PROXY
STATEMENT
FOR
THE 2018 ANNUAL MEETING OF STOCKHOLDERS
TABLE
OF CONTENTS
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Information
Concerning Solicitation and Voting – page 1
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Questions
and Answers Regarding the Annual Meeting – page 1
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Governance
of the Company – page 6
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Proposal
1 — The Election of Directors Proposal – page 10
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Director
Compensation – page 12
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Executive
Compensation and Related Information – page 13
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Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – page 19
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Proposal
2 – Approval of Appointment of Independent Registered Public Accounting Firm – page 20
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Proposal
3 – Approval, on Advisory Basis, the Compensation of our Named Executive Officers – page 21
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Report
of the Audit Committee – page 22
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Certain
Relationships and Related Transactions – page 23
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Requirements
for Advance Notification of Nominations and Stockholder Proposals – page 24
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Other
Matters – page 25
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Annex
A – Form of Proxy Card
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HELIOS
AND MATHESON ANALYTICS INC.
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
To
Be Held at 2:00 p.m. local time on December 27, 2018
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
The
Board of Directors (the “Board”) of Helios and Matheson Analytics Inc. (the “Company,” “we,”
“us” and “our”) is soliciting proxies for an Annual Meeting of Stockholders and any postponements, adjournments
or continuations thereof (the “Annual Meeting”).
The Annual Meeting will be held at Empire State Building, 350
Fifth Avenue, 67th Floor, Suite 6710, Conference Room A, New York, New York 10118 on December 27, 2018, at 2:00 p.m.
local time. This proxy statement and the accompanying form of proxy card are first being mailed on or about December 10, 2018
to all holders of our common stock and our Series A Preferred Stock (the “Preferred Stock”) of record on December
5, 2018.
The
information provided below is a summary of the information included in this proxy statement. You should read this entire proxy
statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated
by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references
only.
QUESTIONS
AND ANSWERS REGARDING THE ANNUAL MEETING
Although
we encourage you to read this proxy statement in its entirety, we include this question and answer section to provide some background
information and brief answers to several questions you may have about the Annual Meeting or this proxy statement.
Q:
What proposals will be voted on at the Annual Meeting?
A:
There are three proposals scheduled to be voted on at the Annual Meeting:
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1.
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to vote on the election of five directors to
serve until the Annual Meeting of Stockholders in 2019 and until their respective successors are duly elected and qualified
(the “Election of Directors Proposal”);
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2.
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to vote on the ratification of the appointment
of Rosenberg Rich Baker Berman, P.A. as the independent auditor of the Company for the year ending December 31, 2018 (the
“Auditor Appointment Proposal”);
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3.
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to vote on a proposal, on an advisory basis,
to approve the compensation of our named executive officers (the “Say-on-Pay Proposal”); and
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4.
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to
transact any other business properly brought before the Annual Meeting or any adjournments thereof.
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Q:
What is the Board’s voting recommendation?
A: The
recommendations of our Board are set forth together with the description of each proposal in this proxy statement. In summary,
the Board recommends a vote:
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FOR
the election of the nominated directors (see Proposal 1);
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FOR the approval
of the appointment of Rosenberg Rich Baker Berman, P.A. as our independent registered public accounting firm (see Proposal
2); and
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FOR the approval,
on an advisory basis, of the compensation paid to our named executive officers (see Proposal 3).
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Q:
Who can vote at the Annual Meeting?
A:
Our Board has set December 5, 2018 as the record date (the “record date”) for the Annual Meeting. All stockholders
who own voting securities at the close of business on the record date may attend and vote at the Annual Meeting. For each share
of common stock held as of the record date, the holder is entitled to one vote on each proposal to be voted on. For each share
of Preferred Stock held as of the record date, the holder will be entitled to 3,205 votes on each proposal to be voted on. However,
the number of votes that a holder of Preferred Stock will be entitled to cast on any matter to be voted upon, when aggregated
with any of our other voting securities held by such holder, cannot exceed 19.9% of the number of shares of common stock that
we had outstanding as of June 21, 2018 immediately prior to the issuance of the Preferred Stock.
As
of the record date, 1,668,207,926 shares of our common stock were outstanding and 20,500 shares of Preferred Stock were outstanding.
The share amounts in this proxy statement have been adjusted to reflect the 1-share-for-250 shares reverse stock split of our
common stock effective on July 24, 2018. Stockholders do not have the right to cumulate votes. Shares held as of the record date
include shares that you hold directly in your name as the stockholder of record and those shares held for you, as a beneficial
owner, through a bank, broker or other nominee.
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
Many of our stockholders hold their shares through a bank, broker or other nominee rather than directly in their own names. As
summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholders
of Record
If
your shares are registered in your name with our transfer agent, Computershare, you are considered the stockholder of record with
respect to those shares and the proxy materials have been sent directly to you. As the stockholder of record, you have the right
to grant your proxy to the Company’s representatives or to vote in person at the Annual Meeting.
Beneficial
Owners
If
your shares are held by a bank, in a brokerage account or by another nominee, you are considered the beneficial owner of the shares.
In this instance, your bank, broker or other nominee is considered, with respect to those shares, the stockholder of record and
they will have forwarded the proxy materials to you. As the beneficial owner, you have the right to direct your bank, broker or
other nominee on how to vote and you are also invited to attend the Annual Meeting. However, since you are not the stockholder
of record, you may not vote these shares in person at the Annual Meeting unless you request a proxy from the bank, broker or other
nominee giving you the right to vote the shares at the Annual Meeting. We sometimes refer to stockholders who hold their shares
through a bank, broker or other nominee as “beneficial owners.”
Q:
How many votes does the Company need to hold the Annual Meeting?
A:
According to our bylaws, the holders of (i) a majority of the voting power of the outstanding shares of our common stock and a
majority of the outstanding shares of our Preferred Stock, voting together as a single class, (ii) a majority of the outstanding
shares of our common stock, and (iii) a majority of the outstanding shares of our Preferred Stock, in each case, entitled to vote
at a meeting of stockholders must be present in person or represented at the Annual Meeting by proxy in order for the Company
to hold the meeting and conduct business. This is called a quorum. Shares for which abstentions or broker “non-votes”
occur are counted as present for the purpose of determining the presence of a quorum. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the beneficial owner.
Shares
are counted as present at the meeting or represented at the meeting by proxy if you are present at the meeting or if you have
properly submitted a proxy card or your duly authorized proxy otherwise attends the meeting in person.
Q:
What is the voting requirement to approve each of the proposals?
A:
The requirements to approve each of the proposals are set forth below.
Proposal
1: Election of Directors
. For the election of directors, a plurality of the votes cast by the holders of common stock
and Preferred Stock, voting together as a single class, entitled to vote in the election of directors at a meeting of stockholders
at which a quorum is present, will be required to appoint each nominee as a director. You may choose to vote, or withhold your
vote, separately for each nominee. A properly executed proxy or voting instructions marked “withhold” with respect
to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will
be counted for the purposes of determining whether there is a quorum.
Proposal
2: Approval of the Appointment of Independent Registered Public Accounting Firm
. The affirmative vote of the holders of
a majority in voting power of the shares of our common stock and Preferred Stock, voting together as a single class, that voted
for or against or expressly abstained with respect to this proposal at a meeting of stockholders at which a quorum is present,
will be required for approval of this proposal. This vote is advisory only.
Proposal
3: Say-on-Pay Proposal
. The affirmative vote of the holders of a majority in voting power of the shares of our common
stock and Preferred Stock, voting together as a single class, that voted for or against or expressly abstained with respect to
this proposal at a meeting of stockholders at which a quorum is present, will be required for approval of this proposal. This
vote is advisory only.
Other
Proposals
. Assuming a quorum is present, any other proposal that might properly come before the Annual Meeting will require
the affirmative vote of the holders of a majority in voting power of the shares of common stock and Preferred Stock entitled to
vote at the Annual Meeting, and that voted for or against or expressly abstained with respect to the proposal, voting together
as a single class, except when a different vote is required by the Delaware General Corporation Law, our bylaws or our Certificate
of Incorporation.
Q:
If I vote against the proposals, do I have appraisal or dissenter’s rights?
A:
No, Delaware law does not provide for appraisal or dissenter’s rights in connection with the proposals to be voted on at
the Annual Meeting.
Q:
Who counts the votes?
A:
Votes cast by proxy or in person at the Annual Meeting will be tabulated and certificated by the inspector of elections who will
also determine whether or not a quorum is present. A representative of Computershare will serve as the inspector of elections.
Q:
What happens if I do not cast a vote?
A:
If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the proposals
at the Annual Meeting. If you submit a signed proxy card with no further instructions, the shares represented by that proxy card
will be voted as recommended by our Board in favor of the three proposals.
If
you are a beneficial owner, your broker may vote on Proposal 2, which is considered by the NYSE to be a “routine”
matter. However, Proposal 1 and Proposal 3 are considered by the NYSE to be “non-routine”. Therefore, if you are a
beneficial owner and you do not instruct your broker how to vote with respect to Proposal 1 and Proposal 3, your broker may not
exercise its right to vote on your behalf with respect to these Proposals.
Q:
How can I vote my shares in person at the Annual Meeting?
A:
Shares held directly in your name as the stockholder of record may be voted in person at the Annual Meeting. If you choose to
vote in person, please bring proof of identification to the Annual Meeting. Even if you plan to attend the Annual Meeting, we
recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to
attend the Annual Meeting. If you are a beneficial owner of shares, you must request and receive in advance of the Annual Meeting
a legal proxy from your bank, broker or other nominee in order to vote in person at the Annual Meeting.
Q:
How can I vote my shares in advance, without attending the Annual Meeting?
A:
Whether you hold shares directly as the stockholder of record or you are a beneficial owner, you may direct how your shares are
voted without attending the Annual Meeting. If you are a stockholder of record, you may vote as follows:
Vote
by Internet.
