UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended: June 30, 2013

 

 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ___________

 

Commission file number:     0-22945       

 

 

HELIOS AND MATHESON ANALYTICS INC.

 (Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware (State or other jurisdiction of incorporation or organization)	13-3169913 (I.R.S. Employer Identification No.)
Empire State Building, 350 5th Avenue, New York, New York 10118 (Address of Principal Executive Offices)	(212) 979-8228 (Registrant’s Telephone Number, Including Area Code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☒
		(Do not check if a smaller reporting company)

                                 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

 

As of July 17, 2013, there were 2,330,438 shares of common stock, with $.01 par value per share, outstanding.

 

 

HELIOS AND MATHESON ANALYTICS INC.

 

INDEX

 

Part I. Financial Information	3
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012	3
Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2013 and 2012	4
Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	5
Notes to Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3. Quantitative and Qualitative Disclosures about Market Risk	14
Item 4. Controls and Procedures	14
Part II. Other Information	14
Item 1. Legal Proceedings	14
Item 1A. Risk Factors	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Defaults Upon Senior Securities	14
Item 4. Mine SafEty Disclosure	14
Item 5. Other Information	14
Item 6. Exhibits	15
SIGNATURES	16

  

 

Part I. Financial Information 

Item 1. Financial Statements 

 

HELIOS AND MATHESON ANALYTICS INC.

CONSOLIDATED BALANCE SHEETS

 

		June 30, 2013				December 31, 2012
ASSETS		(unaudited)
Current Assets:
Cash and cash equivalents		$	2,132,527			$	2,861,733
Accounts receivable- less allowance for doubtful accounts of $44,421 at June 30, 2013, and $32,421 at December 31, 2012			2,026,617				1,257,488
Unbilled receivables			103,400				21,490
Prepaid expenses and other current assets			131,806				130,571
Total current assets			4,394,350				4,271,282
Property and equipment, net			50,204				52,717
Security Deposit			1,000,000				1,000,000
Deposits and other assets			85,520				100,032
Total assets		$	5,530,074			$	5,424,031
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	1,292,711			$	1,171,249
Total current liabilities			1,292,711				1,171,249
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of June 30, 2013, and December 31, 2012			-				-
Common stock, $.01 par value; 30,000,000 shares authorized; 2,330,438 issued and outstanding as of June 30, 2013 and December 31, 2012			23,304				23,304
Paid-in capital			37,855,740				37,855,740
Accumulated other comprehensive loss - foreign currency translation			(61,013	)			(46,910	)
Accumulated deficit			(33,580,668	)			(33,579,352	)
Total shareholders' equity			4,237,363				4,252,782
Total liabilities and shareholders' equity		$	5,530,074			$	5,424,031

 

See accompanying notes to consolidated financial statements.

  

 

HELIOS AND MATHESON ANALYTICS INC

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues		$	3,439,547			$	2,960,464			$	6,642,378			$	5,639,595
Cost of revenues			2,651,082				2,259,369				5,179,492				4,298,004
Gross profit			788,465				701,095				1,462,886				1,341,591
Operating expenses:
Selling, general & administrative			676,100				594,685				1,244,938				1,128,595
Depreciation & amortization			2,495				4,301				4,966				9,319
			678,595				598,986				1,249,904				1,137,914
Income from operations			109,870				102,109				212,982				203,677
Other income/(expense):
Early lease termination fee			-				-				-				(82,548	)
Interest income-net			710				5,173				1,440				6,096
			710				5,173				1,440				(76,452	)
Income before income taxes			110,580				107,282				214,422				127,225
Provision for income taxes			3,000				6,000				6,000				12,000
Net Income			107,580				101,282				208,422				115,225
Other comprehensive loss - foreign currency adjustment			(14,134	)			(9,525	)			(14,103	)			(7,790	)
Comprehensive Income		$	93,446			$	91,757			$	194,319			$	107,435
Basic and diluted income per share		$	0.05			$	0.04			$	0.09			$	0.05
Dividend Per share		$	-			$	-			$	0.09			$	-

 

See accompanying notes to consolidated financial statements.

