Economist Carl J. Schramm has resigned from the board of directors at Helios and Matheson Analytics Inc., the parent company of MoviePass, saying management withheld material information from the board and made important corporate decisions without the board’s knowledge or approval.
“As you know, for several months now, I have raised questions and expressed concerns about the corporate governance of Helios and Matheson Analytics, Inc. HMNY, +4.66% ” Schramm wrote in his resignation letter, dated August 25.
His concerns increased over the past eight weeks, he said, “as management apparently has made a number of important corporate decisions and executed significant transactions either without Board knowledge or approval, or in Board meetings initiated with only a few hours of advance notice by email (at least one of which I did not even know had been called until the meeting had concluded).”
“Just last week, I learned that management withheld material information from the Board for several months,” Schramm added. He did not specify what information was withheld.
Schramm also said that, as a board member, he was unable to obtain information about Helios and Matheson’s financial status and operations.
“I have sought, often unsuccessfully, information about the Company’s financial status and operations, and explanations of Company strategy,” he wrote.
He said he objected to how “a number of business decisions have been presented to the Board of Directors by management, without sufficient time for the Board to examine complex documents, to review significant transactions, or to discuss how the proposed actions fit into the Company’s strategic plan.”
“These and other actions have interfered with my ability to exercise my responsibilities as a board member,” he wrote. “Taken together, they confirm that, despite my best efforts, my ability to effectively discharge my duties as a director has been compromised beyond repair.”
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Schramm is an economist and professor at the School of Information Studies at Syracuse University. In 2007, U.S. Secretary of Commerce Carlos Gutierrez chose Schramm to chair the Department of Commerce’s Measuring Innovation in the 21st Century Economic Advisory Committee. He also headed the Ewing Marion Kauffman Foundation, which provides grants to entrepreneurs, from 2002 to 2012. He had served on the board of Helios and Matheson since November 2016
When asked to comment on Schramm’s resignation, Helios and Matheson said in an email that it “recognizes Mr. Schramm’s contribution to the company” and referred MarketWatch to its the 8-K it filed on August 30.
“The Company is unaware of any unanswered requests for information by Mr. Schramm,” Helios and Matheson wrote in the filing. “The Company firmly believes that it has kept the Board fully informed and has provided all information needed for Board members to exercise their responsibilities.”
Schramm could not be reached for comment by the time of publication.
Helios and Matheson has had a difficult few months. It acquired a controlling stake in MoviePass in August 2017, but despite a surge in subscribing numbers, securities filings in the spring and early summer of 2018 showed the company was burning through cash at an alarming rate. Its monthly cash deficit ballooned and its share price plunged.
The company made a series of cash-raising moves, entering an agreement to issue 20,500 shares of preferred stock and $164 million in convertible notes. It also filed a shelf registration statement to raise $1.2 billion over three years by issuing equity and debt. The company implemented a 1-to-250 reverse stock split in July.
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Later that month, significant service interruptions with MoviePass began to occur due to Helios and Matheson’s inability to make “required payments to its merchant and fulfillment processors,” according to the company. In August, the company reported that it had lost millions of dollars in the second quarter. Helios and Matheson ended the quarter with just $15.5 million in cash on hand, and maintained a going-concern warning that it would not be able to sustain for the next year with the funds it had.
Shares of Helios and Matheson have plummeted 100% in the year to date and are currently trading at just over 2 cents a share, despite the company’s reverse stock split in July. The S&P 500 SPX, -0.30% has gained 9% so far this year.