Helios and Matheson Analytics (HMNY) 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 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.

(Exact Name of Registrant as Specified in Its Charter)

New York	13-3169913
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
200 Park Avenue South New York, New York 10003	(212) 979-8228
(Address of Principal Executive Offices)	(Registrant’s Telephone Number,
	Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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. Yesþ Noo

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).
Yeso Noo

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 filero	Accelerated filero		Non-accelerated filero	Smaller reporting companyþ
		(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) Yeso Noþ

As of August 7, 2009, there were 2,396,707 shares of common stock, with $.01 par value per share, outstanding.

HELIOS & MATHESON NORTH AMERICA INC.

INDEX

PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	3
Consolidated Statement of Operations for the three and six months ended June 30, 2009 and 2008	4
Consolidated Statement of Cash Flows for the six months ended June 30, 2009 and 2008	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	16
Item 4T. Controls and Procedures	16
PART II. OTHER INFORMATION	17
Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 5. Other Information	18
Item 6. Exhibits	19
SIGNATURES	20
Exhibit 31.1
Exhibit 32.1

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Part I. Financial Information

Item 1. Financial Statements

HELIOS & MATHESON NORTH AMERICA INC.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2009			2008
		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,135,380		$	912,272
Accounts receivable- less allowance for doubtful accounts of $214,223 at June 30, 2009, and $209,771 at December 31, 2008		2,278,539			3,846,355
Unbilled receivables		69,853			34,208
Prepaid expenses and other current assets		293,241			326,992
Total current assets		3,777,013			5,119,827
Property and equipment, net		126,112			207,470
Deposits and other assets		144,703			145,336
Total assets	$	4,047,828		$	5,472,633
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	1,251,993		$	1,647,722
Deferred revenue		320,775			159,786
Total current liabilities		1,572,768			1,807,508
Shareholders’ equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of June 30, 2009, and December 31, 2008		—			—
Common stock, $.01 par value; 30,000,000 shares authorized; 2,396,707 issued and outstanding as of June 30, 2009, and December 31, 2008		23,967			23,967
Paid-in capital		34,835,051			34,822,736
Accumulated other comprehensive income — foreign currency translation		2,286			6,863
Accumulated deficit		(32,386,244	)		(31,188,441	)
Total shareholders’ equity		2,475,060			3,665,125
Total liabilities and shareholders’ equity	$	4,047,828		$	5,472,633

See accompanying notes to consolidated financial statements.

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HELIOS & MATHESON NORTH AMERICA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	7,365,275		$	9,607,982		$	3,568,778		$	4,835,953
Cost of revenues		5,500,170			7,759,236			2,656,703			3,971,752
Gross profit		1,865,105			1,848,746			912,075			864,201
Operating expenses:
Selling, general & administrative		2,984,387			3,154,739			1,329,025			1,369,137
Depreciation & amortization		69,790			88,953			34,969			44,827
		3,054,177			3,243,692			1,363,994			1,413,964
Loss from operations		(1,189,072	)		(1,394,946	)		(451,919	)		(549,763	)
Other income(expense):
Interest income-net		2,603			28,590			1,187			9,128
		2,603			28,590			1,187			9,128
Loss before income taxes		(1,186,469	)		(1,366,356	)		(450,732	)		(540,635	)
Provision for income taxes		11,334			9,000			3,910			4,500
Net loss		(1,197,803	)		(1,375,356	)		(454,642	)		(545,135	)
Other comprehensive loss — foreign currency adjustment		(4,577	)		(2,209	)		(2,430	)		(1,353	)
Comprehensive loss	$	(1,202,380	)	$	(1,377,565	)	$	(457,072	)	$	(546,488	)
Net loss per share
Basic	$	(0.50	)	$	(0.57	)	$	(0.19	)	$	(0.23	)
Diluted	$	(0.50	)	$	(0.57	)	$	(0.19	)	$	(0.23	)

See accompanying notes to consolidated financial statements.

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HELIOS & MATHESON NORTH AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2009			2008
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net loss	$	(1,197,803	)	$	(1,375,356	)
Adjustments to reconcile net loss to net cash provided by/(used in) operating activities, net of acquired assets:
Depreciation and amortization		69,790			88,953
Provision for doubtful accounts		30,000			30,000
Stock based compensation		12,316			37,430
Amortization of deferred financing cost		3,882			3,882
Changes in operating assets and liabilities:
Accounts receivable		1,537,816			88,715
Unbilled receivables		(35,645	)		(47,206	)
Prepaid expenses and other current assets		33,751			(34,158	)
Deposits		1,750			(1,750	)
Accounts payable and accrued expenses		(395,729	)		(182,912	)
Deferred revenue		160,989			(516	)
Net cash provided by/(used in) operating activities		221,117			(1,392,918	)
Cash flows from investing activities:
Sale/(Purchase) of property and equipment		11,568			(41,725	)
Net cash provided by/(used in) investing activities		11,568			(41,725	)
Cash flows from financing activities:
Payment of deferred financing cost		(5,000	)		—
Net cash used in financing activities		(5,000	)		—
Effect of foreign currency exchange rate changes on cash and cash equivalents		(4,577	)		(2,209	)
Net increase/(decrease) in cash and cash equivalents		223,108			(1,436,852	)
Cash and cash equivalents at beginning of period		912,272			3,077,655
Cash and cash equivalents at end of period	$	1,135,380		$	1,640,803
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	—		$	—
Cash paid during the period for income taxes — net of refunds	$	(59,201	)	$	4,932

See accompanying notes to consolidated financial statements.

