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MoviePass Owner Over-Reports Subscriber Revenue for Q3 2018, Suffers $147 Million in Net Losses

Company said it had fewer subscribers than previously reported

During its most recent third quarter, MoviePass parent company Helios and Matheson Analytics Inc. thought the subscription service had more members than it actually did. On Tuesday the company re-reported revenue for the period that was more than 8 percent below where it originally thought.

In a filing with the Securities and Exchange Commission on Tuesday, Helios and Matheson said that the company’s board of directors and audit committee decided on Monday that its previously reported quarterly and year-to-date financial statements for the quarter ended Sept. 30, 2018 were no longer reliable.

The company said that due to a misreporting of subscriber numbers, any related press releases, earnings releases and investor communications about Helios and Matheson’s financial statements could not be relied upon.

“The errors primarily relate to the overstatement of subscription revenues in the third quarter of 2018 due to (1) the erroneous recognition of up to approximately $0.7 million of revenue from MoviePass subscriptions that had been terminated through refunds of subscriptions by Costco Wholesale Corporation; and (2) the erroneous recognition of up to approximately $5.9 million of revenue from certain MoviePass subscriptions that were in a suspended state due to changes made to the MoviePass subscription service that had not yet been consented to by the applicable subscribers,” Helios and Matheson said in the SEC filing. “These errors resulted in an understatement of the net loss by approximately $6.6 million.”

The company did not say in its filing how many subscribers it believed MoviePass had at the time, nor how many it has now.

Helios and Matheson reported on Tuesday, however, that revenue for the third quarter of 2018 was $74.7 million, down from $81.3 million when the company thought it had more subscribers that it actually did. The MoviePass owner also saw its net loss for the quarter widen to $146.7 million from the previously reported $137.2 million.

The company said that it’s not yet done with its review so the impact to its financial statement is subject to change.

MoviePass has made changes, implementing a new software solution that is supposed to automate and provide real-time information to better manage and account for subscriptions, including subscriptions that are terminated or in a suspended state.

The movie-theater subscription service has made multiple changes recently in an attempt to shore up its finances and get the service back on track. MoviePass announced last week that it was shifting its business model to prioritize self-generated revenue instead of reliance on earnings from exhibitors and studios.

The company believes that its future growth relies on its ability to maximize audience reach, focus on technological innovation and high-quality content production through MoviePass (theatrical subscription service); MoviePass Films (original content production company) and Moviefone (multimedia media information and advertising service).

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