  

 

HELIOS AND MATHESON ANALYTICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Six Months Ended June 30,
		2013				2012
		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income		$	208,422			$	115,225
Adjustments to reconcile net income to net cash provided/(used) in operating activities, net of acquired assets:
Depreciation and amortization			4,966				9,319
Provision for doubtful accounts			12,000				(858	)
Gain on sale of Fixed Asset			(250	)			(2,429	)
Changes in operating assets and liabilities:
Accounts receivable			(781,129	)			114,118
Unbilled receivables			(81,910	)			(71,823	)
Prepaid expenses and other assets			(1,235	)			(57,922	)
Accounts payable and accrued expenses			121,463				(67,872	)
Deposits			14,512				42,641
Net cash (used in)/provided by operating activities			(503,161	)			80,399
Cash flows from investing activities:
Purchase of Property and Equipment			(2,203	)			(39,028	)
Net cash used in investing activities			(2,203	)			(39,028	)
Cash flows from financing activities:
Dividend Paid			(209,739	)			-
Net cash used in financing activities			(209,739	)			-
Effect of foreign currency exchange rate changes on cash and cash equivalents			(14,103	)			(7,790	)
Net (decrease)/increase in cash and cash equivalents			(729,206	)			33,581
Cash and cash equivalents at beginning of period			2,861,733				1,998,158
Cash and cash equivalents at end of period		$	2,132,527			$	2,031,739
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes - net of refunds		$	3,197			$	4,617

 

See accompanying notes to consolidated financial statements

  

 

HELIOS AND MATHESON ANALYTICS INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

 

1)     GENERAL:

 

These financial statements should be read in conjunction with the financial statements contained in Helios and Matheson Analytics Inc.’s (“Helios and Matheson” or the “Company”) Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”) and the accompanying financial statements and related notes thereto. The accounting policies used in preparing these financial statements are the same as those described in the Company's Form 10-K for the year ended December 31, 2012. On May 3, 2013, the Company changed its name from Helios and Matheson Information Technology Inc. to Helios and Matheson Analytics Inc.

 

2)     CONTROLLED COMPANY:

 

The Board of Directors has determined that Helios and Matheson meets the definition of a “Controlled Company” as defined by Rule 5615(c) of the NASDAQ Listing Rules. A “Controlled Company” is defined in Rule 5615(c) as a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company. Certain NASDAQ requirements do not apply to a “Controlled Company”, including requirements that: (i) a majority of its Board of Directors must be comprised of “independent” directors as defined in NASDAQ’s rules; and (ii) the compensation of officers and the nomination of directors be determined in accordance with specific rules, generally requiring determinations by committees comprised solely of independent directors or in meetings at which only the independent directors are present.

 

 

3)     INTERIM FINANCIAL STATEMENTS:

 

In the opinion of management, the accompanying unaudited consolidated financial statements contain all the adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position as of June 30, 2013, the consolidated results of operations for the three and six months periods ended June 30, 2013 and 2012 and cash flows for the six months periods ended June 30, 2013 and 2012.

 

The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from these financial statements pursuant to the SEC’s rules and regulations. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Form 10-K filed by the Company for the year ended December 31, 2012.

 

For the three month period ended June 30, 2013, the Company reported net income of approximately $108,000 and for the six month period ended June 30, 2013, the Company reported net income of $208,000; for the three month period ended June 30, 2012, the Company reported net income of approximately $101,000 and for the six month period ended June 30, 2012, the Company reported net income of $115,000. The Company continues to focus on revenue growth by expanding its existing client market share and its client base. The Company also keeps a tight rein on discretionary expenditures and SG&A, which the Company believes will enhance its competitiveness.

 

In management's opinion, cash flows from operations combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months. 

 

4)     STOCK BASED COMPENSATION:

 

The Company has a stock based compensation plan, which is described as follows:

 

The Company’s Stock Option Plan (the “Plan”) provides for the grant of stock options that are either “incentive” or “non-qualified” for federal income tax purposes. The Plan provides for the issuance of a maximum of 184,000 shares of common stock (subject to adjustment pursuant to customary anti-dilution provisions). Stock options issued from the plan vest over a period of between one to four years.

