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Thursday, August 13, 2015

HHSE - General Updates and Responses to Shareholder Questions - Aug. 13, 2015

Good Afternoon HHSE Followers - In response to shareholder emails and calls, here is a brief update on items of inquiry, listed in no particular order of priority:

*  What's the status of the Revised FORM 10 Filing?

ANSWER:  HHSE has completed the extensive notes / comments and revisions that were discussed with the S.E.C. from the previously filed draft.  HHSE has engaged a reputable, PCAOB accounting firm to handle the 2013 and 2014 audits (previously, Terry L. Johnson had handled 2012 and 2013 audits).  Without appearing "flip" - HHSE management is confident that the revised Form 10 will be released "soon" and without any advanced notification to the market.

*  It appears that the full Q2's will not be filed "early" as previously planned... but will they be posted by the OTC markets deadline (e.g., on or before August 15)?

ANSWER:  Despite setting an early filing goal, the actual time-demands for the Company's current release activities took priority over beating a mandatory filing date.  So yes, the Q2s will be filed in time, but not early.

*  Can you please explain the "Reserve Shares" amendment to the Articles of Incorporation, and what this means in the real world?

ANSWER:  One of the issues addressed during the S.E.C. discussions relating to the previously filed Form 10 - and the unusual loss of PCAOB certification status for an auditor - was that HHSE had not properly created a mechanism for "Reserve Shares" in the event that existing convertible notes at that time COULD be converted for more shares based on PPS levels.  The creation of a Reserve Share mechanism meets the requirement of having a pre-authorized structure in place without having to change the A/S for this unlikely occurrence.

*  What sort of Dilution or Debt-Conversion Activities are anticipated?

ANSWER:  Horrible day for HHSE - as, despite a lengthy stalemate and press for alternative settlement -  we were informed this afternoon that the transfer agent (Standard Registrar) had accepted the power-of-attorney demand for conversion shares from Magna (re: TCA GLOBAL MASTER FUND), resulting in their demand for debt conversion shares.  PLUS in two, separate and badly-timed transactions, both JSJ and Blackbridge have each notified Standard Registrar of the conversion of 2014 and older debts notes into shares. Accordingly, approximately 15-mm shares have already been added to the overall, available inventory of HHSE Common Stock, and approximately 10-mm shares in addition may be demanded for issue under these power-of-attorney demand provisions. We believe that these transactions were all timed by the note-holders to be processed in order to occur prior to the Aug. 15, Q2 filing deadline, for OTC Markets Current Status Reporting Requirements - perhaps "just in case" HHSE did not meet the filing deadline.

It's difficult to see a "good side" to these three transactions, because the share price is so currently low that the dilution is a disproportionate pain to the benefit of debts.  But as some will ask, what benefits have been achieved as a result?  TCA will have been reduced by $50k, National Bank of California by $50k, and five smaller debt holders have been reduced through payments and negotiated settlements by an additional $226,250.  The total debts carried on the balance sheet will show a reduction of $326,250.  Each of these transactions would have been far less painful had the PPS for HHSE been stronger than it is today - but with the company's delays in refiling of the Form 10 - and management time being demanded for new release duties - the PPS has suffered and the timing of these transactions has been horrible.  

AS OF THESE CONVERSION TRANSACTIONS - THERE EXISTS ONLY ONE MORE AGING NOTE (which is for a modest sum of $25,000 and which HHSE plans to pay off in cash before it's maturation in October).  As for the remaining balance due to TCA ($156,000), HHSE is working to create a mechanism for the accelleration of receivables from NETFLIX licenses - in order to pay off TCA in CASH rather than carrying the painful burden of them forcing a share conversion.  It is not necessary to email or call Shefte and Parkinson to express shareholder disatisfaction for these transactions;  the officers share this sentiment and fought to stop these from occurring.

*  Can HHSE explain how "T-TRADES" could occur over the past several days if no new shares had previously been issued under dilutions?

ANSWER:  Since no new shares have hit the market, HHSE Management is informed that such "T-TRADES" that clear after the normal market closing, are likely to only occur only through the following means:

a).  "SHORT" SELLERS, in hopeful antidipateion of eventually being bailed out with new shares;

b).  "INTER-ACCOUNT MANIPULATION" - Trades created to falsely imply dilution - similar to the manipulative "paint-downs" of tiny share quantities sold to themselves, which are often tried against HHSE in an attempt to create the false impression of a lowered PPSE value;

c).  ACTUAL DEBT-TRANSACTION HOLDERS - Trading "AHEAD" of actually receiving shares;

d).  OFFICERS SELLING their restricted shares;

*  So, are the HHSE officers "selling" any of their shares?

ANSWER:  NO.  The HHSE Officers are confident that reality and logic will prevail and that the PPS will see a nice rebound.  It would be DUMB to sell at the current, historically low pricing - if either Parkinson or Shefte were interested in selling instead of accumulating.

*  What's happening with the Company's Theatrical Releases?

ANSWER:  "DARK AWAKENING" has about 25-more cities / locations to play before its October 6 release to DVD and BluRay;  "BONOBOS" opens in five markets tomorrow (Kansas City, Oklahoma City, Omaha, Phoenix and Pittsburgh), with 20 more markets on Aug. 21 / Aug. 28 / Sept. 4;  "THE ALGERIAN" has been held-over at the Regal Majestic 20 in Silver Spring, MD (DC Market) and opens tomorrow at the U.A. Staten Island 16 in the NYC Metro;  three additional NYC theatres will be added Aug. 21 / plus 10-additional markets on Aug. 28 / Sept. 4.  NEW THEATRICAL LAUNCHES for CMD, GREEN APPLE and other suppliers will have separate new release announcements.

*  VODWIZ update, please?

ANSWER:  Uploads for an impressive Consumer Launch have gone frustratingly slow, for a variety of reasons, from technical formatting to prioritization for the applicable parties.  As stated previously, HHSE is currently not properly staffed to move this project along faster... and incoming receivables are being prioritized to fill the company's growing demand for DVD and BluRay products (leaving little left for investment in staff and operations of VODWIZ).  It may be worthwhile to create a separate credit arrangement through a bank or traditional lending instution - in order to better capitalize the VODWIZ needs without cannibalizing the company's core activities and cash needs.