HMNY Helios and Matheson Analytics Inc (CE)

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents that we incorporate by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements in this prospectus include, without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage competition; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, or SEC. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to,

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to publicly update or review any forward-looking statement.

In this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” “our company”, “the Company” or “Helios” refer to Helios and Matheson Analytics Inc. and its subsidiaries.

OUR BUSINESS

This is only a summary and may not contain all the information that is important to you. You should carefully read this prospectus and any other offering materials, together with the additional information described under the heading “Where You Can Find More Information”.

About Helios and Matheson Analytics Inc.

Since 1983, we have provided high quality IT services and solutions to Fortune 1000 companies and other large organizations.

Rapid technological advances and the wide acceptance and use of the Internet as a driving force in commerce accelerated the growth of the IT industry. These advances, including more powerful and less expensive computer technology, fueled the transition from predominantly centralized mainframe computer systems to open and distributed computing environments and the advent of capabilities such as relational databases, imaging, software development productivity tools, and web-enabled software. These advances expand the benefits that users can derive from computer-based information systems and improve the price-to-performance ratios of such systems. As a result, an increasing number of companies are employing IT in new ways, often to gain competitive advantages in the marketplace, and IT services have become an essential component of many companies’ long-term growth strategies. The same advances that have enhanced the benefits of computer systems rendered the development and implementation of such systems increasingly complex, popularizing the partnering with IT service providers like us for application development, support and related services.

In the past 6 to 8 years, we have seen a significant change in the volume, velocity and variety of data due to emerging technologies in computing power and with the proliferation and use of smart phones. This has unleashed the potential of Big Data, a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications. The amount of data in the world is growing fast. Traditional digital databases are challenged to capture, store, search, share, analyze, and visualize this data deluge. Companies are relentlessly innovating to satisfy the increasingly demanding 21st century customer who lives many lives at once – online, mobile, global, local, blurring the lines between work and play, spoilt for choice and hungry for meaning and connection. It is now essential for business and IT organizations to work hand-in-hand to truly leverage the potential of Big Data – deepen customer engagement, realize operational efficiencies and essentially institutionalize data driven decision making.

We endeavor to provide high-quality, value-based offerings in the areas of application value management, application development, integration, independent validation, infrastructure and information management and analytics services. We believe that our integrated service of Big Data technology, advanced analytics and data visualization empowers our clients to unlock the value of data to make better decisions.

Our clients consist primarily of Fortune 1000 companies and other large organizations. Our clients and prospective clients operate in a diverse range of industries and historically have been concentrated in the banking, financial services, insurance and healthcare industries. Our goal is to realize consistent growth and competitive advantage through the following strategic initiatives:

Zone is the developer of the proprietary RedZone Map, a GPS-driven, real-time crime and navigation map application 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.

Zone’s business model has four components. The first component is providing user access to public safety information. Zone’s goal is to enhance the personal safety of its users by providing crime data to anyone using a mobile or stationary mapping application for navigation. Zone also provides tools for examining such things as neighborhoods for possible relocation, schools to attend, travel planning and lodging selection. The second component, when implemented, will provide enterprise business solutions, such as choosing a route for trucking and delivery services based on crime mapping analytics. The third component, when implemented, will be geared towards providing law enforcement agencies with tools to better understand crime patterns and to engage with their jurisdiction(s) more meaningfully. The fourth component, when implemented, will be to work with governmental agencies using advanced mapping and geo-fencing for counter-terrorism efforts.

Recent Developments

Sale of Senior Secured Convertible Notes

The Convertible Notes

On February 8, 2017 (the “Closing Date”), pursuant to a Securities Purchase Agreement (“SPA”) that we entered into on February 7, 2017 with an institutional investor (the “Investor” and sometimes referred to in this prospectus as the “selling security holder”), we sold and issued two Senior Secured Convertible Notes to the Investor, one in the principal amount of $681,818 (the “Initial Note”) and the other in the principal amount of $5,000,000 (the “Additional Note”), for an aggregate principal amount of $5,681,818 (each, a “Note” and collectively, the “Convertible Notes”) for consideration consisting of a secured promissory note payable by the Investor to the Company (the “Investor Note”) in the principal amount of $5,000,000 (the “Purchase Price Balance”) (collectively, the “Note Financing”). The proceeds from the sale of the Convertible Notes will be used for general corporate purposes of the Company and Zone. Unless earlier converted or redeemed, the Convertible Notes mature 8 months from the Closing Date. The Convertible 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, as defined in the Convertible Notes, and to 18% thereafter. Interest on the Convertible Notes will be payable in arrears commencing on April 1, 2017 and on the first Trading Day of each calendar quarter thereafter and, so long as the Equity Conditions, as defined in the Convertible Notes, 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 Convertible Notes is computed on the basis of a 360-day year and twelve 30-day months.