 

The exercise price per share of a stock option is established by the Compensation Committee of the Board of Directors in its discretion but may not be less than the fair market value of a share of common stock as of the date of grant. The aggregate fair market value of the shares of common stock with respect to which “incentive” stock options first become exercisable by an individual to whom an “incentive” stock option is granted during any calendar year may not exceed $100,000.

 

 

Stock options, subject to certain restrictions, may be exercisable any time after full vesting for a period not to exceed ten years from the date of grant. Such period is established by the Company in its discretion on the date of grant. Stock options terminate in connection with the termination of employment.

 

Information with respect to options granted under the Company’s Plan is as follows:

 

		Number of Shares				Weighted Average Exercise Price
Balance - March 31, 2013			-				-
Granted during 2nd Qtr 2013			-				-
Exercised during 2nd Qtr 2013			-				-
Forfeitures during 2nd Qtr 2013			-				-
Balance - June 30, 2013			-			$	0.00

  

The following table summarizes the status of the stock options outstanding and exercisable at June 30, 2013:

 

	Stock Options Outstanding
	Exercise Price Range					Weighted Average Exercise Price				Number of Options			Weighted- Remaining Contractual Life (years)		Number of Stock Options Exercisable
	$12.00	-	$24.00			$	0.00				0		0			0
											0					0

  

At June 30, 2013 no stock options were exercisable.

 

5)     NET INCOME PER SHARE:

 

The following table sets forth the computation of basic and diluted net income per share for the three months and six months ended June 30, 2013 and 2012:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Numerator for basic net income per share
Net income available to common stockholders		$	107,580			$	101,282			$	208,422			$	115,225
Numerator for diluted net income per share
Net income available to common stockholders & assumed conversion		$	107,580			$	101,282			$	208,422			$	115,225
Denominator:
Denominator for basic and diluted income per share - weighted-average shares			2,330,438				2,330,438				2,330,438				2,330,438
Basic and diluted income per share:
Net income per share		$	0.05			$	0.04			$	0.09			$	0.05

  

  

6)     CONCENTRATION OF CREDIT RISK:

 

The revenues of the Company’s top three customers represented approximately 87% of the revenues for the six month period ended June 30, 2013. The revenue of the Company’s top three customers represented approximately 86.6% of revenues for the same period in 2012. No other customer represented greater than 10% of the Company’s revenues for such periods. The Company continues its effort to broaden its customer base in order to mitigate this risk.

 

 

7)     CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

 

The Company’s commitments at June 30, 2013, are comprised of the following:

 

Contractual Obligations	Payments Due by Period
		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Operating Lease Obligations
Rent (1)		588,900		157,040		314,080		117,780		-
Total	$	588,900	$	157,040	$	314,080	$	117,780	$	-

 

⁽¹⁾ The Company has a New York facility with a lease term expiring March 31, 2017.

 

 

As of June 30, 2013, the Company does not have any “Off Balance Sheet Arrangements”.

 

 

8) PROVISION FOR INCOME TAXES

 

The provision for income taxes as reflected in the consolidated statement of Income and Comprehensive Income varies from the expected statutory rate primarily due to a provision for minimum state taxes and the recording of adjustments to the valuation allowance against deferred tax assets. Internal Revenue Code Section 382 (the “Code”) places a limitation on the utilization of Federal net operating loss and other credit carry-forwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percent change in ownership occurs. During 2006, Helios and Matheson Information Technology Ltd (“Helios and Matheson Parent”) acquired a greater than 50 percent ownership of the Company. Accordingly, the actual utilization of the net operating loss carry-forwards for tax purposes are limited annually under the Code to a percentage (currently about four and a half percent) of the fair market value of the Company at the date of this ownership change. The Company maintains a valuation allowance against additional deferred tax assets arising from net operating loss carry-forwards since, in the opinion of management; it is more likely than not that some portion or all of the deferred tax assets will not be realized.