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HELIOS & MATHESON NORTH AMERICA INC.

Notes to Consolidated Financial Statements

(Unaudited)

1) GENERAL:

These financial statements should be read in conjunction with the financial statements contained in Helios & Matheson North America Inc.’s (“Helios & Matheson” or the “Company”) Form 10-K for the year ended December 31, 2008 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, 2008.

2) CONTROLLED COMPANY:

The Board of Directors has determined that Helios & Matheson is a “Controlled Company” for purposes of NASDAQ listing requirements. A “Controlled Company” is 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. The Board of Directors has determined that Helios & Matheson is a “Controlled Company” based on the fact that Helios & Matheson Information Technology, Ltd. (“Helios & Matheson Parent”) holds more than 50% of the voting power of the Company.

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, 2009, the consolidated results of operations for the three and six month periods ended June 30, 2009 and 2008 and cash flows for the six month period ended June 30, 2009 and 2008.

The consolidated balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. 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, 2008.

The consolidated results of operations for the six month period ended June 30, 2009 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

For the twelve month period ended December 31, 2008, the Company reported an operating loss of approximately ($3.0) million and for the three and six month periods ended June 30, 2009, the Company reported operating losses of approximately ($452,000) and ($1.2) million, respectively. While the Company continues to focus on revenue growth and cost reductions, including but not limited to outsourcing and off-shoring solutions, in an attempt to improve its financial condition, there can be no assurance that the Company will be profitable in future periods.

In management’s opinion, cash flows from operations and borrowing capacity 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 460,000 shares of common stock (subject to adjustment pursuant to customary anti-dilution provisions). Stock options 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.

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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.

The Company uses the modified prospective application method as specified by Financial Accounting Standards Board Statement 123 (revised 2004), Share Based Payment (Statement 123 (R)), whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date of Statement 123 (R) will be recognized over the remaining service period. The compensation cost for that portion of awards is based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. For the three month period ended June 30, 2009 and 2008, the Company recorded stock based compensation expense under the provisions of Statement 123 (R) of $6,192 and $16,339, respectively.

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

			Weighted
	Number of		Average
	Shares		Exercise Price
Balance — December 31, 2008		107,375	$	4.17
Granted during 1st Qtr 2009		—		—
Exercised during 1st Qtr 2009		—		—
Forfeitures during 1st Qtr 2009		39,500	$	3.36
Balance — March 31, 2009		67,875	$	4.26
Granted during 2nd Qtr 2009		—		—
Exercised during 2nd Qtr 2009		—		—
Forfeitures during 2nd Qtr 2009		—		—
Balance — June 30, 2009		67,875	$	4.26

The following table summarizes the status of the stock options outstanding and exercisable at June 30, 2009:

Stock Options Outstanding
						Number of
	Weighted				Weighted-	Stock
Exercise Price	Average		Number of		Remaining	Options
Range	Exercise Price		Options		Contractual Life	Exercisable
$0.00 – $4.80	$	2.24		29,875	2.8 years		28,000
$4.80 – $9.60	$	5.86		38,000	3.8 years		33,000
				67,875			61,000

At June 30, 2009, 61,000 stock options were exercisable with a weighted average exercise price of $4.14.

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5) NET LOSS PER SHARE:

The following table sets forth the computation of basic and diluted net loss per share for the six months and the three months ended June 30, 2009 and 2008.

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Numerator for basic net loss per share
Net loss	$	(1,197,803	)	$	(1,375,356	)	$	(454,642	)	$	(545,135	)
Net loss available to common stockholders	$	(1,197,803	)	$	(1,375,356	)	$	(454,642	)	$	(545,135	)
Numerator for diluted net loss per share
Net loss available to common stockholders & assumed conversion	$	(1,197,803	)	$	(1,375,356	)	$	(454,642	)	$	(545,135	)
Denominator:
Denominator for basic and diluted loss per share — weighted-average shares		2,396,707			2,396,707			2,396,707			2,396,707
Basic and diluted loss per share:
Net loss per share	$	(0.50	)	$	(0.57	)	$	(0.19	)	$	(0.23	)

During the six and three month periods ended June 30, 2009 and June 30, 2008, all options and warrants outstanding were excluded from the computation of net loss per share because the effect would have been anti-dilutive.

6) CONCENTRATION OF CREDIT RISK:

The revenues of two customers represented approximately 25% and 11% of the revenues for the six month period ended June 30, 2009. The revenues of three customers represented approximately 17%, 15% and 11% of revenues for the same period in 2008. No other customer represented greater than 10% of the Company’s revenues for such periods.

