Q&A on multiple issues from HHSE Shareholders...

Greetings HHSE Friends & Shareholders.  Over the past two weeks, we have received a high volume of emails and inquiries from Shareholders, friends and followers with some questions recurring and needing to be addressed.  Listed below are the top 10 current questions for HHSE management, and the answers as to their status, etc...

1).  Are the Q1 results ever going to be released?

     A:  Yes, promptly.

2).  Will the release of Q1 results enable the OTC Markets "Yield" sign to be removed from the stock listing?

     A:  Yes.

3).  Is the company ever going to release two-years of financial audits so that the stock can become fully reporting?

     A:  Yes, and as required for Edgar / SEC status (and Form 10 acceptance) the two years of audits must be the "two most recent" years, which in our case are 2011 and 2012.  The company had previously completed all worksheets and backup for 2010 and 2011; but for 2012, there are still some items requiring backup support or third party verifications (which are in process and almost complete).  Under the TCA credit agreement, the company is required to have these audits completed and posted quickly, and we see no impediments to satisfying this requirement.  As a Pinksheet OTC-Markets security, HHSE has not been required to complete audits, even though it has been a corporate goal for the past two years.  Now, however, the completion of audits is required for compliance with the Company's senior lender, and as such, must become top priority.

4).  Is the Film Library value the cause of audit delays?

     A:  No.  The value of the Company's Film Library is not under question or review.  The Film Library is one of the audit items already fully addressed during the past two-years (approx.) that the Company has been working with auditors on this project.  The current audit issues (relating to the 2012 year-end) are customary items of back-up review, third-party verifications and analysis of capitalized items relative to ultimate revenues.

5).  What's the update on "Mother Goose"?  How can HHSE finance a $12-mm production when the Company is otherwise tightly managing cash flow?

     A:  There's a lot of exciting activities happening with this production, from distribution partnerships and presales, to an amazing cast of box-office superstars.  HHSE is not "financing" the movie with existing credit lines, cash flow or debt.  The film is being financed primarily through a bank structure that includes a direct assignment of international presales, tax incentives, rebates and a senior lien on the asset and revenue streams.  The announcement of distribution partners will be withheld until its deemed most beneficial for the partners (perhaps timed for a major festival or market, or timed to correspond with a theatrical and network broadcast debut of the first teaser-trailer).  The announcement of cast members will be subject to the approval of the agents, managers and publicists for the principal stars, as required.

6).  Is HHSE involved with the new Terminator 5 feature production?

     A:  No.  But the Company has continued to develop the T3K ("Terminator 3000") concept for an animated feature, which would be a complementary and supporting title to the T5 project.

7).  Is the Company still pursuing "higher-profile" titles, or is the business model now strictly indie films for the direct-to-video / VOD market?

     A:  The "meat-and-potatoes" business model for the Company at present is to acquire and release easily placed films for DVD and VOD, while pursuing "tent-pole" / event-level releases to drive the visibility and revenues for each year.  The direct-to-video titles are highly profitable with great return-on-investment (i.e., an average upfront cost of $10,000 plus replication & freight can predictably return $150,000 to $250,000 in gross sales per title).  However, there is a revenue-limit to this model in that the Company's key accounts usually cannot absorb more than two (possibly three) new titles from an indie studio like Hannover House per month.   So for the Company to break a respectable revenue goal of $50-million per year, one or more titles like "Mother Goose" would be required to generate these front-line / mainstream results.

7).  Why has there been such a heavy volume of "short" sales in the stock the past three days (approx. 2,106,112 shares)?

     A:  There are some traders that would like to control the HHSE share price through misinformation and fear.  We think that their efforts cannot be sustained against the wave of pressure that the Company's back-log of information and activities is now beginning to generate.  It would not take very much buying pressure to force the short squeeze and chase them away to other equities.

8).  What are the terms of the deal and relationship between Hannover House and Nanotech (NTEK) regarding the VODwiz.com Video-On-Demand site and Roku IPTV Channel?

