United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended June 30, 2020
[ ]
Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
[X]
For the Three Months Ending Ended June 30, 2020
[ ]
Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
For
the Transition Period from __________ to __________
Commission
File Number: 00028723
HANNOVER
HOUSE, INC.
(Exact
name of registrant as specified in its charter)
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Wyoming
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91-1609973
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
Number)
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355
N. College Ave. Suite 4
Fayetteville,
AR 72701
(Address
of principal executive offices and zip code)
(818)
481-5277
(Registrant’s
telephone number, including area code)
This
company’s Securities are not yet registered under Section 12(g) of the Exchange Act
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]
No [X]
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding
12 months (or such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 if Regulation S-K (229.405 of this Chapter) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-Q or any amendments to this Form 10-Q. Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ] (Do not check if a smaller reporting company)
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Smaller
reporting company [X]
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Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
The
aggregate market value of the voting stock and non-voting common equity on March 31, 2020 (consisting of Common Stock, $0.0001
par value per share) held by non-affiliates was approximately $8,591,314 based upon the most recent sales price of $0.012 for
such Common Stock on April 8, 2020. As of March 31, 2020 there were 811,529,996 shares of Common Stock in issue (of which 95,587,152
were subject to Rule 144 sale restrictions); additionally as of March 31, 2020 there were 4-million shares of Series “A”
shares at a par value of $.0001 each, which shares carry a 1000-to-1 voting authority and a 100-to-1 conversion option into Common
Stock.
As
of June 30, 2020, the
number of shares outstanding of our Common Stock was:
a.
Total Common Stock Shares in issue as of June 30, 2020: 811,529,996
b.
Above Shares Restricted from Sale under Rule 144: 95,587,152
TOTAL
COMMON STOCK SHARES IN MARKET: 715,942,844
c.
Series “A” Preferred Shares: 4,000,000
Shareholders
of Record: 205 (Standard Registrar count)
Total
Beneficial Shareholders: 338 (Broadridge, ICS count)
Total
Authorized Common Stock Shares: 900,000,000
Total
Authorized Series “A” Preferred Shares: 10,000,000
DOCUMENTS
INCORPORATED BY REFERENCE: None
TABLE
OF CONTENTS
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that
involve risks and uncertainties. The issuer’s actual results could differ significantly from those discussed herein. These
include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases
such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we
believe,” “the Company believes,” “management believes” and similar language, including those set
forth in the discussions under “Notes to Financial Statements” and “Management’s Discussion and Analysis
or Plan of Operation” as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that
are not historical facts are forward-looking statements that are subject to the “safe harbor” created by the Private
Securities Litigation Reform Act of 1995.
PART
I
ITEM
1. BUSINESS
Issuer’s
Business, Products and Services
Company
is a media production and distribution enterprise, involved in book publishing, feature film and video production, and distribution
of feature films and videos through various media platforms and territories worldwide.
Wholly-owned
subsidiaries are Medallion Releasing, Inc. (for handling non-Hannover House producer clients), and Bookworks, Inc., a special
purpose entity utilized for book publishing activities, as well as to act as the corporate signatory for compliance purposes with
the Screen Actors Guild. Both Medallion Releasing, Inc and Bookworks, Inc. are Arkansas domiciled corporations. Income and costs
from these two subsidiaries are incorporated into the Company’s consolidated financial statements.
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A.
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Describe
the issuers’ principal products or services, and their markets
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Company
publishes fiction and non-fiction books; Company’s media distribution includes the release of films to theatres, home video,
digital streaming formats, television outlets and international licensors. Company is working with Vodwiz, Inc. (which has
secured non-affiliate private funding) for the development and launch of a new digital streaming site to be named “MyFlix.”
The business model for MyFlix is to consolidate feature films and television series programming owned by a wide range of studios
and content owners, into a single destination digital streaming site.
The
revenue model for MyFlix will be to pay third-party streaming and billing costs off the top and divide remaining revenues on a
fifty-fifty basis between the program suppliers and with Vodwiz / MyFlix. Consumers visiting the MyFlix website (or accessing
the service through mobile APPS or over-the-top devices such as Roku, AppleTV or hardware installed APPS) can purchase movies
or TV episodes on a “per transaction basis” (ala Amazon) or alternatively, can open a monthly subscription
with MyFlix for unlimited access to approximately half of the programming otherwise available for per-transaction access. As of
the date of this filing, forty-three program suppliers, collectively representing over 12,000 titles, had agreed to participate
in the MyFlix service, which would position the site as number two only to Amazon in terms of total programming.
The
growth of digital streaming services – both as a general market trend and more recently as a preferred media for home access
of entertainment products during the COVID-19 pandemic - has created both a boom and bust in the independent film sectors. Consumers
are less likely now to purchase DVDs of unknown movies knowing that the same ten-dollar cost could cover a month’s subscription
to a service such as Netflix with over 1,000 titles at any given time. As other studios scramble to open “studio specific”
streaming services, Hannover House believes that the Vodwiz / MyFlix model is more like the successful Walmart retail strategy
of offering a wider selection of programming at everyday low prices. Hannover House has an option to purchase Vodwiz, subject
to the achievement of obtainable corporate benchmarks which include the filing of the Form 10 Registration and the resolution
or dismissal of four foreign judgments for which the Company has meritorious defenses and legal strategies to oppose.
