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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    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 & MATHESON NORTH AMERICA INC.
  Delaware
State or other jurisdiction of 
incorporation or organization
    
    13-3169913
(I.R.S. Employer Identification No.)200 Park Avenue South 
New York, New York 10003
(Address of Principal Executive Offices)
    
    (212) 979-8228
(Registrants Telephone Number,
Including Area Code)
  Title of Class 
Common Stock, par value $.01 per share
    
    Name of Exchange on which Registered

NASDAQ Capital MarketCM
 
 Yes o No þ
 Yes o No þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
 CM




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##### 



TABLE OF CONTENTS
 PagePART I
    
    
    1Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    4Item 1B. Unresolved Staff Comments
    
    
    9Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. Reserved
    
    
    9Executive Officer of the Registrant
    
    
    9PART II
    
    
    10Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    10Item 6. Selected Financial Data
    
    
    12Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 8. Financial Statements and Supplementary Data
    
    
    20Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    20Item 9A(T). Controls and Procedures
    
    
    20Item 9B. Other Information
    
    
    21PART III
    
    
    22Item 10. Directors, Executive Officers and Corporate Governance
    
    
    22Item 11. Executive Compensation
    
    
    22Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
    
    
    22Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    23Item 14. Principal Accountant Fees and Services
    
    
    23PART IV
    
    
    23Item 15. Exhibits and Financial Statement Schedules
    
    
    23Exhibit 3.1Exhibit 3.2Exhibit 4.1Exhibit 10.1Exhibit 10.2Exhibit 21Exhibit 23.2Exhibit 31.1Exhibit 32.1




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PART I
 This Annual Report on Form 10-K contains forward-looking statements. Additional written and oral
forward-looking statements may be made by the Company from time to time in Securities and Exchange
Commission (SEC) filings and otherwise. 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 due to various risks and factors including
those discussed in this Report or identified from time to time in the Companys filings with the
SEC. Part I, Item 1A Risk Factors of this Annual Report discusses risk factors.
 
 ITEM 1. BUSINESS
 General
 CM
  Controlled Company
  Industry Background
  Strategy
   1




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Expand Existing Client Market Share.
 Expand Client Base.
 Offshore Expansion
 Operational Efficiency
 Helios & Matheson Operations
 Service Lines .
 Software.
   2




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Clients
    Sales and Marketing
  Competition
   Human Resources
  Long-Lived Assets
   3




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Intellectual Property Rights
    Seasonality
  
 ITEM 1A. RISK FACTORS
 Factors that Could Affect Operating Results
   4




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Operating Losses
  Going Concern and Capital Requirements
   Uncertain Economic Environment
   5




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Dependence on Limited Number of Clients
  Volatility of Stock Price
 CM
 NASDAQ Listing
       6




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Project Risk
  Billing Margins
   7




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Fluctuations in Quarterly Operating Results
   Competition
   Rapid Industry Change
  Intellectual Property Rights
    8




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NASDAQ Controlled Company
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. RESERVED
 
 EXECUTIVE OFFICER OF THE REGISTRANT
   9




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Price Range of Common Stock
 CM CM
  2008
    
    High
    
    
    LowFirst Quarter
    
    $
    2.85
    
    
    $
    1.56Second Quarter
    
    
    2.40
    
    
    
    1.52Third Quarter
    
    
    2.24
    
    
    
    1.13Fourth Quarter
    
    
    1.80
    
    
    
    0.01
 2009
    
    High
    
    
    LowFirst Quarter
    
    $
    0.68
    
    
    $
    0.20Second Quarter
    
    
    0.60
    
    
    
    0.15Third Quarter
    
    
    0.55
    
    
    
    0.25Fourth Quarter
    
    
    2.18
    
    
    
    0.25
  10




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Performance Graph
 ®
 
 Dividends
   Holders
  Recent Sales of Unregistered Securities
  Share Repurchases
   11




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ITEM 6. SELECTED FINANCIAL DATA
  Selected Financial Data
(in thousands, except number of shares and per share data)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Statement of Operations Data:Revenues
    
    $
    14,891
    
    
    $
    19,651
    
    
    $
    20,830
    
    
    $
    24,940
    
    
    $
    26,432(Loss)/income from operations
    
    
    (2,059
    )
    
    
    (2,953
    )(3)
    
    
    (1,142
    )
    
    
    900
    (2)
    
    
    (461
    )(1)Net (loss)/income
    
    
    (2,076
    )
    
    
    (2,924
    )
    
    
    (838
    )
    
    
    852
    
    
    
    (484
    )Net (loss)/income per shareBasic
    
    $
    (0.84
    )
    
    $
    (1.22
    )
    
    $
    (0.35
    )
    
    $
    0.36
    
    
    $
    (0.22
    )Diluted
    
    $
    (0.84
    )
    
    $
    (1.22
    )
    
    $
    (0.35
    )
    
    $
    0.35
    
    
    $
    (0.22
    )Weighted
average shares used in per share calculation  basic
    
    
    2,476,065
    (4)
    
