone number is (305)-646-8774. Zone’s website can be found at www.redzonemap.com. Information included on, or that may be obtained from, Zone’s website is not a part of this Information Statement.

Zone is the developer of the proprietary “RedZone Maps”, a GPS-driven, real-time crime and navigation map application (“RedZone Map”) whose goal is to enhance personal safety worldwide by providing users with real time crime data and a platform for alerting other users to criminal and other safety related occurrences in a navigation map format. Zone’s mapping lets users be pro-active when traveling, allowing them to enter a number of different cautionary items such as traffic problems, police sightings, road hazards, accidents and road closures. It also allows users to report a crime and to video upload live incidents. Furthermore, tapping the “crime button” will allow users to see the crimes that have been committed where they live, where they’re traveling or where they’re considering relocating. Zone launched a beta version of RedZone Maps in Apple’s App Store in March 2016.

RedZone Maps Smart Phone Application

Coding the earth to plot geographic reference information was developed approximately 50 years ago. It is the process of converting street addresses into geographic coordinates, like latitude and longitude. Vitally important to crime mapping science, geocoding is the most commonly used way of getting crime-related data into a crime map. Not only can postal addresses be displayed, but street centerlines, land parcels and buildings can also be positioned on the map. Many businesses, such as oil and gas companies, and public agencies, such as the police and the military, use mapping as a tool. In February 2016, P&S Market Research reported that the global geographic information system market is expected to increase from approximately $7.6 billion in 2014 to $14.6 billion by 2020, representing a compound annual growth rate of 11.4%.

RedZone Maps informs users of any approaching areas, or “red zones,” that may pose a threat, such as high crime areas, and redirects the user from the existing route, providing alternative routes through low or lower crime areas that the user may not have known were available. In addition, information about verified incidents (thefts, assaults and shootings) sourced from government agencies come pre-loaded on RedZone Maps. To the knowledge of Zone, this type of information is not currently included in routing technology. RedZone Maps also incorporates a social media component, with users engaging in an active online community. Known as “Zoners”, users can interface with other Zoners – not only serving as online map editors, keeping data in their areas up-to-date, but informing other drivers of road hazards, traffic conditions and safety concerns. Additionally, the application’s social media integration includes the ability for Zoners to share their road trip experiences on social-media feeds and profiles. Currently, RedZone Maps provides routes only in the United States and Israel, although Zone plans to expand the technology to include other international routes in the future.

Zone believes that integrating RedZone Maps with the Company’s technology will allow for a faster, more accurate and more precise mapping application. Following the Merger, Zone expects that the Company will use its expertise in data monitoring to monitor the social chatter arising out of the social media platforms like Facebook, Twitter and other public forums and employ the latest tools to ingest crime data, classify, normalize and unify the data as Single Source of Truth (SSoT) to be analyzed using deep machine learning and artificial intelligence techniques to generate context related signals and draw insights. This learning technique can be adopted across any crime data for many geographies to bring out the relevant signals. Zone also expects the Company to build a Software as a Service (SaaS) platform to serve as a single comprehensive source for crime data that can enable enterprises, law enforcement agencies and partners to subscribe for analytical dashboards and comprehensive visualizations.

Digital Advertising

Because of the significant growth in digital advertising, we anticipate that following the Merger Zone will offer advertisers two formats for advertising through the app - branded pins and takeover ads. Branded pins will show drivers how far away they are from stores. Takeovers are interstitial ads designed not to distract drivers. They will pop up when a user is idle for three or more seconds and disappear when the car starts moving. According to information provided by eMarketer mobile advertising which, at approximately $19 billion, represented approximately 16% of all media advertising spending in 2013, is expected to represent approximately 59.4% of all media advertising spending in 2017, at a projected amount of approximately $134 billion. According to Strategy Analytics, U.S. industries spent approximately $52.8 billion in digital advertising in 2015.

Intellectual Property

Zone currently does not have any filed or registered trademarks or patents. Zone has a registered fictitious name “RedZone Map” filed with the Florida Department of State, a website and certain tradenames. Zone has required its employees and independent contractors who are given access to its technology to enter into a proprietary information and inventions agreement with the company to protect its intellectual property.

Competition

Zone believes the principal competitive factors impacting the market for its product are functionality and reliability.

In general, Zone operates in a highly competitive market. Mobile navigation applications for smart phones are made by many companies, including Google, Apple, Telenav and Garmin. These companies dominate their industries and are very well capitalized. However, none of these technologies, to the knowledge of Zone, enables travelers to navigate around unsound and risky areas with ease. This incremental component embraces the common good and the user’s personal safety, and is the critical feature that separates the app from other apps of its kind. Even though Zone believes its product is unique, at this time, Zone does not have a significant presence in the market.

