The company disclosed the move in an SEC filing dated Jan. 28, when Helios and Matheson filed the petition for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Chapter 7 of the bankruptcy code dissolves an entity, whose assets are sold off to repay creditors (unlike Chapter 11 bankruptcy, in which a company seeks to renegotiate with creditors).
In its bankruptcy filing, Helios and Matheson listed the estimated value of assets at between $1 million-$10 million and $60.9 million in total creditor claims.
The bankruptcy filing comes after MoviePass in September 2019 notified remaining subscribers that it would be shutting down indefinitely because “its efforts to recapitalize MoviePass have not been successful to date.” Ted Farnsworth, the former Helios and Matheson CEO who engineered the 2017 acquisition of MoviePass, subsequently submitted an offer to buy the New York-based company but obviously that didn’t come to pass.
MoviePass executives had positioned the service as a trailblazer ahead of its time, allowing moviegoers to see multiple movies for a flat monthly fee. The startup did prompt theater chains including AMC Theatres, Regal Entertainment and Cinemark to launch their own rival subscription plans.
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But ultimately, MoviePass’ cash-burning business model proved unsustainable. For full-year 2018, according to its most recent financial filing, Helios and Matheson’s reported net loss more than doubled — to $329.3 million — versus the year prior on revenue of $232.3 million.
Originally MoviePass launched with a one-movie-per-day plan for $30-$40 per month then cut that to the too-good-to-be-true $9.95 monthly for a daily movie. Then in August 2018, MoviePass switched that to just three movies each month for $9.95, prompting a wave of cancellations. Last year, it rolled out a refashioned “unlimited” option, for $14.95 per month, to again allow customers to see one movie daily but warning that movie choices would be restricted based on “system-wide capacity.”
With the bankruptcy filing, Helios and Matheson board members Prathap Singh, Gavriel Ralbag, Muralikrishna Gadiyaram and Joseph Fried resigned. In addition, interim CEO Parthasarathy Krishnan, interim CFO Robert Damon resigned.
Helios and Matheson also owned Moviefone, which it bought from Verizon, and the company estimated the value of its trademarks at $4.38 million.
As disclosed in its bankruptcy filing, Helios and Matheson was being investigated by the SEC, the FTC, and attorneys general for New York and California. The company also is the target of several pending shareholder lawsuits.