    
    2,396,707
    
    
    
    2,391,452
    
    
    
    2,380,699
    
    
    
    2,285,874Weighted
average shares used in per share calculation  diluted
    
    
    2,476,065
    (4)
    
    
    2,396,707
    
    
    
    2,391,452
    
    
    
    2,404,946
    
    
    
    2,285,874Balance Sheet DataTotal assets
    
    $
    4,424
    
    
    $
    5,473
    (3)
    
    $
    8,505
    
    
    $
    9,789
    
    
    $
    8,493Long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    
    2,609
    
    
    
    3,665
    (3)
    
    
    6,520
    
    
    
    7,209
    
    
    
    6,205Number of shares outstanding at year end
    
    
    3,086,362
    (4)
    
    
    2,396,707
    
    
    
    2,396,707
    
    
    
    2,382,801
    
    
    
    2,361,333
 (1)
    
    Includes $1.2 million in pretax costs associated with a terminated transaction with Vanguard
Info-Solution Corporation for the year ended December 31, 2005.(2)
    
    Includes net proceeds received by the Company in connection with a release of claims relating
to a terminated transaction with Vanguard Info-Solution Corporation of $881,000.(3)
    
    Includes a goodwill impairment (non-cash) charge of $1.1 million in the fourth quarter of 2008.(4)
    
    Includes an issuance of 689,655 shares of common stock to Helios & Matheson Parent in the
fourth quarter of 2009. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
 CM.
  12




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Investments
   Critical Accounting Policies
  Goodwill and Intangible Assets
   Revenue Recognition
   15




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Allowance for Doubtful Accounts
  Valuation of Deferred Tax Assets
  Stock Based Compensation
  Results of Operations
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    75.2
    %
    
    
    77.2
    %
    
    
    70.5
    %Gross profit
    
    
    24.8
    %
    
    
    22.8
    %
    
    
    29.5
    %Operating expenses
    
    
    38.6
    %
    
    
    37.8
    %(1)
    
    
    35.0
    %Loss from operations
    
    
    (13.8
    )%
    
    
    (15.0
    )%
    
    
    (5.5
    )%Net loss
    
    
    (13.9
    )%
    
    
    (14.9
    )%
    
    
    (4.0
    )%
 (1)
    
    Includes a goodwill impairment charge of $1,141,000. Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008
 Revenues.
  16




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Gross Profit.
 Operating Expenses.
 Taxes.
 Net Loss.
 Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007
 Revenues.
 Gross Profit.
 Operating Expenses.
 Taxes.
 Net Loss.
  17




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Liquidity and Capital Resources
         18




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Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodMore Than 5Contractual Obligations
    
    Total
    
    
    Less Than 1 Year
    
    
    1  3 Years
    
    
    3  5 Years
    
    
    YearsLong Term ObligationsEmployment Contracts (1)
    
    
    127,250
    
    
    
    127,250
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease ObligationsRent (2)
    
    
    824,416
    
    
    
    374,379
    
    
    
    450,037
    
    
    
    
    
    
    
    Total
    
    $
    951,666
    
    
    $
    501,629
    
    
    $
    450,037
    
    
    $
    
    
    
    $
    
 (1)
    
    The Company has an employment agreement with its named Executive Officer Salvatore M.
Quadrino, the Companys Interim Chief Executive Officer and Chief Financial Officer. Under
Mr. Quadrinos employment agreement, Mr. Quadrino will serve in a dual capacity as Interim
Chief Executive Officer and Chief Financial Officer at an annual salary of $220,000.(2)
    
    The Company has a New York facility with a lease term expiring July 31, 2012, a New
Jersey facility with a lease term expiring August 31, 2010, and a Massachusetts facility
with a lease term expiring January 31, 2010. The Company did not renew the lease for the
Massachusetts facility and is currently leasing the facility on a month-to-month basis. In
addition, the Company is unlikely to renew the lease for its New Jersey facility. Recent Accounting Pronouncements
  Inflation
   19




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM
9A(T). CONTROLS AND PROCEDURES
  Evaluation of Disclosure Controls and Procedures
     20




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Management Report on Internal Control Over Financial Reporting
     Inherent Limitations on Effectiveness of Controls
  Changes in Internal Controls
  
 ITEM 9B. OTHER INFORMATION
    21




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IN FAVOR
    
    AGAINST
    
    ABSTAINED1,706,166
    
    9,101
    
    4,000
 
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Code of Ethics
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
   22




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Equity Compensation Plan Information
 ,
 Number of securitiesremaining available for futureissuance under equitycompensation plansNumber of securities to be
    
    
    Weighted-average exercise
    
    
    (Excluding securities to beissued upon exercise of
    
    
    price of outstanding
    
    
    issued upon exercise ofoutstanding options,
    
    
    options, warrants and
    
    
    outstanding options, warrantswarrants and rights as of
    
    
    rights as of December 31,
    
    
    and rights as of December 31,Plan Category
    
    December 31, 2009
    
    
    2009
    
    
    2009)Equity compensation plans
approved by security
holders
    
    
    35,500
    
    
    $
    4.62
    
    
    
