Welcome to the Hannover House Investor Relations Blog

Thursday, June 30, 2016

HHSE prior disclosures and proactive actions

Good Morning HHSE Friends - as previously disclosed in press releases and blogs, HHSE stopped utilizing Alchemy Entertainment as a key wholesaler back in December, with the last new release (mass merchant DVD) product placements already locked-in as of that date. The most recent post about Alchemy was last Thursday, June 23.

We mention this issue today due to increased film industry speculation in current trade journals, that Alchemy may finally be on the verge of filing for bankruptcy.

Already, some shareholders have asked if an Alchemy BK filing will hurt HHSE's cash flow or revenues? While we certainly would prefer to receive payment for shipments made through Alchemy, the worst-case scenario was already anticipated. When Alchemy stopped paying HHSE / Medallion (OCT. 2015), we responded by holding Alchemy sales in "reserve" as potential bad debt - and not adding-in the value of these shipments onto the Company's calculation of quarterly revenues. As described in this blog, following the advice of our CPA team (and triggered specifically by Alchemy's cessation of payments for consignment merchandise), HHSE is now only recognizing such shipments on a "cash-basis" instead of accrual. Accordingly, all Alchemy sales since OCT 2015 have already been reserved or otherwise withheld from HHSE revenue reporting.

What will happen if Alchemy ultimately files for bankruptcy (as HHSE predicted more than six months ago when we replaced them as our primary wholesaler)? We don't know - but we can very accurately quantify the value of our unpaid sales, and as such, would be one of their major creditors.

HHSE has already navigated the "rough" waves from the Alchemy operational problems. As disclosed last week, they caused us to lose a significant component of our prior, monthly cash flow, and it took us several months to replace them with a reliable-paying master distributor. As a result of being proactive, HHSE is months ahead of other suppliers in this regard, as we are now placing two to three new releases per month into Walmart, Target and Best Buy through Cinedigm; and yes, they have been paying us!).  It's refreshing to find that the advice given to HHSE from  outside CPA advisors has put us into a proactive "safe seat" in this matter. We anticipated this possible occurrence, reserved for it properly, and made course corrections months ahead of other distribution suppliers (many of which are just now entering the Alchemy crisis zone).

More to follow on this topic - and several other items of a far more positive nature.

Wednesday, June 29, 2016

General Update on HHSE Corporate Matters

Greetings HHSE Friends & Followers:

Yes, it's been a very busy period for the Company, with post-Cannes follow-ups combined with a wide variety of "ramped-up" activities for new releases, new productions, VODWIZ, television & video sales, and general corporate governance & filings.  We have made diligent attempts to be more timely in our shareholder blog updates... but find that the Company's daily operations keep demanding full attention.

While some shareholders might disagree with management's selection of time priorities, every item that needs to be pursued and followed-up is being handled in descending order of mandatory sensitivity.

1).   INTERNATIONAL SALES / CANNES FOLLOW-UPS - The additional workload following Cannes has been back-breaking, and the Company definitely needs to hire a full-time "international" (or Ancillary Rights) Sales Director. To add to the pressure, the New Release Submission work duties - previously handled by Caitlin McKenzie (who left last month to assume a position with Universal), has been magnified due to the strong support that Cinedigm has demonstrated for HHSE and Medallion new release videos. So we are in need of one, possibly two, quality middle-managers to help with these tasks. Meanwhile, follow-ups continue with sales for 15 of the 32 titles presented at Cannes, and into these key territories: Australia/NZ, China, Colombia, France, Germany, Italy, Japan, Malaysia, Phillipines, Poland, Singapore, South Africa, South Korea, Spain and the U.K.

2).   NEW RELEASE SHIPMENTS (DVD / BLURAY) - The wholesale distribution pact with Cinedigm continues to thrive (and expand). Titles placed a key mass merchants (e.g., Walmart, Target, Best Buy) include (alphabetically):  A Remarkable Life, Brutal Colors, Dark Awakening, Day of Redemption, Dinosaurs of the Jurassic, Hear Me Move, Identity Crisis, Linda Vista Project, Revelations, Salvation and Union Bound.  This volume of new release placements has resulted in the heaviest 90-day DVD replication and shipment status in the 23-year history of the Company.  With new theatrical titles in queue, the pace for physical and digital releases does not look likely to slow down over the next 12-months.

