Carl Schramm resigned from the board of Helios and Matheson Analytics, MoviePass' parent company.
In his resignation letter, Schramm raised concerns about the corporate governance of Helios and accused management of witholding material information from the board for months.
The past few months have been tumultuous for MoviePass and its parent company, which has instituted a series of unpopular changes designed to combat its massive cash burn.
Helios pushed back on Schramm's concerns and said it was "unaware of any unanswered requests for information by Mr. Schramm."
Carl Schramm has resigned from the board of MoviePass' parent company, Helios and Matheson Analytics, the company disclosed in a Securities and Exchange Commission filing Thursday.
In Schramm's resignation letter, he said that for several months he'd raised "questions and expressed concerned about the corporate governance" of Helios, and he accused management of withholding material information from the board for months. He also criticized management for not giving the board "sufficient time" to examine "complex documents, to review significant transactions, or to discuss how the proposed actions fit into the company's strategic plan."
"These concerns have increased substantially over the past eight weeks 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)," Schramm continued. "Just last week, I learned that management withheld material information from the board for several months."
Schramm is a professor at Syracuse University and formerly ran the Ewing Marion Kauffman Foundation, a non-profit focused on entrepreneurship and education. He'd served on the board of Helios since November, 2016, a few months before the company took a majority stake in popular movie-theater subscription app MoviePass last summer.
The last two months have been tumultuous for MoviePass and its parent company. As over three million subscribers have flocked to the service, it has struggled to keep its cash burn, which rose to an estimated $45 million in July, under control. After the service shut off in late July because the company temporarily ran out of money, Helios took an emergency loan of $5 million to turn it back on. In the wake of the loan, MoviePass made drastic changes to its business model. First, MoviePass announced that it would raise prices to $14.95 and ban major blockbusters from the app, at least for the first few weeks. After subscriber outcry, MoviePass quickly reversed those changes and instead instituted a cap of three movies per month (the service previously allowed one movie per day).
Despite Helios management saying the changes to MoviePass had helped slow its cash burn dramatically, the stock price has not recovered. It's currently trading at around $0.02.
Helios pushed back on Schramm's concerns in the Thursday filing.
"The company is unaware of any unanswered requests for information by Mr. Schramm," the filing states. "The board and committees of which Mr. Schramm was a member have met at least 25 times at duly convened meetings thus far in 2018, and 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."
This is not the first controversy surrounding Helios' board. In June, Business Insider reported that current Helios board member, Muralikrishna Gadiyaram, was under investigation in India after allegations of major fraud involving Helios' former parent company, Helios and Matheson Information Technology.
Here is the full resignation letter from Schramm, addressed to Helios CEO Ted Farnsworth:
As you know, for several months now, I have raised questions and expressed concerns about the corporate governance of Helios and Matheson Analytics, Inc. (the "Company"). I have sought, often unsuccessfully, information about the Company's financial status and operations, and explanations of Company strategy. I have objected to the manner in which 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 concerns have increased substantially over the past eight weeks 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.
These and other actions have interfered with my ability to exercise my responsibilities as a board member. Taken together, they confirm that, despite my best efforts, my ability to effectively dis charge my duties as a director has been compromised beyond repair.
Accordingly, effective immediately, I hereby resign from the Board of Directors of Helios and Matheson Analytics, Inc., and from any and all committees of which I am a member.
In accordance with Section 11(b)(1) of the Securities Act, from this date forward, I disclaim any and all responsibility for any part of any registration statement filed with the United States Securities and Exchange Commission by or on behalf of Helios and Matheson Analytics, Inc., or any of its affiliates, including but not limited to the Form S-3 filed on January 25, 2018, the Form S-3 filed on July 2, 2018, and any other corporate filings.