7) CREDIT ARRANGEMENT:

The Company has entered into a Restated and Amended Loan and Security Agreement (“the Loan Agreement”) with Keltic Financial Partners, LP, (“Keltic”) which is effective as of June 27, 2007. The Loan Agreement, which was set to expire June 27, 2009, has been extended through December 31, 2009 under the same terms and conditions. Under the Loan Agreement, the Company has a line of credit up to $1.0 million based on the Company’s eligible accounts receivable balances at an interest rate that varies based on the extent of usage in any given calendar year from a minimum of prime to a maximum of prime plus 0.75% assuming no event of default under the Loan Agreement. Net availability at June 30, 2009 was approximately $700,000. The Loan Agreement has certain financial covenants that shall apply only if the Company has any outstanding obligations to Keltic including borrowing under the facility. The Company had no outstanding balance at June 30, 2009, or at December 31, 2008, under the Loan Agreement.

8) CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

The Company has the following commitments as of June 30, 2009: obligations resulting from certain employment contracts and operating lease obligations. The Company has three operating leases for its corporate headquarters located in New York and its branch offices in New Jersey and Massachusetts.

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The Company’s commitments at June 30, 2009, are comprised of the following:

	Payments Due by Period
									More Than 5
Contractual Obligations	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		Years
Long Term Obligations
Employment Contracts(1)		340,750		340,750		—		—		—
Operating Lease Obligations
Rent(2)		1,043,435		429,187		590,562		23,686		—
Total	$	1,384,185	$	769,937	$	590,562	$	23,686	$	—

(1)	The Company has an employment agreement with its one named Executive Officer, Salvatore M. Quadrino, the Company’s Interim Chief Executive Officer, Chief Financial Officer and Secretary. Under Mr. Quadrino’s employment agreement, Mr. Quadrino will serve in a dual capacity as Chief Financial Officer and Interim Chief Executive Officer. Mr. Quadrino’s employment agreement, which was set to expire June 30, 2009, has automatically renewed for a one year term. Under this agreement, Mr. Quadrino’s annual salary is $220,000 annually.
	Effective February 23, 2009, the Board of Directors of the Company and Mr. Prude, the Company’s former Chief Operating Officer, agreed that Mr. Prude would be terminating his employment with the Company. Under the terms of Mr. Prude’s employment agreement, his final day with the Company was April 30, 2009. Mr. Prude is entitled to nine months of severance totaling $155,250 which is being paid out monthly beginning May 2009. This severance amount is reflected in the table above.
(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.

As of June 30, 2009, the Company does not have any “Off Balance Sheet Arrangements”.

9) TERMINATION OF EMPLOYMENT AGREEMENT

Effective February 23, 2009, the Board of Directors of the Company and Mr. Prude, the Company’s former Chief Operating Officer, agreed that Mr. Prude would be terminating his employment with the Company. Under the terms of Mr. Prude’s employment agreement, his final day with the Company was April 30, 2009. Mr. Prude is entitled to nine months of severance totaling $155,250 which is being paid out monthly beginning May 2009.

The Company recorded a charge of $167,000 for severance and tax expense associated with the termination of Mr. Prude’s employment agreement during the first quarter of 2009. This charge is reflected in Selling, General and Administrative expenses for the six months ended June 30, 2009. The liability is included in accounts payable and accrued expenses on the balance sheet as of June 30, 2009.

10) PROVISION FOR INCOME TAXES

The provision for income taxes as reflected in the consolidated statements of operations varies from the expected statutory rate primarily due to a provision for minimum state taxes and the recording of additional 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. On September 5, 2006, Helios & 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 did not generate taxable income during the six months ended June 30, 2009. 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.

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11) RECENTLY ISSUED ACCOUNTING STANDARDS

The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles(“FAS 168”). FAS 168 replaces FAS 162,The Hierarchy of Generally Accepted Accounting Principles(“FAS 162”). It names the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. Generally Accepted Accounting Principles (“GAAP”) for non-governmental entities recognized by the FASB. FAS 168 is effective for reporting periods ending after September 15, 2009, and once effective, will supersede all U.S. GAAP accounting standards, aside from rules and interpretive releases issued by the SEC. The Codification is not intended to change GAAP but rather, it will change the referencing of U.S. GAAP.

Subsequent Events

In May 2009, the FASB issued SFAS No. 165,Subsequent Events(“FAS 165”). FAS 165 requires companies to disclose the date through which they evaluated subsequent events and whether that date corresponds with the filing of their financial statements. FAS 165 is effective for fiscal periods ending after June 15, 2009. The Company has performed an evaluation of subsequent events through August 7, 2009 based upon reviews of the Company’s financial transactions through that date and inquiries conducted by the Company’s Interim Chief Executive Officer of senior management and the Board of Directors.

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 risk and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements may include, without limitation, statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. 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 & Matheson has provided IT services and solutions to Fortune 1000 companies and other large organizations. In 1997, Helios & Matheson became a public company headquartered in New York, New York. In addition, the Company has offices in Clark, New Jersey, Chelmsford, Massachusetts and Bangalore, India. The Company’s common stock is currently listed on the NASDAQ Capital Market ^CMunder the symbol “HMNA”. Prior to January 30, 2007, the Company’s name was The A Consulting Team, Inc.