Hannover
House, Inc. was originally incorporated in California in September, 1993 under the name of Truman Press, Inc., dba “Hannover
House.” The company reincorporated Truman Press, Inc. in the State of Arkansas and operated the company privately until
December, 2009 at which time a merger occurred with Wyoming-domiciled Target Development Group, Inc., formerly trading on the
OTC Pinksheets under the ticker symbol TDGI. Truman Press, Inc., dba “Hannover House” became the effective surviving
entity of the merger with Target Development Group, Inc., and in 2011, the company’s petition to the Financial Industry
Regulatory Agency (FINRA) for an official corporate name change and ticker symbol change was approved after a lengthy analysis
of the company’s history and activities. At that time, the company’s name was officially certified as “Hannover
House, Inc.” and the trading ticker symbol was changed to “HHSE.” A similarly named entity (“Hannover
House, Inc.”) was registered many years earlier (2005) in Arkansas, but immediately abandoned within less than thirty (30)
days from initial registration, due to a change in the Arkansas film incentives program which no longer provided special benefits
to Arkansas-based entities. The 2005 Arkansas filing does not now, nor ever has existed as an operating company. Efforts by the
actual and operating Hannover House, Inc. (of Wyoming) to expunge the records of the abandoned Arkansas filing have not succeeded.
However, there is substantial public record evidencing that Hannover House, Inc., is the operating, Wyoming corporation, and that
no reasonable parties could possibly confuse the robust, publicly-traded Hannover House, Inc., with the similarly named, but non-operating
entity abandoned as an Arkansas filing more than 15 years ago.
Hannover
House, Inc. has released over four hundred titles to the USA Home Video markets since taking on video product distribution activities
s in 2002. Some of the better known home video releases include: “TWELVE” from director Joel Schumacher - starring
Curtis “50-Cent” Jackson, Zoe Kravitz, Emma Roberts and Kiefer Sutherland; “GRAND CHAMPION” - starring
Bruce Willis, Julia Roberts and George Strait; “SAVAGE LAND” – starring Graham Greene, Corbin Bernsen,
Vivian Schilling and Charlotte Ross; “TOYS IN THE ATTIC” – starring Forest Whitaker, Joan Cusack and
Cary Elwes; and “BONOBOS: BACK TO THE WILD” – starring Luke Evans and Rebecca Hall.
Regarding
book publishing, Hannover House has achieved best-seller status on both the fiction and non-fiction charts. The best-selling fiction
title has been the suspense-thriller, “QUIETUS” by author Vivian Schilling (with over 100,000 copies in print,
including mass market editions from Penguin-Putnam and Onyx Publishers); the best-selling Fiction title to date has been “Blood,
Money & Power: How L.B.J. Killed J.F.K.” from attorney Barr McClellan (over 120,000 copies in print, inclusive of
mass market editions).
The
company has also released thirty-two feature films to theatres, beginning in 2008 with “HOUNDDOG” a dramatic
feature starring Dakota Fanning, and two top performing feature documentaries, “TURTLE: THE INCREDIBLE JOURNEY”
(2011) and “ON ANY SUNDAY: THE NEXT CHAPTER” (2014).
Employees
As
of June 30, 2020, the Company had two full-time employees and one full-time, short-term employee. The full-time employees were
Eric F. Parkinson (CEO and SECY), and D. Frederick Shefte (PRESIDENT), each working on an unsalaried basis. The one full-time,
short-term employee is Randall Blanton, working as interim Chief Financial Officer (CFO) for a period of between ninety (90) and
one-hundred-eighty (180) days or until such time that the company has obtained Directors and Officer’s Liability Insurance
(“D&O”) coverage, at which time, Mr. Blanton’s short-term affiliation will be converted into a full-time
employment status with a term of at least one (1) year. During the interim process, Mr. Blanton is being paid as an outside contractor
at the monthly rate of four-thousand dollars (USD $4,000).
Issuer’s
Facilities
As
of the date of this filing, the Company does not hold a direct lease on offices; however, as a trade-out for marketing services
with Vodwiz, Inc., Company has been granted occupancy of offices at 355 N. College Ave., Suite N, Fayetteville, AR, 72701, consisting
of approx. 1,380 square feet, including four executive offices, a conference room, two bathrooms and a kitchen. For purposes of
accounting and revenue and expense recognition, Company is accruing costs of $2,050 per month for office space value, and matching
this sum with a ledger entry for marketing services.
Available
Information
Issuer
utilizes M2 Compliance Corporation to file reports and other disclosures electronically with the U.S. Securities and Exchange
Commission (SEC) for information statements, financial reports as well as for the upcoming Form 10 Registration statement. The
company’s financials and other disclosures may also be found on the OTC Markets website, at www.OTCMarkets.com/HHSE.
