a). AUDIT STATUS -- when, pray tell, will
the audit-from-hell be completed? A
common question we receive. Short
answer: both Parkinson and Shefte will
be back in the Arkansas Corp. offices during the third week of April
(specifically, Tuesday the 23rd through Friday the 26th), which corresponds to
the availability of our outside accountant reviewer as well as the Hogan Taylor
team (reprioritized for tax season, and
now finishing that up). We have
again complied with document requests, and do not believe there are any other
issues that have not been addressed and fully supported with back-up. We hope that we are right. If that's the case, then the audit completion
should be pretty fast... and on a going forward basis (now that our internal
systems have been modified to conform to simplified audit review), future reporting
should be as simple as a print out from our software systems. Despite the well-thought analysis from
shareholder Malcolm Stone, the completion of our audits is not impacted by the
legal issues affecting the former TDGI CEO, Fotis Georgiadis, on a matter
unrelated to TDGI. There had been some
speculation that this could create further delays in the long-awaited audit
completion, but this is not the case. UPDATE: To be clear, Malcolm had a very valid analysis in determining that the "uncertain" status of the total holdings of HHSE stock by Fotis Georgiadis (and / or entities beneficially controlled), would qualify an issue impacting both an independent auditor's report as well as a Form 10 Registration. However, as of 09/30/12, Company filings listing 5% owners of record had been modified to list Georgiadis as an unknown and potential control person under Rule 144 (even though HHSE stock ownership details have not been provided to the Company by Georgiadis). Clearly, as of Jan. 1, 2010 Mr. Georgiadis (and / or entities owned or beneficially controlled by him) owned more than the 24-million share threshold which at that time defined who were the 5% or more controlling shareholders (there were a total of 200-million shares issued to Georgiadis in December, 2009, as a result of the "forgiveness" of a note and the commitment to raise $1.5-mm for the Company). At this time, Company does not know how many shares of HHSE stock are currently owned by Georgiadis or entities which fall under the beneficial control definition. Accordingly, and out of an abundance of caution, Mr. Georgiadis has been listed as a "potential" control person in the Company's disclosure filings.
b). FORM 10 STATUS -- This is on the
Company's table at present, as additional disclosure items still need to be
assembled and added to the prior filing.
We are told that there are circumstances under which a Form 10 statement
can be filed without the need for simultaneous audit filings, and this is the
route we are pursuing so that the Edgar reporting is in place faster.
c). DISTRIBUTION VENTURE -- Hannover
House is working with three other, well-known independent studio suppliers on
structuring a "JV" of sorts to improve access to retail video
distribution and enhanced volume for all placements. Each of these prospective supplier-partners
has non-competitive / complementary product lines, and each are likely to benefit
from the improved stature of a multi-label sales presence. Additionally, each company will save on sales
overhead. This concept has been
structured similarly to the successful "WEA DISTRIBUTION" venture (a combined sales force for Warner - Elektra
and Atlantic music products). The
existing distribution channels for Hannover House (primarily a two-step process through an intermediary wholesaler of VMI
partner) continues to operate well for the company. However, the multi-label structure as
proposed is expected to work better (i.e.,
greater market penetration, higher volume of orders on placements and higher
per-unit wholesale revenues back to HH).
This is a structure we hope to finalize within the next four to six
weeks, if it's going to happen (remember,
we're dealing with other companies!!).
d). INTERNATIONAL ACTIVITIES -- Parkinson
and Shefte are excited about the high-level meetings set at the upcoming Cannes
Film Festival (and Marche du Filme
Market), May 15 - 26. Presale
agreements for the Company's major title slate will be pursued (and in some cases finalized and announced); the title production slate will not be
announced until a few days prior to the market (for competitive reasons... as you cannot "copyright" a great
idea for a movie, unfortunately!). Hannover
planned on some Cannes announcements last year (specifically, announcing the
"other" star casting as well as our primary financing
partnerships); but for strategic
reasons, were requested to not make such public announcements at that
time. We will announce certain elements
at Cannes, perhaps not all of the elements or some of the more exciting
activities, but you can expect news from France next month that does not
require third party approvals!
e). LEVERAGING OF KEY RETAIL RELATIONSHIPS
-- The Company is looking at the possibility of acting as a distribution or
"retail sales agency" for representation of entertainment related and
other retail-friendly items into the Company's key USA retail accounts. This strategy of a sales-agency
representation structure has worked tremendously well for Gaiam, Inc. (GAIA) in
helping them rapidly build annual gross revenues to over $200-mm. Hannover House has been presented with some
items from other manufacturers - such as
videogame software, sporting-goods related merchandise and nutritional
supplements. Some of these items very appear
likely to be considered or placed with accounts such as Wal-Mart, SAMS, Costco,
Best Buy, Walgreens and other existing retail accounts for Hannover House home
video products. Structurally, under such
a scenario, the suppliers would be responsible for all costs, with HHSE earning
an off-the-top sales placement fee. We
do not see any downside risk, and as
this topic is on the table, we wanted to let our shareholders know it's being analyzed
and considered.
f). UPCOMING NEW RELEASES -- Looking
ahead for the upcoming months, "Next
Up" and "Inconsistent Truth"
were both rescheduled for July; Coming
in August, the company will release "The
Coffin" (horror), "Yoga Fit"
(exercise), "Cowboys and Heroes"
(western multipack) and the "S.E.C.