Helios & Matheson provides a wide range of high quality, software and consulting solutions, through an integrated suite of market driven Service Lines in the areas of Application Value Management, Application Development and Integration, Independent Validation, Infrastructure, Information Management and IT Advisory Services for Fortune 1000 companies and other large organizations. These services account for approximately 85% of the Company’s revenues. The Company’s solutions are based on an understanding of each client’s enterprise model. The Company’s accumulated knowledge may be applied to new projects such as planning, designing and implementing enterprise-wide information systems, database management services, performance optimization, migrations and conversions, strategic sourcing, outsourcing and systems integration.

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Helios & Matheson delivers its IT solutions through Solution Teams composed of Client Partners, Solution Partners, Project Managers, and Technical Specialists. These professionals possess the industry experience, project management skills and technical expertise to identify and effectively address a particular client’s needs in relation to its business objectives. Helios & Matheson’s focus on providing highly qualified IT professionals allows the Company to identify additional areas of the client’s business which could benefit from the Company’s IT solutions, thereby facilitating the cross-marketing of multiple Company services. The Company keeps its Solution Teams at the forefront of emerging technologies and business trends through close interaction with Helios & Matheson research personnel who identify innovative IT trends, tools and technologies and market driven solutions. As a result, management believes that Helios & Matheson Solution Teams are prepared to anticipate client needs, develop appropriate strategies and deliver comprehensive IT services, thereby allowing the Company to deliver the highest quality IT services in a timely fashion.

Helios & Matheson markets and distributes a number of software products developed by independent software developers. The Company believes its relationships with approximately 56 software clients throughout the country provide opportunities for the delivery of additional Company consulting and training services. The software products offered by Helios & Matheson are marketed primarily through trade shows, direct mail, telemarketing, client presentations and referrals. Revenue from the sale of software is ancillary to the Company’s total revenues, but in the future the Company hopes to use such sales as a means of introducing itself to potential clients. For the six month period ending June 30, 2009, revenue from the software service line accounted for approximately 15% of the Company’s total revenues.

The Company is dedicated to providing cost efficient competitive services to its clients through its Flexible Delivery Model which allows for dynamically configurable Onsite, Onshore or Offshore service delivery based on the needs of the clients. This capability is made possible by the Company’s investment in Helios and Matheson Global Services Private Limited (“HMGS”), the Company’s subsidiary operating in Bangalore, India. The Company’s ability to blend more offshore work into its pricing should allow it to be more price competitive.

Rapid technological advances and the wide acceptance and use of the Internet as a driving force in commerce, accelerated the growth of the IT industry. These advances, including more powerful and less expensive computer technology, fueled the transition from predominantly centralized mainframe computer systems to open and distributed computing environments and the advent of capabilities such as relational databases, imaging, software development productivity tools, and web-enabled software. These advances expand the benefits that users can derive from computer-based information systems and improve the price-to-performance ratios of such systems. As a result, an increasing number of companies are employing IT in new ways, often to gain competitive advantages in the marketplace, and IT services have become an essential component of many company’s long-term growth strategies. The same advances that have enhanced the benefits of computer systems rendered the development and implementation of such systems increasingly complex, popularizing the outsourcing of IT development and services to third party IT service providers like the Company. Many companies outsource such work because their internal personnel lack the qualifications for certain projects or they have an insufficient number of internal staff to address all of the projects being undertaken. Outsourcing also enables companies to realize cost efficiencies through reduced personnel costs. Accordingly, organizations turn to external IT services organizations such as Helios & Matheson to develop, support and enhance their internal IT systems.

The Company believes that its business, operating results and financial condition continue to be impacted by the current economic conditions. A significant portion of the Company’s major customers are in the financial services, pharmaceutical and manufacturing/automotive industries and have come under considerable pressure as a result of the unprecedented economic conditions in the financial markets. Spending on IT consulting services is largely discretionary. While the Company has not lost any major clients, it has experienced a pushback of new assignments from existing clients and difficulty in replacing completed higher margin projects, both of which have impacted revenue growth through 2009 year to date.

Beginning in 2006 and continuing through the fourth quarter of 2008, the Company expanded its sales and recruiting resources in an effort to increase its revenues in both the short and long-term. This effort, however, was met with limited success through the third quarter of 2009. While the Company continues to experience an increase in its lower margin staffing business, consulting revenue, as a whole, has declined as a result of a decreased demand for higher margin project services.

For the twelve month period ended December 31, 2008 the Company reported an operating loss of approximately ($3.0) million and for the three and six month periods ended June 30, 2009, the Company reported an operating loss of approximately ($452,000) and ($1.2) million, respectively. While the Company continues to focus on revenue growth and cost reductions, including but not limited to outsourcing and off-shoring solutions, in an attempt to improve its financial condition, there can be no assurance that the Company will be profitable in future periods.

