Dear Friends & Shareholders - The Cannes 2014 market was robust and successful for Hannover House, and proved quite a few points that have material impact on the company's immediate results and long term direction.
Some of our new items are already featured on the HannoverHouse.com website, which is shaping up very impressively! Meanwhile, here's a brief recap of key events and issues resulting from Cannes 2014:
1). MULTI-MILLION DOLLAR PRE-SALES AND CO-PRO DEALS - First of all, we proved that top tier titles such as "
Mother Goose: Journey to Utopia"
(with solid casts, scripts and "the right budgets") can and will attract major territorial buyers, presales and co-production opportunities. This opens HHSE to be a significant player in the product and financing space of companies such as MILLENNIUM and LIONSGATE.
2). CATALOG AND D-T-V ITEMS DO HAVE INTERNATIONAL VALUE - HHSE offered ten catalog titles
(and one "new" production of "Dinosaurs of the Jurassic World"), and we were pleased with response from key territories, including deals for France, Spain, Italy, U.K. and more. This is "found" money from the company's library, and evidence that our international valuations were overly conservative.
3). MAJOR TITLES CAN BE ACQUIRED "FOR THE RIGHT PRICE" IF LICENSED EARLY - The Company's acquisition of "
Within Screaming Distance" for $1-mm plus a P&A Commitment
(all of which is being privately funded on behalf of HHSE), proves that early participation in higher-end titles can result in dramatic savings over "bidding-war-mania" that often accompanies finished films at festivals such as Toronto, Tribeca and Sundance.
4). HHSE CAN ACQUIRE OTHER "FINISHED" FILMS OF A WIDE RANGE - At Cannes, HHSE acquired quite a few titles that will be announced over the coming days and weeks... ranging from "re-releases" for budget-bin placements, to mega-budgeted, national theatrical release titles. It's an impressive line up that will keep our product pipeline at near capacity.2
ABOUT PRE-SALES AND PRODUCTION FINANCING...
The vast majority of sales at Cannes 2014 for Hannover House were pre-sales and co-production deals for "
Mother Goose." Some shareholders have inquired about how such agreements work and are recognized under industry practices and Generally Accepted Accounting Principles. Here's a brief overview:
I. Presales and Co-Production funding for major films such as "
Mother Goose: Journey to Utopia" are assigned to the funding bank, and the proceeds from the production loan are used to actually produce the movie.
II. The Bank Requires that a "completion bond" be purchased, which is their guarantee that the movie will be completed, delivered and that the pre-sale contracts can therefore be enforced. A suitable bond is in place for "
Mother Goose."
III. The studio or production entity
(in this case, HHSE), can book these agreements as revenue, but must simultaneously "expense" out the cost for the production, and only recognize the applicable distribution fee / commission on the balance sheet. This results in a nice reporting quarter (or year), but has no immediate benefit to the company's cash flow as the contracts are assigned to the production loan.
IV. After the film is delivered and the bank's production loan retired, HHSE can "capitalize" the movie on it's balance sheet as a permanent asset - in the same way that "
Gone With The Wind" or "
Wizard Of Oz" appear on the MGM balance sheet and library report.
WATCH WHAT HAPPENS WITH NEWS AND FILINGS OVER THE NEXT FEW DAYS AND WEEKS!
Sunrise over Cannes Bay - Hannover House Sales Suite in the Palais des Festivals visible on upper left horizon.
HHSE executives FRED SHEFTE and ERIC PARKINSON announce the launch of Medallion International Pictures to handle the company's higher-end productions.
HHSE CEO Eric Parkinson next to the teaser artwork for "
The Legend of Belle Starr." No presales were sought for this title due to private production funding already committed... as well as the company's desire to keep the top-tier star cast news under wraps.
Odyssey Pictures President John Foster makes the deal with HHSE President Fred Shefte for the North American pre-sale acquisition of "Within Screaming Distance," the first $1-mm+ deal of the Cannes 2014 market.
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