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Thursday, January 10, 2013

OTC Compliance, Edgar Filing, Audit, Orders, More...

HHSE postings went quiet since Dec. 28 on this blog, and we've certainly recieved an outpouring of inquiries for updates.  Accordingly, we'll try to briefly address the key issues as presented by shareholders.

1).  OTC Compliance -- "Why is the company listed as fully current when the Attorney Letter has not yet been posted?"  Good question, so we inquired and received two responses.  First of all, the Attorney Letter was submitted directly by our outside counsel to the OTC Markets last week instead of to Hannover House for our public posting.  So this will be rectified on our side and the letter will also be accessible by the public.  The other potential reason is that the OTC Markets has changed their rules so that an Attorney Opinion Letter on current reporting status will no longer be required quarterly... instead it will be a once-a-year requirement.  We're told that one of these two reasons is "probably" why the Yield Sign came off the stock and that we're categorized again as a current reporting status company.

2).  Edgar Filing -- MacReport Media has been very helpful since our Dec. 28 submission to them for our first Edgar Filing.  Patient is probably a good word, too.  We were not assigned a representative from within the MRM Edgar Department until we submitted the filing and paid on Dec. 28.  So we did not realize until late on Dec. 28th that the OTC Markets current filing information was significantly less than what the Edgar report requires.  Some information was promptly provided to MRM, but some of items were not addressed until Monday of this week (Jan. 7) and a final review of the docs and format (against a MRM supplied check list received Monday) will be completed today.  The MRM representative has been very helpful in navigating us through the first-time requirements, and establishing a "template" format for future HHSE Edgar submissions.

3).  Audit -- We expect to have the Y/E 2012 results ready to submit to the auditors by Jan. 18.  With respect to the audits for 2010 and 2011, the remaining issue of consolidated tax returns should be finalized after our meeting next week with the IRS on this topic.

4).  Orders -- Clearly, the driving force in our silence the past two weeks has been the logistics of filling a record volume of new release DVD and Blu-Ray orders (and it's not just for "Toys in the Attic" but also for "Deceptz", "Fathers of the Sport", "Zombie Warz" and our launch -- finally -- into Redbox with "Turtle: The Incredible Journey").  Not only are our existing customers doubling down on "Toys in the Attic," but we're also opening up a lot of new accounts, retailers and wholesalers that had not previously purchased items from Hannover House.  Dealing with the matters of our orders and fulfillment has been the focus for both Fred and Eric over the past 7 to 14 days, as the street dates and warehouse delivery needs of these major accounts are inflexible.

5).  More -- Management believes that the strategy of an enhanced focus on generating new sales will benefit the company and shareholders in a variety of ways.  Firstly, having more cash will enable the company to deal more effectively with the legitimate (and with the disputed) debts -- thus minimizing the need to consider future debt-equity type transactions.  Next, our growing sales volume is helping with our quantity pricing / costs structures with suppliers... so our margins are improving.  And finally, our visible presence on major retail shelves (especially Wal-Mart), is becomming a far better tool when pursuing new title acquisitions, than the absurd pursuit of films during a festival feeding-frenzy (wherein a film like "Twelve" can be bid up-and-up to well past it's reasonable market value).  Commercial titles for the home video / VOD market, aquired and released with modest investments, are providing a solid-foundation for the business.  While we plan on pursuing intelligently structured credit arrangements to facilitate major theatrical releases in 2013 and 2014 (i.e., more than 1,000 theatres on a movie like "Mother Goose"), it's good to have a solid / core business in place.

6).  Academy Awards -- Hannover got a thrilling jolt back in October when key members of the "Animation Nominating Committee" for the Oscars contacted the company regarding "Toys in the Attic."  As described to us in this series of calls, a select group of specialists in animation provide the Academy with the titles they believe merit a nomination in that category.  Enough of these special committee members in the animation category indicated support for "Toys in the Attic" to make a submission well worth pursuing.  So we submitted the film for the Academy Awards.  After a few days, however, we received the disappointing news that the title had been declared ineligible under existing rules:  the 2010 theatrical release in the Czech Republic and in France rendered the film ineligible for Oscar consideration in 2012 (apparently, there's a rule about looking back only one, prior calendar year for any international release).  We tried to appeal on the basis that "Toys in the Attic" is not the same film as "Napude" (it's 4-minutes longer from newly-added material, and the story was substantially rewritten to better appeal to a U.S. audience).  However, the amount of "new material" in the film did not meet the Academy's requirement for reclassification as a new movie.  So it's disappointing to know that "Toys in the Attic" was deemed to have DESERVED a nomination in the Best Animated Feature category, but was ineligible due to the prior European release...