    424,500Equity compensation
plans not
approved by security
holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    35,500
    
    
    $
    4.62
    
    
    
    424,500
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements
  Consolidated Financial Statement Schedules
   23




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Exhibits
  ExhibitNumber
    
    Description of Exhibits3.1
    
    
    Certificate of Incorporation of the Registrant.3.2
    
    
    Bylaws of Helios & Matheson North America Inc.4.1
    
    

Specimen
Common Stock Certificate.10.1
    
    
    Securities Purchase Agreement between the Company and Helios & Matheson Information
Technology Ltd. dated as of November 18, 2009.10.1.1
    
    
    Amended and Restated 1997 Stock Option and Reward Plan, incorporated by reference to Annex
J to the Companys Definitive Proxy Statement, as previously filed with the SEC on June 27,
2005. 10.1.2
    
    
    Amendment No. 1 to the Registrants Amended and Restated 1997 Stock Option and Award Plan,
incorporated by reference to Exhibit 10.2 on Form 8-K, as previously filed with the SEC on
June 9, 2006. 10.1.3
    
    
    Amendment No. 2 to the Registrants Amended and Restated 1997 Stock Option and Award Plan,
incorporated by reference to Exhibit 10.1.3 to the Form 10-K for the period ended December
31, 2006, as previously filed with the SEC on March 29, 2007. 10.1.4
    
    
    Form of Restricted Stock Award Grant and Notice Agreement between the Registrant and each
of its Non-Employee Directors, incorporated by reference to Exhibit 10.9 to the Form 10-Q for
the nine months ended September 30, 2005, as previously filed with the SEC on November 14,
2005. 10.1.5
    
    
    Form of Non-Qualified Stock Option Agreement between the Registrant and each of its
Non-Employee Directors incorporated by reference to Exhibit 10.10 to the Form 10-Q for the
nine months ended September 30, 2005, as previously filed with the SEC on November 14, 2005.10.2
    
    
    Loan and Security Agreement between the Registrant and Keltic Financial Partners II, LP
dated December 29, 2009.10.3
    
    
    Form of Indemnification Agreement between the Registrant and certain of its Directors and
its Chief Executive Officer, incorporated by reference to Exhibit 10.12 to the Form 10-Q forthe period ended September 30, 2003 as previously filed with the SEC on November 14, 2003. 10.4
    
    
    Employment Agreement, dated as of May 1, 2006, between the Registrant and Salvatore M.
Quadrino, incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, as
previously filed with the SEC on May 1, 2006. 10.5
    
    
    Amended Employment Agreement, dated as of May 9, 2008, between the Registrant and Salvatore
M. Quadrino, incorporated by reference to Exhibit 10.9 to the Form
10-K, as previously filed with the SEC on March 31, 2009. 10.6
    
    
    Form of Release and Covenant Not to Sue entered into by the Registrant releasing certain
parties, incorporated by reference to Exhibit 10.1 on Form 8-K, as previously filed with the
SEC on June 2, 2006.10.7
    
    
    Form of Release and Covenant Not to Sue entered into by the certain parties releasing the
Registrant, incorporated by reference to Exhibit 10.2 on Form 8-K, as previously filed with
the SEC on June 2, 2006.10.8
    
    
    Professional Services Agreement by and between the Registrant and IonIdea, Inc., dated as
of August 1, 2008, incorporated by reference to Exhibit 10.1 to the Form 10-Q as previously
filed with the SEC on November 13, 2008.
  24




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ExhibitNumber
    
    Description of Exhibits10.9
    
    

Letter
from Helios and Matheson Information Technology Ltd. dated March 26, 2007,
incorporated by reference to Exhibit 10.14 to the Form 10-K for the period ended December 31,
2006, as previously filed with the SEC on March 29, 2007.21
    
    
    Helios & Matheson North America, Inc. List of Subsidiaries.23.2
    
    
    Consent of Mercadien, P.C., Certified Public Accountants.31.1
    
    
    Certification of Interim Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Interim Chief Executive Officer and Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 
    
    Management contract or compensation plan.  25




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SIGNATURES
  HELIOS & MATHESON NORTH AMERICA INC.By:
    
    /s/ Salvatore M. Quadrino

Salvatore M. Quadrino,Interim Chief Executive Officer andChief Financial OfficerDate: March 31, 2010
  Signature
    
    Title
    
    Date/s/ Salvatore M. Quadrino

Salvatore M. Quadrino
    
    Interim Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer)
(Principal Financial Officer)
    