Officers,
Directors, and Control Persons
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Name of Officer/Director and Control Person
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Affiliation with Company (e.g. Officer/Director/Owner of more than 5%)
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Residential Address (City / State Only)
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Number of shares owned
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Share type/class
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Ownership Percentage of Class Outstanding
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Note
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Eric Parkinson
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Officer / Director
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Fayetteville, AR
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43,141,649
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Common Stock
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5.32
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%
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Rule 144 Restrictions
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Eric Parkinson
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Officer / Director
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Fayetteville, AR
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2,400,000
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Series “A” Preferred
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60
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%
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1000-to-1 Voting Value; 100-to-1 conversion
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Don Frederick Shefte
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Officer / Director
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Fayetteville, AR
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31,487,546
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Common Stock
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3.88
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%
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Rule 144 Restrictions
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Don Frederick Shefte
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Officer / Director
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Fayetteville, AR
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1,600,000
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Series “A” Preferred
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40
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%
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1000-to-1 Voting Value; 100-to-1 conversion
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During
the applicable reporting period, officer D. Frederick Shefte completed a dissolution of marriage with Diana Shefte; under the
terms of the divorce settlement, the officer (affiliate) shares beneficially owned by D. Frederick Shefte as listed in the above
table, will eventually be transferred to Diana Shefte, under the specific sale restriction rules governing the disposition of
affiliate-owned shares under Rule 144.
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A.
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Please
identify whether any of the persons listed above have, in the past 10 years, been the subject of:
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1.
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A
conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding traffic violations
and other minor offenses);
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Not
Applicable
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2.
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The
entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by a court of competent jurisdiction
that permanently or temporarily enjoined, barred, suspended or otherwise limited such person’s involvement in any type
of business, securities, commodities, or banking activities;
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Not
Applicable
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3.
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A
finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission, the
Commodity Futures Trading Commission, or a state securities regulator of a violation of federal or state securities or commodities
law, which finding or judgment has not been reversed, suspended, or vacated; or
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Not
Applicable
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4.
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The
entry of an order by a self-regulatory organization that permanently or temporarily barred, suspended, or otherwise limited
such person’s involvement in any type of business or securities activities.
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Response:
On October 8, 2019, Company was advised of an order from the Arkansas Securities Commission regarding the issuance of a convertible
debt instrument to JSJ Investments, Inc. in 2014, which transaction was not registered with the Arkansas Securities Commission.
Company was ordered to not issue any additional convertible debt instruments from within the State of Arkansas if such instruments
are not registered within the State of Arkansas Securities Commission. Company was advised on a call with the Commission on October
10, 2019 that this policy in Arkansas is effective until such time that the Company is otherwise a fully reporting and registered
with the Securities & Exchange Commission. Company has requested an appeal and administrative hearing to remove the order
on multiple causes of action. The initial step of the appeal process occurred in late November, at which time, a representative
of the Arkansas Dept. of Securities concurred that the transaction in question was not with an Arkansas resident or Arkansas entity,
and therefore may not be subject to Arkansas Laws. There will be an additional appeal process hearing at such time that the COVID-19
pandemic shut-down of courthouses and non-essential hearings has been lifted. Based upon prior calls with the Arkansas Securities
Commission and with appropriate counsel, Company will present the appropriate evidence at this upcoming hearing that should result
in a dismissal of the Arkansas C&D order.
ITEM
1A. RISK FACTORS.
Investors
and prospective shareholders should carefully consider the risks described below, together with all of the other information included
in this report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing
the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair
our business operations. The occurrence of any of the following risks could harm our business, financial condition or results
of operations.
Risks
Related to Our Business
The
company’s previous core-business of DVD Distribution is being eroded and replaced with digital streaming media for deliver
to consumers.
During
the years 2004 through 2008, the company was selling nearly four-million DVD units per year to Walmart Stores, Inc., primarily
for the “budget bin” business (at suggested retail prices of $5.00 or less), in addition to a robust new-release business
for two or three higher priced DVD titles per month. Beginning with the emergence of the BluRay format, available retail shelf
space at Walmart, Target, Best Buy and other major USA retailers began to shrink for independent films. Beginning with the emergence
of the Netflix / Amazon Prime models of direct-to-home digital delivery of entertainment, the consumer buying trends have evolved
away from DVD and BluRay units in favor of home streaming. While Hannover House is moving its titles into the streaming media
– both through multiplatform placements as well as through the planned “MYFLIX” multi-studio site, there can
be no assurance that the revenues previously generated by DVD and BluRay physical units will be fully replaced with digital streaming
revenues.
The
Company needs additional capital for new venture development, new product acquisition, general operations and existing debt management.
The
development, production and distribution of original content feature films – as well as the onboarding and launch of the
MyFlix streaming portal each demand significant funding resources which exceed the company’s abilities from current revenue
levels. To continue with the acquisition (or production) of commercially viable feature film products – and to finance the
costs to on-board titles and launch the MyFlix streaming site – Company will be reliant upon outside financing which may
not be available. Sources which the Company plans to pursue include the issuance of a S1 stock registration filing to raise up
to eight million dollars (USD $8,000,000) for such ventures. Other financing options include the use of international pre-sales
and various co-production and state film incentives to provide the capital for high-profile feature film productions. Currently,
the Company has no established bank-financing arrangements. Therefore, it is likely that the Company’s future financing
need would involve some form of registration offering or a future private offerings of the Hannover House, Inc. equity securities,
debt financings, or strategic partnerships and other arrangements with corporate partners.
We
may incur significant costs to ensure compliance with corporate governance and accounting requirements.
With
the Company’s impending registration through the Securities and Exchange Commission, the enhanced level of compliance and
disclosure – including audit and review requirements – may result in a strain on the Company’s resources. New
operational procedures will need to be implemented and maintained, to comply with the Company’s public company reporting
requirements, including operational compliance under the Sarbanes-Oxley Act of 2002, and other rules implemented by the SEC. We
expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to
make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more
difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be
more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.