11

For the six months ended June 30, 2009, approximately 76% of the Company’s consulting services revenues were generated from the hourly billing of its consultants’ services to its clients under time and materials engagements, as compared to approximately 68% for the six months ended June 30, 2008, with the remainder generated under fixed-price engagements. The increase in time and material engagements as a percentage of engagements is a result of the Company’s efforts to grow its lower margin staffing business in response to the decreased demand for higher margin project services. 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 semi-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 has also generated revenues by selling software licenses. In addition to initial software license fees, the Company also derives revenues from the annual renewal of software licenses. Because future obligations associated with such revenue are insignificant, revenues from the sale of software licenses are recognized upon delivery of the software to a customer. The Company views software sales as ancillary to its core consulting services business. Revenue generated from software sales will vary from period to period. For the six month period ending June 30, 2009, revenue from the software service line accounted for approximately 15% of the Company’s total revenues.

The Company’s most significant operating cost is its personnel cost, which is included in cost of revenues. As a result, the Company’s operating performance is primarily based upon billing margins (billable hourly rate less the consultant’s hourly cost) and consultant utilization rates (number of days worked by a consultant during a semi-monthly billing cycle divided by the number of billing days in that cycle). For the six month period ended June 30, 2009, gross margin was 25.3% as compared to 19.2% for the six month period ended June 30, 2008. Gross margin has increased primarily as a result of a decision by the Company to minimize the amount of non-billing time for project resources. Large portions of the Company’s engagements are on a time and materials basis. While most of the Company’s engagements allow for periodic price adjustments to address, among other things, increases in consultant costs, to date clients have been averse to accepting cost increases. In addition, an increasing number of the Company’s clients are outsourcing the management of their time and material engagements to external Vendor Management Organizations (“VMOs”) who are responsible for monitoring the costs of external service providers. The Company has been challenged with absorbing the costs associated with the VMOs.

Helios & Matheson actively manages its personnel utilization rates by monitoring project requirements and timetables. Helios & Matheson’s utilization rate for the six month period ended June 30, 2009 was approximately 78% as compared to approximately 76% for the six month period ended June 30, 2008. As time and material engagements or projects are completed, consultants either are re-deployed to new time and material engagements or projects at the current client site or to new time and material engagements or projects at another client site or are encouraged to participate in Helios & Matheson’s training programs in order to expand their technical skill sets. The Company carefully monitors consultants that are not utilized. While the Company has established guidelines for the amount of non-billing time that it allows before a consultant is terminated, actual terminations vary as circumstances warrant.

Critical Accounting Policies

The methods, estimates and judgments the Company uses in applying its most critical accounting polices 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. 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.

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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 reevaluated 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 Financial Accounting Standards Board Statement 123 (revised 2004), Share Based Payment (Statement 123 (R)), whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date of Statement 123 (R) will be recognized over the remaining service period. The compensation cost for that portion of awards is based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, 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 Operations:

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		74.7	%		80.8	%		74.4	%		82.1	%
Gross profit		25.3	%		19.2	%		25.6	%		17.9	%
Operating expenses		41.5	%		33.8	%		38.2	%		29.2	%
Loss from operations		(16.1	)%		(14.5	)%		(12.7	)%		(11.4	)%
Net loss		(16.3	)%		(14.3	)%		(12.7	)%		(11.3	)%

Comparison of The Three Months Ended June 30, 2009 to The Three Months Ended June 30, 2008

Revenues.Revenues for the three months ended June 30, 2009 were $3.6 million compared to $4.8 million for the three months ended June 30, 2008. The decrease is primarily attributable to a decline in consulting revenue due to difficulty in replacing completed projects and a pushback of new assignments from existing clients primarily as a result of the current economic condition in the financial markets and the economy more broadly. In addition, the Company has experienced a drop off in business from its higher margin project service line and, as a result, the Company has shifted its emphasis on expanding its lower margin staffing service line consisting of time and material engagements.

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Gross Profit. The resulting gross profit for the three months ended June 30, 2009 was $912,000, an increase of $48,000 or 6% from the 2008 comparable period amount of $864,000. As a percentage of total revenues, gross margin for the three months ended June 30, 2009 was 25.6% compared to 17.9% for the three months ended June 30, 2008. Gross margin has increased primarily as a result of a decision by the Company to minimize the amount of non-billing time for project resources. This decision has required the Company to reduce the headcount of non-billing resources.

Operating Expenses.Operating expenses are comprised of Selling, General and Administrative (“SG&A”) expenses, and depreciation and amortization. SG&A expenses for the three months ended June 30, 2009 were $1.3 million compared to the 2008 comparable period level of $1.4 million. The decrease in SG&A expenses is associated with various cost reduction initiatives including, but not limited to, a reduction in employee headcount and pay rates. Depreciation and amortization expenses decreased $10,000 from $45,000 for the three months ended June 30, 2008 to $35,000 for the three months ended June 30, 2009.

Taxes.Taxes for the three months ended June 30, 2009 were $4,000 compared to $5,000 for the three months ended June 30, 2008. For the three months ended June 30, 2009, the Company recorded a tax provision of $5,000 for minimum state taxes which was partially offset by ($1,000) related to provision to return adjustments from the filing of state and federal tax returns compared to a tax provision of $5,000 solely for minimum state taxes for the three months ended June 30, 2008.