3).  THEATRICAL ACTIVITIES - HHSE's single-screen exclusive engagement of "THE HOMELESS BILLIONAIRE" last week in New York City (Regal E-Walk) has been the highest per-screen grossing independent film of the year (over $40,000 in one week!).  Company feels that this initial week test is a good sign for the film's forthcoming expansion to approx. 100 locations on Labor Day Weekend (Sept. 2 - 5).  HHSE / Medallion are also opening another romantic-comedy in mid-September that is currently being prepared for release.  Details of this Cannes acquisition have not yet been posted to the trade, public or shareholders.  "A REMARKABLE LIFE" continues to open in top 30 DMA markets; and "TOYS IN THE ATTIC" has an encore theatrical re-launch in October.

4).   VODWIZ STATUS - HHSE met in NYC two weeks ago with a new portal management / distribution partner company to finalize terms of negotiations that had been occurring over the prior six months. Due to the stature (and public company status) of this venture partner, details of the VODWIZ relationship and launch will be made via public and joint announcement.

5).   FORM 10 ISSUES - The HHSE / Medallion film library (now over 455 titles) is requiring more time for valuation (and more costs) than previously anticipated, due to PCAOB requirements for the Form 10 audit opinion letter. Each title requires a five-year forecast for gross and "net to HHSE" revenues from all applicable media under license for that title (which in most cases is physical video, digital video and television... and in other cases, international and / or theatrical rights are added in).  With respect to titles already released, a 3-year prior sales history is used as the benchmark to support the five-year sales forecasts.  With respect to unreleased new titles, HHSE is required to provide a "comparable" title (and their sales history) in order to justify the five-year sales forecasts. The management labor-hours required have thus far been in excess of 300 (which translates to roughly 7-1/2 weeks of full-time work, if no other task were also addressed). Accordingly, HHSE Managers have not been able to be as accessible or communicative to shareholders over the past few weeks / months of this process.  On a positive note, we will NOT need to have a new Library Valuation for another five years.  On a negative note, we cannot file the Form 10 until all of this is completed.  But it's a painful, time-consuming process which must be completed due to the value of the Library relative to the overall assets of the Company's balance sheet.

We are cognizant that many shareholders want us to file the Form 10 "yesterday."  However, it is essential that we file the Form 10 in a manner which is likely to be approved by the S.E.C. with minimal comments.  Assuredly, HHSE is not "sitting" on the project.

6).  LEGAL ISSUES - Legal counsel for HHSE have made beneficial settlements or prevailed in several matters over the past two months.

a).  Redbull Media House - The lawsuit in which Redbull was attempting to enforce payment for home video rights which HHSE did not license has been settled.

b).  Amityville Asylum - Settlement negotiations are continuing in this royalty dispute.

c).  DC Photographer - HHSE was named in a vendor lawsuit for an event photographer engaged as a work-for-hire by the Algerian producers at a DC-area theatre. HHSE has decided to tender the services payment ($1,000) on behalf of the production company, and otherwise respond and defend as may be appropriate.

d).  Accutrak, Tribune - These older judgments, which were recently reinvigorated with garnishment filings, have been settled, and the garnishment activities withdrawn.

7).  MAJOR PRODUCTION MATTERS - There was a bit of a panic last Friday with respect to a 25% portion of the funding on "MOTHER GOOSE." The plan to access EU benefits by shooting the castle-sequences in Wales was impacted by the unexpected, self-inflicted wound of U.K. voters choosing to withdraw from the EU.  Fortunately, we were able to reinstate a prior discussion involving an Irish castle location, as the Republic of Ireland is an EU member nation.  There has been some significant forward progress in the past few weeks on the financing of a slate of smaller features which would be shot in the State of Arkansas, utilizing a wide-range of incentives through the film office and the Arkansas Economic Development Commission.  Details will be released if, as and when these exciting discussions turn into executed agreements.

Friday, June 24, 2016

FRIDAY Update Blog

Greetings HHSE Friends & Followers - apologies for the late update today. The "Brexit" vote had some short-term and unanticipated funding ramifications to a portion of our "Mother Goose" production financing. This issue has since been resolved... but the distraction kept us from allocating time today to the drafting of a general blog update, as previously planned. A general update blog will be posted SUNDAY.  Sorry Folks - this will have to wait until MONDAY as we were unable to reach our Library Valuation project manager today  (Sunday, June 25) for an update (and this item is part of the blog).  We will proceed to release other information tomorrow am, if we have not received back approval for certain updates re: the Library, and the Form 10 filing.  Thank you!

Thursday, June 23, 2016

Growing Revenues + Termed-Out Collections = Corporate Growing pains...

Dear HHSE Friends & Followers - We have received some 'confused' communications from shareholders over the past several days. Not that their requests were worded confusingly, but that they were asking to address the apparent disconnect between all of the positive revenue activities for the company, combined with ongoing creditor litigation matters.  To alleviate such confusion, we will elaborate on the current cash status of HHSE and how our growing revenues do not instantly relieve prior payables issues.