Our
future success is substantially dependent on the performance and continued service of Eric Parkinson, our Chief Executive Officer.
We
are presently substantially dependent on the experience, abilities, industry relationships and continued services of Eric F. Parkinson,
our Chief Executive Officer. The loss of Mr. Parkinson’s services would be highly detrimental to the Company’s ongoing
and future business, and his replacement with an executive with Mr. Parkinson’s level of experience and prior success in
the entertainment distribution industry could be prohibitively expensive.
Our
future growth will require the recruitment of additional qualified employees, and there is no assurance that we will be able to
find such employees on acceptable terms.
To
accommodate our future growth, we will need to increase the depth and experience of our employees and management team. Our future
success will depend to a large degree upon the active participation of our key officers and employees. There is no assurance that
we will be able to employ additional qualified persons on acceptable terms. Lack of qualified employees will adversely affect
our business development.
Risks
Related to Our Common Stock
Investors
/ Shareholders may experience a dilution of ownership interest because of the future issuance of additional shares of our common
stock and our preferred stock.
In
the future, Hannover House, Inc. may issue authorized but previously unissued equity securities, resulting in the dilution of
the ownership interests of our present stockholders. The Company is currently authorized to issue an aggregate of 900,000,000
shares of capital stock, but anticipates changing the authorized level of shares to 1-Billion in total (to accommodate the upcoming
S1 stock offering which calls for the sale of up to 150-million shares in three stages of 50-million shares each).
The
Company may also issue additional shares of our common stock or other securities that are convertible into or exercisable for
common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities
for capital raising purposes or for other business purposes. The future issuance of any such additional shares of our common stock
or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will
not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring
or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for
other business purposes, including at a price (or exercise prices) below the price at which shares of our common stock are then
quoted on the OTC or other quotation system.
Our
common stock is subject to the “penny stock” rules of the SEC and the trading volume in our securities is, to date,
modest, which can make transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The
SEC has adopted Rule 15g-9, which establishes the definition of a “penny stock,” for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker
or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to
approve a person’s account for transactions in penny stocks, the broker or dealer must: (i) obtain financial information
and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form: (i) sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
Our
stock price may be highly volatile and subject to wide fluctuations due to many factors, including a substantial market overhang.
The
market price of our common stock may be highly volatile and subject to wide fluctuations in response to quarterly variations in
operating results, announcements of distribution agreements, new affiliations or new products and services by us or our competitors,
changes in financial estimates by securities analysts, lack of market acceptance of our products, or other events or factors,
including the risk factors described herein. In addition, the stock market in general experiences significant price and volume
fluctuations that are often unrelated to a company’s operating performance. As with any public company, we may be subject
to securities class action litigation following periods of volatility in the market price of our securities which could result
in substantial costs and a diversion of management’s attention and resources.
Company
does not expect to pay dividends for some time, which could result in no immediate return on a stock purchase investment.
Hannover
House, Inc. has never declared or paid cash dividends on our common stock. We currently intend to retain our earnings, if any,
to provide funds for the operation and expansion of our business and, therefore, do not anticipate declaring or paying cash dividends
in the foreseeable future. Any payment of future dividends will be at the discretion of the Company’s board of directors
and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other relevant factors of our operations.
Company’s
common stock shares are not currently trading “electronically” through the DTCC which can limit an Investor / Shareholder’s
placement with brokers (if shares are acquired via “paper certificates”).
As
of June 1, 2020 common stock shares of Hannover House, Inc. were approved for electronic clearance and transfer through the Depository
Trust Clearing Corporation (DTCC). Shareholders may still request a physical (paper) share certificate if electronic transfer
is not preferred.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not
Applicable.
ITEM
2. PROPERTY.
The
Company owns office furnishings, computers, fixtures and a wide range of motion picture production equipment as are itemized on
the Company’s balance sheet. The Company does not own any real estate property, and is sharing offices with Vodwiz, Inc.,
under a services-barter arrangement.
ITEM
3. LEGAL PROCEEDINGS.
Over
the course of operations these past twenty-seven (27) years, from time-to-time the Company has been involved in litigation, most
commonly from third-party producers who wish to claim that they are owed more in royalties that the results of their title’s
release actually accrued. The total number of lawsuits has been seventeen (17), the majority of which have been resolved in Company’s
favor. The Company is not currently not involved in any litigation that we believe could have a materially adverse effect on our
financial condition or results of operations. Excepting as specified in the summary below, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our
company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers
or directors in their capacities as such, in which an adverse decision could have a material adverse effect on us. Notwithstanding
the above, the Company has summarized all significant legal proceedings or legal judgments below, along with a status on activities
regarding the disposition of each. These legal issues are listed alphabetically by the name of the principal adversarial party.
3a).
BEDROCK VENTURES v. HANNOVER HOUSE – A California default judgment was entered against the company for approximately $513,098
in 2005, which Bedrock has attempted to enforce through unsuccessful garnishment attempts against some Hannover House customers.
Based on Arkansas law, and the meritorious defense that Bedrock was contractually committed to funding the Company for $1.5-mm
(which was only partially paid), and the subsequent discovery of fraud by Bedrock involved with the transaction, Company plans
to re-open the case for adjudication once the COVID-19 court shut downs are lifted.