The Investor may, at any time, elect to convert the Convertible Notes into shares of the Company’s common stock at the Conversion Price, subject to certain beneficial ownership limitations. For the Initial Note, the Conversion Price is defined as $4.00. For the Additional Note, the Conversion Price is defined as $4.50. The Conversion Price of the Convertible Notes is subject to proportionate adjustment for stock splits, dividends and combinations. 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) and for any period of time deemed appropriate by the Company’s Board of Directors.

Alternatively, the Investor may, at any time, elect to convert the Convertible Notes into shares of the Company’s common stock at the Alternate Conversion Price instead of the Conversion Price, subject to certain beneficial ownership limitations. The “Alternate Conversion Price” is defined in the Initial Note as that price which is the lower of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion and (ii) $4.00 and in the Additional Note is defined as the greater of (I) the Floor Price and (II) 85% of the quotient of (x) the sum of the volume weighted average price (“VWAP”) of the Company’s common stock for each of the 5 consecutive trading days ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, divided by (y) 5.

If and to the extent the Investor elects to convert the Initial Note, the Investor will elect to convert the Initial Note at the applicable Conversion Price of $4.00 per share (which is the same as the Alternate Conversion Price of the Initial Note).

We expect that, if and to the extent the Investor elects to convert the Additional Note, the Investor will elect to convert the Additional Note at the applicable Alternate Conversion Price if the preceding 5-trading day average VWAP of our common stock is less than the Conversion Price ($4.50) (unless the Company has, with the consent of the Investor, reduced the Conversion Price to a price lower than the applicable Alternate Conversion Price), whereas we expect that the Investor will convert the Additional Note at the Conversion Price ($4.50) if the preceding 5-trading day average VWAP of our common stock is equal to or greater than the Conversion Price ($4.50). Accordingly, in the case of voluntary conversions of the Additional Note by the Investor, in effect, the Conversion Price serves as the ceiling price and the applicable Alternate Conversion Price serves as the floor price at which the Additional Notes will be converted.

If the Equity Conditions are satisfied, the Company may require the holder of the Convertible Notes to convert all or any part of the Convertible 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 holder of the Convertible Notes an additional number of shares of the Company’s common stock equal to the difference between the number of shares of common stock delivered to the holder 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 VWAP of the Company’s common stock on the trading day with the lowest VWAP 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.

“Mandatory Conversion Price” means, with respect to any Mandatory Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Mandatory Conversion Date, (ii) 80% the sum of (A) the VWAP of the Company’s common stock for each of the 3 trading days with the lowest VWAP of the Company’s common stock during the 20 consecutive trading day period ending on and including the trading day immediately prior to the applicable Mandatory Conversion Date, divided by (B) 3.

“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 Company’s 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 Convertible Note during the 5 trading day period ending and including the applicable Mandatory Conversion Date.

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 Convertible 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 Convertible 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 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 Convertible 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.

The Investor Note

The Investor Note will be payable in full by the Investor on October 8, 2017, which is eight months from the Closing Date. The Investor’s obligation to pay the Company the Purchase Price Balance pursuant to the Investor Note is secured by $5,000,000, in the aggregate, in cash, cash equivalents, any Group of Ten (“G10”) currency and any notes or other securities issued by any G10 country belonging to the Investor and provides for full recourse against the Investor in the event of a default from the failure of the Investor to pay the principal and interest when due or as a result of either a court entering a decree or order, or the Investor filing a petition or being the subject of an involuntary petition, under any applicable bankruptcy, insolvency or other similar law. The Company will receive a payment of principal and interest upon each voluntary or mandatory prepayment of the Investor Note. On or after February 28, 2017 (or earlier if the Company permits), the Investor may, at its option and at any time, 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 Initial Note – At any time the Investor has converted $681,818 or more in principal amount of the Initial Note, the Investor will be required to prepay the Investor Note, on a dollar-for-dollar basis, for each subsequent conversion of the Additional 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 the 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 $5,000,000 of the principal amount of the Convertible Notes), not in excess of the Maximum Mandatory Share Amount or the Maximum Mandatory Conversion Amount.