You can vote via the internet at www.investorvote.com/HMNY or you may scan the QR code with your smartphone
and, once you are at the website, follow the online instructions. You will need information from your proxy card to vote via the
internet. Internet voting is available 24 hours a day. Proxies submitted by the internet must be received by 11:59 p.m. Eastern
time on the day before the Annual Meeting.
Vote
by Telephone.
You can vote by telephone by calling the toll-free telephone number 1-800-652-VOTE (8683). You will need
your proxy card to vote by telephone. Telephone voting is available 24 hours a day. Proxies submitted by telephone must be received
by 11:59 p.m. Eastern time on the day before the Annual Meeting.
Vote
by Mail.
You can vote by marking, dating and signing your name exactly as it appears on the proxy card you received,
and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior
to the closing of the polls at the Annual Meeting.
If
your shares are held in the name of a bank, broker or other nominee, you should have received this proxy statement and voting
instructions, which include the following, from your bank, broker or other nominee:
Vote
by Internet.
You can vote via the internet by following the instructions on the Voting Instruction Form provided to you.
Once there, follow the online instructions. Internet voting is available 24 hours a day.
Vote
by Telephone.
You can vote by telephone by calling the number provided on your Voting Instruction Form. Telephone voting
is available 24 hours a day.
Vote
by Mail.
You can vote by marking, dating and signing your name exactly as it appears on the Voting Instruction Form,
and returning it in the postage-paid envelope provided. Please promptly mail your Voting Instruction Form to ensure that it is
received prior to the closing of the polls at the Annual Meeting.
If
you vote by any of the methods discussed above, you will be designating Theodore Farnsworth, our Chief Executive Officer, and/or
Stuart Benson, our Chief Financial Officer, as your proxies. They may act together or individually on your behalf, and will have
the authority to appoint a substitute to act as proxy. Submitting a proxy will not affect your right to attend the Annual Meeting
and vote in person.
Q:
How may my bank, broker or other nominee vote my shares if I fail to provide timely directions?
A:
Banks, brokers and other nominees holding shares of common stock in street name for their customers are generally required to
vote such shares in the manner directed by their customers. In the absence of timely directions from you, your broker will have
discretion to vote your shares on “routine” matters. Therefore, your broker may vote your shares on Proposal 2, which
is considered by the NYSE to be a “routine” matter, in the absence of timely directions from you. However, your broker
will not have the right to vote your shares on Proposal 1 and Proposal 3, which are considered by the NYSE to be non-routine matters,
in the absence of timely directions from you.
Q:
How can I change or revoke my vote?
A:
Subject to any rules your bank, broker or other nominee may have, you may change your proxy instructions at any time before your
proxy is voted at the Annual Meeting.
Stockholders
of record.
If you are a stockholder of record, you may change your vote by (1) filing with our Corporate Secretary, prior
to your shares being voted at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case
dated later than the prior proxy relating to the same shares, or (2) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not, by itself, revoke a proxy). Any written notice of revocation or subsequent proxy card
must be received by our Corporate Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation
or subsequent proxy card should be hand delivered to our Corporate Secretary at the Annual Meeting or should be sent so as to
be delivered, prior to the date of the Annual Meeting, to our principal executive office, Empire State Building, 350 Fifth Avenue,
Suite 7520, New York, New York 10118, Attention: Stuart Benson, Secretary.
Beneficial
owners.
If you are a beneficial owner of shares, you may change your vote (1) by submitting new voting instructions to
your bank, broker or other nominee, or (2) if you have obtained, from the bank, broker or other nominee who holds your shares,
a legal proxy giving you the right to vote the shares, by attending the Annual Meeting and voting in person. Your bank, broker
or other nominee can provide you with instructions on how to change your vote.
In
addition, a stockholder of record or a beneficial owner who has voted via the internet or by telephone may also change his, her
or its vote by making a subsequent and timely internet or telephone vote prior to the date of the Annual Meeting.
Q:
Where can I find the voting results of the Annual Meeting?
A:
We will announce the preliminary voting results at the Annual Meeting. We will also report the final results in a Current Report
on Form 8-K to be filed with the Securities and Exchange Commission (the “Commission” or “SEC”) within
four business days after the date of the Annual Meeting.
Q:
Who are the proxies and what do they do?
A:
Our Board designated Theodore Farnsworth and Stuart Benson as proxies, as indicated on the proxy card. When you, as a stockholder
of record, provide voting instructions in the proxy card, the named proxies vote your shares in accordance with the instructions
as indicated on the proxy card. If you are a stockholder of record and submit a signed proxy card, but do not indicate your voting
instructions, the named proxies will vote as recommended by our Board in favor of the three proposals. If the Annual Meeting is
adjourned, the named proxies can vote the shares on the new Annual Meeting date as well, subject to such limitations as set forth
in our bylaws.
Q:
How are proxies solicited for the Annual Meeting?
A:
Our Board is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by
us. We will reimburse brokers or other nominees for reasonable expenses that they incur in sending our proxy materials to you
if a bank, broker or other nominee holds shares of our common stock on your behalf. In addition, our directors and employees may
also solicit proxies in person, by telephone, or by other means of communication. Our directors and employees will not be paid
any additional compensation for soliciting proxies. We have retained the services of Alliance Advisors to assist in the solicitation
of proxies at a cost of approximately $8,500, plus reimbursement of certain expenses.
Q:
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional
set of the proxy materials?
A:
We have adopted a procedure called “householding” which the Commission has approved. Under this procedure, we deliver
one set of proxy materials to multiple stockholders who share the same address unless we have received contrary instructions from
one or more of the stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate
in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver
promptly our proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these materials.
To receive a separate copy, or, if a stockholder is receiving multiple copies, to request that we send only a single copy of our
proxy materials, such stockholder may contact our Corporate Secretary, in writing, at Empire State Building, 350 Fifth Avenue,
Suite 7520, New York, New York 10118, Attention: Stuart Benson, Corporate Secretary, or through telephone at (212)-979-8228.
Beneficial
owners may contact their bank, broker or other nominee to request information about householding.
Q:
What should I do if I receive more than one set of proxy materials?
A:
If you receive more than one set of proxy materials, it is because your shares are registered in more than one name or brokerage
account. Please follow the voting instructions on each proxy card or Voting Instruction Form you receive to ensure that all of
your shares are voted.
Q:
Who can attend the Annual Meeting?
A:
Only stockholders of record as of the record date for the Annual Meeting, holders of valid proxies from stockholders of record
as of the record date for the Annual Meeting and our invited guests will be admitted to the Annual Meeting. If you are a stockholder
of record as of the record date for the Annual Meeting, to gain admittance to the Annual Meeting, you must bring a form of personal
identification to the Annual Meeting, which such proof of identification will be verified against our list of stockholders of
record as of the record date for the Annual Meeting. If a bank, broker or other nominee holds your shares and you plan to attend
the Annual Meeting, you will need to obtain a valid proxy from the record holder of your shares in order to gain admittance to
the Annual Meeting. In order to streamline the process for admission at the Annual Meeting and ensure that we have enough seats
for those attending the Annual Meeting, we are asking that you register no less than five days in advance of the Annual Meeting
(i.e., on or before December 22, 2018) via email at investor@hmny.com or at the following address:
Attention:
Stuart Benson
Helios and Matheson Analytics Inc.
Empire State Building, 350 Fifth Avenue
New York, New York 10118
No
cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the meeting.
GOVERNANCE
OF THE COMPANY
Our
business, property and affairs are managed by, or under the direction of, our Board, in accordance with the Delaware General
Corporation Law (the “DGCL”), our certificate of incorporation, as amended, and our bylaws. Members of the Board are
kept informed of our business through discussions with the Chief Executive Officer, Chief Financial Officer and other key members
of management, by reviewing materials provided to them by management, and by participating in meetings of the Board and its committees.
There are no family relationships between any director, executive officer or person nominated to become a director.
We
continue to review our corporate governance policies and practices by comparing our policies and practices with those suggested
by various groups or authorities active in evaluating or setting best practices for corporate governance of public companies.
Based on this review, we have adopted, and will continue to adopt, changes that the Board believes are the appropriate corporate
governance policies and practices for our Company.
Stockholder
Communications
Stockholders
may communicate with the Board by written correspondence. Correspondence from the Company’s stockholders to the Board or
any individual directors or officers should be sent to the Company’s Secretary. Correspondence addressed to either the Board
as a body, or to any director individually, will be forwarded by the Company’s Secretary to the Chairman of the Governance
Committee or to the individual director, as applicable. The Company’s Secretary will regularly provide to the Board a summary
of all stockholder correspondence that the Secretary receives. This process has been approved by the Company’s Board.
All
correspondence should be sent to Helios and Matheson Analytics Inc., Empire State Building, 350 Fifth Avenue, New York, NY 10118,
Attention: Stuart Benson, Secretary. The Secretary will screen all communications for product inquiries, new product suggestions,
resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening, illegal, unsuitable,
frivolous, patently offensive or otherwise inappropriate material before forwarding the correspondence to the Board.
Independence
of Directors
The
Governance Committee operates pursuant to a charter, available on our website at www.hmny.com/our-team. In determining the independence
of our directors, we apply the definition of “independent director” provided under the Listing Rules of The Nasdaq
Stock Market LLC (“Nasdaq”). Pursuant to these rules, the Governance Committee has concluded that the following two
directors, Gavriel Ralbag and Prathap Singh, meet Nasdaq’s independence standards, including the criteria for independence
set forth in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Committees
of our Board
The
Board has three standing committees: (i) the Audit Committee, (ii) the Compensation Committee and (iii) the Nominating and Corporate
Governance Committee (the “Governance Committee”). The Board held thirteen meetings during the year ended December
31, 2017. No member of the Board attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board (held
during the period for which he or she was a director) and (ii) the total number of meetings held by all committees of the Board
on which such director served (held during the period that such director served).