Net Loss.As a result of the above, particularly the improvement of gross margin and the reduction of operating expenses, the net loss of ($455,000) or ($0.19) per basic and diluted share for the three months ended June 30, 2009 was an improvement over the net loss of ($545,000) or ($0.23) per basic and diluted share for the three months ended June 30, 2008.

Comparison of The Six Months Ended June 30, 2009 to The Six Months Ended June 30, 2008

Revenues.Revenues for the six months ended June 30, 2009 were $7.4 million compared to $9.6 million for the six months ended June 30, 2008. The decrease is primarily attributable to a decline in consulting revenue due to difficulty in replacing completed projects and a pushback of new assignments from existing clients primarily as a result of the unprecedented crisis in the financial markets and the economy more broadly. In addition, the Company has experienced a drop off in business from its higher margin project service line and, as a result, the Company has shifted its emphasis on expanding its lower margin staffing service line consisting of time and material engagements.

Gross Profit.The resulting gross profit for the six months ended June 30, 2009 was $1.9 million, an increase of $16,000 or 1% from the 2008 comparable period amount of $1.8 million. As a percentage of total revenues, gross margin for the six months ended June 30, 2009 was 25.3% compared to 19.2% for the six months ended June 30, 2008. Gross margin has increased primarily as a result of a decision by the Company to minimize the amount of non-billing time for project resources. This decision has required the Company to reduce the headcount of non-billing resources.

Operating Expenses.Operating expenses are comprised of Selling, General and Administrative (“SG&A”) expenses, and depreciation and amortization. SG&A expenses for the six months ended June 30, 2009 were $3.0 million compared to the 2008 comparable period level of $3.2 million. The decrease in SG&A expenses is associated with various cost reduction initiatives including, but not limited to, a reduction in employee headcount and pay rates. Depreciation and amortization expenses decreased $19,000 from $89,000 for the six months ended June 30, 2008 to $70,000 for the six months ended June 30, 2009.

Taxes.Taxes for the six months ended June 30, 2009 were $11,000 compared to $9,000 for the six months ended June 30, 2008. For the six months ended June 30, 2009, the Company recorded a tax provision of $9,000 for minimum state taxes which was increased by $2,000 related to provision to return adjustments from the filing of state and federal tax returns compared to a tax provision of $9,000 solely for minimum state taxes for the six months ended June 30, 2008.

Net Loss.As a result of the above, particularly the improvement of gross margin and the reduction of operating expenses, the net loss of ($1.2) million or ($0.50) per basic and diluted share for the six months ended June 30, 2009 was an improvement over the net loss of ($1.4) million or ($0.57) per basic and diluted share for the six months ended June 30, 2008.

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Liquidity and Capital Resources

The Company had an operating and net loss of approximately ($1.2) million for the six months ended June 30, 2009, both of which included a charge of $167,000 to record severance and tax expense associated with the termination of Mr. Prude’s employment agreement. During the six months ended June 30, 2008, the Company had an operating and net loss of approximately ($1.4) million. The Company believes that its business, operating results and financial condition have been harmed by the recent economic crisis. A significant portion of the Company’s major customers are in the financial services industry and have come under considerable pressure as a result of the unprecedented economic conditions in the financial markets. While the Company has not lost any major clients, it has experienced a pushback of assignments from existing clients. Spending on IT consulting services is largely discretionary, and the Company has experienced a pushback of new assignments from existing clients and difficulty in replacing completed projects, both of which have impacted revenue growth through the second quarter of 2009. While the Company continues to focus on revenue growth and cost reductions, including but not limited to outsourcing and off-shoring solutions, in an attempt to improve its financial condition, there can be no assurance that the Company will be profitable in future periods.

The Company’s cash balances were $1.1 million at June 30, 2009 and $912,000 at December 31, 2008. Net cash provided by operating activities for the six months ended June 30, 2009 was approximately $221,000 compared to net cash used in operating activities of approximately ($1.4) million for the six months ended June 30, 2008. The increase in net cash provided is primarily a result of a decrease in operating losses and an increase in working capital incurred for the six months ended June 30, 2009.

The Company’s accounts receivable, less allowance for doubtful accounts, at June 30, 2009 and at December 31, 2008 were $2.3 million and $3.9 million, respectively, representing 59 and 66 days of sales outstanding (“DSO”), respectively. The Company believes the decrease in DSO is consistent with an extensive collection effort by the Company resulting in more timely collections as well as favorable resolutions of a limited number of dated client disputes. The accounts receivable at June 30, 2009 and December 31, 2008 included $70,000 and $34,000 of unbilled revenue, respectively. 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 month period ended June 30, 2009, cash provided by investing activities was approximately $12,000, relating to the sale of a Company automobile. For the six month period ended June 30, 2008, cash used in investing activities was approximately ($42,000), comprised solely of additions to property and equipment.