     A:  NTEK is handling the technical and operational infrastructure for both streaming outlets, with Hannover House acquiring and accumulating programming (both from our own library as well as from a long-list of supplier partners and studios).  There is a revenue split agreement with NTEK.  Hannover determined that the upfront costs (both in terms of technical infrastructure and engineering expertise) were significant, and instead agreed to the NTEK deal to enable HHSE to focus on the programming and not the hardware.  Additional details will be released under mutually approved announcements.

9).  Is the Company still involved with book publishing?  There haven't been any new releases in a long while.

     A:  Yes, new publishing activities are in place now, even though prior plans for 2012 were delayed.  "ONE OF THE LUCKY ONES" ships from the printer today, and will hit book stores next month.  "SABLE SHORE" and "BLIND VISION" will print next week for August on-sale dates.  All three items will be widely available on e-Book formats.  The Company temporarily stopped new release activities of publishing projects in 2012 due to uncertainty in the marketplace.  The Company's largest book retail customer, Borders Group, Inc., went completely out of business, and sales to the Company's primary book wholesaler, NBN Books, ground to a halt.  With e-Books emerging as the dominant media, Hannover decided to wait-and-see before investing in large print runs or promotions.  The Company is now comfortable with a strategy of modest print runs and a more aggressive effort to develop the e-Book formats.

10).  How come I couldn't find "Toys in the Attic" at some Wal-Mart locations? 

     A:  In January of this year, the Company's relationship with the Vendor-Manager / distribution partner that had been placing our products into Wal-Mart deteriorated over a sales and cash dispute;  a prior agreement for this vendor to remit monthly payments to Hannover House, as well as an agreement for direct payment to the replication lab, were both ignored by this distribution partner.  These actions caused a disruption in the product flow and nationwide roll-out of units to Wal-Mart on the initial street date.  The dispute with this former distribution partner continues, and may result in litigation by Hannover House with our Company's demand that they render payment.  Accordingly, HH would be remiss to publicly release additional details at this time.  Hannover House has since replaced this former distribution partner with a much larger entity with greater placement strength and higher per-unit net pricing to Hannover House.  This new distribution relationship is one of the exciting and  pending new announcements for the Company.

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Address your Shareholder questions to:  HannoverPR@aol.com  /  Thanks!

THANK YOU to all our Company "long" shareholder supporters!

From all of us at Hannover House, we want to THANK the legitimate Shareholder "longs" who remained patient and kept-the-faith while we navigated some difficult waters.  With the announcement and OTC Disclosure of the Company's Credit Facility agreement with TCA Global Master Fund, we see smooth waters ahead as we cruise to new and exciting destinations.

Over the next few weeks, we will release new title details from recent acquisitions, and will be releasing corporate governance items as promised.  The closure of the TCA venture was 2-months in the works, and monopolized the time of HHSE managers... so other items that had been put onto the back-burner can now be brought forward and addressed / disclosed.

For those that have predicted (for more than two years!!) that "the sky is falling," we'd like thank you for the attention you've given to the Company, despite the obvious errors of your conclusions.  And for clarity: 

1).  Yes, TCA does have a lien against the Company's extensive and extremely valuable Film Library (and it was included in their Due Diligence review for accuracy and historic / current sales activities);

2).  Yes, the Company has already received a significant initial tranche of funding;

3).  Yes, most of the funding has been used for the acquisition and release of new titles (including eight new film and video releases), that collectively are anticipated to generate over $4-million in short term revenues for the Company;

4).  Yes, the transaction is extremely beneficial to the Company and it's shareholders;

5).  Yes, the attorney Compliance Letter is completed and will be uploaded shortly (tonight) to restore the OTC Markets Current Information status for HHSE.

Interesting featurette to view...

The Hannover House release of "Na Pude", retitled "TOYS IN THE ATTIC" has already become one of the Company's most popular releases.  But it took quite a bit of work to adapt the film from the original Czech language and recast and remix it for the U.S. audience.  English Adaptation Writer-Producer-Director Vivian Schilling provides an unprecedented look behind-the-scenes of the creative and technical processes involved with this project in a special YouTube featurette,  It's definitely worth viewing! 