3b).
DAISY WINTERS v. HANNOVER HOUSE – A California default judgment was entered against Hannover House (amount of award still
pending), despite a written agreement to dissolve the venture between the two parties, including Hannover’s full cooperation
with the dissolution of rights. Based on Arkansas law and meritorious defenses, Company plans to re-open this case for adjudication
in Arkansas once the COVID-19 court shut downs are lifted.
3c).
DOGPATCH (Carters A.V.) v. HANNOVER HOUSE – A case has been filed in Arkansas for which Hannover House has meritorious defenses
which are likely to prevail upon adjudication. Hannover House has not yet filed its response due to the COVID-19 court house shut
down.
3d).
GETTING GRACE v. HANNOVER HOUSE – A settlement agreement with this program supplier has been made, but court shut downs
have impeded the certification and consummation of this agreement.
3e).
HINDS-SHANKMAN v. HANNOVER HOUSE – Company has three causes of meritorious defense which have not yet been pursued due to
court house shut downs in California. Although the Plaintiff has filed for a “default.” Counsel and representatives
of the court have disclosed that respondents that are impeded from filing a timely response during the court house shut downs
will be granted an equal amount of compensatory time to make a response once the courts are reopened.
3f).
JSJ v. HANNOVER HOUSE – Company has engaged counsel to move to set-aside the Texas default on the grounds that the notes
were fully paid prior to the Plaintiff seeking a judgment.
3g).
LEWIN v. HANNOVER HOUSE – This is a foreign (New York) default judgment for which there is no contractual basis whatsoever.
Company will seek to have the foreign judgment stayed-from-enforcement at such point in time that the Arkansas courts are re-opened
following the COVID-19 shut downs.
3h).
ORIGIN RELEASING v. HANNOVER HOUSE – This was a Texas matter that Hannover House defended and ultimately acquiesced and
agreed to payment of approx. $250,000 on the basis of a revised accounting of revenues. Subsequent to the agreement to pay this
revised sum to Origin Releasing, Hannover House found the original contract which was not “marked-up with hand-written changes”
that were the basis for the Origin claim of monies still being due. This significant development provides the basis to re-open
the case in Texas, which can be implemented once the COVID-19 court house shut downs are lifted.
3i).
SECOND STAR v. HANNOVER HOUSE – Company has not yet filed its response due to the applicable court house being shut-down
during the COVID-19 pandemic. Although the Plaintiff has proceeded to file for a “default,” Counsel and representatives
of the court have disclosed that respondents that are impeded from filing a timely response during the court house shut downs
will be granted an equal amount of compensatory time to make a response once the courts are reopened.
3j).
UPTONE (Davis) v. HANNOVER HOUSE – This was a California default judgment for which no service of the summons onto defendants
occurred. Accordingly, once the California courts are reopened for business, Hannover House will file to set-aside this judgment
and will file the applicable, meritorious responses, including the cross complaint for damages of more than $700,000 resulting
from Uptone’s failure to fund the theatrical releasing costs of the movie “Union Bound,” which forced Hannover
House to mitigate.
ITEM
4. MINE SAFETY DISCLOSURES.
Not
applicable.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Hannover
House, Inc. common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “HHSE.”. The last trade
for our common stock prior to the effective date of this filing was at $0.0123 per share on August 14, 2020. The OTC Markets chart
summary indicates that the common stock trades at a daily average volume of 627,842 shares, which is a daily trading volume at
average prices of approximately $7,722. Accordingly, large dollar volume purchases will have a substantial impact to the price-per-share
of Hannover House, Inc. stock, while liquidity is presently limited and a large block of shares for sale could take time to sell.
It is management’s belief that the filing of the Form 10 Registration could improve investor / shareholder confidence in
the HHSE stock and that this could manifest into both a higher average share price as well as an increase in daily volume.
Holders
As
of June 30, 2020, the Company had approximately 205 shareholders of record for its common stock – according to the Company’s
stock transfer agent, Standard Registrar and Transfer Co., Inc. An additional pool of shareholders are consolidated under block
listings for trade brokers such as E-Trade, Scottrade and TD Ameritrade.
Dividends
Hannover
House, Inc. has not declared or paid any dividends on our common stock and the Company intends to retain any future earnings to
fund the development and growth of our business. Therefore, we do not anticipate paying dividends on our common stock for the
foreseeable future. There are no restrictions on our present ability to pay dividends to stockholders of our common stock, other
than those which may be prescribed by Wyoming law.
Equity
Compensation Plan and Stock Option Plan Information
The
Company, at the current time, has no stock option plan or any equity compensation plans
Recent
Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During
the period covered by this report (three-month period ending June 30, 2020), the registrant has not issued any securities without
registration under the Securities Act of 1933.
Purchases
of Equity Securities
During
the first and second quarters of the fiscal year to end on December 31, 2020, there were no purchases of the registrant’s
common stock by or on behalf of the registrant or any affiliated purchaser.
Transfer
Agent
The
Company’s transfer agent is Standard Registrar & Transfer Co., Inc., located at 440
E 400 S Suite 200, Salt Lake City, UT 84111
ITEM
6. SELECTED FINANCIAL DATA
As
a smaller reporting company still pending full registration, Hannover House, Inc. is not required to include this information
in our Annual Report on Form 10-K or in Quarterly Reports on Form 10-Q.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
The
following discussion of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and the related notes and other financial information appearing elsewhere in this Annual Report. Readers
are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties
of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part I of this Annual
Report under the caption “Risk Factors.”