    March 31, 2010/s/ Shri S. Jambunathan

Shri S. Jambunathan
    
    Chairman and Director
    
    March 31, 2010/s/ Daniel L. Thomas

Daniel L. Thomas
    
    Director
    
    March 31, 2010/s/ Rabin Dhoble

Rabin Dhoble
    
    Director
    
    March 31, 2010/s/ Divya Ramachandran

Divya Ramachandran
    
    Director
    
    March 31, 2010
  26




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ITEM 15 (a) (1) and (2)
 HELIOS & MATHESON NORTH AMERICA INC.
  Report of Independent Registered Public Accounting Firm  Mercadien, P.C. Certified Public Accountants
    
    
    F-2Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Operations and Comprehensive Income
    
    
    F-4Consolidated Statements of Shareholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7The following consolidated financial statement schedule of Helios & Matheson North America Inc. is included
in Item 15(c): Schedule II  Valuation and Qualifying Accounts
    
    
    S-1
   F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      /s/ Mercadien, P.C., Certified Public Accountants

Mercadien, P.C., Certified Public AccountantsHamilton, New JerseyMarch 31, 2010
  F-2




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HELIOS & MATHESON NORTH AMERICA INC.
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,354,989
    
    
    $
    912,272Accounts receivable- less allowance for doubtful accounts of $220,879 at December 31, 2009, and $209,771 at December 31, 2008
    
    
    2,471,705
    
    
    
    3,846,355Unbilled receivables
    
    
    184,229
    
    
    
    34,208Prepaid expenses and other current assets
    
    
    178,879
    
    
    
    326,992Total current assets
    
    
    4,189,802
    
    
    
    5,119,827Property and equipment, net
    
    
    79,952
    
    
    
    207,470Deposits and other assets
    
    
    154,703
    
    
    
    145,336Total assets
    
    $
    4,424,457
    
    
    $
    5,472,633LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    1,630,054
    
    
    $
    1,647,722Deferred revenue
    
    
    184,904
    
    
    
    159,786Total current liabilities
    
    
    1,814,958
    
    
    
    1,807,508Shareholders equity:Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of December 31, 2009, and December 31, 2008
    
    
    
    
    
    
    Common stock, $.01 par value; 30,000,000 shares authorized; 3,086,362 issued and outstanding as of December 31, 2009 and 2,396,707 issued
and outstanding as of December 31, 2008
    
    
    30,864
    
    
    
    23,967Paid-in capital
    
    
    35,840,669
    
    
    
    34,822,736Accumulated other comprehensive income  foreign currency translation
    
    
    2,084
    
    
    
    6,863Accumulated deficit
    
    
    (33,264,118
    )
    
    
    (31,188,441
    )Total shareholders equity
    
    
    2,609,499
    
    
    
    3,665,125Total liabilities and shareholders equity
    
    $
    4,424,457
    
    
    $
    5,472,633
   F-3




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HELIOS & MATHESON NORTH AMERICA INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Revenues
    
    $
    14,890,970
    
    
    $
    19,650,588
    
    
    $
    20,830,184Cost of revenues
    
    
    11,201,957
    
    
    
    15,175,319
    
    
    
    14,683,313Gross profit
    
    
    3,689,013
    
    
    
    4,475,269
    
    
    
    6,146,871Operating expenses:Selling, general and administrative
    
    
    5,623,108
    
    
    
    6,108,704
    
    
    
    7,100,950Depreciation and amortization
    
    
    124,662
    
    
    
    178,199
    
    
    
    187,711Impairment of goodwill
    
    
    
    
    
    
    1,140,964
    
    
    
    5,747,770
    
    
    
    7,427,867
    
    
    
    7,288,661Loss from operations
    
    
    (2,058,757
    )
    
    
    (2,952,598
    )
    
    
    (1,141,790
    )Interest income
    
    
    5,011
    
    
    
    39,942
    
    
    
    157,200Loss before income taxes
    
    
    (2,053,746
    )
    
    
    (2,912,656
    )
    
    
    (984,590
    )Provision for income taxes
    
    
    21,931
    
    
    
    11,692
    
    
    
    (146,795
    )Net loss
    
    $
    (2,075,677
    )
    
    $
    (2,924,348
    )
    
    $
    (837,795
    )Other comprehensive (loss)/income
 foreign currency adjustment
    
    
    (4,779
    )
    
    
    5,208
    
    
    
    (2,294
    )Comprehensive loss
    
    $
    (2,080,456
    )
    
    $
    (2,919,140
    )
    
    $
    (840,089
    )Basic and diluted loss per share
    
    $
    (0.84
    )
    
    $
    (1.22
    )
    
    $
    (0.35
    )
   F-4




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HELIOS & MATHESON NORTH AMERICA INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Additional
    
    
    AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Other Comp
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    TotalBalance, December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    2,382,801
    
    
    $
    23,828
    
    
    $
    34,607,651
    
    
    $
    3,949
    
    
    $
    (27,426,298
    )
    
    $
    7,209,130Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (837,795
    )
    
    
    (837,795
    )Exercise of employee stock
options
    
    
    
    
    
    
    
    
    
    
    13,906
    
    
    
    139
    
    
    
    41,494
    
    
    