The primary question from shareholders has been: why are there still unresolved (or new) payables problems or lawsuits when the company's revenues have been growing so significantly?

There is not a short answer because of the many issues that impact cash flow.  But we will try to be brief.

1).  ALLEGRO DISTRIBUTION & ANDERSON / ALCHEMY - The two largest DVD and Blu-Ray wholesale distributors for HHSE during 2014 and 2015 were ALLEGRO (for sales in CANADA) and ANDERSON / ALCHEMY (for sales into Walmart, Best Buy and Target).  We started experiencing "payment" problems & delays from Allegro as far back as April 2015, which were masked on their part by their notifications of "pending returns" and other holdbacks. Ultimately, we realized that we simply were not being paid for actual NET sales at Walmart, Jumbo and other key Canadian retailers.

Regarding ANDERSON MERCHANDISERS, for more than 20-years, they were always a solidly and reliable wholesaler and payment source.

However, in late Summer (2015) they "merged" (or were acquired?) by ALCHEMY ENTERTAINMENT (previously MMS), which had been our wholesaler for DVDs and BluRays into TARGET STORES.  The combination of ANDERSON and ALCHEMY resulted in several months of uncertainty regarding product returns, payment procedures and new sales solicitations.  But by December, 2015, HHSE had grown very concerned and began ramping up the collections pressure on Alchemy for payment against these significant sales.  By January, we stopped providing them with new release titles (for fear of simply not ever getting paid), and by February, their overall tenuous financial position was the chatter of the film industry (with trade publication articles touting that Alchemy bit off too much in acquiring Anderson).

Alchemy to this day remains "upbeat" that they will survive and ultimately pay what they owe to HHSE / Medallion and other suppliers (it's a substantial amount by our calculations).  However, until that happens (or until we are forced to file a lawsuit), our corporate response has been to terminate Alchemy's representation of our product line - and to align with a far more financially stable wholesale partner in CINEDIGM (NAS: CIDM).  Cash flow wise, what used to be a reliable monthly checks in the $100k range have totally stopped for these past 9+ months during the struggles / mergers of these key physical goods wholesalers.

NET IMPACT TO HHSE'S CASH FLOW HAS BEEN THE SHORT-TERM LOSS OF ABOUT $100,000 PER MONTH.  However, we have not needed to revise our accrued earnings for 2015 as Alchemy and Allegro remain confident in their communications that HHSE will ultimately be paid in full.  That said, these slow-collections issues are the primary reason that physical goods sales (and digital streaming licenses) on a going-forward basis are being accounted for on a CASH Basis (instead of accrual).

2).  NEW VENTURE WITH CINEDIGM IS ROCKETING - Beginning with shipments already delivered - and continuing through to the last month that new releases have been selected (November, 2016), the HHSE sales venture with Cinedigm has been a solid launch - with two and three titles PER MONTH going into Walmart and Best Buy.  This is good-news / bad-news.  Good news because it represents huge shipments and a sunny year-end... Bad news because HHSE has to advance pay all of the manufacturing and freight costs to fulfill these orders. When you add huge new manufacturing costs to an already strained cash flow (see above), it's no wonder that SOME creditor bills get pushed to the back burner...

3).  DISTRACTING LITTLE STUFF? Yes, it was a clerical error or priorities oversight to not pay the $99 fee to renew the Registered Agent for HHSE in Wyoming.  But this has since been "fixed" (paid and filed) and this housekeeping chore is resolved.  Now we're informed that a former employee (Daniel Ackerman) has filed to get paid his accrued / unpaid salary (about $13,500 according to our records).  Is this distracting?  Yes, especially when our management priorities are to fill new orders for the Company's growth, and complete the corporate tasks with the Form 10 (including finalization of the Library Valuation so that the audits can be released). With limited hours in a day, and limited cash resources, it's impossible to promptly resolve all matters... even items that to management's priority can seem to be inconsequential "little stuff."  But every issue that becomes subject to an actual litigation matter is being addressed, regardless of the creditor's merit or the absence therein.  Regarding Daniel Ackerman, his continued position as a bookkeeper / invoice-generator at HHSE was no longer justified last summer when we switched to quarterly reviews with an outside CPA firm and an enhanced version of Quickbooks.  We simply could not justify this salary against the work-product that was so easily fulfilled for a dramatically smaller amount. As Daniel Ackerman had never held a key role in preparing the financials, we did not see a need to replace his position.

