MoviePass Parent Co. Borrows $5 Million to Cover Missed Payments That Caused ‘Technical Issues’

Helios & Matheson shares fell more than 67 percent on Friday

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MoviePass parent company Helios & Matheson Analytics said in a filing with the Securities and Exchange Commission on Friday that it borrowed $5 million in cash in order to fulfill its business partnership payments.

The $5 million went to pay MoviePass’ merchant and fulfillment processors, the company said. The company had failed to make a previous payment, which lead to MoviePass customers experiencing technical difficulties Thursday evening, or more simply put, MoviePass’ merchant and fulfillment partners stopped processing the company’s payments.

“If the company is unable to make required payments to its merchant and fulfillment processors, the merchant and fulfillment processors may cease processing payments for MoviePass, which would cause a MoviePass service interruption,” Helios & Matheson wrote in the SEC filing. “Such a service interruption occurred on July 26, 2018. Such service interruptions could have a material adverse effect on MoviePass’ ability to retain its subscribers. This would have an adverse effect on the Company’s financial position and results of operations.”

MoviePass fielded complaints on Thursday and tweeted that it was experiencing issues processing customers’ payments.

Shares of Helios & Matheson were down more than 67 percent during trading hours on Friday.

Earlier this week, Helios & Matheson shareholders voted to approve a reverse stock split and to increase the total number of outstanding shares to 5 billion from 500 million, in order to help buoy the company’s stock.

“Make no bones about it, it is a full blow war going on, especially with AMC,” said Helios & Matheson CEO Ted Farnsworth at the time, according to Business Insider, referencing MoviePass’s ongoing feud with AMC Theaters.

The stock plan did briefly boost Helios and Matheson’s share price, helping the company just stave off being delisted from the Nasdaq. The company’s shares have plummeted more than 91 percent in the last five days, and are now trading near $2.25 a share.

Helios & Matheson’s shares traded as high as $32.90 last October, but if shares fall below $1 again it could be at risk of being delisted. While that alone doesn’t spell the end of the MoviePass owner, it’s often the first of many warning signs for publicly traded companies.

The problems for the company are many — and they are multiplying as MoviePass continues to lose money even as investor confidence (and the parent company’s market share) plummets.

Helios & Matheson has poured tens of millions of dollars into the $10-a-month subscription moviegoing service, fueling its booming growth to 3 million-plus users

But that subscriber growth has proven costly: The company reported $40 million in MoviePass losses in May, and anticipated that to grow to $45 million in June — with just $18.5 million cash on hand as of May 31.

Since the company pays movie theaters full price for every ticket its subscribers purchase, frequent MoviePass users are driving the company further into the red.

In an April filing with the Securities and Exchange Commission, Helios & Matheson reported losses of $150 million in 2017 thanks to MoviePass and the lower subscription price launched last August — up from just $7 million in losses the year before.