Good
Afternoon HHSE Friends & Followers – On Monday, we posted an invitation for
an open forum for questions to the company and management. We expected to get maybe a dozen. However, we received a total of 216 questions
– and this idea for a quick blog suddenly became a massive project and
time-suck at a moment when management did not have unlimited hours to
allocate. Accordingly, our plan to
respond by Wednesday got pushed forward.
In any event, listed below is a “consolidation”
of questions (because most were about the
same issues). There were some
questions for which the answer would require either a breach of public company
rules, or a compromise if a legal position or business strategy. So those questions will not be answered
through this forum. But most questions
addressed basic activities, strategies and projects, and can therefore be
answered now. We are NUMBERING the
questions and answers below simply for referral purposes, and not to imply
order of corporate priority or frequency of shareholder requests.
HHSE BLOG –
SHAREHOLDER QUESTIONS – SEPT. 16, 2015
1). How close is the film library, new
valuation to completion?
In order for the new Library Valuation Study to proceed, HHSE had to
first prepare the new title additions (to
the prior film library report), and edit out titles and media rights that
are no longer current. Next, a review of
title and media-specific sales from the past four years needed to be compared
against forecasts in order to revise the new 7-year projections against current
data and trends (for instance, the
existing library report predicted a much faster decline in DVD sales and a much
slower growth in streaming revenues… both of which, in retrospect, were proven
wrong… DVD sales have held in solid and streaming has grown faster than
valued). The new Library Valuation Study will show a net increase of about
120 more titles than the prior report. The forecasts in general represent a
7-year catalog value reduction across the board of about 20% to 25%. However, the significant increase in titles
more than offsets the reductions on a per-title basis. Accordingly, management feels that the
balance sheet value of the Library will increase quite a bit after the new
study is completed. Timing wise, HHSE is
waiting until late November for three primary reasons: 1). Revenue Forecasts for
four current theatrical titles include significant Subscription Video-On-Demand
licenses and Cable TV sales, but only after achieving certain release
thresholds which will be achieved by late November – and thus impact the
long-term value of those titles;
2). Management is still revising
some of the “deep-catalog” titles, with a view as to whether or not some of the
older or less-commercial product can be repurposed for budget bin DVD, or multi-pack
configuration, or for Television, V.O.D. or even international. Some of the titles in the “comedy” genre, for example, have almost
no catalog value if they are missing a name star. On the other hand, some horror titles, even
if sub-marginal in production and star value, have been selling continuously,
every week for years, to the surprise and delight of HHSE management. So the 7-year projections for each title
require some marketing analysis, which is only about 75% completed at this
time. 3). The Valuation firm is expensive, and this timing works better for the
Company’s cash flow, especially in respect of the commitment to pay of primary
debt holders through cash resources instead of debt-conversion / stock
issuances. If we meet the target date of providing the complete
Management-prepared study to the Valuation Firm by late December, we are told
that the report and opinion letter will be ready by early January. The Valuation Firm that we have selected is highly
credible (does two of the Major Studios),
and their opinion on Valuation is accepted by the top entertainment banks as
collateral value.
2). What films are in pre-production, actual
production or post production?
For simplicity in answering this broad
question, we will first define what was see each of these three production
category terms to mean:
a). PRE-PRODUCTION – Projects for which HHSE – or a Special Purpose Entity
for which HHSE has control of distribution rights (or the option to acquire control) – for which the “rights” to proceed as a production have
been secured, and for which current activities are occurring in preparation for
actual production:
2a-I – MOTHER GOOSE: JOURNEY TO UTOPIA –
The Company’s Crown-Jewel, an outstanding live-action, family-fantasy-adventure
featuring beloved characters and cast commitments from Shirley MacLaine and
Samuel L. Jackson. A prior plan to shoot
the film in Louisiana (utilizing tax
incentives and a facilities deferral arrangement) grew uncertain over the
past few months as cast scheduling began to encroach into 2016, after the tax
eligibility expired. HHSE hired a line-producer for the film last week (separate announcement pending), and
location exterior scouting trips have now occurred in Germany and Ireland, with
the principal photography of interiors and “Utopia” (on a massive soundstage), being researched for Georgia, Arkansas
or New York State (to access those tax incentives
in lieu of Louisiana). Although HHSE
wanted to shoot this film in 2014, obtaining cast approval over a director was
an unexpectedly difficult task, only to be followed by the next task of finding
a window-of-time that accommodated all key talent. It appears that the magic moment for key cast
occurs in mid-February (2016), so we are moving towards that timeframe for all
other production issues.