Results
of Operations for the three-month period ended June 30, 2020
The
first six months of 2020 were utilized by management primarily to complete reporting requirements for the Company’s forthcoming
Form 10 Registration filing, as well as the Company’s subsequent S1 Registration and raising. Additional activities included
ongoing supervision of the editorial process of the feature film, “WILDFIRE” as well as on-boarding and mastering
work related to the preparation and prelaunch of the consumer streaming site, MyFlix. Revenues for Q2 were a modest $75,319 of
which $69,345 were non-cash journal entries for invoiced services rendered ($54,250), studio royalties ($8,945) and rental-space
barter ($6,150).
Cost
of Revenue
There
were not cost-of-goods incurred during Q1 which impacted the G&A or Income Statement for this period.
Gross
& Net Profits
For
the applicable reporting period, Company posted a Gross Profit of $75,319 which after interest and operational expenses resulted
in a net income of $57,870. Due to tax-loss carry forwards, no provision for income taxes has been included in this quarterly
assessment of net income
General
and Administrative Expenses
General
and administrative expenses for the current reporting period were $9,848. This G&A expense for the period ending 6-30-2020
is lower than in prior quarters due to the waiver of salary from officers and the cessation of travel, entertainment and releasing
costs as a result of the COVID-19 impact to the motion picture and video distribution industries, including Hannover House, Inc.
Interest
expense.
Interest
expense was $7,601 for the three-month period ended June 20, compared to $7,502 for the three-month period ended March 31, 2019,
which represents a modest and predicted rise in the interest expenses due to compounding balances.
Liquidity
& Capital Resources
The
company had limited and minimal liquidity during the three-month period ended June 30, 2020, which was not problematic due to
a cessation of most costs due to the COVID-19 industry shut downs.
As
of the June 30, 2020, Company had cash of $1,028, as compared to $4,849 as of March 30, 2020, representing a decrease of $3,821.
This
filing includes a summary of Cash Flows for the Company during the applicable reporting period.
Critical
Accounting Policies and Estimates
Our
financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported.
These estimates can also affect supplemental information contained in our external disclosures including information regarding
contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP
and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our
significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies
impact its financial condition and results of operations, we view certain of these policies as critical. Policies determined to
be critical are those policies that have the most significant impact on our financial statements and require management to use
a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given
current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause
effect on our results of operations, financial position or liquidity for the periods presented in this report.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons,
also known as “special purpose entities”.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
a smaller reporting company, we are not required to include this information in our Annual Report on Form 10-K or onto Form 10-Q
ITEM
8. FINANCIAL STATEMENTS
Our
consolidated financial statements appear in a separate section of this Annual Report on Form 10-Q beginning on page F-1.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
(a)
Evaluation of Disclosure and Control Procedures
The
Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the
Company in the reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within
the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including
its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
Our
principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of June 30, 2020, and concluded that the disclosure controls and procedures were not effective as a
whole, and that the deficiency involving internal controls constituted a material weakness as discussed below.
(b)
Management’s Assessment of Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
the Exchange Act Rules 13a-15(f). A system of internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Under
the supervision and with the participation of management, including the principal executive officer and the principal financial
officer, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of
November 30, 2015, based on the criteria established in a report entitled “Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission
in Release No. 34-55929. Based on this evaluation, the Company’s management has evaluated and concluded that the Company’s
internal control over financial reporting was ineffective as of November 30, 2015, and identified the following material weaknesses:
|
|
●
|
There
is a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles in the United States
(“GAAP”) and the financial reporting requirements of the U.S. Securities and Exchange Commission.
|
|
|
|
|
|
|
●
|
There
are insufficient written policies and procedures to insure the correct application of accounting and financial reporting with
respect to the current requirements of GAAP and SEC disclosure requirements.
|
|
|
|
|
|
|
●
|
There
is a lack of segregation of duties, in that the Company had not yet segregated, specified and otherwise assigned those specific
duties which were to be separately handled respectively by Parkinson (CEO), Shefte (President) and Blanton (acting CFO) during
this applicable period.
|
Notwithstanding
the existence of these material weaknesses in our internal control over financial reporting, our management believes that the
financial statements included in its reports fairly present in all material respects the Company’s financial condition,
results of operations and cash flows for the periods presented.
The
Company will continue its assessment on a quarterly basis and the Company plans to hire personnel and resources to address these
material weaknesses when it is financially able to do so. We believe these issues can be solved by hiring in-house accounting
support and plan to do so as soon as we have funds available for this.
This
quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding
internal control over financial reporting. The Company’s registered public accounting firm was not required to issue an
attestation on its internal controls over financial reporting pursuant to temporary rules of the SEC. The Company will continue
to evaluate the effectiveness of internal controls and procedures on an on-going basis.