Audit
Committee
The
Board has an Audit Committee which is comprised of Messrs. Singh and Ralbag, with Mr. Singh serving as the Chairman. The
primary purpose of the Audit Committee is to act on behalf of the Board in fulfilling the Board’s oversight
responsibilities with respect to the Company’s corporate accounting and financial reporting processes; the
Company’s systems of internal control over financial reporting, including financial disclosure controls and procedures;
audits of the Company’s consolidated financial statements; the quality and integrity of the Company’s
consolidated financial statements and reports provided to the Company’s stockholders, the SEC and other persons; and
the qualifications, independence and performance of the Company’s independent registered public accounting firm. During
2017, the Audit Committee met or acted by written consent five times. In connection with the review of our financial
statements for our quarterly reports, the Board determined that due to the complexity of the accounting issues related to the
sale and issuance of our Senior Secured Convertible Notes to institutional investors, the Audit Committee no longer had an
Audit Committee Financial Expert. No member of the Audit Committee has experience preparing, auditing, analyzing or
evaluating financial statements that present the breadth and level of complexity of accounting issues that are raised by such
Senior Secured Convertible Notes. The Board is actively searching for an independent director who will have the
qualifications of an Audit Committee Financial Expert. The Audit Committee Charter is posted at the Company’s website
at www.hmny.com/our-team.
We
currently do not meet the Nasdaq requirement to have three independent board members on our Audit Committee. We have until February
21, 2019 to meet such requirements. We believe that if Mr. Fried is elected to the Board at the Annual Meeting, he will be appointed
to the Audit Committee and we will then be in compliance with the Nasdaq requirement for three independent board members on our
Audit Committee.
Compensation
Committee
Our
Compensation Committee is comprised of Messrs. Singh and Ralbag, with Mr. Singh serving as Chairman. The Board has determined
that all members of our Compensation Committee are independent under the Nasdaq rules. The Compensation Committee Charter is posted
at the Company’s website at www.hmny.com/our-team.
The
Compensation Committee is authorized and empowered to review and approve the Company’s compensation and benefits
policies generally (subject, if applicable, to stockholder ratification), including reviewing and approving any
incentive-compensation and equity-based plans of the Company that are subject to Board approval. The Compensation Committee
is also authorized to annually approve for each of the Company’s executive officers his or her (i) annual base salary
level, (ii) annual incentive compensation, (iii) long-term incentive compensation, (iv) employment, severance and
change-in-control agreements, if any, and (v) any other compensation, ongoing perquisites or special benefit items. In
reviewing and approving executive officer compensation, the Compensation Committee takes into consideration corporate goals
and objectives relevant to the executive officer’s compensation and the performance of the executive officer. The
Compensation Committee reports to the full Board with respect to its meetings and other activities and the actions of the
Compensation Committee must be ratified by the full Board within three months. During 2017, the Compensation Committee
retained Gemini Valuation Services, LLC to assist the Compensation Committee by preparing a fairness evaluation respecting
the proposed compensatory arrangements for the Company’s Chief Executive Officer under his proposed employment
agreement with the Company. The Compensation Committee may delegate its authority to subcommittees or the Chairman of the
Compensation Committee when it deems it appropriate and in the best interests of the Company. There were no delegations of
the Compensation Committee’s authority during 2017. The Compensation Committee met or acted by written consent three
times during 2017.
Governance
Committee
Our
Governance Committee is comprised of Messrs. Singh and Ralbag, with Mr. Singh serving as Chairman. The Board has determined that
all members of our Governance Committee are independent under the Nasdaq rules. The Governance Committee Charter is posted at
the Company’s website at www.hmny.com/our-team.
The
Governance Committee recommends nominees for election to the Board of Directors and is responsible for monitoring and safeguarding
the independence of the Board. The Governance Committee also recommends directors for appointment to committees of the Board.
The Governance Committee receives recommendations for director nominees from a variety of sources, including from stockholders,
management and members of the Board. Stockholders may recommend any person to be a director of the Company by writing to the Company’s
Secretary. Each submission must include (i) a brief description of the candidate, (ii) the candidate’s name, age, business
address and residence address, (iii) the candidate’s principal occupation and the number of shares of the Company’s
capital stock beneficially owned by the candidate and (iv) any other information that would be required under the SEC rules in
a proxy statement listing the candidate as a nominee for director. There has been no material change to these procedures.
In
conducting a search for director candidates, the Governance Committee may use its network of contacts to compile a list of potential
candidates, but it may also engage, if it deems appropriate, a professional search firm. The Governance Committee generally reviews
all recommended candidates at the same time and subjects all candidates to appropriate review criteria. Members of the Board should
be qualified, dedicated, ethical and have experience relevant to the Company’s operations and understand the complexities
of the Company’s business environment. The Governance Committee evaluates candidates in the context of the current composition
of the Board, and these recommendations are submitted to the Board for review and approval. As part of this assessment, the Governance
Committee considers diversity of age, skills and such other factors as it deems appropriate, given the current needs of the Board
and its committees. The Governance Committee is also responsible for providing a leadership role in shaping and monitoring the
corporate governance practices of the Company. The nominees to the Board were recommended by the Governance Committee. The
Governance Committee met or acted by written consent one time during 2017.
Code
of Business Conduct and Ethics
The
Board has adopted a code of ethics designed, in part, to deter wrongdoing and to promote honest and ethical conduct, including
the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair,
accurate, timely and understandable disclosure in reports and documents that the Company files with or submits to the Commission
and in the Company’s other public communications, compliance with applicable governmental laws, rules and regulations, the
prompt internal reporting of violations of the code to an appropriate person or persons, as identified in the code, and accountability
for adherence to the code. The code of ethics applies to all directors, executive officers and employees of the Company. The Company
will provide a copy of the code to any person without charge, upon request to Ms. Jeannie Lasek, Human Resources Generalist by
calling (212) 979-8228 or by writing to Helios and Matheson Analytics Inc., Empire State Building, 350 Fifth Avenue, Suite 7520,
New York, NY 10118, Attention: Ms. Jeannie Lasek.
The
Company intends to disclose any amendments to or waivers of its code of ethics as it applies to directors or executive officers
by filing them on Form 8-Ks.
Review,
Approval or Ratification of Transactions with Related Persons
In
January 2017, the Board adopted policies and procedures for transactions with related parties (the “Related Party Transactions
Policy”). The Related Party Transactions Policy applies to “Related Parties,” which are defined as directors
and director nominees, any individual who has been appointed an officer of the Company and is subject to Section 16 of the Exchange
Act, any stockholder owning in excess of 5% of the total equity of the Company, and any child, stepchild, parent, stepparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of a person, and
any person (other than a tenant or an employee) sharing the household of such person. The Related Party Transactions Policy governs
any financial transaction, arrangement or relationship in which (i) the aggregate amount involved is the lesser of $120,000 or
one percent of the average of the Company’s total assets at year end for the last two completed fiscal years in any fiscal
year, (ii) the Company is a participant, and (iii) any of the persons described above has or will have a direct or indirect material
interest in the transaction. The Audit Committee is tasked with the responsibility of reviewing all transactions with related
parties. Prior to adoption of the Related Party Transactions Policy, the Board reviewed issues involving potential conflicts of
interest, and reviewed and approved all related party transactions, including those required to be disclosed as a “related
party” transaction under applicable federal securities laws. The Board had not adopted any specific procedures for conducting
reviews of potential conflicts of interest and considered each transaction in light of the specific facts and circumstances presented.
However, to the extent a potential related party transaction was presented to the Board, the Company expected that the Board would
become fully informed regarding the potential transaction and the interests of the related party, and would have the opportunity
to deliberate outside of the presence of the related party. The Company expected that the Board would only approve a related party
transaction that was in the best interests of the Company, and further would seek to ensure that any completed related party transaction
was on terms no less favorable to the Company than could be obtained in a transaction with an unaffiliated third party. Other
than as described under the section titled, “Certain Relationships and Related Transactions,” no transaction requiring
disclosure under applicable federal securities laws occurred during the period beginning on January 1, 2017 through the date of
this proxy statement that was submitted to the Board or the Audit Committee for approval as a “related party” transaction.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers and certain beneficial owners of the Company’s
equity securities (the “Section 16 Reporting Persons”) to file with the SEC reports regarding their ownership and
changes in ownership of the Company’s equity securities. Based on a review of Forms 3, 4 and 5 and any amendments thereto,
we believe that each of the Section 16 Reporting Persons reported on a timely basis all transactions required to be reported by
Section 16(a) during the year ended December 31, 2017, except for the following:
|
|
●
|
Carl
J. Schramm, a former director, has not filed a Form 3 since his appointment to the Company’s
Board.
|
|
|
●
|
Muralikrishna
Gadiyaram filed a late Form 4, which was due on October 31, 2017, on November 3, 2017
with respect to 2,000 (500,000 on a pre-reverse stock split basis) unregistered shares
of common stock that he acquired on October 27, 2017. Muralikrishna Gadiyaram filed a
late Form 4, which was due on January 24, 2017, on January 25, 2017 with respect to 1,000
(250,000 on a pre-reverse stock split basis) unregistered shares of common stock that
he acquired on January 22, 2017.
|
|
|
●
|
Theodore
Farnsworth filed a late Form 4, which was due on October 31, 2017, on November 3, 2017
with respect to 2,000 (500,000 on a pre-reverse stock split basis) unregistered shares
of common stock that he acquired on October 27, 2017. Theodore Farnsworth filed a late
Form 4, which was due on January 24, 2017, on January 25, 2017, with respect to 1,000
(250,000 on a pre-reverse stock split basis) unregistered shares of common stock that
he acquired on January 22, 2017; and
|
|
|
●
|
Parthasarathy
Krishnan filed a late Form 4, which was due on January 24, 2017, on January 25, 2017
with respect to 1,000 (250,000 on a pre-reverse stock split basis) unregistered shares
of common stock that he acquired on January 22, 2017.
|
Director
Qualifications and Diversity
The
Board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the
Board’s deliberations and decisions. The Board is particularly interested in seeking a mix that includes individuals who
are active or retired executive officers and senior executives, particularly those with experience in finance, accounting and
the development of disruptive businesses.