4).  IRS TAXES - Yes, HHSE owes some IRS Payroll Taxes.  Payments have commenced, and we are told (by a resolution service) that a formal settlement will happen in the next few business days.  It's not a lot of money, but as it had not been paid in a timely manner, they came for the collections.  On a going-forward basis, we have engaged a payroll service so that our 941 forms and payments are made in a timely manner.

While this blog today is focusing on the ugly stuff of problems and obstacles... the blog for tomorrow will cover all the far-more-impressive GREAT stuff that the Company has achieved in the past few weeks and months.


Wednesday, June 22, 2016

... and the Beat Goes ON, and ON, and ON!!

Dear HHSE Friends & Followers:

What happens when you have the right time, the right product and the right resources to market a film?  We surprised a TON of people this past weekend with the STELLAR box office gross of $19,771 for "The Homeless Billionaire" at the prestigious Regal E-Walk theatre in New York.  A lot said it was a "fluke" and could not be sustained.  Why did they think this?  Is it because the PRIOR attempt to market the film was not successfully received (released 6+ years earlier in a different version under a different title?).  Certainly, many would discredit the film's age alone as the reason for why it was not likely to succeed.  But they were wrong... and the skeptics continue to be wrong.

Check out the MONDAY (June 20) and TUESDAY (June 21) grosses, and you'll see that this film's re-marketing campaign as designed and implemented by Hannover House is a MAJOR HIT!  The Monday grosses were a whopping $5,300 at the Regal E-Walk (3X greater than "Finding Dory" at that location) and the Tuesday grosses were an impressive $4,909.  In fact, HHSE would normally be doing a BACK-FLIP HAPPY DANCE if we did $4,909 for an ENTIRE WEEKEND!  But to do it on a TUESDAY NIGHT is outrageous!

"THE HOMELESS BILLIONAIRE" is up to $29,980 in only five-days... and we are probably going to finish the sneak-peek engagement tomorrow night at more than $36,000 for the week.

One theatre, one week, $36,000?  That's so far out of the ballpark, it's a SMASH homerun.

Now you can see why our Labor Day expansion on 100+ locations is getting solid support from the major theatre circuits!



Monday, June 20, 2016

HOLY SMOKES! HHSE's "Homeless Billionaire" is the Highest Per Screen Ltd. Release Film in the USA!


From FilmGrosses@RegalCinemas.com
To hannoverhouse hannoverhouse@aol.com, GM1929 gm1929@RegalCinemas.com

