The owner of MoviePass restated its financial results for the third quarter of 2018, saying it had incorrectly recognized $6.6 million in revenue from the struggling discount-ticketing service.
In a regulatory filing, Helios & Matheson Analytics Inc. disclosed that it had overstated MoviePass subscription revenues due to the erroneous recognition of up to $0.7 million of revenue from a partnership with Costco and another $5.9 million of revenue from subscriptions that had been suspended pending subscribers’ consent to changes in the service.
During the third quarter, Costco began accepting returns of one-year paid subscriptions to MoviePass. According to Helios & Matheson, refunded subscriptions were incorrectly recognized as revenue.
As a result of the revenue recognition errors and an incorrect accounting for derivative securities, Helios & Matheson reported a restated net loss for the third quarter of $146.7 million from $137.2 million and restated revenue of $74.7 million from $81.3 million.
“Management has determined that a material weakness relating to subscription management existed in the company’s internal control over financial reporting,” Helios & Matheson said, adding that it had “implemented a new software solution to automate and provide real-time information for managing and accounting for subscriptions.”
The accounting snafu is the latest setback for Helios & Matheson, which, as MarketWatch reports, has “struggled to make MoviePass viable” since it acquired the service in August 2017 and introduced a plan allowing one film per day for $9.95 per month.
The subscriber base topped three million in June 2018 but cash deficits mounted due to the cost of covering full price for each ticket a subscriber ordered. In July, a “service interruption” occurred when MoviePass failed to pay vendors and in October, Helios & Matheson announced plans to spin it off as a separate company.
“Free from the shackles of Helios and Matheson, with discretion over its subscription plans, MoviePass is expected to adopt a simpler model to reel in subscribers,” Investing.com said. “MoviePass will adopt a bait-the-hook approach, or, more aptly, bait the screen with movies that MoviePass subscribers will pay to see in a bid to avoid some of the earlier pitfalls.”