In
evaluating nominations to the Board of Directors, the Board also looks for depth and breadth of experience within the Company’s
industry and otherwise, outside time commitments, special areas of expertise, accounting, finance and legal knowledge, business
judgment, leadership ability, experience in developing and assessing business strategies, corporate governance expertise, and
for incumbent members of the Board, the past performance of the incumbent director. Each of the candidates nominated for election
to our Board was recommended by the Governance Committee.
Board
Leadership Structure and Role in Risk Oversight
In
accordance with the Company’s bylaws, the Board elects the Company’s Chairman and Chief Executive Officer. Each of
these positions may be held by the same person or may be held by different people. Currently, these two offices are held by the
same person. The Board believes that it is currently in the best interests of the Company and its stockholders to have Mr.
Farnsworth serve both roles given the fact that, following the merger with Zone Technologies, Inc. (“Zone”), there
was a change in management and an expansion of our business. Mr. Farnsworth has subsequently been actively involved in our acquisition
of the 91.8% ownership interest of MoviePass Inc. (“MoviePass”) and the integration of our Company with MoviePass,
Moviefone, MoviePass Films LLC and MoviePass Ventures LLC. As an experienced executive in developing new businesses, Mr. Farnsworth
has deep insight into the challenges we face in our business expansion and is directly involved in our operations, therefore,
he is in the best position to propose short- and long-term objectives for our business. We believe that this combined role is
balanced by the independence of a majority of our director nominees, who may meet in executive session at any time, which allows
them to review key decisions and to discuss matters independently of Mr. Farnsworth. Our Board does not have a person designated
as a lead independent director.
The
Company is exposed to a number of risks that are inherent with every business. Such risks include, but are not limited to, financial
and economic risks and legal and regulatory risks. While management is responsible for the day-to-day management of these risks,
the Board, as a whole and through its committees, is responsible for the oversight of risk management. The Board is responsible
for evaluating the adequacy of risk management processes and determining whether such processes are being implemented by management.
The Board has delegated to the Audit Committee the primary role in carrying out risk oversight responsibilities. The Audit Committee’s
Charter provides that it will discuss significant risks or exposures and assess the steps management has taken to minimize such
risks to the Company. The Board has also delegated to other committees the oversight of risks within their areas of responsibility
and expertise. For example, the Compensation Committee oversees risks associated with the Company’s policies and practices
relating to compensation.
Policy
with Regard to Attendance at the Annual Meeting
It
is anticipated that each of the current members of the Board of Directors will attend the Company’s 2018 Annual Meeting
of Stockholders via telephone. At the Company’s 2017 Annual Meeting of Stockholders, all directors, other than Mr. Ralbag,
attended the meeting. The Company does not have a formal policy with respect to directors’ attendance at the Annual Meeting
of Stockholders.
PROPOSAL
1
(the
Election of Directors Proposal)
The
following nominees are standing for election to serve as directors until the Annual Meeting of Stockholders in 2019:
|
Name
|
|
Age
|
|
Director since
|
|
|
Theodore Farnsworth
|
|
56
|
|
November 9, 2016
|
|
|
Joseph J. Fried
|
|
38
|
|
-
|
|
|
Muralikrishna Gadiyaram
|
|
66
|
|
November 9, 2016
|
|
|
Prathap Singh
|
|
52
|
|
April 1, 2016
|
|
|
Gavriel Ralbag
|
|
35
|
|
November 9, 2016
|
|
Each
nominee has agreed, if elected, to serve until the next Annual Meeting or until the election and qualification of his successor.
If any nominee is unable to stand for election, which circumstance we do not anticipate, the Board may provide for a lesser number
of directors or designate a substitute. In the latter event, shares of common stock and Preferred Stock represented by proxies
may be voted for a substitute nominee.
If
a quorum is present at the Annual Meeting, then nominees will be elected by the vote of a plurality of the votes cast by the holders
of common stock and Preferred Stock, voting together as a single class, entitled to vote. There is no cumulative voting in
the election of directors.
Information
concerning the proposed nominees is set out below:
Theodore
Farnsworth – Chief Executive Officer and Chairman of the Board
Theodore
Farnsworth has served as the Chairman of our Board of Directors and as the Chief Executive Officer of our wholly-owned subsidiary,
Zone, since November 9, 2016 and as our Chief Executive Officer since January 20, 2017. With deep experience in strategic development,
marketing and consumer relations, Mr. Farnsworth has utilized these assets and skills building companies throughout his 30-year
career. Mr. Farnsworth has been actively involved in our acquisition of the 91.8% ownership interest of MoviePass and the integration
of our Company with MoviePass, Moviefone, MoviePass Films LLC and MoviePass Ventures LLC. As an experienced executive in developing
new businesses, Mr. Farnsworth has deep insight into the challenges we face in our business expansion and is directly involved
in our operations. He has owned and operated numerous companies with proprietary products with recognized brand names that he
actively helped to develop. Prior to his service with Zone, Mr. Farnsworth was the Manager and Sole Member of Highlander Development
I, LLC, a real estate company, from January 2014 until September 2016, and was the CEO of Source Vitamin Co Inc., a dietary and
nutritional supplement and OTC drug company, from May 2009 until September 2013.
Prior
to the merger of Zone Acquisition, Inc. into Zone, which was completed on November 9, 2016, Mr. Farnsworth, as President of Zone,
developed the idea for the RedZone Map application while on a visit to Israel.
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.
Mr.
Farnsworth’s extensive business experience and his extensive involvement with Zone led us to conclude that he should serve
as a director.
Muralikrishna
Gadiyaram – Director
Muralikrishna
Gadiyaram has been a director since November 9, 2016. Mr. Gadiyaram co-founded Helios and Matheson Information Technology Ltd.
(“HMIT”), our former parent company, 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. Gadiyaram is a gold-medalist graduate in science with post-graduate education in business
management from the Indian Institute of Management in Ahmedabad, India. On January 21, 2016, HMIT became subject to a liquidation
order by an Indian Court resulting from creditors’ claims against HMIT. On February 15, 2016, the High Court of Judicature
at Madras (Civil Appellate Jurisdiction) issued an order of interim stay of the liquidation order, providing HMIT with an opportunity
to work out the claims of its creditors.
Mr.
Gadiyaram’s deep experience in the information technology and data analytics sector gives him an exceptional understanding
of our businesses and led us to believe that he should serve as a director.
Prathap
Singh – Director
Mr.
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.
Multi-faceted
and multi-linguistic, Mr. Singh possesses excellent verbal and written communication skills. In handling both Indian and U.S.
operations, Mr. Singh travels extensively between the U.S. and India and has been spending 6 months in the U.S. and 6 months in
India every year for the past several years. 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 government agencies, the judiciary, and bureaucracy in both governments, as well as with the corporate
world and capital markets such as the New York Stock Exchange, Nasdaq and the Bombay Stock Exchange. He has also served as General
Secretary and Chairman of the Press Committee for a national political party in India. In addition, Mr. Singh has led bilateral
trade delegations in his capacity as the International Business and Economic Development Coordinator for U.S. city and county
governments, and also as 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.
Mr.
Singh holds several other distinctions as well, including being a business partner for LG CNS, a consulting Marketing Director
managing mergers and acquisitions for the law firm Sharma & Yakshi Associates LLC, in Atlanta, Georgia, and a business advisor
for state government-owned financial institutions and industry bodies such as KSFC & KASSIA in India. He is a former international
baseball player and a life patron of ISKCON, Krsna.
Mr.
Singh brings to the Board valuable insight into management issues as well as extensive experience in public relations and business
development in U.S. and India, which led us to the conclusion that he should serve as a director.
Gavriel
Ralbag – Director
Gavriel
Ralbag has been a director since November 9, 2016. Mr. Ralbag specializes in commercial real estate and finance brokerage. He
currently works with Gold Edge Capital, where, since 2012 he has served as Managing Director. Mr. Ralbag has experience in a wide
variety of commercial financing transactions throughout the United States, including transactions involving multi-family housing,
shopping centers, ground-up development, rehab conversions and wholesale business loans. He served as director for International
Advisers, founding and heading the U.S. branch of this global debt recovery corporation headquartered in The Netherlands, from
2009 to 2012. He served as a broker/analyst with Palladium Capital Advisors LLC from 2007 to 2009 and began his career interning
with Maxim Group LLC. Mr. Ralbag volunteers his time and assists with fundraising for Child Life Society, an organization helping
children and the families of children with Cystic Fibrosis. Additionally, he has been instrumental in developing, opening and
managing a community center in his home town of Brooklyn, New York.
We
believe that Mr. Ralbag’s experience in the financial services industry will provide value to us as we determine how to
meet our future capital requirements, leading us to believe that he should serve as a director.
Joseph
J. Fried – Director
Since
May 2018, Joseph J. Fried, Esq. has been the principal of his law firm, Joseph J. Fried Law PC. Prior to founding his firm,
from August 2014 through May 2018, Mr. Fried has served as counsel to HBF Ventures, where he advised a real estate developer on
various corporate matters, including contract review and advice on regulatory issues, and worked as an associate at two other
law firms, where he handled all aspects of residential and commercial real estate transactions and financing, as well as advised
clients on regulatory compliance and labor and employment issues. In 2013, Mr. Fried served as an intern to the Honorable David
I. Schmidt, Kings County Supreme Court, and as a legal intern at the Immigrant Justice Clinic at Rutgers University School of
Law. Mr. Fried earned his J.D. degree from Rutgers School of Law and is admitted to the Bars of the State of New York and the
State of New Jersey.
