MyFlix Updates and More Developments of Interest to HHSE Shareholders

Greetings HHSE Shareholders, Friends & Followers - This has been an eventful and exciting week thus far for HHSE, despite the shortened week due to the M.L.K. Holiday. As promised earlier, this blog will contain (among other topics) an update on MyFlix.

MYFLIX UPDATE - First of all, Parkinson and Shefte have taken some deserved criticism for promising a MyFlix Blog update LAST WEEK, but not delivering. We have determined that it's better for us to NOT provide such specific timing predictions, because circumstances often create impediments. In the case of MyFlix, the plan was to start releasing the names of our forty principal program suppliers, beginning with five or six per week via the Blog and via wide-distribution Access Wire press releases. However, this well-intended plan encountered several obstacles:  

a). Which do we list first, and does this make the other suppliers look "less important?" 

b). How can we begin wide release press announcements without telling the WHOLE MyFlix launch story (knowing that we absolutely CANNOT announce a studio supplier partner ONLY via a blog mention).  

c). How do we control the overall messaging and branding of MyFlix - which focuses on the concept of being one of the world's largest DIGITAL SUPERSTORE OF MOVIES & ENTERTAINMENT - by only disclosing information about a handful of suppliers at a time?  

So, no. We want to keep our HHSE shareholders in the loop of updates... but not at the expense of sabotaging the venture's successful launch. Without jeopardizing the launch, we can state that the venture is on-track for a significant consumer launch that should position MyFlix quickly as a major digital streaming portal / website and APP. Management firmly believes that the greatest growth opportunity at this time in the media industry is through the creation of consumer direct streaming portals. Rather than building a digital portal that aspires to be the "Science Site" or the "Mandarin Film site" or the "Comedy Site"... MyFlix is being built to be the "EVERYTHING SITE" - and it is this SuperStore concept that we believe will ultimately prove to be the winning formula. Maybe it's the local WALMART mentality that has inspired our vision?

We can say this to our shareholders and followers: over the next few weeks AS IT IS APPROPRIATE TO RELEASE MYFLIX INFORMATION, this Blog will be timed with Access Wire press releases to be a simultaneous vehicle for the dissemination of such updates. We're insanely excited about MyFlix - and are dying to talk about it 24/7. But as has been said, "loose lips sink ships," and we must be cautious with our messaging on the launch of MyFlix.

ORIGIN MATTER UPDATE - As we predicted, the appointment of a "receiver" in Texas was both absurd and unenforceable; accordingly, HHSE was not surprised to learn today that the receiver who had been appointed to the case has declined to accept the appointment, stating that there is nothing in the State of Texas to attach. For those of you that read and follow this HHSE management blog (as opposed to intentionally inaccurate sources), the Origin matter is NOT a great big, scary "ooohhh, you'd better sell us your shares now" development. It is, in fact, a matter that has a meritorious legal basis at this point in time to be completely set-aside. For your edification, below are excerpts from the HHSE Blog of Jan. 13 (mentioning the company's strategy), and from last week, January 18 (mentioning the unenforceable nature of a Texas-based receiver against a non-Texas entity). 

(Excerpt from HHSE BLOG, Jan. 18, 2019) "Well, the Dallas Texas Civil Court that has been handling the ORIGIN VS. HANNOVER HOUSE litigation made the unusual (if not Draconian) move to approve the assignment of a "Receiver." This is odd at best because Hannover House has no offices in Texas, no assets in Texas and no customers with headquarters in Texas. The appointment of a receiver in Texas has the same "real world impact" as appointing a receiver to attach Hannover House assets on the Moon."


(Excerpt from HHSE BLOG, Jan. 13, 2019) "Item 7 (referring to Origin Releasing) is a judgment which was voluntarily entered into by HHSE, but newly obtained documents show that the HHSE was induced into accepting the judgment based on an agreement that had been modified by the Plaintiffs; accordingly, this provides the basis to either re-open the case in Texas or to dismiss it under Arkansas Law."


CRIMSON FOREST MATTER UPDATE - As of yesterday, a settlement with Crimson's counsel and Hannover House is now being mutually drafted... and this dispute will be removed from calendar and future actions in the Los Angeles Superior Court. Upon mutual approval, additional details concerning the principal terms of this settlement may be released. 

WATCH THIS SPACE!

Theatrical Expansion / New Film Festival Platform and Studio Partnership for THE RIOT ACT

Greetings HHSE Friends & Followers - maybe the Super Wolf Blood Moon is a good sign, because sales and exhibition opportunities are one the rise for the Hannover House release of THE RIOT ACT. The film has been selected for featured presentation at a major film festival (details will be released separately), which has sparked theatre interest for additional playdates in March and April... AND... a major studio home video venture for the film's release (physical DVD / BluRay and Video-On-Demand) this May (with details also to be subject to a separate press announcement).  International sales are now in motion, with many offers received expected to be finalized at the European Film Market / Berlinale festival (Berlin, Germany, Feb. 7 - 15). 

"THE RIOT ACT" star and producer LAUREN SWEETSER with I-Hollywood TV personality NOAH WILSON. Oct. 4, 2018 at the Laemmle Fine Arts Theatre, Beverly Hills, CA.

Odd Happenings in Texas...

Greetings HHSE Friends & Followers - Well, the Dallas Texas Civil Court that has been handling the ORIGIN VS. HANNOVER HOUSE litigation made the unusual (if not Draconian) move to approve the assignment of a "Receiver." This is odd at best because Hannover House has no offices in Texas, no assets in Texas and no customers with headquarters in Texas. The appointment of a receiver in Texas has the same "real world impact" as appointing a receiver to attach Hannover House assets on the Moon.

