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Thursday, March 10, 2016

Mega Blog - Plate Tectonics

Dear HHSE Friends, Followers and Foes - "Plate Tectonics" is the geological study of continental drift on Earth - which is viewed as a primary catalyst behind earthquakes, mountain building and the creation of new lands and biomes.

The past few month have had so many major developments that have profoundly impacted Hannover House (and our affiliated activities), that it seems to be the most appropriate term to describe the metamorphosis that is presently in motion for HHSE.

We will attempt to be a brief as possible, despite the complexity of these issues and developments.

1).  SHAREHOLDER'S MEETING - As will be described below, new developments necessitate the rescheduling and relocation of the Shareholder's Meeting - which is presently slated for next Friday, March 18, in Los Angeles.  We sincerely apologize to the handful of shareholders who had been planning to fly in and attend this meeting - and this travel issue was a major consideration in our analysis of the situation. But the upside of WHY we must reschedule is so significant that the short-term frustration that some might feel after making travel plans SHOULD be quickly supplanted with consensus for the rationale' behind the meeting change.  The "new" meeting will be held on Thursday, March 31st, at 3:30 pm Central Time, and will be "live streamed" over the internet from the Hannover House offices in Springdale, Arkansas.  Both Parkinson and Shefte are scheduled to be in the country (and at the HHSE offices) at that time.  As has been the Company's custom for the past five years, Shareholders (of record) can also elect to attend in person.

The following represents a sincere effort to be brief in summarizing the activities currently occupying HHSE management's attention:

a).  Material Change in Distribution Partnerships.  With respect to the Company's prior "core" business of DVD / BluRay distribution to video retailers, kiosks and mass merchants, the Company's prior wholesale conduit into Walmart, SAMS and Best Buy (Anderson Merchandisers / AN Connect) was purchased by a different field merchandising company (Alchemy Entertainment), and this has been disruptive to the flow of HHSE new release products. Accordingly, and in response to a growing gap in the levels of films that HHSE is handling, two new distribution ventures are in motion:  a distribution partnership with one of the Major Studios for "wide" release theatrical titles, and a distribution partnership with a large, well-funded consolidator for "limited release" theatrical titles and direct-to-video releases. Both new distribution ventures should result in significantly higher sales for HHSE titles.  Current new release titles (with street dates starting in MAY) will be handled through these new distribution pacts.  Details will be announced via joint press release - which would not have been possible to announce prior to March 18.

b).  Financing Agreement for "Mother Goose: Journey To Utopia" - Hannover House was offered the opportunity to move immediately on the funding of this major "event-level" project, but only if we were able to commence principal photography on or before April 30, 2016.  The structure of the Mother Goose funding extends beyond the production costs, and includes a mechanism for $10-mm in P&A to support a theatrical release launch onto approximately 1,785 screens. This is such a significant, material level development for the Company that it requires an immediate refocus of management resources and support staffing.  Principal photography will occur primarily in the State of Georgia, with certain scenes shot in Ireland (castles / epic sequences), under a EU Certified Co-Production venture.  HHSE plans to comply with the April 30 launch date requirement, and expects to have a major announcement (and "promo reel") on display at the Company's booth at the Cannes Film Festival / Marche Du Filme in May.

c).  VODWIZ - HHSE has hired a President for VODWIZ, Inc., and entered into a major venture with the nation's top digital content provider.  While every effort was being made to have all of the details and elements ready for a formal "surprise" announcement at the Shareholder's Meeting - it is now clear that logistically, the parties will not be ready for public disclosure by next Friday.

d).  Form 10 / Audits / Library Valuation - Quite a few shareholders have recommended that HHSE present these three items for review at the Shareholder's Meeting. We agree with the analysis that significant and sustainable PPS growth will likely only occur in a specific order (as suggested below), and that any prior investments in Investor Relations / Financial Industry PR or general Shareholder Promotions prior to the completion of corporate governance tasks are likely to result in short term and unsustainable "spikes" in the PPS.  Real and long-term / sustainable PPS value is within reach:

*  Completion of Library Valuation;
*  Inclusion of Valuation into 2014 / 2015 Auditor's Report;
*  Re-File the Form 10 Registration Documents;

The expansion of the Company into more lucrative aspects of the entertainment and worldwide media markets will support a significantly higher PPS - and the non-stop barrage of news from these higher profile titles and ventures will likely sustain the "new normal" for the HHSE stock shares.

While we're not abandoning the home video release activities for direct-to-video titles and limited release theatricals, we do not expect this prior "core" activity to be a major revenue source for the "New HHSE" business model.  Theatrical release titles come with significant advertising funding, and these titles will pay HHSE significant "servicing" fees, as well as elevate our name, logo and visibility.  These higher-profile theatrical titles also are ideally suited for our major studio distribution pact, which have proven to generate 3-X or more "net" revenues from V.O.D. and Physical Home Media formats than HHSE's "direct" distribution has been generating. The significant funding ventures for "Mother Goose", "Belle Starr", "Delirium" and three other high-profile features also provide HHSE with operating capital and net income revenues from production servicing fees (ala the Major Studios).

What the marketplace will SEE are bigger films - such as Shirley MacLaine and Samuel L. Jackson in MOTHER GOOSE: JOURNEY TO UTOPIA - and less emphasis on direct-to-video titles with unknown casts and marginal production values.  International Buyers will see HHSE and MEDALLION RELEASING as highly-visible licensors and key market exhibitors and sellers of high-end independent productions.  Consumers will see a greater concentration of HHSE films at THEATRES and onto V.O.D. and O.T.T. platforms (as opposed to the stagnant marketplace for physical DVDs and BluRays that has been occupying most of the Company's attention the past five years). Consumers will see BETTER movies from HHSE and our supplier studios - and we believe that these factors combined will make for far GREATER revenues and PPS for our Shareholders.

While the EARTH MAY BE MOVING at HHSE.. what we see are new mountains rising that are reaching (and taking us to) new heights.  There is change underfoot, but sometimes change can be a very big and very positive thing!  Watch this Blog Site for more updates!