    
    
    
    
    
    
    
    
    41,633Stock based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,121
    
    
    
    
    
    
    
    
    
    
    
    109,121Foreign Exchange Translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,294
    )
    
    
    
    
    
    
    (2,294
    )Balance, December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    2,396,707
    
    
    $
    23,967
    
    
    $
    34,758,266
    
    
    $
    1,655
    
    
    $
    (28,264,093
    )
    
    $
    6,519,795Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,924,348
    )
    
    
    (2,924,348
    )Stock based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,470
    
    
    
    
    
    
    
    
    
    
    
    64,470Foreign Exchange Translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,208
    
    
    
    
    
    
    
    5,208Balance, December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    2,396,707
    
    
    $
    23,967
    
    
    $
    34,822,736
    
    
    $
    6,863
    
    
    $
    (31,188,441
    )
    
    $
    3,665,125Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,075,677
    )
    
    
    (2,075,677
    )Sale of stock
    
    
    
    
    
    
    
    
    
    
    689,655
    
    
    
    6,897
    
    
    
    993,103
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Stock based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,830
    
    
    
    
    
    
    
    
    
    
    
    24,830Foreign Exchange Translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,779
    )
    
    
    
    
    
    
    (4,779
    )Balance, December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    3,086,362
    
    
    $
    30,864
    
    
    $
    35,840,669
    
    
    $
    2,084
    
    
    $
    (33,264,118
    )
    
    $
    2,609,499
   F-5




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (2,075,677
    )
    
    $
    (2,924,348
    )
    
    $
    (837,795
    )Depreciation and amortization
    
    
    124,662
    
    
    
    178,199
    
    
    
    187,711Impairment of goodwill
    
    
    
    
    
    
    1,140,964
    
    
    
    Provision for doubtful accounts
    
    
    60,000
    
    
    
    50,000
    
    
    
    93,000Stock based compensation
    
    
    24,830
    
    
    
    64,470
    
    
    
    109,121Write down of investment
    
    
    
    
    
    
    
    
    
    
    87,059Reduction of capital lease obligation
    
    
    
    
    
    
    
    
    
    
    (214,016
    )Amortization of deferred financing cost
    
    
    8,883
    
    
    
    7,764
    
    
    
    9,883Changes in operating assets and liabilities:Accounts receivable
    
    
    1,314,650
    
    
    
    (416,794
    )
    
    
    105,921Unbilled receivables
    
    
    (150,021
    )
    
    
    (1,454
    )
    
    
    283,402Prepaid expenses and other current assets
    
    
    148,113
    
    
    
    (47,367
    )
    
    
    (121,840
    )Deposits
    
    
    1,750
    
    
    
    (1,750
    )
    
    
    (43,142
    )Accounts payable and accrued expenses
    
    
    (17,668
    )
    
    
    (159,311
    )
    
    
    (273,880
    )Deferred revenue
    
    
    25,118
    
    
    
    (18,232
    )
    
    
    (107,209
    )Net cash used in operating activities
    
    
    (535,360
    )
    
    
    (2,127,859
    )
    
    
    (721,785
    )Cash flows from investing activities:Sale/(Purchase) of property and equipment
    
    
    2,856
    
    
    
    (42,732
    )
    
    
    (73,425
    )Net cash provided by/(used in) investing activities
    
    
    2,856
    
    
    
    (42,732
    )
    
    
    (73,425
    )Cash flows from financing activities:Proceeds from the sale of stock and exercise of stock options
    
    
    1,000,000
    
    
    
    
    
    
    
    41,633Payment of deferred financing cost
    
    
    (20,000
    )
    
    
    
    
    
    
    (15,530
    )Net cash provided by financing activities
    
    
    980,000
    
    
    
    
    
    
    
    26,103Effect of foreign currency exchange rate changes on cash and cash equivalents
    
    
    (4,779
    )
    
    
    5,208
    
    
    
    (2,294
    )Net increase/(decrease) in cash and cash equivalents
    
    
    442,717
    
    
    
    (2,165,383
    )
    
    
    (771,401
    )Cash and cash equivalents at beginning of period
    
    
    912,272
    
    
    
    3,077,655
    
    
    
    3,849,056Cash and cash equivalents at end of period
    
    $
    1,354,989
    
    
    $
    912,272
    
    
    $
    3,077,655Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    
    
    
    $
    
    
    
    $
    Cash paid during the period for income taxes, net of refunds
    
    $
    (64,018
    )
    
    $
    6,543
    
    
    $
    163,796
   F-6




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SIGNIFICANT ACCOUNTING POLICIES
 Description of Business and Basis of Presentation
  Principles of Consolidation
   Accounting Standards Codification
  Accounting for Income Taxes
   Comprehensive Income (Loss)
   F-7




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Foreign Currency Translation
  Use of Estimates
  Going Concern
  Earnings Per Share
  Cash Equivalents
  Fair Value of Financial Instruments
   F-8