We
believe that Mr. Fried’s diverse legal experience will provide value to us in identifying, evaluating and resolving various
legal issues related to the Company, leading us to believe that he should serve as a director.
DIRECTOR
COMPENSATION
The
following table sets forth certain information regarding compensation for services rendered by our non-employee directors during
the year ended December 31, 2017. Our directors are paid $7,500 for each full quarter during which they provide services to us.
Reimbursable expenses such as travel-related expenses are not included in the table below.
DIRECTOR
SUMMARY COMPENSATION TABLE
|
|
|
Fees Earned
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
Or paid in
|
|
|
Stock
|
|
|
Other
|
|
|
|
|
|
|
|
cash
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prathap Singh
|
|
|
30,000
|
|
|
|
|
|
|
|
-
|
|
|
|
30,000
|
|
|
Muralikrishna Gadiyaram
|
|
|
-
|
|
|
|
7,250,000
|
|
|
|
206,250
|
|
|
|
7,456,250
|
|
|
Carl J. Schramm
|
|
|
34,321
|
|
|
|
|
|
|
|
-
|
|
|
|
34,321
|
|
|
Gavriel Ralbag
|
|
|
30,000
|
|
|
|
|
|
|
|
-
|
|
|
|
30,000
|
|
|
(1)
|
Represents fees
earned or paid in cash in 2017, including annual retainer fees, committee fees and fees for special Board or committee projects.
|
|
(2)
|
The amounts reflect
the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of
these amounts are included in Note 14 to our audited consolidated financial statements for the fiscal year ended December
31, 2017. The amount in this column excludes 160 (40,000 on a pre-reverse stock split basis) shares awarded to each director
during the year ended December 31, 2017 under the Company’s 2014 Equity Incentive Plan. The award of such shares is
subject to the entry into applicable award agreements, and accordingly the shares were not granted in fiscal 2017.
|
|
(3)
|
Consists of consultant
fees.
|
Vote
and Recommendation
The
affirmative vote of a plurality of the votes cast by the holders of common stock and Preferred Stock, voting together as a single
class, entitled to vote in the election of directors at a meeting of stockholders at which a quorum is present will be required
to appoint each nominee as a director. Abstentions and broker non-votes will not affect the outcome of this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES.
EXECUTIVE
COMPENSATION AND RELATED INFORMATION
The
following table sets forth the names, ages, offices and the dates of appointment of the Company’s current executive officers.
|
Name
|
|
Age
|
|
Position
|
|
Officer since
|
|
Theodore Farnsworth
|
|
56
|
|
Chief Executive Officer of the Company and Zone Technologies, Inc. and Chairman of the Board
|
|
November 9, 2016
|
|
Stuart Benson
|
|
57
|
|
Chief Financial Officer and Secretary
|
|
November 22, 2016
|
Biographical
information concerning our executive officers is set forth below:
Theodore
Farnsworth – Chief Executive Officer and Chairman of the Board
Please
see the biographical information included at Proposal 1.
Stuart
Benson – Chief Financial Officer
Mr.
Benson provided consulting services to us from September 2016 until his appointment as Chief Financial Officer in November 2016.
Mr. Benson is a seasoned finance and accounting officer with over 25 years’ experience. From 2008 through August 2016, Mr.
Benson was Senior Vice President of Finance for A+E Network’s International division (a Hearst and Disney company) where
he oversaw finance, accounting, reporting, and strategic planning. From 1997 to 2006, Mr. Benson was Controller and Vice President
of Finance and, from 2006 to 2008, Chief Financial Officer, of Sundance Channel LLC. Mr. Benson began his career in 1982 as a
senior accountant with J. H. Cohn and Company in New Jersey. Mr. Benson received a B.S. degree from the University of Maryland.
Summary
Compensation Table for 2017 and 2016
Set
forth in the table below is the compensation paid to our executive officers during the years ended December 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
|
Name
and Principal Position
|
|
Year
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
Theodore Farnsworth
|
|
2017
|
|
|
225,000
|
|
|
|
1,350,000
|
|
|
|
7,250,000
|
|
|
|
76,050
|
(3)
|
|
|
8,901,050
|
|
|
Chief Executive Officer
|
|
2016
|
|
|
32,500
|
|
|
|
|
|
|
|
|
|
|
|
176,400
|
|
|
|
208,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parthasarathy Krishnan
|
|
2017
|
|
|
225,000
|
|
|
|
500
|
|
|
|
2,685,000
|
|
|
|
7,244
|
(5)
|
|
|
2,917,744
|
|
|
Chief Innovation Officer (4)
|
|
2016
|
|
|
131,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart Benson
|
|
2017
|
|
|
200,000
|
|
|
|
35,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
235,500
|
|
|
Chief Financial Officer
|
|
2016
|
|
|
22,052
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,052
|
|
|
|
(1)
|
Amounts
for this column reflect (i) a cash bonus awarded to Mr. Farnsworth in accordance with the terms of his employment agreement and
(ii) discretionary bonuses awarded to Mr. Krishnan and Mr. Benson.
|
|
|
(2)
|
The
amounts for 2017 reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used
in the calculation of these amounts are included in Note 13 to our audited consolidated financial statements for the fiscal year
ended December 31, 2017. The amounts in this column exclude an aggregate of 8,213 (2,053,255 on a pre-reverse stock split basis)
shares awarded to Mr. Farnsworth in consideration for entry into, and as a bonus under, his employment agreement in 2017, which
award is subject to stockholder approval and which shares have not yet been granted. Based on the market price of our common stock
on December 5, 2018, of $0.0165, the value of the shares granted to Mr. Farnsworth reported in the Summary Compensation Table
is $49.50.
|
|
|
(3)
|
Consists
of payment of housing expenses.
|
|
|
(4)
|
The
Company’s Board of Directors determined on, and as of, November 2, 2017 that Mr. Krishnan was no longer a named executive
officer of the Company.
|
|
|
(5)
|
Consists
of payment of 2016 compensation in arrears which was discovered by the Company in the first quarter of 2017.
|
Option
Exercises for 2017
No
options were exercised by the named executive officers during 2017.
Outstanding
Equity Awards at 2017 Fiscal Year End
The
named executive officers did not hold unvested equity compensation awards as of December 31, 2017.
Employment
Agreements
Farnsworth
Agreement
On
December 11, 2017 (the “Farnsworth Agreement Date”), we entered into an employment agreement (the “Farnsworth
Agreement”) with Theodore Farnsworth, our Chief Executive Officer and Chairman of the Board. The Farnsworth Agreement has
an initial term of five years and, following the expiration of the initial term, will be automatically renewed for additional
consecutive terms of one year, unless either we or Mr. Farnsworth objects to the renewal upon at least ninety days prior to the
commencement of the renewal term.
Compensation
Each
grant of common stock discussed below is subject to approval by our stockholders to the extent required by the Listing Rules of
Nasdaq, including Listing Rule 5635(c), which has not yet been sought or obtained.
Base
Salary.
Pursuant to the Farnsworth Agreement, Mr. Farnsworth’s base salary will be $325,000 per year and will be increased
on each anniversary of the Farnsworth Agreement in an amount to be determined by the Board, but in no event less than $15,000.
Annual
Bonus.
For 2017, Mr. Farnsworth received a year-end cash bonus in the amount of $350,000 and received an award of 213 shares
(53,255 shares on a pre-reverse stock split basis) of the Company’s common stock which, if issued, shall vest in their entirety
as of February 15, 2019. For each subsequent year of the term, Mr. Farnsworth will receive an annual bonus, made up of cash and
shares of our common stock, as determined in the sole discretion of the Board based on its assessment of our Company and individual
performance in relation to performance targets, a subjective evaluation of Mr. Farnsworth’s performance or such other criteria
as may be established by the Board. The annual cash target bonus will be 25% of Mr. Farnsworth’s base salary and the annual
award of shares of the Company’s common stock will have a value equal to 200% of his base salary, also determined by the
closing price of the common stock on the grant date. Shares of common stock granted to Mr. Farnsworth in each subsequent year
of the term will vest ratably at the end of each of the six calendar quarters subsequent to the calendar quarter in which the
grant is made.
Market
Capitalization Milestone Bonus.
Mr. Farnsworth will receive a stock bonus based upon the Company’s achievement of certain
market capitalization milestones during the term of the agreement, as set forth in the table below. Each award of common stock
pursuant to a market capitalization milestone will vest upon the later of February 15, 2019 and the end of the applicable three-month
period following the applicable date of the grant. The Company’s market capitalization for each applicable milestone and
measurement period will be determined based on the market capitalization reported by Bloomberg LP.
|
Company
Market Capitalization Milestone
|
|
Percentage
|
|
$100,000,000
|
|
3%
|
|
$150,000,000
|
|
3%
|
|
$200,000,000
|
|
4%
|
|
$250,000,000
|
|
4%
|
|
$300,000,000
|
|
5%
|
|
$350,000,000
|
|
5%
|
|
$400,000,000
|
|
7%
|
|
$450,000,000
|
|
7%
|
|
$500,000,000
|
|
9%
|
|
every
additional $100,000,000 thereafter
(cumulated
with the applicable immediately preceding milestone)
|
|
10%
|
Each
milestone above is a separate milestone for which Mr. Farnsworth may earn the applicable percentage. Mr. Farnsworth will be entitled
to earn the applicable percentage for each milestone only once.
Capital
Raise Bonus.
Mr. Farnsworth received a one-time bonus of $1,000,000, payable no later than December 29, 2017, for his efforts
in bringing capital sources that were critical to the Company’s needs during 2017.
Grant
of Common Stock.