   

9)    TRANSACTIONS WITH RELATED PERSONS

 

In September 2010, the Company entered into a Memorandum of Understanding with Helios and Matheson Parent (the “HMIT MOU”) pursuant to which Helios and Matheson Parent has agreed to make available to the Company facilities of dedicated Off-shore Development Centers (“ODCs”). In connection with the ODCs, Helios and Matheson Parent also renders services by way of support in technology and client engagement, and by providing management and operational services at the ODCs. Helios and Matheson Parent has been providing recruitment services to Helios and Matheson Analytics Inc. and has not charged a fee for these services. Helios and Matheson Parent also invests in deepening client relationships by providing knowledge transition free of cost to clients and volume/ business commitment-based discounts.  The investment made by Helios and Matheson Parent in this regard during six months ended June 30, 2013 is $57,986.  The amount payable to Helios and Matheson Parent for services rendered under the HMIT MOU was $210,456 for the six months ended June 30, 2013 and is included as a component of cost of revenue. All payments to Helios and Matheson Parent under the MOU are made after collections are received from clients. The amount paid to Helios and Matheson Parent for services rendered under the HMIT MOU was $99,383 for the six months ended June 30, 2013.

 

  

10)      LEGAL PROCEEDINGS

 

On April 5, 2011, the Company filed a Complaint in the Superior Court of New Jersey, Union County against Toranco-Clark Associates LLC, the Company’s former landlord, for breach of the lease agreement in the amount of $22,000. On June 17, 2011, Toranco-Clark Associates LLC filed a Counterclaim against the Company in the amount of $24,000 for alleged breach of the lease agreement.  The case was dismissed on May 9, 2013 after the Company accepted $7,000 to settle the action and remaining balance of $15,000 was written off during quarter ending June 30, 2013.

 

During 2011, Rosen and Associates, P.C. has asked for a payment of $23,680 for services it allegedly performed for the Company. No action has been filed by Rosen and Associates, P.C.

 

11) DIVIDEND PAID

 

On February 3, 2013 the Company’s Board of Directors declared a dividend of $0.09 per share on the Company's common stock, amounting to a total payout of approximately 50% of the net profits of the Company for the year ended December 31, 2012. The dividend was paid on March 5, 2013 to shareholders of record on February 18, 2013. “However, there can be no assurance that we will pay dividends in the future.

 

12)    SUBSEQUENT EVENTS

 

Management completed an analysis of all subsequent events occurring after June 30, 2013, the balance sheet date, through August 2, 2013, the date upon which the quarter-end consolidated financial statements were issued, and determined there were no disclosures necessary which have not been already disclosed elsewhere in these financial statements.

 

  

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

 

The following discussion and analysis of significant factors affecting the Company's operating results, liquidity and capital resources should be read in conjunction with the accompanying financial statements and related notes.

 

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this document that do not relate to present or historical conditions are “forward-looking statements” within the meaning of that term under Section 27A of the Securities Act of 1933, as amended, and under Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the SEC. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking statements. The Company cautions readers that results predicted by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects, revenues, working capital, liquidity, capital needs, interest costs, and income are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. The important factors on which such statements are based, include but are not limited to, assumptions concerning the magnitude of the ongoing economic crisis, including its impact on the Company’s customers, demand trends in the information technology industry and the continuing needs of current and prospective customers for the Company’s services.

 

Overview

 

Since 1983, Helios and Matheson has provided high quality technology services and solutions to Fortune 1000 companies and other large organizations. The Company is headquartered in New York City and has a second office in Bangalore, India.

 

The Company believes that a philosophy of intense focus on client satisfaction, business aware solutions and guaranteed delivery provides tangible business value to its client base across banking, financial services, insurance, pharmaceutical and manufacturing/automotive verticals.