Friday   $5,859.00
Saturday  $9,100.00
Sunday  $4,812.00
Total  $19,771.00


Regal Entertainment Group
7132 Regal Lane
Knoxville, TN   37918
(865) 925-9408

P Please consider the environment before printing this e-mail



Weekend Domestic Chart for June 17th, 2016

← Previous ChartChart Index

  MovieDistributorGrossChangeThtrs.Per Thtr.Total GrossDays
1newFinding DoryWalt Disney$135,060,273 4,305$31,373  $135,060,2733
2newCentral IntelligenceWarner Bros.$35,535,250 3,508$10,130  $35,535,2503
3(1)The Conjuring 2: The Enfiel…Warner Bros.$14,880,050-63%3,356$4,434  $71,055,13610
4(3)Now You See Me 2Lionsgate$9,373,379-58%3,232$2,900  $41,085,90810
5(2)WarcraftUniversal$7,241,430-70%3,406$2,126  $38,432,95510
6(5)X-Men: Apocalypse20th Century Fox$5,309,290-46%2,632$2,017  $146,157,12624
7(4)Teenage Mutant Ninja Turtle…Paramount Pictures$5,251,531-63%3,086$1,702  $71,981,10517
8(8)Alice Through the Looking G…Walt Disney$4,290,760-24%1,880$2,282  $69,993,68424
9(6)Me Before YouWarner Bros.$3,911,175-57%2,645$1,479  $46,112,02917
10(9)Captain America: Civil WarWalt Disney$2,331,622-46%1,434$1,626  $401,312,59145
11(7)The Angry Birds MovieSony Pictures$1,693,096-74%2,021$838  $103,183,94331
12(10)The Jungle BookWalt Disney$1,488,657-46%953$1,562  $355,909,30866
13(18)ZootopiaWalt Disney$947,753+70%305$3,107  $339,507,242108
14(12)The Nice GuysWarner Bros.$822,340-58%522$1,575  $34,186,43631
15(14)Love & FriendshipRoadside Attractions$734,679-48%497$1,478  $10,930,50338
16(15)The LobsterA24$647,570-35%319$2,030  $6,686,38287
17(17)Maggie's PlanSony Pictures Classics$471,417-24%335$1,407  $1,805,63631
18(11)Neighbors 2: Sorority RisingUniversal$352,005-83%464$759  $54,542,87031
19(28)GeniusRoadside Attractions$297,146+202%134$2,218  $433,69610
20(16)Money MonsterSony Pictures$228,819-67%286$800  $40,316,38038
21(13)Popstar: Never Stop Never S…Universal$169,140-90%211$802  $9,393,83517
22(23)WeinerSundance Selects$128,048-20%80$1,601  $1,039,29431
23(22)The Man Who Knew InfinityIFC Films$127,982-23%86$1,488  $3,397,70252
24(36)Dark HorseSony Pictures Classics$78,371+81%43$1,823  $368,70745
25(26)The MeddlerSony Pictures Classics$69,508-46%94$739  $4,033,87259
26(24)Barbershop: The Next CutWarner Bros.$67,634-50%121$559  $53,790,08466
27(27)The WailingWell Go USA$56,823-54%23$2,471  $657,94617
28(46)KeanuWarner Bros.$55,496+253%123$451  $20,484,39152
29(32)Miracles from HeavenSony Pictures$45,800-41%123$372  $61,487,23396
30(29)The DarknessBH Tilt$42,108-56%106$397  $10,658,46238
31(40)De PalmaA24$37,659+24%19$1,982  $81,42010
32(34)A Bigger SplashFox Searchlight$34,806-40%37$941  $1,936,52447
33(43)The Music of Strangers: Yo …The Orchard$30,795+25%11$2,800  $68,15810
34newClownDimension Pictures$27,000 100$270  $27,0003
35newRaiders! The Story of the G…Drafthouse Films$26,059 24$1,086  $26,0593
36(33)Sing StreetWeinstein Co.$25,500-61%35$729  $3,037,87166
37(38)Kung Fu Panda 320th Century Fox$23,442-33%53$442  $143,403,643143
38newTickledMagnolia Pictures$21,898 2$10,949  $21,8983
39(39)Hello, My Name is DorisRoadside Attractions$20,579-36%47$438  $14,375,126101
40newHomeless BillionaireHannover House$19,771 1$19,771  $19,7713
41(42)DheepanSundance Selects$19,502-26%24$813  $188,75345
42(50)The WitnessFilmRise$18,299+42%9$2,033  $58,40417
43(52)Le Journal d'une femme de c…Cohen Media Group$16,872+52%9$1,875  $32,19210
44(53)A Hologram for the KingRoadside Attractions$11,539+12%16$721  $4,182,88459
45(73)Sunset SongMagnolia Pictures$11,505+374%14$822  $111,44838
46(47)DoughMenemsha Entertainment$10,780-26%10$1,078  $1,016,836133
47(54)High-RiseMagnolia Pictures$8,559-4%8$1,070  $300,15038
48newSeoul SearchingMondo Paradiso Films$6,779 1$6,779  $6,7793
49newMy Love, Don't Cross That R…Film Movement$6,340 2$3,170  $6,3403
50(49)Jimmy Vestvood: Amerikan Hero$4,997-63%5$999  $194,57938
51newThe Last KingMagnolia Pictures$4,599 3$1,533  $4,5993
52newCosmosKino Lorber$3,807 1$3,807  $3,8073
53(62)Germans and JewsFirst Run Features$3,312-34%1$3,312  $13,11610
54(79)VivaMagnolia Pictures$3,150+109%7$450  $173,82252
55newSerial Killer 1Kino Lorber$2,659 1$2,659  $9,7293
56(64)Sweet BeanKino Lorber$2,373-45%5$475  $74,91394
57newArgentinaFirst Run Features$2,274 1$2,274  $2,2743
58(65)Presenting Princess ShawMagnolia Pictures$2,205-46%4$551  $29,01724
59(68)TikkunKino Lorber$2,038-43%1$2,038  $8,67710
60(74)HockneyFilm Movement$1,300-46%2$650  $107,17459
61(-)Neon BullKino Lorber$1,014 3$338  $23,04473
62(-)The Dying of the LightFirst Run Features$665 1$665  $4,74474
63newGolden KingdomKino Lorber$554 1$554  $5543
64(89)Last Cab to DarwinFirst Run Features$406-35%1$406  $1,40210
65(92)Unlocking the CageFirst Run Features$384-9%1$384  $16,74626
66(82)The Measure of a ManKino Lorber$374-70%3$125  $105,41366
67(94)The InvitationDrafthouse Films$166-47%2$83  $231,49373
68(93)Men & ChickenDrafthouse Films$88-79%2$44  $30,04059
69(-)Burning BodhiMonterey Media$76 1$76  $3,28994