In approving the Farnsworth Agreement, the Board approved the issuance of 8,000 (2,000,000 on a pre-reverse
stock split basis) shares of common stock to Mr. Farnsworth. If issued, the shares will be considered vested in their entirety
as of February 15, 2019, which is 18 months following August 15, 2017, the date on which the Company entered into the MoviePass
SPA. Pursuant to the terms of the MoviePass SPA, the Company was required to enter into a 5-year employment agreement with Mr.
Farnsworth prior to the closing of the MoviePass Transaction, which occurred on December 11, 2017.
Other
Benefits
Life
Insurance.
We pay the premiums of an insurance policy insuring Mr. Farnsworth’s life, providing coverage in the amount
of $3,000,000, payable to a beneficiary chosen by Mr. Farnsworth.
Automobile
Allowance.
Mr. Farnsworth receives an automobile allowance of $750 per month.
Company
Benefits.
Mr. Farnsworth is be entitled to participate in all pension, savings and retirement plans, welfare and insurance
plans, practices, policies, programs and perquisites of employment applicable generally to other senior executives of the Company.
Termination
Provisions
We
may terminate the Farnsworth Agreement as a result of the death or disability of Mr. Farnsworth or for “cause” as
defined in the Farnsworth Agreement. Mr. Farnsworth may terminate the Farnsworth Agreement upon 30 days’ notice to us or
for “good reason,” as defined in the Farnsworth Agreement. If the Farnsworth Agreement is terminated by Mr. Farnsworth
for any reason other than good reason, terminated by us for cause, or expires by its terms, Mr. Farnsworth will receive earned
but unpaid base salary, unpaid expense reimbursements, any earned but unpaid annual bonus, and the value of any accrued and unused
vacation days (collectively, the “Farnsworth Accrued Obligations”).
If
the Farnsworth Agreement is terminated due to his death or disability, Mr. Farnsworth will receive the Farnsworth Accrued Obligations;
a pro-rata portion of the annual bonus, if any, for the fiscal year in which the termination occurs; accelerated vesting of any
equity-incentive awards; reimbursement of health insurance premiums, for himself or his dependents in the event of his death,
for a period of 18 months; and, in the event of his disability, continuation of the base salary until the earlier of (A) the 12
month anniversary of the termination date of his employment and (B) the date Mr. Farnsworth is eligible to commence receiving
payments under our long-term disability policy.
If
Mr. Farnsworth’s employment is terminated due to a Change in Control, as defined in the Farnsworth Agreement, without cause
by us or for good reason by Mr. Farnsworth, he will receive the Farnsworth Accrued Obligations; severance in a single lump sum
installment in an amount equal to 2 times the sum of (A) the base salary plus (B) an amount equal to 2 times the maximum annual
bonus for which he is eligible in the fiscal year in which the termination of his employment occurs, or if there is no annual
bonus for which he is eligible in that year, then 2 times the annual bonus most recently paid to him; a pro-rata portion of the
annual bonus, if any, for the fiscal year in which the termination occurs; accelerated vesting of any equity-incentive awards;
and reimbursement of health insurance premiums for a period of 18 months.
If,
as of the date of a Change in Control, Mr. Farnsworth holds equity awards that are not vested and, if applicable, exercisable,
such equity awards will become fully vested and, if applicable, exercisable, as of the date of the Change in Control if the acquirer
does not agree to assume the awards or substitute equivalent equity awards.
The
Farnsworth Agreement includes standard provisions relating to maintaining the confidentiality of our confidential information,
non-solicitation of our employees and indemnification.
Benson
Agreement
On
January 18, 2018, we entered into an employment agreement (the “Benson Agreement”) with Stuart Benson, our Chief Financial
Officer. The term of the Benson Agreement will expire on December 31, 2020, and, following the expiration of the initial term,
will be automatically renewed for additional consecutive terms of one year, unless either we or Mr. Benson objects to the renewal
at least ninety days prior to the commencement of the renewal term.
Compensation
Each
grant of common stock discussed below is subject to approval by our stockholders to the extent required by the Listing Rules of
Nasdaq, including Listing Rule 5635(c), which has not yet been sought or obtained.
Base
Salary.
Pursuant to the Benson Agreement, Mr. Benson’s base salary will be $275,000 per year, retroactive to January
1, 2018, and will be increased on the first day of each calendar year thereafter in an amount that is no less than 7% of the base
salary.
Annual
Bonus.
For 2017, Mr. Benson received a performance bonus consisting of (i) cash in the amount of $150,000; (ii) 1,200 (300,000
on a pre-reverse stock split basis) shares of the Company’s common stock for extraordinary services related to the Company’s
acquisition of a majority stake in MoviePass Inc.; and (iii) 400 (100,000 on a pre-reverse stock split basis) shares of the Company’s
common stock for outstanding performance of his general duties in 2017. If issued, the shares will be considered vested in their
entirety as of February 15, 2019. For each subsequent year of the term, Mr. Benson may receive an annual bonus, made up of cash
and shares of the Company’s common stock, as determined in the sole discretion of the Board based on its assessment of Company
and individual performance in relation to performance targets, a subjective evaluation of Mr. Benson’s performance or such
other criteria as may be established by the Board. The annual cash target bonus will be 50% of Mr. Benson’s base salary
and, if granted, the annual award of shares of the Company’s common stock will be as follows: (i) for services rendered
during 2018, 1,200 (300,000 on a pre-reverse stock split basis) shares; (ii) for services rendered during 2019, 1,300 (325,000
on a pre-reverse stock split basis) shares; and (iii) for services rendered during 2020, 1,600 (400,000 on a pre-reverse stock
split basis) shares. The shares of common stock included in the annual bonus, if any, will vest ratably at the end of each of
the six calendar quarters subsequent to the calendar quarter in which the grant is made.
Grant
of Common Stock.
In approving the Benson Agreement, the Board approved the issuance of 2,400 (600,000 on a pre-reverse stock
split basis) shares of common stock to Mr. Benson. If issued, the shares will be considered vested in their entirety as of February
15, 2019, which is 18 months following August 15, 2017, the date on which we entered into the MoviePass SPA, which contemplated
that we would enter into an employment agreement with Mr. Benson prior to the closing under the MoviePass Transaction, which occurred
on December 11, 2017.
Other
Benefits
Life
Insurance.
We pay the premiums of an insurance policy insuring Mr. Benson’s life, providing coverage in the amount of
$3,000,000, payable to a beneficiary chosen by Mr. Benson.
Automobile
Allowance.
Mr. Benson receives an automobile allowance of $750 per month.
Company
Benefits.
Mr. Benson is entitled to participate in all pension, savings and retirement plans, welfare and insurance plans,
practices, policies, programs and perquisites of employment applicable generally to other senior executives of the Company.
Termination
Provisions
We
may terminate the Benson Agreement as a result of the death or disability, as defined in the Benson Agreement, of Mr. Benson or
for “cause” as defined in the Benson Agreement. Mr. Benson may terminate the Benson Agreement upon 30 days’
notice to the Company or for “good reason,” as defined in the Benson Agreement. If the Benson Agreement is terminated
by Mr. Benson for any reason other than good reason, terminated by the Company for cause, or expires by its terms, Mr. Benson
will receive earned but unpaid base salary, unpaid expense reimbursements, any earned but unpaid annual bonus, and the value of
any accrued and unused vacation days (collectively, the “Benson Accrued Obligations”).
If
the Benson Agreement is terminated due to his death or disability, Mr. Benson will receive the Benson Accrued Obligations; a pro-rata
portion of the annual bonus, if any, for the fiscal year in which the termination occurs; accelerated vesting of any equity-incentive
awards that are subject to time-based vesting; subject to a valid election under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), reimbursement of health insurance premiums, for himself or his dependents in the
event of his death, for a period of 18 months; and, in the event of his disability, continuation of the base salary until the
earlier of (A) the 12 month anniversary of the termination date of his employment and (B) the date Mr. Benson is eligible to commence
receiving payments under our long-term disability policy.
If
Mr. Benson’s employment is terminated without cause by us, due to a Change in Control, as defined in the Benson Agreement,
or for good reason by Mr. Benson, he will receive the Benson Accrued Obligations; severance in a single lump sum installment in
an amount equal to 2 times the sum of (A) the base salary plus (B) an amount equal to 2 times the maximum annual bonus for which
he is eligible in the fiscal year in which the termination of his employment occurs, or if there is no annual bonus for which
he is eligible in that year, then 2 times the annual bonus most recently paid to him; a pro-rata portion of the annual bonus,
if any, for the fiscal year in which the termination occurs; accelerated vesting of any equity-incentive awards; and subject to
a valid election under COBRA, reimbursement of health insurance premiums for a period of 18 months.
If,
as of the date of a Change in Control, Mr. Benson holds stock options that are not vested and exercisable, such stock options
will become fully vested and exercisable, as of the date of the Change in Control if the acquirer does not agree to assume the
awards or substitute equivalent stock options.
The
Benson Agreement includes standard provisions relating to maintaining the confidentiality of the Company’s confidential
information, non-solicitation of the Company’s employees and indemnification.
Krishnan
Agreement
On
April 7, 2016, we entered into an at-will employment agreement with Parthasarathy (Pat) Krishnan (the “Krishnan Agreement”)
whereby, in exchange for his services as Chief Executive Officer, President and Interim Chief Financial Officer, we agreed to
pay him compensation of $175,000 a year. On November 9, 2016, Mr. Krishnan’s annual compensation was increased to $225,000.
Pursuant to the Krishnan Agreement, Mr. Krishnan must provide us with at least 10 days’ notice before terminating his employment.
The Krishnan Agreement also includes a confidentiality provision and non-compete and non-solicitation provisions that continue
for a period of one year following his separation from service. Mr. Krishnan resigned his positions as Chief Executive Officer,
President and Interim Chief Financial Officer on January 20, 2017, when he was appointed as our Chief Innovation Officer.