(c)
Changes in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors
and Executive Officers
The
following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel
as of June 30, 2020. All of our directors serve until the next annual meeting of stockholders and until their successors are elected
and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of
the board of directors, and are elected or appointed to serve until the next board of directors meeting following the annual meeting
of stockholders. Also provided is a brief description of the business experience of each director and executive officer and the
key management personnel and an indication of directorships held by each director in other companies subject to the reporting
requirements under the Federal securities laws.
|
Name
|
|
Age
|
|
Title
|
|
Date
of Appointment
|
|
Eric
F. Parkinson
|
|
61
|
|
Director,
Chief Executive Officer, and Corporate Secretary
|
|
January
24, 2002
|
|
|
|
|
|
|
|
|
|
Don
Frederick Shefte
|
|
73
|
|
Director,
President & Treasurer
|
|
June
1, 2007
|
|
|
|
|
|
|
|
|
|
Randall
Blanton
|
|
69
|
|
Interim
/ Acting CFO
|
|
February
1, 2020
|
We
do not have a standing audit committee or an audit committee financial expert. We do not have an audit committee financial expert
because of the small size of our company and our board of directors at this time, and also because the cost related to retaining
a financial expert at this time would be prohibitive.
Eric
Parkinson - Director, Chief Executive Officer and Secretary
Eric
Parkinson is a film distribution and marketing veteran whose stellar career extends back to his very first # 1 best-selling video,
“The 1984 Summer Olympic Highlights” – a production co-venture with ABC Sports. Parkinson has since released
over 1,200 titles to the North American home video market, and earned 117 Gold or Platinum Certified hits (titles ranging from
“Terminator”, “Platoon”, “The Last Emperor” and “Hoosiers” to less obvious top
hits such as “Savage Land”, “Highlander 2”, “The Magic Voyage” and “Little Nemo: Adventures
in Slumberland.” Parkinson was a key executive involved with the sale of the Hemdale library into MGM in 1996, which stood
for many years as the record top price for a film library sale. Parkinson is also experienced as a producer and executive producer,
with credits on more than fifty titles, and his first feature film directoral debut now underway with “Wildfire (2020).”
Don
Frederick Shefte – Director, President and Treasurer
Shefte
was a JAG officer in the Navy before becoming a partner in the prestigious San Diego law firm of Seltzer Caplan. He relocated
to N.W. Arkansas in 2001 as a Walmart vendor, and later joined the Bank of Fayetteville as its Senior Trust Officer. At the Bank
of Fayetteville, one of Shefte’s principal duties was the collection and distribution of approximately five-million dollars
per year from retail and wholesale purchasers of products from the bank’s client, Hannover House. Shefte joined Hannover
House in 2007 and has since expanded his legal and financial expertise to include credits on several feature film productions.
Randall
Blanton – Interim / Acting Chief Financial Officer
Randy
Blanton has over 30-years of experience as a CPA and at the Controller or CFO level at multiple major banks throughout the State
of Arkansas. Blanton has also been involved with the audit-committees of banks (both in respect of auditing internal operations
as well as auditing clients and prospective bank customers).
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until
removed by the board of directors.
There
are no agreements or understandings for any director or officer to resign at the request of another person and none of the directors
or officers is acting on behalf of or will act at the direction of any other person. The activities of each director and officer
are material to the operation of the Company. No other person’s activities are material to the operation of the Company.
Code
of Ethics
The
Company has adopted a Code of Ethics applicable to its directors and officers (including its principal executive officer and principal
financial officer).
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires the Company’s directors and executive officers and any beneficial owner of more than
10% of any class of the Company’s equity securities to file reports of ownership and changes in ownership with the SEC and
furnish copies of the reports to the Company. Based solely on the Company’s review of copies of such forms and written representations
by the Company’s directors and executive officers received by it. As of June 30, 2020, none of the officers effected any
changes in their share ownerships that would require such a notification.
ITEM
11. EXECUTIVE COMPENSATION.
The
following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers
paid by us during the three-month period ending March 31, 2020.
Executive
Compensation
|
|
|
Current
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
All
Other
|
|
|
|
|
|
Name
and Principal Position
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
|
Eric
F. Parkinson, C.E.O.
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Frederick Shefte,
President
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Option
Grants
There
were no individual grants of stock options to purchase our common stock made or outstanding to the executive officers named in
the Summary Compensation Table for the three-month period ending 3-31-2020.
Long-Term
Incentive Plan Awards
The
Company does not currently have a long-term incentive plan.
Compensation
of Directors
Directors
are permitted to receive fixed fees and other compensation for their services as directors. The Company’s board of directors
has the authority to fix the compensation of directors. No amounts were paid to, or accrued to, directors in such capacity for
the three-month period ending 6-30-2020.
Employment
Agreements
Currently,
we do not have an employment agreement in place with any of our executive officers.
Committees
As
the Company’s Board of Directors currently consists of two persons, the Company’s board of directors does not currently
have any committees. During the most recently completed fiscal year and reporting quarter, Eric Parkinson and Fred Shefte made
all decisions concerning executive officer compensation.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table presents information concerning the beneficial ownership of the shares of our common stock as of June 30, 2020
by: (i) each of our named executive officers and current directors, (ii) all of our current executive officers and directors as
a group and (iii) each person we know to be the beneficial owner of 5% of more of our outstanding shares of common stock.