Research and Development

Because the industry in which Zone competes is characterized by rapid technological advances, Zone expects that its ability to compete successfully will depend upon its ability to ensure a continual and timely flow of competitive technologies to the marketplace. Zone plans to develop new technologies to enhance RedZone Maps and to expand the range of its product offerings through research and development, the possible licensing of intellectual property and the possible acquisition of third-party businesses and technology. Through June 30, 2016, Zone incurred $244,035 in research and development costs for the development of the RedZone mapping technology.

Properties

Zone leases its corporate offices from Regus on a month-to-month basis.

Employees

Zone has three employees, none of whom are full-time.

Market Price of and Dividends on Zone’s Common Stock

There is no market for Zone’s common stock and Zone has never declared or paid any dividends on its common stock. As of the date of the Merger Agreement, Zone had only one stockholder.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of Zone should be read in conjunction with the unaudited condensed financial statements and related notes as well as the audited financial statements and related notes included elsewhere in this Information Statement. In addition to historical information, the discussion and analysis here and throughout this Information Statement contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in the forward-looking statements.

Overview and Plan of Operation

Zone Technologies, Inc. is a Florida based Company engaged in the development and operation of the RedZone application available at no cost from the Apple iTunes® store. Zone Technologies, Inc. was incorporated on October 27, 2015. The application provides users the safest travel routes in GPS map format based on crime data accumulated from government agencies and first-hand reports from a community of active users. Zone commenced its software development activities on January 9, 2015 and as of December 31, 2015 had a version of the application available at the Apple iTunes store.

Zone’s financial statements contemplate the continuation of the business as a going concern. However, Zone is subject to the risks and uncertainties associated with a new business, has no established source of capital, does not yet have the ability to earn revenue and has incurred significant losses from operations since inception. These matters raise substantial doubt about Zone’s ability to continue as a going concern.

Zone intends to pursue development of its technology to enable future sales. These activities range from research and development, the possible licensing of intellectual property and the possible acquisition of third-party businesses and technology.

Zone’s anticipated costs include employee salaries and benefits, compensation paid to consultants, capital costs for research and other equipment, costs associated with development activities including travel and administration, legal expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage technology company. Zone expects to incur consulting expenses related to technology development and other efforts as well as legal and related expenses to protect its intellectual property. Zone expects capital expenditures to be between $5 million and $7 million annually.

The amounts that Zone actually spends for any specific purpose may vary significantly, and will depend on a number of factors including, but not limited to, the pace of progress of its commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or revisions to marketing strategies. In addition, Zone may use a portion of any capital raised to acquire complementary products, technologies or businesses; however, it does not have plans for any acquisitions at this time.

Results of Operations for the six months ended June 30, 2016.

Operating Expenses. Operating expenses, consisting of research and development and general and administrative expenses for the six months ended June 30, 2016 were $307,900.

Loss from Operations. Loss from operations for the six months ended June 30, 2016 was $307,900.

Net Loss. As a result of Zone’s operating expenses, its net loss for the six months ended June 30, 2016 was $307,900.

Results of Operations for the period from January 9, 2015 (commencement of operations) through December 31, 2015.

Operating Expenses. Operating expenses, consisting of research and development and general and administrative expenses for the period from January 9, 2015 (commencement of operations) through December 31, 2015 were $1,084,580.

Loss from Operations. Loss from operations for the period from January 9, 2015 (commencement of operations) through December 31, 2015 was $1,084,850.

Net Loss. As a result of Zone’s operating expenses, its net loss for the period from January 9, 2015 (commencement of operations) through December 31, 2015 was $1,084,580.

Liquidity and Capital Resources

At June 30, 2016, Zone’s current assets were less than its current liabilities resulting in a working capital deficit of ($74,810) compared to a working capital deficit of ($38,303) at December 31, 2015. The increase in working capital deficit resulted primarily from an increase in accounts payable and accrued liabilities.

Operating activities for the six months ended June 30, 2016 resulted in cash outflows of $307,900, which were due primarily to general and administrative and research and development expenses. These were offset by a $45,204 increase in accounts payable.

There were no cash outflows from investing activities for the six months ended June 30, 2016.

Financing activities for the six months ended June 30, 2016 resulted in $271,393 of cash inflows, which came primarily from stockholder contributions.