 

The Company’s services include application value management, application development, integration, independent validation, infrastructure and information management services and, in May 2013, it formally promoted its predictive analytics capabilities. Together with the Company’s integrated services, which include big data technology, extensive domain expertise in financial services and healthcare, and engaging data visualization, predictive analytics capabilities allows the Company to leverage its technological expertise to garner analytic insights from data and make intelligent predictions to assist clients in their decision-making processes. The Company’s new name, Helios and Matheson Analytics Inc., reflects the Company's strategy to move beyond IT to offer its clients an enhanced suite of services of predictive analytics with technology at its foundation enriched by data science.

 

For the six months ended June 30, 2013 and 2012, approximately 89% of the Company's consulting services revenues were generated from clients under time and materials engagements, with the remainder generated under fixed-price engagements and recruitment process outsourcing (RPO). The Company has established standard-billing guidelines for consulting services based on the types of services offered. Actual billing rates are established on a project-by-project basis and may vary from the standard guidelines. The Company typically bills its clients for time and materials services on a weekly and monthly basis. Arrangements for fixed-price engagements are made on a case-by-case basis. Consulting services revenues generated under time and materials engagements are recognized as those services are provided. Revenues from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs.

 

The Company's most significant operating cost is its personnel cost, which is included in cost of revenues. For the six months ended June 30, 2013 and 2012, gross margin was 22% and 23.8% respectively.

 

The Company actively manages its personnel utilization rates by monitoring project requirements and timetables. The Company’s utilization rate for the three months ending June 30, 2013 was approximately 95% as compared to 97.5% for the three months ending June 30, 2012. As projects are completed, consultants either are re-deployed to new projects at the current client site or to new projects at another client site or are encouraged to participate in the Company’s training programs in order to expand their technical skill sets.

 

  

Critical Accounting Policies

 

The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. The Company evaluates its estimates and judgments on an on-going basis. Estimates are based on historical experience and on assumptions that the Company believes to be reasonable under the circumstances. The Company’s experience and assumptions form the basis for its judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what is anticipated and different assumptions or estimates about the future could change reported results. The Company believes the following accounting policies are the most critical to it, in that they are important to the portrayal of its financial statements and they require the most difficult, subjective or complex judgments in the preparation of the consolidated financial statements.

 

Revenue Recognition

 

Consulting revenues are recognized as services are provided. The Company primarily provides consulting services under time and material contracts, whereby revenue is recognized as hours and costs are incurred. Customers for consulting revenues are billed on a weekly, semi-monthly or monthly basis. Revenues from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs. Any anticipated contract losses are estimated and accrued at the time they become known and estimable. Revenues from RPO services are recorded when service is performed. Unbilled accounts receivables represent amounts recognized as revenue based on services performed in advance of customer billings. Revenue from sales of software licenses is recognized upon delivery of the software to a customer because future obligations associated with such revenue are insignificant.

 

Allowance for Doubtful Accounts

 

The Company monitors its accounts receivable balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to accurately determine its accounts receivable reserve. The Company’s allowance for doubtful accounts is an estimate based on specifically identified accounts as well as general reserves. The Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations. In these cases, management uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer, against amounts due, to reduce the receivable to the amount that is expected to be collected. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved. The Company also establishes a general reserve for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, the Company’s estimate of the recoverability of amounts due the Company could be reduced or increased by a material amount. Such a change in estimated recoverability would be accounted for in the period in which the facts that give rise to the change become known.

 

Valuation of Deferred Tax Assets

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Company, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assesses the recoverability of deferred tax assets at least annually based upon the Company’s ability to generate sufficient future taxable income and the availability of effective tax planning strategies.

 

Stock Based Compensation

 

The Company uses the modified prospective application method as specified by the FASB whereby compensation cost is recognized over the remaining service period based on the grant-date fair value of those awards as calculated for pro forma disclosures as originally issued.