The Investor Note also contains certain optional offset rights, which if exercised, would reduce the amount outstanding under the Additional Note and the Investor Note by the same amount and, accordingly, the cash proceeds received by the Company. These offset rights are triggered by specific occurrences that could jeopardize the Investor’s investment and include the following:

(i)      Optional Offset Right : On or after March 1, 2017, if an Equity Conditions Failure, as defined in the Convertible Notes, exists, the Investor is entitled to satisfy any principal and related accrued and unpaid interest owed under the Investor Note in full by cancelling an equal amount of principal amount under the Additional Note.

(ii)      Event of Default Offset : The Investor may, at any time on or after the occurrence of any Event of Default under the Additional Note, but prior to the date of cure thereof, satisfy all or any part of the principal due pursuant to the Investor Note by cancelling an equal amount of principal due pursuant to the Additional Note. Furthermore, in the event of a Bankruptcy Event of Default, as defined in the Convertible Notes, all of the principal and related accrued and unpaid interest of the Investor Note will be automatically satisfied in full by the deemed automatic surrender and concurrent cancellation of the outstanding obligations under the Additional Note equal to the portion of principal being satisfied.

(iii)      Automatic Offset Upon Prohibited Transfer of the Investor Note . If for any reason the Additional Note or any interest therein is pledged, assigned or transferred to any person other than the Company without the prior written consent of the Investor, including by contract, operation of law, court order or otherwise, then, (i) all of the outstanding principal of the Investor Note will be automatically deemed satisfied in full, (ii) 75% of the remaining Restricted Principal will be automatically cancelled (with the remaining 25% of the Restricted Principal of the Additional Note automatically becoming unrestricted principal thereunder), and (iii) the Investor Note will be deemed to be paid in full and will be null and void.

Upon any of the foregoing offsets, any accrued and unpaid interest under the Investor Note shall be automatically cancelled with respect to the portion of the principal of the Investor Note being offset.

The Company, if it so chooses, is entitled to reduce the principal of the Investor Note, and any accrued but unpaid interest, by any cash amount then due and payable by the Company to the Investor under the Additional Note. This offset right allows the Company to satisfy any redemption amount or any other cash obligations then due and payable under the Additional Note.

The Additional Note also includes an offset right in favor of the Company. At any time no Equity Conditions Failure exists, the Company has the right to redeem all of the Conversion Amount then remaining under the Additional Note in cash at a price equal to 115% of the Conversion Amount being redeemed. Any Restricted Principal may be offset and reduced on a dollar for dollar basis by the surrender for cancellation of the portion of the Investor Note equal to the amount of Restricted Principal included in the Company’s redemption.

As of March 8, 2017, $681,818 is the amount of unpaid unrestricted principal amount of the Convertible Notes that we owe to the selling security, which is equal to the principal amount of the Initial Note.

The above does not purport to be a complete description of the Note Financing and is qualified in its entirety by reference to the full text of the documents which are attached as exhibits 10.1 through 10.8 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2017 and which are incorporated by reference herein.

Potential Profit from Conversion of the Convertible Notes at the Option of the Selling Security Holder

The following table sets forth the potential profit to be realized upon conversion by the selling security holder of the Convertible Notes based on the Conversion Price on the Closing Date and the closing price of our common stock on the Closing Date:

*Based on the principal amount of $681,818 of the Initial Note (converted at $4.00 per share) and $5,000,000 of the principal amount of the Additional Note (converted at $4.50 per share) and interest for a period of 8 months in the amount of $27,272 accrued at the rate of 6% on the principal amount of the Initial Note (converted at $4.00 per share) and at the rate of 6% on the principal amount of the Additional Note (converted at $4.50 per share).

** Based on per share market price as of February 8, 2017

Alternate Right of Conversion: Number of Shares Issuable in Satisfaction of the Convertible Notes Based on Various Assumed Alternate Conversion Prices

The Conversion Price and the Alternate Conversion Price are each designated in the Initial Note as $4.00, therefore the number of shares of common stock that could be issued upon the conversion of principal and interest under the Initial Note will not change based on the market price of our common stock prior to each installment date. We have computed the number of shares of common stock that could be issued upon conversion of the principal and interest under the Initial Note to be 177,274. The following table reflects changes in the number of shares of common stock that could be issued upon conversion of the principal and interest under the Additional Note, based on changes to the market price of our common stock.

*Based on the principal amount of $5,000,000 and interest in the amount of $200,000 accrued at the rate of 6% on the entire principal amount over a period of 8 months.

**Assumes the Alternate Conversion Price remains the same throughout the entire installment payment period, which is unlikely to occur because the Alternate Conversion Price applicable to each installment payment will be based on the market price of our common stock prior to each such installment date.