Football Preview 2013" DVD products.
There is a possibility that August will also kick-off a venture with a
major media company (that does not have a
home video operation!), and this will result in up to three new movies per
month for Hannover House to release onto DVD, Blu-Ray and VOD. If this venture is consummated (closing is pending for next week in New
York), a separate announcement will be jointly released. Company is also looking to emulate the
successful Magnolia Pictures plan of debuting certain titles on premium VOD or
On-Demand prior to their
theatrical openings. The first three
items planned for this type of release in September are "Weather Station", "Asalto Al Cine" and "The Honeymoon."
g). CORPORATE FINANCING -- We lost a lot
of momentum, unfortunately, in structuring a financing deal with a New York
based entity that ultimately was unable to perform. Frankly, we were promised funds back in
October, and almost daily since then, were given assurances of imminent funding
which were optimistic at best. In any
event, we have moved-on to more fertile sources, and have signed an agreement
with a separate NYC based group for a revolving line-of-credit (up to
$4-mm); with an initial availability of
a more modest $300k to start. Use of
proceeds is expressly limited to new release activity (and cannot be utilized for existing payables); however, it's nice to have a funding venture
in place to cover ongoing acquisition and releasing activities to keep the
company growing and dynamic. Overall corporate
debts for Hannover House were significantly reduced during calendar year 2012,
despite taking on new debts associated with the production and theatrical release
of "Toys in the Attic" and the journal-entry acknowledgement of the
Bedrock settlement and the court default to Interstar Releasing (both matters are subject to judicial review,
but were included in the year-end financials based on the status as of that
moment in time).
h). MARKET MAKER & SPENCER EDWARDS --
The Company will be earning the support soon from Spencer Edwards as a market
maker in our stock. Filing requirements
to support this relationship are about two weeks away from completion. It's difficult to say if having a market
maker's support for the stock will stop some of the "boxing" that has
enabled bashers to profit from scaring up sales, but we think it's another step
in the right direction. Speaking of bashers,
Company is very pleased to be working with the FBI in monitoring communications
and trading activities of persons known or suspected to be involved in stock
manipulations and false statements about the Company and its officers. We are certain that these individuals will be
brought to justice. It takes time, but
much time has already transpired. We're sitting back and watching these guys incriminate
themselves.... one "screen name" is saying that the Company provided
insider information to another basher, then stopped and this motivated the
vendetta? Not quite, Brasco, the
vendetta was sparked because the company REFUSED to provide the basher (or
anyone!) with information of a material nature. Communicating with the purported I-Hub moderator
about already announced news is quite acceptable. But don't let facts get in the way of a good lie and scare tactic. Don't even try to make a plausible lie Mr.
Donnie or Mikey, or Tommy or whatever fictional poster name they are using at any given
moment. They can fake up emails,
fake up facts, pretend that Hannover House is a coffee shop or that
Fred is a domestic terrorist. Doesn't
make any of it true. So they can save their
bullshit lies for the authorities. As we stated, tell these bashers to stand up and show their true identities. Fred and I are not afraid to do so! But they KNOW they are lying and as such, they are HIDING behind fictional names and posting IDs. If they won't stand behind their statements, why should anyone listen?
i). FORECAST FOR 2013? -- Company is still
navigating choppy waters of dealing with the painful debt-burden from
"Twelve" and a few other (thankfully, more manageable non-Twelve)
debts. But the Gaumont license for
"Twelve" (originally at $1.75-mm)
has been reduced to only $145,000, and other P&A debts and loans (originally totaling $2.3-mm) have been
reduced to $680,000 (plus the Bedrock
claim of $578,000). So a total of
$4-mm in debt on "Twelve" has been reduced by $2,637,000 in the past
two-and-one-half years. With deals in
place (or pending finalization) for
the other major debt matters, the Company should enjoy smooth-sailing through
2013 and into 2014. Revenues amounts for
2013 are difficult to peg for a variety of reasons: do we post international presales as executed
or as the projects are delivered? will
we complete the infrastructure needs to launch VODwiz in a bigger than beta
mode? is there merit in handling non home video product lines? Regardless of these answers, Fred Shefte and
Eric Parkinson remain diligent and committed to maximizing revenues and
shareholder values. The mistakes of the
past -- such as acquiring an uber-expensive title -- will not be repeated. The strategy of representing major suppliers
of entertainment will not only assure a steady supply of quality products for
home video release, but will enable the company to concentrate on sales and
more lucrative ventures (as opposed to
the monthly grind of seeking out new, indie titles that merit release).