2a-II – LEGEND OF BELLE STARR – HHSE was
informed of the availability and interest from a significant female lead for
the title role, requiring filming to commence in February (2016).
2a-III – THE SUMMONING – Although also a
privately funded production, the loss of the Louisiana tax credits have pushed
producer-director Steven Rumbelow towards a Georgia production in October.
2a-IV – CLOWN TOWN – Great “premise” for a
low-budget horror film, but HHSE has not yet hired a screenwriter to expand the
treatment into a script.
2a-V – SHUCK AND JIVE – Private funding is
on offer for a production shoot in Kansas; discussions are underway with a
significant L.A. based director for the film, and the potential of a
significant star “cameo” role for a pivotal opening (and closing)
sequence. If the director commits, then
the funding can proceed. If this director
candidate does not commit by Nov. 1st, then the plan is to move on
to other options for this key position.
Despite its edgy title, the film is a heart-warming, true story of a
man’s redemption in the face of obstacles, criticism and self-doubt. It’s the
sort of film that HHSE can see meriting serious awards consideration if it
turns out as brilliantly as the script.
2a-VI – PRIMATE – This screenplay is a
formulaic monster-movie, of college kids researching a series of
“bigfoot-creature” sightings in the remote Ozark Mountains near the Buffalo
River in Arkansas. But monster movies
ALWAYS do well, and seem to sell forever in all media. HHSE’s current plan is to find a talented but
hungry producer-director team to do the heavy lifting of this production next
Spring (April) for an October, 2016 Theatrical Release. A discussion is also underway for a TV
license with the SyFy Channel.
2b). PRODUCTION – Films for which actual “filming” is occurring.
2b-1 – EXTREME OPERATIVE – Now
Filming. Details via a separate release,
pending wording approval of the army of agents, managers and handlers that seem
to surround pretty much every known star nowadays.
2b-II – SHADOW VISION – This is an “in production” and “not in production” venture.
Let us explain. The premise of
the movie is that a woman loses her eyesight after a car accident into a frozen
lake, followed by a prolonged coma. To
restore her vision, doctors try an experimental therapy utilizing a mixture of
herbs and pharmacy which (over several
years) has the unexpected side-effect of enabling her to “visualize” remotely occurring
incidents. What startles her is a vision
of a mysterious man who gasses-to-death a van full of “day laborers” in what
appears to be a trial-run for a planned terrorist attack on a nuclear reactor
facility. When she reports her “visions”
to the local authorities, she is dismissed as a wacko on experimental
drugs. However, one of the cops takes a
liking to her, and becomes convinced of her story and the accuracy of her
skills. This production has encountered
some problems. Most crucially, despite
support from the Arkansas Film Commission and representatives of Entergy
Arkansas, Inc. (parent company of the
Arkansas One Nuclear Reactor Facility near Russellville, AR), approval could
not be obtained from Federal Nuclear Regulatory Authorities or the Liability
Insurance underwriter for the film, to “shoot” at the reactor site… especially
considering the storyline which was viewed as an inadvertent explanation to
potential real-life terrorists as to how to break-into and destroy a nuclear
facility! So, what the woman “sees” now
in the film is no longer a terrorist attack on a nuclear facility… but an
equally impressive vision (which we’re
keeping under wraps for competitive reasons until the first theatrical trailer
is released). So - with the required script changes, scheduling, casting
and other logistics issues arose, including HHSE CEO Eric Parkinson (as director) having more pressing
corporate priorities that suggest now that a different director is probably
going to be more available to complete this film. The on-again, off-again production history
for this film will make for an interesting Press Kit item, and DVD Bonus
Feature, to say the least.
2c). POST-PRODUCTION – Films (or videos) for which filming is completed and
which are otherwise being “edited” or “mixed” at this time.