Hannover's counsel in this matter feels that what the attorneys for Origin are hoping for is that the appointment of a receiver in Texas will somehow create "unencumbered cash and receivables" to apply against the settlement agreement. Certainly, as clearly communicated to Origin, their counsel and the court, there are NO unencumbered assets or receivables for Hannover House / Medallion... and any attempt to circumvent prior security interests will hit a wall.

We understand Origin's frustration and anger; we are sympathetic to this situation because HHSE management is genuinely working to create a mechanism to pay them the settlement agreement.  If we were NOT wanting to honor the settlement agreement, the "unmarked" distribution contacts would be a good basis to work to halt enforcement actions. But we do not disagree that Origin is owed monies... Hannover House "received the benefit" of sales for Origin predecessor titles, even though Phase 4 did not actually render cash payments to Hannover House (Phase 4 used the "positive cash flow" revenues from titles owned by the Origin predecessor to OFFSET revenue losses on other Hannover House releases such as PINK SKIES and ANIMAL CLINIC). From a GAAP accounting standpoint, this resulted in a ROYALTY PAYABLE even though no cash passed through to Hannover House.  Subsequent changes in Hannover's customers (and a general decline in the sales of indie films on DVD), meant that Hannover was unable to rectify an accounting journal entry and render payment to the Origin predecessor. We get it. We understand that this would be frustrating and upsetting to the new owners of these films (Origin Releasing). We also understand that there is no TRUST basis for Origin to study our situation and truly understand our proposal for the settlement funds. Why should they trust us?  After all, Hannover House did NOT pay them royalties that were technically owed under GAAP rules for the past five years!  Hannover House has not yet EARNED the presumption of trust to the Origin owners.

However, this is not the first time that Hannover House has faced a situation of dealing with an acrimonious and uncooperative creditor. The company endured (and prevailed) with prior significant matters - such as Fantastic Films and TCA Global - both of which started out as "angry adversarial matters" and ultimately became resolved and fully paid only after deferring to a Hannover House work-out plan.

A friendly work-out plan with Hannover House is what we are hoping will eventually be agreed to by Origin. They might be feeling "victorious" today, having won a judgment good in the State of Texas. But the enforcement - and hoped for "collection of funds" against Hannover House in other states is not an automatic acceptance, especially with U.C.C. and prior lien holders that could file a motion to stay enforcement (or file in the Dallas court for a motion to vacate the receiver appointment).  It may take several months of angry efforts before Origin realizes the futility of such a strategy... and accepts the value of the Hannover plan to create these settlement funds. HHSE management is patient... we will await with hope that they come back to the table and enable this matter to be resolved (just like we have succesfully paid-off other, legitimate and major debts over the years). 

MEANWHILE - Parkinson and Shefte recall the "gleeful" predictions that I-Hub short-sellers made many times in the past that incorrectly anticipated "the end of the world" for Hannover House. In fact, eight separate instances (ALL SINCE RESOLVED IN HANNOVER'S FAVOR!) come to mind.

The bottom line is that Hannover House has a definitive methodology to retire the Origin Releasing balance... and it does NOT involve any of the ineffective methods that they are currently pursuing to attach assets. We have communicated this methodology to Origin as well as to the court. Over the next few months, the viability of our strategy will become evident and we think that calmer heads will prevail in that Origin will likely grow exhausted from pursuit of their current, adversarial collection efforts.

SO, stay tuned... the future is ahead for HHSE, and is clearly not with releasing more B-minus horror films into today's marketplace. What we are doing with high-end films, the development of MyFlix site and the registration of the company's shares all mark the beginning of an exciting new era. The Origin matter is a vestige of a former time and business model when micro-budget films were still viable in the DVD marketplace. These small, direct-to-video films are not the level of programming that HHSE management sees in the company's future.

ONWARD!!!

Downtown Dallas, Texas skyline - overlooking the West End Entertainment District.

Balance Sheet Cleansing and other Pre-Form 10 Matters

Greetings HHSE Friends & Followers - As we finalize the last few tweaks in our Form 10 narrative and registration documentation, we are dealing with some issues of balance sheet adjustments.  

For instance, some shareholders have noted (with dismay?) that HHSE has finally issued new stock shares after a 41-month freeze on such issuances. A block of 10-mm shares were issued on Monday to a known  (but non-affiliate) long in order to restore the Graham Financial Services note to current status (rather than be  listed as "in default" for the registration statement). This move improves the company's narrative (to not have any credit lines in default), and has been achieved in a manner which will NOT result in 10-mm shares hitting the open market.  At the same time, with the filing of the Form 10, the 10-mm shares issued years ago to TCA Global Master fund are being cancelled. 

There are other balance sheet adjustments underway, including the detailed / updated status of all payables, producer royalties, producer recoupment balances, film investments, hard assets and officer deferrals and loans - which are part of the supporting documentation of our current 12-31-2018 filings.  While these adjustments are all proving to be "positive" for HHSE, on the "negative side" of the balance sheet impact the value of the company's DVD inventories is being written-down to reflect the dismal state and resale value of the physical DVD market for lesser-known titles. The bottom line is that the registration filing must reflect the most accurate and current data for the company's activities... good, bad or indifferent. It just needs to be disclosed. 

On the SALES front, there is some exciting news regarding our ancillary (North American and International) sales for THE RIOT ACT, as well as two new distribution alliances for upcoming titles.  

MyFlix also continues to dominate the workload, with the process of signing-up additional suppliers and uploading more titles both building in momentum.