Happy Memorial Day to all HHSE friends and fans.  We are looking forward to a great (but short) week of exciting activities to share.

http://www.youtube.com/watch?v=M9kpK9RmVQw

From an Urban Nightmare... to the American Dream.

"Shuck & Jive" is the riveting, true story of a small-time hustler and conman who ultimately escapes the streets and generates his own success and redemption.  Hannover House has acquired all Sales Agency (Distribution) rights to this amazing and inspirational story, and will oversee the private financing commitment for the film's production and theatrical release.  Principal photography on this feature film is scheduled to begin in September (2013) with an April (2014) theatrical launched planned. Watch for more details as casting and principal talent are made public!

Crikey!! Irwin's legend lives on....

It's hard to believe that it's been almost seven years since the bizarre and untimely death of internationally acclaimed animal expert STEVE IRWIN.  But his work lives on, and the interest in his DVDs and nature film programming is high.  Hannover salutes his amazing body of work in entertaining and educating an entire generation on wildlife and nature!

Updates on a Variety of Things...

Good Afternoon HHSE Friends & Shareholders - As requested, listed below are some items not covered in the Board of Directors meeting as posted today on the OTC Markets site.

1).    Status of "Yield" Sign on OTC Markets -- The Company has fully complied with the disclosure filings for "Current Reporting" status, but is missing the Attorney's Letter stating as much.  The Securities Attorney that will be posting this letter is currently working on the Corporate Financing documents listed in the Board of Directors Minutes, so it will be a couple of more days before the Attorney Letter is posted (at which time, our designation should return to "Current" / Fully Reporting Pinksheet status).

2.    Status of Audits -- We've had a very positive development with respect to completing the 2011 and 2012 audits (note, that we have moved the covered years to reflect "the two most recent, full year periods" as required under EDGAR rules).  Suffice it to say that our biggest obstacle in providing satisfactory support for H-T has been resolved to satisfaction.  We will not "forecast" the release date of the audits (and the simultaneous filing of the Form 10 Registration Statement with the S.E.C., which is otherwise already completed); we'll just do it, then say, "Aha!  Go check it out!"

3.    Distribution Ventures / Pacts and Personnel -- The Company has mentioned that there is a venture being structured under which Hannover House would form a "multi-studio distribution pact" with two (or three) other independent suppliers.  The goal of such a combined marketing presence would be to lower our cost-of-sales, while increasing our unit-sales penetration and customer base.  The determination of the value of such a pact was long-in-the-process, and based in large part by management's dissatisfaction with the placement rates being achieved by outside sales representatives.  One of these outside, commissioned-sales representatives, Tony Perez, has since accepted a full-time position with Origin Films.  In 2011, Mr. Perez licensed his library of horror films and urban features to Hannover House (which 36 titles the Company has not yet started marketing), and subsequently worked as a commissioned, non-exclusive sales representative for the Company.  We wish Mr. Perez well, and hope that his new employment with Origin generates mutually satisfactory results.  Under the new Hannover House (multi-studio) distribution venture, there is no more opportunity for commissioned, outside or non-exclusive sales representatives.  In respect of the confidentiality of the multi-studio distribution pact at this time (one of the other three primary studios is also publicly-traded), the formal announcement of this sales venture will be withheld until possibly as late as August (which is the first month during which "new release" shipments will be handled under the new mutli-studio distribution pact).

4.   The Lion Prince -- Can't contain our enthusiasm for the acquisition of this amazing, $20-million dollar live-action / African wilderness adventure.  The stars (two, young African children) are outstanding, and the story and message in the film is inspiring.  Hannover House is looking at various release date opportunities, but has initial sites set for late January, 2014 (to be "on retail shelves" during February's Black History Month).  Stay tuned!

Which College Football Team will prevail as the BCS Champion for this coming season?  Will it be a repeat for Alabama?  Or will L.S.U. rise again?  Will Johnny "Football" Manziel take Texas A&M all the way?  And which teams are best-positioned for success?  While college football pundits argue over such points - including whether or not any non-S.E.C. school is likely to be a national title contender - Hannover House remains agnositic in our support for all fans.  Mostly, we're excited about the launch of our Football Preview (DVD) series, and for the fall season!  Go Teams!!