Net cash used in financing activities for the six month period ended June 30, 2009 was $5,000 and related solely to the extension of the Company’s line of credit with Keltic Financial Partners, LP. There was no cash provided by or used in financing activities for the six month period ended June 30, 2008.

The Company has entered into a Restated and Amended Loan and Security Agreement (“the Loan Agreement”) with Keltic Financial Partners, LP, (“Keltic”) which is effective as of June 27, 2007. The Loan Agreement, which was set to expire June 27, 2009, has been extended through December 31, 2009 under the same terms and conditions. Under the Loan Agreement, the Company has a line of credit up to $1.0 million based on the Company’s eligible accounts receivable balances at an interest rate that varies based on the extent of usage in any given calendar year from a minimum of prime to a maximum of prime plus 0.75% assuming no event of default under the Loan Agreement. Net availability at June 30, 2009 was approximately $700,000. The Loan Agreement has certain financial covenants that shall apply only if the Company has any outstanding obligations to Keltic including borrowing under the facility. The Company had no outstanding balance at June 30, 2009, or at December 31, 2008, under the Loan Agreement.

Beyond December 31, 2009, there is no guarantee that the Company will be able to renew or replace such financing upon expiration on commercially reasonable terms or at all.

In management’s opinion, cash flows from operations and borrowing capacity 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 2009, there were no shares of common stock issued pursuant to the exercise of options issued under the Company’s stock option plan.

Off Balance Sheet Arrangements

As of June 30, 2009, the Company does not have any “Off Balance Sheet Arrangements”.

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Contractual Obligations and Commitments

The Company has the following commitments as of June 30, 2009: long term obligations of certain employment contracts and operating lease obligations. The Company has three operating leases for its corporate headquarters located in New York and its branch offices in New Jersey and Massachusetts. The Company’s commitments at June 30, 2009 are reflected and further detailed in the Contractual Obligation table located in Part I, Item 1, Note 8 of this Form 10-Q.

Recent Accounting Pronouncements

The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles(“FAS 168”). FAS 168 replaces FAS 162,The Hierarchy of Generally Accepted Accounting Principles(“FAS 162”). It names the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. Generally Accepted Accounting Principles (“GAAP”) for non-governmental entities recognized by the FASB. FAS 168 is effective for reporting periods ending after September 15, 2009, and once effective, will supersede all U.S. GAAP accounting standards, aside from rules and interpretive releases issued by the SEC. The Codification is not intended to change GAAP but rather, it will change the referencing of U.S. GAAP.

Subsequent Events

In May 2009, the FASB issued SFAS No. 165,Subsequent Events(“FAS 165”). FAS 165 requires companies to disclose the date through which they evaluated subsequent events and whether that date corresponds with the filing of their financial statements. FAS 165 is effective for fiscal periods ending after June 15, 2009. The Company has performed an evaluation of subsequent events through August 7, 2009 based upon reviews of the Company’s financial transactions through that date and inquiries conducted by the Company’s Interim Chief Executive Officer of senior management and the Board of Directors.

Inflation

The Company has not suffered material adverse affects 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company has not entered into market risk sensitive transactions required to be disclosed under this item.

Item 4T. Controls and Procedures

Evaluation of disclosure controls and procedures. Salvatore M. Quadrino, the Company’s Principal Executive Officer and Principal Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, has concluded that its disclosure controls and procedures are effective and designed to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to it by others within these entities.

Changes in internal control. There were no significant changes in the Company’s internal control over financial reporting in connection with the evaluation that occurred during its second fiscal quarter of 2009 that has materially affected or is reasonably likely to materially affect its internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The Company’s 2008 Annual Report on Form 10-K includes a detailed discussion of risk factors. Additional risks or uncertainties not currently known to the Company or that the Company deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results. The information presented below updates and should be read in conjunction with the risk factors and information disclosed in the Company’s Form 10-K for the year ended December 31, 2008.

Going Concern and Capital Requirements

The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2009, the Company had approximately $1.1 million of cash and cash equivalents on hand as compared to $1.6 million at June 30, 2008. The Company has a line of credit up to $1.0 million with Keltic Financial Partners, LP (“Keltic”) based on the Company’s eligible accounts receivable balances which is subject to certain financial covenants that shall apply only if the Company has any outstanding obligations to Keltic including borrowing under the facility. The Keltic line of credit, which was set to expire on June 27, 2009, has been extended through December 31, 2009 under the same terms and conditions. For the twelve month period ended December 31, 2008 the Company reported an operating loss of ($3.0) million, which included a goodwill impairment (non-cash) charge of $1.1 million. For the six month period ended June 30, 2009, the Company reported an operating loss of ($1.2) million. Additionally, the Company had an accumulated deficit of $32.4 million at June 30, 2009. Beyond December 31, 2009, there is no guarantee that the Company will be able to renew or replace its current financing upon expiration on commercially reasonable terms or at all. Based upon the Company’s reduced liquidity, net losses and accumulated deficit, the ability of the Company to continue as a going concern is dependent on the Company achieving profitable operations and or obtaining additional sources of financing.