2c-I – DINOSAURS OF THE JURASSIC – Excited
about how well this one has turned out. Three separate production shoots on
locations, plus nearly a dozen of the world’s top dinosaur experts, and clips
from quite a few major motion pictures make this item both entertaining and
educational. The 3-D Lenticular DVD
packaging should help it pop off the shelf and achieve its greatness as a
companion title to the upcoming “JURASSIC WORLD” home video release.
2c-II
– CHAMPIONSHIP
SOCCER, VOLUME ONE: GOALKEEPER – There’s only one reason that this
video is not completed, and it’s the insanely busy schedule of the host and
instructor, Kendall Spencer. HHSE has shot more than 40-hours of classes,
instructions, training drills and demonstrations with Kendall and students in
both indoor and outdoor soccer arenas.
All that remains is narration to introduce the graphics cards for the
openings / closings of each segment of the program, followed by the final
edit-assembly tweaks that are being performed by Earl Hale.
3). Wild Oats film is completed, did or when
will Hannover House receive their buyout?
HHSE
receives a significant cash payment and profit participation in the film, but
receipt of these amounts is subordinate to the recoupment of the advance
provided by the Weinstein Company for the film’s production. The preview screening last month was well
received by the audience; however, there is not yet an official USA theatrical
release date set by the Weinstein Company.
4). Update/status on audit, audit letter,
F10 filing and uplist
The revised Form-10 12(g) Registration
Statement is ready, and awaiting the final audit letter. Upon filing of the
statement, the engagement of the new auditor becomes effective and recorded;
thereafter, any future changes in auditor will require a Form 8k information
statement. As for an “uplist” of the
Company off the OTC Pinksheets, the first step would be OTC: QB, which becomes automatically
eligible after SEC approval of the Form 10 filing, or 60-days after filing,
whichever occurs first. HHSE has decided
to not assist the stock naysayers by forecasting a filing date of the Form 10.
5) Explanation for the
2.9M increase in OS on 9/10. Who got those shares and
why? How did the TA issue those shares again without CEO's
knowledge?
Mohawk Capital provided a loan to HHSE in May
of 2014 to cover market attendance and promotional costs associated with the
Cannes Film Festival and the launch of direct international sales
activities. The note matured in May of
2015. It was our understanding that the
entire note had been satisfied with a stock issuance of 3,284,567 shares on May
29, 2015. Under the terms of the note
with Mohawk, Hannover House was alerted by Mohawk in a timely manner and given
10 days to pay off the loan in cash, with the understanding that failure to do
so would result in Mohawk’s pre-authorization to convert the note into shares
being enacted. The company was cash poor in May, as we had just utilized all of
our working capital to cover new release DVD orders for June Modular
placements, as well as dealing with ongoing operational overhead costs and debt
servicing. So we were unable to pay the note in cash at that time. We have since been informed by our Transfer
Agent, Standard Registrar & Transfer Co., Inc., that a portion of the
Mohawk Capital loan had not been redeemed on May 29, and that they exercised
their conversion right last week (Sept. 10) when the stock was at an absurdly
low PPS. HHSE was unable to stop this
transaction. However, we are appealing
the quantity of shares issued based on a dispute over the conversion rate formula. HHSE managers have made the commitment to pay
off any remaining, existing Convertible Notes with cash, now that the Company
is beginning to turn the table on receivables collections.
6). Update on VODwiz.
Timeline? Obstacles? Are studio partners still being patient?
Compound
question. VODWIZ has been progressing at
a rate that HHSE managers find unsatisfactory.
It is the company’s hope that the current efforts to hire a senior
manager / VP level executive will help all issues be better addressed,
obstacles removed and timelines re-established.
Studio partners are all still on board, and the two “major studio”
partners have agreed to provide approximately fifty (50) titles each once the
consumer campaign is live (which is
planned for launch at the 500-title threshold).
7)
Update on Mother Goose. Production timeline? Obstacles?
See
answer 2a-I) above.
8)
Update on IR outreach. How will the word about HHSE get out to the
investment community?
The
following means and activities are expected to impact awareness of HHSE, and to
correct the false-narrative of the stock-naysayers; in doing so, it is expected
that new interest in the stock will be nurtured, and that this will help the
PPS rise to a level that’s closer to the actual value and the reality of the
Company’s activities.
