Greetings HHSE Friends - many shareholders have expressed frustration at the prolonged delay in getting the "Yield" sign removed from the HHSE OTC Markets page, even though the company has complied with the new disclosure formatting process. We were told by OTC Markets personnel yesterday that HHSE had forfeited our priority review status for 12-31-2020 due to having TWO of our prior 12-31-2020 reports reviewed and rejected (the first for being in the prior format, and the second for listing information not requested). We refiled the 12-31-2020 OTC annual report (and kept it limited to the specific items that they feel are worth reporting); yet, two weeks later we're still listed as "Yield." The response from OTC Markets yesterday was to accelerate and file the Q1 results ASAP, and that this action will get HHSE back to the top of the compliance review list. Accordingly, we are completing this filing now - and hope to post it tonight.
There are additional issues of inquiry and concern from Shareholders over the past few days, which we will briefly address below:
1). LEWIN LAWSUIT - Shareholders may remember that the investor in the movie "Dancin' It's On" filed a lawsuit against Hannover House (and officers), despite having no agreement with the company or officers (the company only has an agreement with the producer / licensor of the movie). In any event, despite hiring NY counsel (Michael Drobenare) to move for dismissal in the New York courts, we were surprised to find out months later that attorney Drobenare actually moved to "strike" our answers (without prior approval or notification). The result was that the company and officers ended up on the wrong side of a default judgment from a party with whom no contract or agreement existed. Fast-forward to April 2021, and we find that a local collection agent / attorney in Arkansas is now rattling-the-sword to attempt enforcement of this foreign (NY) default. Accordingly, we have now engaged Arkansas counsel to move to set-aside the judgment / stay enforcement, and coordinate in moving to strike the New York Judgment. Due to the facts being on HHSE's side (i.e., no agreement or contract) - and strengthened by the Arkansas limitation on the enforcement of a sister-state default judgment - we feel confident that the outcome will be in HHSE's favor.
2). LISA HIGGINS, CPA - In 2019, Fred Shefte met with Lisa Lashley Higgins about having her tax firm prepare and file the HHSE consolidated 1120 Federal Tax Returns for 2018 (and later, added for 2019 and 2020). Lisa agreed to accept HHSE as a tax client. However, she suggested that these tax filings (even though already late), should be delayed until AFTER the PCAOB auditing firm completes the F10 reviews for HHSE. Lisa correctly predicted that some items and aspects of the HHSE accounting would need revision to conform to GAAP and Sarbanes-Oxley requirements, and that filing cash-basis tax returns that might not later conform with the audited reports could create an issue for both the IRS and the Securities and Exchange Commission. Accordingly, despite Lisa's willingness to handle the company's tax returns, she has not yet performed this service as we are still making formatting changes to the worksheets provided to the F10 auditors. Due to previous attempts by "HHSE Critics" (aka Stock Short Sellers / Bashers), to sabotage and otherwise interfere with the previous PCAOB auditing firms that HHSE engaged, the disclosure of the current PCAOB auditing firm has been intentionally delayed until the maximum possible date - to occur as close as possible to the F10 filing.
3). HANNOVER HOUSE FILM & TELEVISION LIBRARY - Although it seems self-evident to anyone with knowledge of the film industry, the HHSE Film & Television Library is NOT a giant building full of DVDs and is NOT an asset which can be sold or otherwise liquidated in order to achieve its valuation. A film library is the projected value that the items being handled by a company should ultimately receive over the length of each title's agreement with that company. It's a projection that assumes current market sales patterns and projects these out over time to reach the "ultimate" valuation. In the case of the HHSE film library, the valuation report is now stale (it's over 10-years old), and there has been a paradigm shift during that time wherein the tiny sums predicted for Digital Streaming have offset (and in some instances) even surpassed the prior "huge" amounts listed for projected DVD and BluRay sales (which revenue streams are now insignificant). Additionally, and as is almost always the requirement for indie producers placing a title with an indie distributor, the rights conveyed to HHSE terminate if HHSE ceases to operate, if HHSE attempts to "sell" the agency rights granted from each supplier, or if "key man" Eric Parkinson leaves the company for any reason. These conditions protect the producers / owners of the titles from the possibility that an adversarial creditor might try to force a sale of the HHSE agency rights... or if the company ceases to operate... or if Eric Parkinson is abducted by aliens and there's only a collections agent remaining at HHSE to try to market the producer's asset over the next 10-years. The company DOES need a new and updated Film & Television Library Report. We haven't done it yet due to the cost ($40,000); however, we DO plan to proceed with a new and updated Library Report (from one of the top three specialty firms), with proceeds from the Company's S1 Offering.
Most of the HHSE titles are under Sales Agency agreements, which do not convey a transference or license of the film's rights or underlying copyrights, but which authorize HHSE to make copies of the titles in the fulfillment of the HHSE duties as Sales Agency. Again, these are standard provisions that a majority of the owners of films require before engaging a sales agency distributor.
FWIW (For What It's Worth) - HHSE has been successful in acquiring sales rights to titles due to the sales track record of CEO Eric Parkinson. Beginning his video distribution career in 1984 with the "Summer Olympic Highlights" video (the first title in 2-years to knock the Jane Fonda Workout out of the #1 position on the Billboard Magazine Top Videos Charts), Parkinson has handled the release of over 1,350 titles to the video market. He has had eight # 1 Billboard hits and 137 titles qualifying for R.I.A.A. Gold or Platinum Selling Status. In 1991, his re-release of "TERMINATOR" (timed for the theatrical launch of T2) generated 2.8-million unit sales to launch Hemdale Home Video; and his bold launch into "Sell-Thru" pricing of new release titles in 1995 sold another 6-million videos combined of Little Nemo, The Magic Voyage, The Princess & The Goblin and Savage Land. In 2004, when Walmart first launched the "$5 Budget Bin" - titles handled by Parkinson / Hannover House put the unit volume into the top ten of all Walmart DVD suppliers (and at one time, Parkinson titles were 7 of the 10 top selling titles at Walmart based on unit sales). This history for Parkinson - from 1984 through the hey days of DVD - have proven to be a powerful magnet for the company to find successful engagement as a Sales Agency / Distributor for independent films. As the world moves into the Digital Streaming media over physical devices, the Parkinson track record has again proven to motivate MyFlix supplier studios into agreeing to join in this one-stop digital superstore concept.
It's expensive (and frustratingly complex and time-consuming) to launch a site such as MyFlix. But watch what happens to HHSE when this new superstore is opened-for-business!