The
Helios and Matheson Analytics Inc. 2014 Equity Incentive Plan
On
March 3, 2014, our Board approved and adopted, and on May 5, 2014, our stockholders approved, the Company’s 2014 Equity
Incentive Plan (the “2014 Plan”), which initially set aside and reserved 1,600 shares (400,000 shares on a pre-reverse
stock split basis) of the Company’s common stock for grant and issuance under the 2014 Plan, in accordance with its terms
and conditions. In conjunction with our merger with Zone Technologies, Inc., we increased the number of shares reserved for the
2014 Plan by 2,900 shares (725,000 shares on a pre-reverse stock split basis), and in February 2018, we increased the number of
shares reserved for the 2014 Plan by 7,500 shares (1,875,000 shares on a pre-reverse stock split basis) so that the total shares
set aside and reserved for issuance under the 2014 Plan totals 12,000 shares (3,000,000 shares on a pre-reverse stock split basis).
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 (collectively, the “Participants”). The 2014 Plan permits the Company to issue to
Participants qualified and/or non-qualified options to purchase the Company’s common stock, restricted common stock, performance
units (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. 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 our 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 shares of our 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.
Individual
Employee Benefit Plans
On
January 20, 2017, the Board approved individual employee benefit plans (the “Executive Plans”) for Theodore Farnsworth,
Pat Krishnan and Muralikrishna Gadiyaram. Pursuant to the Executive Plans, upon stockholder approval of the Executive Plans, which
was obtained on October 27, 2017, the Company issued 1,000 (250,000 on a pre-reverse stock split basis) unregistered shares of
common stock to each of the above-named individuals as a bonus for exceptional services provided in connection with the Company’s
merger transaction with Zone. The Executive Plans each include a provision that prevents the sale or transfer of the shares, subject
to exceptions for the transfer by gift, by will or intestate succession, or to a trust for the benefit of the individual or his
family, for a period of 24 months from the date that stockholder approval is obtained. Subject to the requirements of the Company’s
insider trading policy, the shares may also be sold or transferred in connection with the full or partial payment of taxes or
tax withholding obligations required to be paid or satisfied upon the individual’s receipt of the shares. The Executive
Plans also include a market standoff provision which prevents the recipient from selling or transferring the shares for a period
not to exceed 180 days from the consummation of a registered offering if so requested by the underwriter or placement agent.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth the number of shares of common stock beneficially owned as of December 5, 2018 by:
|
|
●
|
each
person known by the Company to own beneficially more than 5% of the Company’s common
stock;
|
|
|
●
|
each
person known by the Company to own beneficially more than 5% of the Company’s Preferred
Stock;
|
|
|
●
|
each
of the Company’s directors, director nominee and named executive officers listed
in the Summary Compensation Table under the sections entitled “Director Compensation”
and “Executive Compensation and Related Information”; and
|
|
|
●
|
all
of our current executive officers and directors as a group.
|
|
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
|
|
|
Name
of Beneficial Owner
(1)
|
|
Amount
and
Nature of
Beneficial
Ownership
(2)
|
|
|
Percentage
of
Ownership
(3)
|
|
|
Amount
and
Nature of
Beneficial
Ownership
|
|
|
Percentage
of Preferred Stock
Ownership
|
|
|
Voting
Power of Preferred
Stock
(4)
|
|
|
5%
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Bay Capital Management, L.P.
(5)
|
|
|
2,190,246,164
|
(6)
|
|
|
9.99
|
%
|
|
|
10,000
|
|
|
|
48.78
|
%
|
|
|
1.85
|
%
|
|
Discover
Growth Fund
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
24.39
|
%
|
|
|
*
|
|
|
Alto
Opportunity Master Fund, SPC Segregated Master Portfolio B
(8)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500
|
|
|
|
12.20
|
%
|
|
|
*
|
|
|
Empery
Asset Master, Ltd.
(9)
|
|
|
|
|
|
|
|
|
|
|
1,336
|
|
|
|
6.52
|
%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore
Farnsworth
|
|
|
9,960
|
(10)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stuart
Benson
|
|
|
-
|
(11)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Joseph
Fried
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Muralikrishna
Gadiyaram
|
|
|
9,294
|
(12)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Prathap
Singh
|
|
|
160
|
(13)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gavriel
Ralbag
|
|
|
160
|
(13)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
current directors and executive officers as a group (5 persons)
|
|
|
19,574
|
(14)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Unless otherwise noted, the business address
of each named person is c/o Helios and Matheson Analytics Inc., Empire State Building, 350 Fifth Avenue, Suite # 7520, New
York, New York 10118.
|
|
(2)
|
Unless otherwise noted, each person named in
the table below has sole voting and investment power with regard to all shares beneficially owned, subject to applicable community
property laws. All share information in the table reflects the reverse stock split.
|
|
(3)
|
The percentages shown are calculated based on
1,668,207,926 shares of common stock issued and outstanding on December 5, 2018. In calculating the percentage of ownership,
all shares of common stock that are acquirable by the identified person or group within 60 days of December 5, 2018 are deemed
to be outstanding for purposes of computing the percentage of the shares of common stock owned by that person or group, but
are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by any other
person or group.
|
|
(4)
|
Each share of Preferred Stock is entitled to
3,205 votes. The amount of votes with respect to each holder of Preferred Stock, when aggregated with the common stock held
by such holder, is subject to a 19.9% voting power limitation based on the voting power of the Company as of June 21, 2018.
|
|
(5)
|
Hudson Bay Capital Management, L.P. (“Hudson
Bay”), which serves as the investment manager to Hudson Bay Master Fund Ltd., in whose name the securities reported
are held, may be deemed to be the beneficial owner of all shares of common stock of the Company held by Hudson Bay Master
Fund Ltd. Mr. Gerber serves as the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay.
Mr. Gerber disclaims beneficial ownership of these securities. The address for Hudson Bay and Mr. Gerber is 777 Third Avenue,
30th Floor, New York, New York 10017.
|
|
(6)
|
Represents shares issuable upon conversion of
the Senior Secured Convertible Notes that were issued in November 2017 and January 2018 (collectively, the “Notes”). The
Notes are each subject to a 9.99% beneficial ownership limitation. The percentage of ownership gives effect to such limitation.
The number of shares issuable upon conversion of the Notes assumes that they are convertible at $0.02.
|
|
(7)
|
Discover Growth Fund is a Cayman Islands exempted
mutual fund and its address is 4th Floor, Harbour Place, 103 South Church Street, Grand Cayman KY1-1002, Cayman Islands.
|
|
(8)
|
Alto Opportunity Master Fund, SPC Segregated
Master Portfolio B, a Cayman Islands exempted company, is a private investment vehicle and its principal business office is
222 Broadway, 19th Floor, New York, NY 10038.
|
|
(9)
|
The address for Empery Asset Master Ltd. is
c/o Empery Asset Management, LP, One Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
|
(10)
|
This amount includes 1,000 (250,000 pre-reverse
stock split) shares issuable within 60 days of December 5, 2018, subject to entry into applicable award agreements. This
amount does not include 8,213 (2,926,355 pre-reverse stock split) shares of common stock that have been approved for issuance
to Mr. Farnsworth in conjunction with the execution of his employment agreement, but have not yet been approved by our stockholders,
as required by Nasdaq Listing Rule 5635(c).
|
|
(11)
|
Does not include 4,000 (1,000,000 pre-reverse
stock split) shares of common stock that have been approved for issuance to Mr. Benson in conjunction with the execution of
his employment agreement, but have not yet been approved by our stockholders, as required by Nasdaq Listing Rule 5635(c).
|
|
(12)
|
Includes (i) 2,750 (687,149 pre-reverse stock
split) shares held by Helios & Matheson Information Technology Ltd. and (ii) 3,544 (885,891 pre-reverse stock split) shares
held by Helios Matheson Inc., over which Mr. Gadiyaram holds shared voting and investment control.
|
|
(13)
|
Each of our independent directors received a
grant of 160 (40,000 pre-reverse stock split) shares as payment for services rendered as a director during 2017. The
shares of common stock have not yet been issued.
|
|
(14)
|
Includes 1,000 (250,000 pre-reverse stock split)
shares of common stock that may be issued within 60 days following December 5, 2018, and 320 (80,000 pre-reverse stock split)
shares of common stock granted to independent directors but not yet issued.
|
PROPOSAL
2
APPROVAL
AND RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AND REMUNERATION TO BE SET BY THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
(the
Auditor Appointment Proposal)
The
Company’s stockholders approved the appointment of Rosenberg Rich Baker Berman, P.A., Certified Public Accountants (“Rosenberg”)
as the auditor of the Company on October 27, 2017, to serve for the ensuing year. Rosenberg has served as our independent registered
public accounting firm since March 27, 2015.
In
making its recommendation to the Board that stockholders approve the appointment of Rosenberg as our independent registered
public accounting firm until the next Annual Meeting of stockholders, the Audit Committee considered whether Rosenberg’s
provision of non-audit services is compatible with maintaining the independence of our independent registered public accounting
firm. The Audit Committee pre-approved the audit fees, audit-related fees, tax fees and all other fees described below in accordance
with our pre-approval policy and believes such fees are compatible with the independence of Rosenberg.
Audit
Fees
For
the years ended December 31, 2017 and 2016, the aggregate fees paid to Rosenberg for the audit of the Company’s financial
statements for each of such years, the reviews of Company’s interim financial statements and other filings with the SEC,
as well as comfort letters and consents during each of such years were $323,000 and $85,500, respectively.
Audit-Related
Fees
For
the years ended December 31, 2017 and 2016, there were no fees paid to Rosenberg for audit-related services.
Tax
Fees
During
the years ended December 31, 2017 and 2016, there were no fees paid to Rosenberg for tax advice and tax planning services.