8a-I). IR. Four “Investor
Relations” firms have agreed to perform various forms of outreach and promotion
to help expand awareness of HHSE to legitimate shareholders. Over the past week, only one of these has
launched (MicrocapAdvantage), and a second is about to launch (Hotstoqx
Canada). The last two (plus Hotstoqx)
are imminent.
8a-II). PR. The Company has a
number of press releases on new acquisitions and activities that will be
released over the next few days and weeks.
8a-III). ADS. The Company is currently placing over
$1-million worth of ads for “DANCIN’ IT’S ON” in a wide range of publications,
ranging from Hollywood Trade papers, to teeny-bopper websites. The ads in higher-end outlets will each
feature the HHSE logo and (OTC: HHSE) ticker symbol, which will help with
awareness of the Company and stock.
8a-IV). FILINGS. The Company will be making additional
S.E.C. Filings over the next few weeks which should have a very positive impact
on the market’s perception and support.
8a-V). LITIGATION & ENFORCEMENT. The Company has been working for some time
with the FBI and US Attorney’s Office regarding their current investigations
and activities to prosecute those that have been clearly identified as engaging
in HHSE Stock Price Manipulation – timed with corporate interference meant to
sabotage dealings, and timed with the publication of false, defamatory and actionable
statements about HHSE and its managers.
It is HHSE management’s belief that the enforcement actions (both Civil and Criminal) that have been
progressing behind-the-scenes (and which
now also involve the S.E.C.’s assistance), will have a chilling effect in
completely and permanently stopping the manipulation that has driven the HHSE
stock price down by $15-mm in value.
8a-VI). MAJOR
NEW ACQUISITIONS. As is
currently being demonstrated, a single new acquisition such as “DANCIN’ IT’S ON” can result in over
$5-mm in revenues and $1.5-mm in fees for HHSE.
Accordingly, it is management’s belief that the news of two additional
titles under similar releasing structures will both spike interest among the
existing shareholders, as well as provide new visibility and ads to continue
promoting the HHSE name.
8a-VII). PRODUCTION
UPDATES. With several “AAA”
caliber cast members attached to HHSE productions (but not yet announced), management believes that the news of their
participation in these films will have a positive impact on the
marketplace.
9). Update on OS increase by 9.8M
In
the past two weeks, two debt conversions occurred, one for approx. 5.8-mm and
another for approx. 2.9-mm. The 5.8-mm
was for TCA Global Master Fund through Magna. Contrary to TCA’s erroneous court
filing (which misstated that TCA was
unable to get HHSE shares in satisfaction of their debt), TCA’s actions
over the past year have proven that they PREFER to receive HHSE shares over
cash payments (otherwise, the liens
against receivables could have been removed to create a cash resource for
payments). From April 24, 2015
through Sept. 10, 2015, TCA (Magna) received approximately 17.7-mm shares of
HHSE stock which was sold and applied against the loan/judgment amount. The
Florida Court filing for TCA neglected to disclose both that these shares had
been received and sold, as well as that the balance due had been markedly
reduced below the amount in their filing. HHSE could appeal the filing on the
basis of these material errors. However,
as a payment plan has been agreed (with
the correct dollar amounts), the cost for opposing the judgment based on
filing errors seems both unnecessary and counterproductive. The second debt issuance of approx. 2.9-mm
shares was answered in item 5 above.
10).
Update on AS decrease from 900m to 800M.
The
change in A/S from 800-mm to 900-mm occurred unnecessarily; and while Standard
Registrar had been legally empowered by the HHSE Board of Directors to take
such actions that the Board is authorized to pursue “as may be necessary,”
there was no reason for the A/S to be increased. Accordingly, the corporate articles have been
amended back to clearly state the 800-mm A/S.
The filing was sent about a week ago; as of this morning the $50 check
to the Wyoming Secretary of State had not been presented to the Company’s bank
account… suggesting that the filing has not yet been processed.
11)
Are the two megafund deals stated in the blog still active?