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Property and Equipment
  Long-Lived Assets
  Goodwill and Intangible Assets
  Revenue Recognition
  Accounts Receivable and Allowance for Doubtful Accounts
  Segment Information
   F-9




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock-Based Compensation
        F-10




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2009
    
    
    2008
    
    
    2007Expected life (years)
    
    
    4.00
    
    
    
    4.00
    
    
    
    4.00Risk free interest rate
    
    
    1.62
    %
    
    
    1.50
    %
    
    
    2.45
    %Expected volatility
    
    
    1.72
    
    
    
    1.70
    
    
    
    0.57Weighted average fair
value per option
    
    $
    0.00
    (1)
    
    $
    0.00
    (1)
    
    $
    0.00
    (1)
 (1)
    
    There were no options
granted by the Company for the 12 months ended December 31, 2009, 2008 and
2007. 2. NET INCOME (LOSS) PER SHARE
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Numerator for basic net loss per shareNet loss
    
    $
    (2,075,677
    )
    
    $
    (2,924,348
    )
    
    $
    (837,795
    )Net loss available to
common stockholders
    
    $
    (2,075,677
    )
    
    $
    (2,924,348
    )
    
    $
    (837,795
    )Numerator for diluted net loss per shareNet loss available to common
stockholders & assumed conversion
    
    $
    (2,075,677
    )
    
    $
    (2,924,348
    )
    
    $
    (837,795
    )Denominator:Denominator for basic and diluted loss
per share  weighted-average shares
    
    
    2,476,065
    
    
    
    2,396,707
    
    
    
    2,391,452Basic and diluted loss per share:Net loss per share
    
    $
    (0.84
    )
    
    $
    (1.22
    )
    
    $
    (0.35
    )
   F-11




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3. PROPERTY AND EQUIPMENT
  December 31,2009
    
    
    2008Equipment and leaseholds
    
    $
    226,475
    
    
    $
    218,459Software
    
    
    166,705
    
    
    
    163,793Furniture and fixtures
    
    
    111,984
    
    
    
    107,502Automobiles
    
    
    20,990
    
    
    
    54,136526,154
    
    
    
    543,890Less accumulated depreciation and amortization
    
    
    446,202
    
    
    
    336,420$
    79,952
    
    
    $
    207,470
 4. CREDIT ARRANGEMENT
  5. CONTRACTUAL OBLIGATIONS AND COMMITMENTS
    F-12




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Payments Due by PeriodMore Than 5Contractual Obligations
    
    Total
    
    
    Less Than 1 Year
    
    
    1  3 Years
    
    
    3  5 Years
    
    
    YearsLong Term ObligationsEmployment Contracts (1)
    
    
    127,250
    
    
    
    127,250
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease ObligationsRent (2)
    
    
    824,416
    
    
    
    374,379
    
    
    
    450,037
    
    
    
    
    
    
    
    Total
    
    $
    951,666
    
    
    $
    501,629
    
    
    $
    450,037
    
    
    $
    
    
    
    $
    
 (1)
    
    The Company has an employment agreement with its named Executive Officer Salvatore M.
Quadrino, the Companys Interim Chief Executive Officer and Chief Financial Officer. Under
Mr. Quadrinos employment agreement, Mr. Quadrino will serve in a dual capacity as Interim
Chief Executive Officer and Chief Financial Officer at an annual salary of $220,000.(2)
    
    The Company has a New York facility with a lease term expiring July 31, 2012, a New
Jersey facility with a lease term expiring August 31, 2010, and a Massachusetts facility
with a lease term expiring January 31, 2010. The Company did not renew the lease for the
Massachusetts facility and is currently leasing the facility on a month-to-month basis. The
Company is unlikely to renew the lease for its New Jersey facility. 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  December 31,2009
    
    
    2008Accounts payable
    
    $
    424,010
    
    
    $
    593,430Payroll
    
    
    808,366
    
    
    
    645,606Other accrued expenses
    
    
    397,678
    
    
    
    408,686$
    1,630,054
    
    
    $
    1,647,722
 7. REINCORPORATION IN THE STATE OF DELAWARE
   F-13




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  8. INCOME TAXES
    December 31,2009
    
    
    2008Licensing revenues
    
    $
    29,000
    
    
    $
    (47,000
    )Accounts receivable reserve
    
    
    111,000
    
    
    
    107,000Depreciation and amortization
    
    
    274,000
    
    
    
    268,000Investments
    
    
    928,000
    
    
    
    928,000Other
    
    
    247,000
    
    
    
    214,000Net operating losses
    
    
    4,739,000
    
    
    
    5,273,0006,328,000
    
    
    
    6,743,000Valuation allowance
    
    
    (6,328,000
    )
    
    
    (6,743,000
    )$
    
    
    
    $
    
    F-14




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    (123,486
    )State and local
    
    
    21,931
    
    
    
    11,692
    
    
    
    (23,309
    )Total Current
    
    $
    21,931
    
    
    $
    11,692
    
    
    $
    (146,795
    )Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State and local
    