All
Other Fees
During
the years ended December 31, 2017 and 2016, there were no fees paid to Rosenberg for professional services other than audit and
tax services.
Audit
Committee Policies and Procedures
The
Audit Committee reviews the independence of the Company’s auditors on an annual basis and has determined that Rosenberg
is independent. In addition, the Audit Committee pre-approves all fees and work which is performed by the Company’s independent
auditor, including the above services and fees.
Rosenberg’s
Representatives at Annual Meeting
We
expect that representatives of Rosenberg will be present telephonically at the Annual Meeting. They will be given the opportunity
to make a statement if they desire to do so, but will not be available to respond to questions.
Vote
and Recommendation
The
affirmative vote of the holders of a majority of the common stock and Preferred Stock, voting together as a single class, entitled
to vote on, and that voted for or against or expressly abstained with respect to this proposal at a meeting of stockholders at
which a quorum is present, will be required for approval of this proposal. This proposal is advisory only.
Abstentions
will have the effect of a vote against Proposal 2. As this proposal is a “routine” matter, we do not expect any broker
non-votes. If you are a beneficial owner, your broker may vote on Proposal 2.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE AUDITOR APPOINTMENT PROPOSAL.
PROPOSAL
3
APPROVAL,
ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS
(the
Say-on-Pay Proposal)
In
recent years, good corporate governance commentators and advisors have advocated and, increasingly, governmental regulatory authorities,
including the SEC, are mandating that public companies initiate procedures to ensure that stockholders have input on compensation
programs for named executive officers. The Company’s policies and programs for compensating our named executive officers
are designed to attract, retain, motivate and reward top quality personnel capable of driving our success. Pay that reflects performance
and alignment of that pay with the interests of long-term stockholders are key principles that underlie the design of our compensation
programs for our named executive officers.
Our
Board values and encourages constructive dialogue on executive compensation and other important governance topics with our stockholders,
to whom it is ultimately accountable. We urge you to read this proxy statement for additional details on the Company’s executive
compensation.
Our
Say-on-Pay Proposal is designed to provide our stockholders with the opportunity to consider and vote upon the compensation paid
to our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the compensation
tables and narrative discussion. Although the vote is advisory and non-binding on the Company or the Board, our Board, the Governance
Committee and the Compensation Committee will review the voting results. To the extent there is any significant lack of support
for the compensation of our named executive officers, we would expect to initiate procedures designed to help us better understand
stockholder concerns.
We
are asking stockholders to vote on the following resolution:
RESOLVED
,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the compensation tables and the related narrative discussion, is hereby APPROVED.
Vote
and Recommendation
The
affirmative vote of the holders of a majority of the common stock and Preferred Stock, voting together as a single class, entitled
to vote on, and that voted for or against or expressly abstained with respect to this proposal at a meeting of stockholders at
which a quorum is present, will be required for approval of this proposal. This proposal is advisory only. Abstentions will have
the effect of a vote against Proposal 3, but broker non-votes will not affect the outcome of this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE SAY-ON-PAY PROPOSAL.
REPORT
OF THE AUDIT COMMITTEE
The
Audit Committee of the Board has:
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reviewed and discussed the
Company’s audited consolidated financial statements for the year ended December 31, 2017 with management;
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discussed with the Company’s
independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications
with Audit Committees, issued by the Public Company Accounting Oversight Board (“PCAOB”); and
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received the written disclosures
and letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB regarding
the independent registered public accounting firm’s communications with the Audit Committee concerning independence,
and has discussed with Rosenberg Rich Baker Berman, P.A. matters relating to its independence. The Audit Committee
concluded that Rosenberg Rich Baker Berman, P.A. is independent from the Company and management.
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In
reliance on the review and discussions referred to above, the Audit Committee recommended to the Board that the consolidated financial
statements audited by Rosenberg Rich Baker Berman, P.A. for the fiscal year ended December 31, 2017 be included in its Annual
Report on Form 10-K for such fiscal year.
Audit
Committee of the Board
Prathap
Singh
Gavriel
Ralbag
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons, Promoters and Certain Control Persons
Other
than as disclosed below, during our last two fiscal years through the date of this proxy statement, there has not been any transaction
or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed the
lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years ($87.8
million) and in which any of our directors, nominees for director, executive officers, holders of more than five percent of any
class of our voting securities or any member of the immediate family of the foregoing persons had or will have a direct or indirect
material interest.
Gadiyaram
Consulting Agreement
On
October 5, 2017, the Company entered into a consulting agreement (the “Consulting Agreement”) with Mr. Muralikrishna
Gadiyaram (the “Consultant”), a director of Helios for a period of two years from the agreement date (the “Consulting
Term”). The Consulting Agreement formalized the arrangement of the consulting services without compensation since the acquisition
of Zone. Such fees have been accrued and paid by the Company since January 1, 2017. Mr. Gadiyaram will continue to provide guidance
to the Company and Zone relating to the further development of the respective businesses and technologies. In addition to the
aforementioned service, if requested by the Company, Mr. Gadiyaram will provide guidance with respect to the development of any
businesses or technologies that the Company or Zone may acquire during the Consulting Term, including, but not limited to, MoviePass.
Pursuant to the Consulting Agreement, the Consultant will receive fees in the amount of $18,750 per month in cash. Following the
execution of the Consulting Agreement, the Company paid the Consultant the accrued consulting fees in the amount of $206,250 in
2017 and $168,750 in 2018.
Adoption
of Executive Plans
The
Board has approved individual employee benefit plans (the “Executive Plans”) for three of our executives, Theodore
Farnsworth, Parthasarathy (Pat) Krishnan and Muralikrishna Gadiyaram (the “Executives”). There are no other executive
officers or directors that will participate in the Executive Plans. Each of the Executive Plans includes the following:
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A grant of 1,000
(250,000 on a pre-reverse stock split basis) unregistered shares of our common stock (the “Award Shares”) to each
Executive, which grant was subject to approval by our stockholders, which we obtained at a special meeting of our stockholders
on October 27, 2017;
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A grant of 2,000
(500,000 on a pre-reverse stock split basis) unregistered shares of our common stock (the “MP Award Shares”) to
each Mr. Farnsworth and Mr. Gadiyram, which grant was subject to approval by our stockholders, which we obtained at a special
meeting of our stockholders on October 27, 2017;
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A lock-up provision
preventing the sale or transfer of the Award Shares for a period of 24 months from the date that stockholder approval was
obtained subject to exceptions for (i) the transfer of Award Shares as a bona fide gift, by will or intestate succession or
to a trust for the benefit of the Executive and his immediate family and (ii) the transfer of Award Shares to us or any deemed
disposition or deemed sale with respect to the Award Shares in connection with the full or partial payment of taxes or tax
withholding obligations required to be paid or satisfied upon receipt by the Executive of the Award Shares;
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A lock-up provision
preventing the sale or transfer of the MP Award Shares for a period of 18 months from the date of the closing of the Company’s
acquisition of a majority of MoviePass; and
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A “market
standoff” provision pursuant to which the Executive agrees that, following the execution of a definitive underwriting
or placement agency agreement with respect to a registered offering of our securities, the Executive will not sell or otherwise
transfer any Award Shares or other securities of the Company during any period, not to exceed 180 days, requested by the underwriter
or placement agent and agreed to in writing by us.
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Transactions
with Helios and Matheson Information Technology Ltd. (“HMIT”)
On
May 22, 2018, the Company and HMIT executed a letter agreement whereby HMIT agreed not to sell the shares of the Company’s
common stock held by HMIT until after April 15, 2019 (the “Lockup Agreement”). In exchange for such Lockup Agreement
the Company agreed to issue to HMIT 2,000 (500,000 on a pre-reverse stock split basis) shares of common stock of the Company.
As of the date of this proxy statement, the shares issuable to HMIT had not yet been issued and accordingly, the Company accrued
$225,000 with respect thereto, representing the value of the shares on May 22, 2018.
REQUIREMENTS
FOR ADVANCE NOTIFICATION OF NOMINATIONS AND STOCKHOLDER PROPOSALS
Stockholder
proposals submitted to us pursuant to Rule 14a-8 promulgated under the Exchange Act for inclusion in our proxy statement and form
of proxy for our 2019 Annual Meeting of Stockholders must be received by us no later than August 12, 2019, which is 120 calendar
days before the one-year anniversary of the date on which the Company first mailed this proxy statement, and must comply with
the requirements of the proxy rules promulgated by the SEC. The Company must receive notice of any stockholder proposal to be
submitted at the 2019 Annual Meeting of Stockholders, but not required to be included in our proxy statement, no later than October
26, 2019, which is 45 calendar days before the one-year anniversary of the date on which the company first mailed the proxy statement
for the 2018 Annual Meeting of Stockholders. Stockholder proposals should be addressed to our Secretary at Helios and Matheson
Analytics Inc., Empire State Building, 350 5th Avenue, Suite 7520, New York, NY 10118, Attn: Stuart Benson, Secretary.
Recommendations
from stockholders which are received after the deadline likely will not be considered timely for consideration by the Governance
Committee for next year’s Annual Meeting.
OTHER
MATTERS
The
Company does not intend to bring any other matters before the Annual Meeting and has no reason to believe any other matters will
be presented. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy
card to vote the common stock they represent as the Board may recommend. Discretionary authority with respect to such other matters
is granted by the execution of the proxy, whether through telephonic or internet voting or, alternatively, by using a paper copy
of the proxy card that has been requested.
It
is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are,
therefore, urged to vote by telephone or by using the internet as instructed on the proxy card or, if so requested, by executing
and returning, at your earliest convenience, the requested proxy card in the envelope that will have been provided.
THE
BOARD OF DIRECTORS
New
York, New York
December
10, 2018
ANNEX
A
Proxy
Card
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