Yes on one, “maybe” on the second. The first is from a significant, NY-Based
capital firm. The first transaction that
was documented for their funding was completed this morning. The plan is to perform a series of major
deals together, which create significant cash resources for the Company, from
which the largest or most problematic aged debts can be retired (and in some cases, significantly reduced as
a result of a one-time cash payment).
The second entity that expressed interest in the same sort of structure
requested some documentation that was not readily available… so as a result,
that potential venture has not yet been pursued.
12)
Bashers are always harping on Shadow Vision which was blogged as being 30%
complete about a year ago. Any progress on that?
Answered
in item 2b-II above.
13)
Can proof be provided to the shareholders that Mindset was in error in filing
that they have no revs or a business in 2005, thus making the "HHSE was
once a shell" issue go away for good?
Mindset made a filing many years back that
contained a factual misstatement. Their
filing stated that the Company “had no business.” However, as has been clearly demonstrated,
and reviewed to the consensus of FINRA and three separate S.E.C. approved
attorneys, the actual statement should have said that the company “had no
revenues” at that time, which has a significantly different implication than the verbiage used. Subsequent activities for the Company proved the error of
the filing, and the issue has been resolved ad nauseum (every time someone new just skims the surface and doesn’t look
further). Regardless, HHSE will ask FINRA for approval to release the
opinion generated in this matter back in 2011 when FINRA completed their
historic review of TDGI in preparation for approving the ticker symbol change
to HHSE. The correspondence from FINRA
contains standard disclaimers limiting the republication and redistribution of
the communication without their expressed, written approval.
14)
Why do shareholders hear about most lawsuits from the bashers before they hear
it from company?
The
bashers (under the guidance of their
primary puppet-master) are desperate to profit from short-sales of HHSE as
well as to hurt the PPS as punishment for HHSE management refusing to
participate in their demand for advanced knowledge of material events. This extortion from them, the promise to “tank the stock” if HHSE refused to
cooperate, is the basis of the criminal investigation activities underway for
the FBI and US Attorney’s office. The good news is that all of these bashers /
boxers / manipulators are readily identifiable and easy for legitimate persons to figure out who these
people are… just visit InvestorsHub, which allows them to flourish, unchecked, regardless
of the obvious criminality of their ventures (and watch for news involving IHUB as well). So, while the bashers like to think “they own HHSE” the truth of the matter
is that we have taken over their lives with a myriad of mundane tasks that
comprise the time that they otherwise could have utilized to make money. For instance, every day, these guys contact
the Transfer Agent, in gleeful hopes that the A/S has changed and they can
scream that “the sky is falling.”
Every day, these guys search and scan for any possible typo in any possible
draft of any possible letter, ad or document, in hopes that they can call HHSE “liars”
or worse for any perceived inconsistency.
(Almost) every day, these guys try to contact HHSE suppliers and
customers to try to sabotage business relations through misinformation (we have records of such contacts), and
lastly, every day, these guys visit the free-on-line access Court Records at
Washington, County, Arkansas, where court filings appear, often times days or
weeks before HHSE is actually “served” with notice of a complaint. We figure that they are wasting at least six
hours per week, which means that they are not making money for themselves
during this time. It’s possible that
this lengthy Q&A blog will distract them for five or more hours as they pursue a futile scramble to try to find any modicum of perceived inconsistency. Smart use of time! Yeah, they're REAL smart cookies.
15)
Any progress on the FBI investigation? What about HHSE's blogged civil
lawsuit against the perps? Timeline on either?
Yes,
both are progressing, but we cannot comment further than what has been
disclosed herein.
16)
Any share buyback plans?
If the stock price is still under $.02 by
year’s end, HHSE management will ask for a proxy vote to use cash to buy-back a
large block of shares that will be retired to treasury. We cannot realistically take such an action
at this time because all of our cash is being utilized for operations, growth
and debt management. If we had enough surplus cash to buy back shares, it would
be difficult to persuade a major creditor to accept a discount on their notes in
exchange for a one-time cash payment.
HHSE management feels that the stock is worth $.06 to $.10 depending
upon year-end results and valuations.
Shares for sale on the open market at $.02 or less could be an arguably
good use of the surplus capital that is forecasted from current sales
activities.
17)
What percentage of their new salary are CEO and CFO actually taking home
considering the Form 10 registration hasn't gone through yet?