The Company may require additional financing in the future to continue to implement its product and services development, marketing and other corporate programs. If the Company is able to obtain additional debt financing, the terms of such financing could contain restrictive covenants that might negatively affect its shares of common stock, such as limitations on payments of dividends and could reduce earnings due to interest expenses. Any further issuance of equity securities could have a dilutive effect on the holders of the Company’s shares of common stock. The Company’s business, operating results and financial condition (including, potentially, its ability to continue as a going concern) may be materially harmed if the Company cannot obtain additional financing.

NASDAQ Listing

The NASDAQ Capital Market CM’s continued listing requirements include requirements both that a company maintain a minimum bid price of $1 and that the market value of its publicly held shares (the market value of its shares not held by officers, directors or beneficial owners of more than 10% of the company’s total shares outstanding) be at least $1,000,000. At the close of business on August 7, 2009, the bid price for a share of the Company’s stock was $0.44, and the Company believes the value of its publicly held shares was approximately $506,951 based upon the public filings of our officers, directors and beneficial owners.

Due to the recent turmoil in the financial markets, The NASDAQ Capital Market CM had temporarily suspended both these continued listing requirements thru July 31, 2009, and did not take any action to delist a security for failing the minimum bid price or market value of publicly held shares requirements during this suspension. Effective Monday, August 3, 2009, however, the compliance process was reinstated. If the Company’s minimum bid price and the market value of its publicly held shares do not regain a $1 minimum bid price and $1 million market value of publicly held shares, then the Company will be considered deficient under the NASDAQ listing requirements, and the Company would face being delisted from The NASDAQ Capital Market CM.

If the Company’s common stock is delisted from The NASDAQ Capital Market CM, the market liquidity of the Company’s common stock will likely be significantly limited, which would reduce stockholders’ ability to sell the Company’s common stock. Additionally any such delisting could harm the Company’s ability to raise capital through alternative financing sources on acceptable terms, if at all, and may result in the loss of confidence in the Company’s financial stability by suppliers, customers and employees. In addition, a delisting would likely increase the price volatility of the Company’s shares of common stock and have a material adverse impact on the price of the Company’s shares of common stock.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

On May 28, 2009, the Company held its annual meeting of shareholders (the “Annual Meeting”) for the following purposes:

Proposal 1. To elect the Board of Directors of the Company to serve until the annual meeting of shareholders in 2010 and until their respective successors are duly elected and qualified; and

Proposal 2. To ratify the selection of Mercadien P.C. as the independent public accountants of the Company for the year ending December 31, 2009.

The shareholders approved the election of Messrs. Shri S. Jambunathan, Daniel L. Thomas, Rabin K. Dhoble, Kishan Grama Ananthram and Ms. Divya Ramachandran as the directors of the Company by the following number of votes:

NAME	IN FAVOR		AGAINST		ABSTAINED		BROKER NON-VOTE
Shri S. Jambunathan		1,890,526		0		1,851		0
Daniel L. Thomas		1,890,526		0		1,851		0
Rabin K. Dhoble		1,890,526		0		1,851		0
Kishan Grama Ananthram		1,874,821		0		17,556		0
Divya Ramachandran		1,874,821		0		17,556		0

The shareholders approved the ratification of the appointment of Mercadien P.C. as the independent public accountants of the Company for the fiscal year ending December 31, 2009 by the following number of votes:

IN FAVOR	AGAINST	ABSTAINED	BROKER NON-VOTE
1,891,201	1,176	0	0

Item 5. Other Information

None.

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Item 6. Exhibits

(a)Exhibits

3.1	Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the Form 10-Q for the period ended June 30, 2001, as previously filed with the SEC on August 10, 2001.
3.2.1	Certificate of Amendment of the Certificate of Incorporation of the Registrant dated August 8, 2002 incorporated by reference to Exhibit 3.2 to the Form 10-Q for the period ended June 30, 2001, as previously filed with the SEC on August 14, 2002.
3.2.2	Certificate of Amendment of the Certificate of Incorporation of the Registrant dated November 12, 2002, incorporated by reference to Exhibit 3.2.2 to the Form 10-Q for the period ended September 30, 2002, as previously filed with the SEC on November 14, 2002.
3.2.3	Certificate of Amendment of the Certificate of Incorporation of the Registrant dated January 5, 2004, incorporated by reference to Exhibit 3.2.3 to the Form 8-K dated January 8, 2004, as previously filed with the SEC on January 8, 2004.
3.2.4	Certificate of Amendment of the Certificate of Incorporation of the Registrant dated January 30, 2007, incorporated by reference to Exhibit 3.2.4 to the Form 10-K for the period ended December 31, 2006, as previously filed with the SEC on March 29, 2007.
3.3	Second Amended and Restated By-Laws of the Registrant, dated June 20, 2007, incorporated by reference to Exhibit 3.3 on Form 8-K, as previously filed with the SEC on June 22, 2007.
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.

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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 & MATHESON NORTH AMERICA INC.
	By:	/s/ Salvatore M. Quadrino
Date: August 10, 2009		Salvatore M. Quadrino
		Interim Chief Executive Officer and Chief Financial Officer

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EXHIBIT INDEX

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.

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