    
    
    
    
    
    
    
    
    
    Total Deferred
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    21,931
    
    
    $
    11,692
    
    
    $
    (146,795
    )
  2009
    
    
    2008
    
    
    2007Federal statutory rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%
    
    
    (34.0
    )%State and local taxes net of federal tax benefit
    
    
    0.7
    
    
    
    0.3
    
    
    
    (1.6
    )Non-deductible expenses
    
    
    (0.1
    )
    
    
    13.4
    
    
    
    (0.2
    )Provision to return adjustments
    
    
    
    
    
    
    
    
    
    
    (4.8
    )Change in valuation allowance
    
    
    34.47
    
    
    
    20.75
    
    
    
    25.71Total
    
    
    1.07
    %
    
    
    0.40
    %
    
    
    (14.91
    )%
 9. RETIREMENT PLAN
  10. CONCENTRATION OF CREDIT RISK
   F-15




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. LEASES
  2010
    
    
    374,3792011
    
    
    284,2342012
    
    
    165,803Total minimum future lease payments
    
    $
    824,416
    (1)
 (1)
    
    The Company has a New York facility with a lease term expiring July 31, 2012, a
New Jersey facility with a lease term expiring August 31, 2010, and a Massachusetts facility with a
lease term that expired on January 31, 2010. The Company is unlikely to renew the lease for its New
Jersey facility.  12. IMPAIRMENT OF GOODWILL
  13. STOCK OPTION PLAN
     F-16




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  WeightedNumber of
    
    
    AverageShares
    
    
    Exercise PriceBalance  December 31, 2006
    
    
    189,906
    
    
    $
    4.76Granted during 2007
    
    
    
    
    
    $
    0.00Exercised during 2007
    
    
    (13,906
    )
    
    $
    3.00Forfeitures during 2007
    
    
    (47,000
    )
    
    $
    4.73Balance  December 31, 2007
    
    
    129,000
    
    
    $
    4.96Granted during 2008
    
    
    
    
    
    $
    0.00Exercised during 2008
    
    
    
    
    
    $
    0.00Forfeitures during 2008
    
    
    (21,625
    )
    
    $
    6.13Balance  December 31, 2008
    
    
    107,375
    
    
    $
    4.17Granted during 2009
    
    
    
    
    
    $
    0.00Exercised during 2009
    
    
    
    
    
    $
    0.00Forfeitures during 2009
    
    
    (71,875
    )
    
    $
    3.95Balance  December 31, 2009
    
    
    35,500
    
    
    $
    4.62
   Stock Options OutstandingNumber ofWeighted
    
    
    
    
    
    
    Weighted-
    
    
    StockExercise Price
    
    Average
    
    
    Number of
    
    
    Remaining
    
    
    OptionsRange
    
    Exercise Price
    
    
    Options
    
    
    Contractual Life
    
    
    Exercisable$0.00  $4.80
    
    $
    3.06
    
    
    
    15,500
    
    
    1.5 years
    
    
    13,625$4.80  $9.60
    
    $
    5.82
    
    
    
    20,000
    
    
    6.3 years
    
    
    15,00035,500
    
    
    
    
    
    
    
    28,625
   F-17




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. EMPLOYMENT AGREEMENT OF INTERIM CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
    15. SUBSEQUENT EVENTS
    F-18




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##### Table of Contents



HELIOS & MATHESON NORTH AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16. QUARTERLY RESULTS (UNAUDITED)
  Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(in thousands, except per share amounts)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Revenues
    
    $
    3,796
    
    
    $
    3,569
    
    
    $
    3,562
    
    
    $
    3,964Gross profit
    
    
    953
    
    
    
    912
    
    
    
    795
    
    
    
    1,029Loss from operations
    
    
    (737
    )
    
    
    (452
    )
    
    
    (536
    )
    
    
    (334
    )Net loss
    
    
    (743
    )
    
    
    (455
    )
    
    
    (540
    )
    
    
    (338
    )Net loss per shareBasic and diluted loss per share
    
    $
    (0.31
    )
    
    $
    (0.19
    )
    
    $
    (0.23
    )
    
    $
    (0.11
    )
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(in thousands, except per share amounts)
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Revenues
    
    $
    4,772
    
    
    $
    4,836
    
    
    $
    5,038
    
    
    $
    5,005Gross profit
    
    
    985
    
    
    
    864
    
    
    
    1,198
    
    
    
    1,428Loss from operations
    
    
    (845
    )
    
    
    (550
    )
    
    
    (310
    )
    
    
    (1,248
    )Net loss
    
    
    (830
    )
    
    
    (545
    )
    
    
    (301
    )
    
    
    (1,248
    )Net loss per shareBasic and diluted loss per share
    
    $
    (0.35
    )
    
    $
    (0.23
    )
    
    $
    (0.13
    )
    