Neither
Parkinson nor Shefte are currently drawing cash salaries. However, the sums due to them are continuing
to be accrued as deferred salaries. It
is anticipated that both will agree to significant reductions in both deferred
salaries and cash loans provided to the Company, if the mega-funding discussions
come to a close.
18)
Are there ANY outstanding lawsuits? Or are they ALL settled?
HHSE
is aware of a complaint from the producers of AMITYVILLE ASYLUM. It’s for a very small dollar amount, and to
date, the plaintiffs have not followed proper court protocol. We have agreed to what is due to them, and in
fact paid (via cashier’s check) the
initial amount that they agreed to accept.
So the financial exposure to HHSE is inconsequential and this matter
should be expeditiously removed from our agenda.
19)
Are there ANY plans for additional debt conversion (dilution) in
2015?
There
are no new deals in place or in discussion involving any new debt
conversions. There are still unpaid
notes that could be converted to shares if HHSE did not pay them in cash under
the terms of the note. The only stock
issuance that HHSE was unable to stop was the TCA-Magna transaction for shares,
as they love that HHSE stock (much to our
dismay). As previously disclosed –
and based on current, artificially manipulated and low PPS – it is possible
that Magna could convert in the near future for approximately 5-mm shares. We wish this were not the case, but the
cash-payments settlement with TCA required that HHSE allow the July 2nd
TCA-Magna conversion to survive.
20). Ahnume Business Consultants, LLC were given
1,000,000 restricted shares of HHSE stock at one time and then issued
another 26,000,000 shares of restricted common shares on another
date. What have shareholders received for all of these shares ?
At the time that we were approached by
Ahnume, HHSE had hit a financial wall with VODWIZ. We had two mid-level workers (Tim Ellis and Garrett Krier) working
full-time to determine the operational, technical and financial needs for
creating a server network as the back-room functions for VODWIZ. The best pricing we could determine was more
than $1-mm in cash – to create a clean-room, temperature controlled servers,
fiber-optic distribution lines to key internet data distribution points,
back-up power supplies and a massive list of equipment and personnel to operate
the system. HHSE would have been
challenged to commit $100,000 at that time, let alone $1-million. So the proposal from Ahnume – to implement
the website creation, the title uploads, and to handle all of the technical
back-room operational and delivery functions – for no cash, but restricted
shares instead, seemed like a smart solution.
However, as of today, we don’t have much to show for it, even though absolutely no blame could be attributed to Ahnume, and even though HHSE acknowledges that much of the responsibility for delayed uploads comes from the HHSE and Supplier side for masters, meta data and formatting requirements. As of today, the VODWIZ website is perfunctory and the titles
that are uploaded are insufficient in total quantity count to justify a
consumer outreach campaign. As stated
above, it is HHSE’s hope that the hiring of an internet / streaming executive
to handle VODWIZ will help navigate the various issues that have impeded the
official launch of this otherwise very exciting venture.
21). What is the status of the relationship
between VODWIZ and NanoTech?
Nanotech has contracted with HHSE to
handle the website creation, maintenance, title uploads and digital
distribution (back-room) services for VODWIZ, in consideration of an
off-the-top fee from revenues. There has
been no formal change in the terms of the agreement entered into by the
companies two years ago.
22). What is the Company’s biggest theatrical
movie you foresee in the next 3-6 months? Mother Goose; Legend of Belle Starr;
Shadow Vision??
“Dancin’ It’s On”
is slated for approximately 600 theatres next month. That’s a very big screen count for an
independent studio. So that’s definitely
going to be a big one. Our next “big”
release (600+ screens) is planned for FEBRUARY and our third is planned for
APRIL. However, those two titles have
not yet been announced. As for the three
productions listed in the question, the setting of a theatrical date needs to
be deferred until principle photography is underway – because there are too
many scheduling factors that could affect the completion (and release) dates. There’s
an additional issue with “MOTHER GOOSE” in that a major fast-food-restaurant
chain has offered to participate in a multi-million dollar consumer advertising
and marketing promotion around the film’s theatrical launch… so with that
substantial resource on the line, the selection of a release date must be made
in concert with the cross-promotional partners.