 

Results of Operations

 

The following table sets forth the percentage of revenues of certain items included in the Company’s Statements of Income:

 

  

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenues			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenues			77.1	%			76.3	%			78.0	%			76.2	%
Gross profit			22.9	%			23.7	%			22.0	%			23.8	%
Operating expenses			19.7	%			20.2	%			18.8	%			20.2	%
Income from operations			3.2	%			3.5	%			3.2	%			3.6	%
Net Income			3.1	%			3.5	%			3.1	%			2.0	%

 

Comparison of the Three Months Ended June 30, 2013 to the Three Months Ended March 31, 2012

 

Revenues. Revenues for the three months ended June 30, 2013 were $3.4 million compared to $3 million for the three months ended June 30, 2012. The increase was primarily attributable to an increase in consulting and RPO revenue.

Gross Profit. The resulting gross profit for the three months ended June 30, 2013 was $788,000 as compared to $701,000 for the three months ended June 30, 2012. As a percentage of total revenues, gross margin for the three months ended June 30, 2013 was 22.9% compared to 23.7% for the three months ended June 30, 2012. The reduction to gross margin is due to a change in the revenue mix.

 

Operating Expenses. Operating expenses are comprised of selling, general and administrative (“SG&A”) expenses and depreciation and amortization. Operating expenses for the three months ended June 30, 2013 were $679,000 as compared to the 2012 period of $599,000. The increase is mainly due to certain onetime charges primarily relating to promotion of the Company's predictive analytics offering. It also includes a charge of $15,000 due to the settlement of a legal action with Toranco-Clark Associates LLC, the Company’s former landlord (as discussed in note 10 of Item I of Part I).

 

Taxes. Tax provision for the three months ended June 30, 2013 was $3,000 compared to $6,000 for the three months ended June 30, 2012.

 

Net Income. As a result of the above, the Company had net income of $107,000 or $0.05 per basic and diluted share for the three months ended June 30, 2013 as compared to a net income of $101,000 or $0.04 per basic and diluted share for the three months ended June 30, 2012.

 

Comparison of the Six Months Ended June 30, 2013 to the Six Months Ended June 30, 2012

 

Revenues. Revenues for the six months ended June 30, 2013 were $6.6 million compared to $5.6 million for the six months ended June 30, 2012. The increase was primarily attributable to an increase in consulting and RPO revenue.

Gross Profit. Gross profit for the six months ended June 30, 2013 was $1.5 million as compared to $1.3 million for the six months ended June 30, 2012. As a percentage of total revenues, gross margin for the six months ended June 30, 2013 was 22% compared to 23.8% for the six months ended June 30, 2012. The reduction to gross margin is due to a change in the revenue mix.

 

Operating Expenses. Operating expenses are comprised of Selling, General and Administrative (“SG&A”) expenses and depreciation and amortization. Operating expenses for the six months ended June 30, 2013 were $1.2 million compared to $1.1 million in operating expenses for the 2012 comparable period. The increase is mainly due to certain onetime charges primarily relating to promotion of the Company's predictive analytics offering. It also includes a charge of $15,000 due to the settlement of a legal action with Toranco-Clark Associates LLC, the Company’s former landlord (as discussed in note 10 of Item I of Part I).

 

Taxes. Tax provision for the six months ended June 30, 2013 was $6,000 compared to $12,000 for the six months ended June 30, 2012, and is comprised exclusively of minimum state taxes.

 

Net Income. As a result of the above, the Company had net income of $208,000 or $0.09 per basic and diluted share for the six months ended June 30, 2013 compared to a net income of $115,000 or $0.05 per basic and diluted share for the six months ended June 30, 2012.

 

 

Liquidity and Capital Resources

 

A significant portion of the Company’s major customers are in the financial services industry and came under considerable pressure as a result of the unprecedented economic conditions in the financial markets. Spending on analytics and technology consulting services is largely discretionary, and the Company could experience pushback of new assignments and high margin projects from existing clients. Although revenues have improved quarter over quarter, the Company has reported almost similar income from operations. The Company had income from operations of approximately $212,000 and net income of approximately $208,000 for the six months ended June 30, 2013. During the six months ended June 30, 2012, the Company had income from operations of approximately $204,000 and net income of approximately $115,000. Net Income of the six months ended June 30, 2012 had a non recurring expense of approximately $83,000 with respect to early lease termination costs.

