UPDATE ON LONG-TERM CORPORATE STRATEGY - HHSE management has been contacted by several "long" shareholders with the inquiry regarding LONG-TERM STRATEGY for both the core business (traditional film distribution) and the NEW business (digital streaming / MyFlix). As the market for lower-end films continues to diminish (i.e., lower-budgeted films without notable star casts), the merits of the HHSE plan to pursue "event" level features becomes more obvious. The sort of films that are driving theatrical box office have the same elements that are driving home video, streaming, television and international sales. Movies like "MOTHER GOOSE: JOURNEY TO UTOPIA" and "THE LEGEND OF BELLE STARR" are event-level theatrical features with major star casts. HHSE has known this for years, and struggled to secure the multi-millions of dollars required to bring each of these films to the screen. The challenges have been daunting, including:
a). Difficulties in obtaining "bankable" foreign presales (i.e., a prior contract with Odyssey Pictures for a $2-mm Minimum Guarantee against foreign royalties for "Mother Goose" met with banking resistance to the point of futility).
b). Skepticism Regarding likely Production Values - Until HHSE could show the production quality obtainable in Arkansas for amounts that by film industry standards were considered "small," the company met with presale and private investor skepticism that a quality film could be produced for the amounts that HHSE was arranging. Now, with films like "THE RIOT ACT" as available evidence - and the boom of production in Arkansas due to State incentives and low-cost crews and accommodations - the HHSE budgets for "Mother Goose" and "Belle Starr" are no longer being viewed as "too low to be viable" but as "too reasonable to not pursue."
c). General Corporate Status - Without being a fully reporting company, and plagued with nuisance lawsuits from the "old" business model for HHSE, both private investors and banks have taken pause at times when HHSE is presented as the distributor for these locomotive, windfall-generating event pictures. The solution to these concerns includes the current registration filing and uplist, a continued elimination of nuisance litigation and balance sheet debts, and a series of significant distribution partnerships from theatrical to international.
It is HHSE's belief that ONE title like "MOTHER GOOSE: JOURNEY TO UTOPIA" is capable of generating over $40-mm in gross revenues... or more than TEN TIMES what HHSE generates in a 10-Year Period with the smaller titles of the prior business model. For these reasons - the long-term goal of major features as the locomotives will drive the core distribution business... while the exciting new venture of MyFlix streaming will be the tail that wagged the dog as a complementary venture.
COMPLIANCE & AUDIT UPDATES - Progress continues to be made in the audit compliance issues and general status of the Form 10 Registration. Q2, 2018 filing will be made on or before the August 14 OTC Markets Guidelines (a filing which was held from prior release in order to conform as much as possible to current status news and audit adjustments).
MYFLIX - On-boarding of titles for this impressive streaming site continues, while marketing & P.R. efforts for the upcoming launch consume the majority of management focus. The company's trademark filing was approved, which was an important step towards empowering HHSE attorneys to halt any "squatters" that are attempting to utilize the MyFlix brand name (we are aware of two current attempts that will be pursued for halting). An outside firm has been engaged for the creation and placement of the MyFlix APP (onto all major platforms and hardware devices)... and a website compliance meeting is scheduled for late August in order to test the functionality of the MyFlix operational infrastructure. At this point, a public launch to consumers in mid-to-late September is looking more realistic. It's understandable (now) why the Disney streaming site allowed themselves 18-months of development (they launch in March, 2019).
LEGAL ISSUES - Responsive filings have been made in the Crimson Forest matter; at the recommendation of counsel, HHSE has been advised to not elaborate on the company's legal strategy on this publicly-accessible blog.
Regarding Origin Films, the Motion to Dismiss was rejected, so this matter will proceed to trial at some time over the next two weeks. Based upon the contracts and math, HHSE believes that a reasonable review of the accounting reports will result in another victory for HHSE: an adjudication based solely on reality. HHSE has prevailed in the past three matters in which producers chose to ignore the terms of the agreements, and instead sued for "fictional" amounts they incorrectly claimed were owed. As stated previously in this blog, the long-term solution for HHSE to avoid this sort of baseless and frivolous action in the future is to avoid dealing with inexperienced producers and low-end programming.
NEW THEATRICAL UPDATES - Materials preparation and marketing support are underway for TWO theatrical releases coming in September. On Sept. 14, THE RIOT ACT will open in approx. 10 theatres in Arkansas and 10 theaters in Top 10 DMA markets... each theatre will have focused marketing support, including lobby standees. If the film's opening weekend results in holdovers, then a plan to expand to additional markets will be immediately implements. On Sept. 28, DOGPATCH USA will open in Arkansas theatres, along with NY and LA exclusives. This documentary feature tells the story of the now-defunct theme park which was based on characters from the Lil' Abner comic strip by Al Capp.
OPPORTUNITIES IN THE ARKANSAS PRODUCTION BOOM? - As N.W. Arkansas businesses enjoy the $70+ million in production funds currently being spent by HBO on Season 3 of "True Detective," the availability of experienced crews has grown significantly - while the supply of cinema production equipment has been squeezed out. There is talk of additional HBO funded productions. But regardless, with two smaller-budgeted features in the works for HHSE - and two "event level" features being pursued - HHSE is beginning to investigate the opportunity to allocate some portion of the current off-balance sheet production funding to build-up production equipment inventory and to possibly enjoy third-party rentals when such gear is not in use. This concept is still in the research stage, but appears to make sense based on the lucrative State of Arkansas incentives, the current commitments for funding of two new features and the prospective production of the two "event" features.