    $
    (0.51
    )
  F-19




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
 Col. A
    
    Col. B
    
    
    Col. C
    
    
    Col. D
    
    
    Col. EAdditions(1)
    
    
    (2)Balance at
    
    
    Charged to
    
    
    Charged toBeginning of
    
    
    Costs and
    
    
    Other Accounts
    
    
    Deductions 
    
    
    Balances atDescription
    
    Period
    
    
    Expenses
    
    
    Describe
    
    
    Describe
    
    
    End of PeriodReserves and allowances
deducted from
asset accounts:For the year ended December 31,
2009Allowance for doubtful accounts
    
    $
    209,771
    
    
    $
    60,000
    
    
    $
    
    
    
    $
    (48,892
    )(a)
    
    $
    220,879For the year ended December 31,
2008Allowance for doubtful accounts
    
    $
    221,970
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    (62,199
    )(b)
    
    $
    209,771For the year ended December 31,
2007Allowance for doubtful accounts
    
    $
    225,741
    
    
    $
    93,000
    
    
    $
    
    
    
    $
    (96,771
    )(c)
    
    $
    221,970
 (a)
    
    Uncollectible accounts written off during 2009.(b)
    
    Uncollectible accounts written off during 2008.(c)
    
    Uncollectible accounts written off during 2007.  S-1




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibits3.1
    
    
    Certificate of Incorporation of the Registrant.3.2
    
    
    Bylaws of Helios & Matheson North America Inc.4.1
    
    

Specimen
Common Stock Certificate.10.1
    
    
    Securities Purchase Agreement between the Company and Helios & Matheson Information
Technology Ltd. dated as of November 18, 2009.10.1.1
    
    
    Amended and Restated 1997 Stock Option and Reward Plan, incorporated by reference to Annex
J to the Companys Definitive Proxy Statement, as previously filed with the SEC on June 27,
2005. 10.1.2
    
    
    Amendment No. 1 to the Registrants Amended and Restated 1997 Stock Option and Award Plan,
incorporated by reference to Exhibit 10.2 on Form 8-K, as previously filed with the SEC on
June 9, 2006. 10.1.3
    
    
    Amendment No. 2 to the Registrants Amended and Restated 1997 Stock Option and Award Plan,
incorporated by reference to Exhibit 10.1.3 to the Form 10-K for the period ended December
31, 2006, as previously filed with the SEC on March 29, 2007. 10.1.4
    
    
    Form of Restricted Stock Award Grant and Notice Agreement between the Registrant and each
of its Non-Employee Directors, incorporated by reference to Exhibit 10.9 to the Form 10-Q for
the nine months ended September 30, 2005, as previously filed with the SEC on November 14,
2005. 10.1.5
    
    
    Form of Non-Qualified Stock Option Agreement between the Registrant and each of its
Non-Employee Directors incorporated by reference to Exhibit 10.10 to the Form 10-Q for the
nine months ended September 30, 2005, as previously filed with the SEC on November 14, 2005.
10.2
    
    
    Loan and Security Agreement between the Registrant and Keltic Financial Partners II, LP
dated December 29, 2009.10.3
    
    
    Form of Indemnification Agreement between the Registrant and certain of its Directors and
its Chief Executive Officer, incorporated by reference to Exhibit 10.12 to the Form 10-Q for
the period ended September 30, 2003 as previously filed with the SEC on November 14, 2003. 10.4
    
    
    Employment Agreement, dated as of May 1, 2006, between the Registrant and Salvatore M.
Quadrino, incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, as
previously filed with the SEC on May 1, 2006. 10.5
    
    
    Amended Employment Agreement, dated as of May 9, 2008, between the Registrant and Salvatore
M. Quadrino, incorporated by reference to Exhibit 10.9 to the Form
10-K, as previously filed with the SEC on March 31, 2009. 10.6
    
    
    Form of Release and Covenant Not to Sue entered into by the Registrant releasing certain
parties, incorporated by reference to Exhibit 10.1 on Form 8-K, as previously filed with the
SEC on June 2, 2006.10.7
    
    
    Form of Release and Covenant Not to Sue entered into by the certain parties releasing the
Registrant, incorporated by reference to Exhibit 10.2 on Form 8-K, as previously filed with
the SEC on June 2, 2006.




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.8
    
    
    Professional Services Agreement by and between the Registrant and IonIdea, Inc., dated as
of August 1, 2008, incorporated by reference to Exhibit 10.1 to the Form 10-Q as previously
filed with the SEC on November 13, 2008.10.9
    
    

Letter
from Helios and Matheson Information Technology Ltd. dated March 26, 2007,
incorporated by reference to Exhibit 10.14 to the Form 10-K for the period ended December 31,
2006, as previously filed with the SEC on March 29, 2007.21
    
    
    Helios & Matheson North America, Inc. List of Subsidiaries.23.2
    
    
    Consent of Mercadien, P.C., Certified Public Accountants.31.1
    
    
    Certification of Interim Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Interim Chief Executive Officer and Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 
    
    Management contract or compensation plan.