Critical Accounting Policies

Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Revenue recognition:

Revenue will be recognized when the services have been provided or delivered, the fees are determinable and collection is reasonably assured.

Research and development costs:

Research and development costs have been charged to expense as incurred since Zone cannot ascertain as of December 31, 2015, the future economic benefits arising from the application. Any future capitalizable costs will be subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies. Costs that may be capitalized include direct costs, labor and related overhead associated with future development and enhancement of the software as application updates.

Income taxes:

Income taxes are accounted for under the asset and liability method as stipulated by Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in the years in which those temporary differences are expected to be recovered or settled.

Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts expected to be realized by the use of the valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized.

ASC 740 provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In the unlikely event when an uncertain tax position arises in which Zone could incur income taxes, Zone would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. A liability for uncertain tax positions would then be recorded if Zone determined it is more likely than not that a position would not be sustained upon examination or if a payment would have to be made to a taxing authority.

As of December 31, 2015, Zone does not believe any uncertain tax positions exist that would result in Zone having a liability to the taxing authorities. Zone’s policy is to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of interest expense and general and administrative expense, respectively, in the statement of operations.

Recent accounting pronouncements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), No. 2014-09, “Revenue from Contracts with Customers” (topic 606), to replace the existing revenue recognition criteria for contracts with customers and to establish the disclosure requirements for revenue from contracts with customers. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019. Earlier application is permitted only as of an annual reporting period beginning after December 15, 2016. Management is currently assessing whether the implementation of ASU 2014-09 will have any material effect on Zone’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern”, to provide guidance within GAAP requiring management to evaluate whether there is a substantial doubt about an entity’s ability to continue as a going concern and requiring related disclosures.

The ASU is effective for annual periods ending after December 15, 2016. Zone is currently assessing the impact of the ASU, if any, on its financial statements.

DESCRIPTION OF OUR CAPITAL STOCK

We have 32,000,000 shares of capital stock authorized under our certificate of incorporation, consisting of 30,000,000 shares of Common Stock, and 2,000,000 shares of preferred stock, $0.01 par value.

As of the date of this Information Statement we had 2,330,438 shares of Common Stock outstanding. Our authorized but unissued shares of Common Stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. We have no shares of preferred stock outstanding.

Holders of our Common Stock are entitled to such dividends as may be declared by our Board out of funds legally available for such purpose, subject to any preferential dividend rights of any then outstanding preferred stock. The shares of Common Stock are neither redeemable or convertible. Holders of our Common Stock have no preemptive or subscription rights to purchase any of our securities.

Each holder of our Common Stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of Common Stock is entitled to cumulate votes in voting for directors.

In the event of our liquidation, dissolution or winding up, the holders of our Common Stock are entitled to receive pro rata our assets which are legally available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All of the outstanding shares of our Common Stock are fully paid and non-assessable.

Our Common Stock is listed on the Nasdaq Capital Market under the symbol “HMNY”. On September 21, 2016, the last sale price of our Common Stock was $8.33 per share.

ACTION BY OUR BOARD OF DIRECTORS AND CONSENTING STOCKHOLDERS

In accordance with the DGCL, the Board adopted resolutions approving the Merger Agreement and the Transactions at a meeting held on June 24, 2016. The Board executed a written consent, dated August 30, 2016, approving the Note Financing, the Certificate Amendment and the Reverse Split.

In order to obtain the approval of the Action Items by our stockholders, we could have convened a special meeting of our stockholders. However, Section 228(a) of the DGCL and Article II, Section 10 of our bylaws provides that any action that may be taken at any annual or special meeting of our stockholders may be taken without a meeting and without prior notice if a consent in writing setting forth the action taken is signed by the holders of outstanding shares of voting capital stock having not less than the minimum number of votes that would be necessary to take such action.  To eliminate the costs and management time involved in holding a special meeting and obtaining proxies, and so that we could effect the Action Items as early as possible, we elected to utilize the written consents of the Majority Stockholder. The written consents were signed on September 2, 2016 and September 21, 2016.

VOTE APPROVING THE MERGER AGREEMENT AND THE RELATED TRANSACTIONS

On the record date, there were issued and outstanding 2,330,438 shares of our Common Stock and no shares of our preferred stock.

Pursuant to the DGCL a majority of the outstanding stock of the Company entitled to vote must be voted for the adoption of the Merger Agreement. The Majority Stockholder, holding 1,743,040 votes equal to approximately 75% of the voting equity of the Company, has approved the Merger Agreement, the Merger and the Related Transactions by written consent in lieu of a meeting, thereby satisfying the requirement of the DGCL.