 

The Company's cash balances were approximately $2.13 million at June 30, 2013 and $2.9 million at December 31, 2012. Net cash used by operating activities for the six months ended June 30, 2013 was approximately $503,000 compared to net cash provided by operating activities of approximately $80,000 for the six months ended June 30, 2012.

 

The Company's accounts receivable, less allowance for doubtful accounts, at June 30, 2013 and at December 31, 2012 were approximately $2 million and $1.3 million, respectively, representing 55 days and 34 days of sales outstanding (“DSO”) respectively. The increase in DSO was temporary and a significant amount of overdue amounts have been collected subsequent to June 30^th. The Company has provided an allowance for doubtful accounts at the end of each of the periods presented. After giving effect to this allowance, the Company does not anticipate any difficulty in collecting amounts due.

 

For the six months ended June 30, 2013 cash used by investing activities was ($2,200) as compared to ($39,000) of cash used by investing activities for the six months ended June 30, 2012. During the six months ended June 30, 2012, cash used in investing activities consisted of the amount paid as a security deposit for the new executive office in the Empire State Building.

 

For the six months ended June 30, 2013, cash used by financing activities was ($210,000) as compared to $0 for the six months ended June 30, 2012. On February 3, 2013 the Company’s Board of Directors declared a dividend of $0.09 per share on the Company's common stock, amounting to a payout of $209,739.

 

In management's opinion, cash flows from operations combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months.

 

For the six months ended June 30, 2013 and 2012, there were no shares of common stock issued pursuant to the exercise of options granted under the Company’s stock option plan.

 

Off Balance Sheet Arrangements

 

As of June 30, 2013, the Company does not have any Off Balance Sheet Arrangements.

 

Contractual Obligations and Commitments

 

The Company’s commitments at June 30, 2013 are reflected and further detailed in the Contractual Obligation table located in Part I, Item 1, Note 7 of this Form 10-Q.

 

Inflation

 

The Company has not suffered material adverse effects from inflation in the past. However, a substantial increase in the inflation rate in the future may adversely affect customers’ purchasing decisions, may increase the costs of borrowing or may have an adverse impact on the Company’s margins and overall cost structure.

 

Recent Accounting Pronouncements

 

None.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting Company this information is not required to be provided.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures. As of June 30, 2013, we carried out an evaluation, under the supervision of and with the participation of our President and Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of June 30, 2013, our disclosure controls and procedures were effective.

 

Changes in internal control. During the quarter covered by this report, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

The Company’s legal proceedings at June 30, 2013 have been disclosed in Part I, Item 1, Note 10 of this Form 10-Q.

 

Item 1A. Risk Factors

 

We incorporate herein by reference the risk factors included under Item 1A. of our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on March 4, 2013.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities 

 

None.

 

Item 4. Mine Safety Disclosure

 

Not Applicable

 

Item 5. Other Information 

 

None.

 

 

Item 6. Exhibits

(a)     Exhibits

 

 

3.1

Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the Form 10-K, as previously filed with the SEC on March 31, 2010.

 

3.2

Bylaws of Helios and Matheson Analytics Inc., incorporated by reference to Exhibit 3.2 to the Form 10-K, as previously filed with the SEC on March 31, 2010.

 

3.3

Certificate of amendment of Certificate of Incorporation of the Registrant.

 

10.1

Amendment to Professional Services Agreement by and between the Registrant and IonIdea, Inc., dated as of May 31, 2013. †

 

31.1

Certification of Principal Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

 

31.2

Certification of Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

 

32.1

Certification of the Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

Certification of the Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101

The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets; (ii) consolidated statements of Income and Comprehensive income; (iii) consolidated statements of cash flows; and (iv) the notes to the financial statements.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

	HELIOS AND MATHESON ANALYTICS INC.
	By:	/s/ Divya Ramachandran
Date: August 2, 2013		Divya Ramachandran
		Chief Executive Officer and President

	By:	/s/ Umesh Ahuja
Date: August 2, 2013		Umesh Ahuja
		Chief Financial Officer and Secretary

 

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