Executive
Stock Ownership
|
Name
and Principal Position
|
|
Common
Stock
Shares
|
|
|
Percentage
of
A/S
|
|
|
Preferred
Stock
Shares
|
|
|
Percentage
Of
Class
|
|
|
Eric F. Parkinson, C.E.O.
|
|
|
43,141,649
|
|
|
|
5.31
|
%
|
|
|
2,400,000
|
|
|
|
60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Frederick Shefte, President
|
|
|
31,487,546
|
|
|
|
3.88
|
%
|
|
|
1,600,000
|
|
|
|
40
|
%
|
|
|
(1)
|
The
number of outstanding shares of commons stock of the Company for the purpose of calculating
the above percentages is: 811,529,996.
|
|
|
(2)
|
For
reporting purposes, both Parkinson and Shefte have listed the following address: 355
N. College Ave. Suite 4, Fayetteville, AR 72701.
|
|
|
(3)
|
Parkinson
has the option to reclaim or otherwise cause to be reissued up to 31,200,000 shares of
common stock that were voluntarily surrendered back into treasury stock over the past
ten (10) years, which reissuance is subject to applicable regulatory restrictions.
|
The
Company had no outstanding equity awards at fiscal year-end.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions
with Related Persons
As
of June 30, 2020, the Company had received loans from officers Eric Parkinson and D. Frederick Shefte, for which unpaid balances
still existed. The balance owed to Parkinson as of 6-30-2020 is $83,312, of which approximately $14,850 was paid during the past
calendar year. The balance owed to Shefte as of 6-30-2020 is $32,358, all of which was received by the Company more than four
years ago. Unless otherwise specified, these officer loans are unsecured, bear no interest, and are due on demand.
Director
Independence
On
an annual basis, each director and executive officer will be obligated to disclose any transactions with our Company and any of
its subsidiaries in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect
material interest. Following completion of these disclosures, our board of directors will make an annual determination as to the
independence of each director using the current standards for “independence” that satisfy the criteria for The NASDAQ
Stock Market.
As
of June 30, 2020, none of our directors qualified as independent in accordance with Nasdaq Marketplace Rule 5605(a)(2).
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit
Fees
Audit
Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial
statements. This category includes fees related to the performance of audits and attest services not required by statute or regulations,
and accounts consultations regarding the application of GAAP to proposed transactions. The aggregate Audit Fees billed for the
fiscal years ended December 31, 2019 and the current reporting quarter of 6-30-2020 are not included in this filing, but are specified
separately in the Company’s Form 10 registration disclosures.
Audit
Related Fees
The
aggregate fees billed for assurance and related services by our principal accountant that are reasonably related to the performance
of the audit or review of our financial statements, other than those previously reported in this Item 14, for the current reporting
period were $0.
Tax
Fees
Tax
Fees consist of the aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax
advice, and tax planning. These services include preparation for federal and state income tax returns. The aggregate Tax Fees
billed for the fiscal years ended December 31, 2019, were $800.
Audit
Committee Pre-Approval Policies and Procedures
Effective
May 6, 2003, the SEC adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit
related service, the engagement be:
|
|
●
|
approved
by our audit committee; or
|
|
|
|
|
|
|
●
|
entered
into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures
are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures
do not include delegation of the audit committee’s responsibilities to management.
|
We
do not have an audit committee. Our board of directors pre-approves all services provided by our independent auditors.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)
Financial Statements
1.
The following financial statements of are included in this Quarterly Report on Form 10-Q;
Statements
of Operations - for the three-month period ended June 30, 2020;
Statements
of Cash Flows - for the three-month period ended June 30, 2020;
Statements
of Stockholders’ Equity - for the three-month period ended June 20, 2020;
Notes
to Financial Statements. Additionally, in compliance with specific disclosures required by the OTC Markets, exhibits describing
these additional items are attached hereto.
SIGNATURES
Pursuant
to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Hannover
House, Inc.
|
|
|
|
|
Date:
August 19, 2020
|
By:
|
/s/
Eric F. Parkinson
|
|
|
|
Eric
F. Parkinson
|
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
/s/
Eric F. Parkinson
|
|
Chairman
of the Board,
|
|
August
19, 2020
|
|
ERIC
F. PARKINSON
|
|
Chief
Executive Officer and Secretary
(Principal
Executive Officer and Principal Financial Officer)
|
|
|
HANNOVER
HOUSE, INC. AND AFFILIATES AND SUBSIDIARIES
Financial
Statements
June
30, 2020 (UNAUDITED)
TABLE
OF CONTENTS
HANNOVER
HOUSE, INC., AND AFFILIATES AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
FOR
THE THREE-MONTH PERIOD ENDED JUNE 30, 2020
|
|
|
3/31/2020
|
|
|
|
|
6/30/2020
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Cash Equivalents
|
|
|
4,849
|
|
|
|
|
|
1,028
|
|
|
Accounts Receivable, Net
|
|
|
324,652
|
|
|
(1)
|
|
|
336,903
|
|
|
Prepaid Wages
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Merchandise Inventory
|
|
|
100,704
|
|
|
|
|
|
100,704
|
|
|
Prepaid Advertising
|
|
|
765,000
|
|
|
|
|
|
765,000
|
|
|
Prepaid Producer Royalties
|
|
|
2,454,674
|
|
|
|
|
|
2,454,674
|
|
|
Producer Marketing Recoupment
|
|
|
3,016,762
|
|
|
|
|
|
3,016,762
|
|
|
Film Distribution Rights
|
|
|
1,996,379
|
|
|
|
|
|
1,996,379
|
|
|
Film Production Investments
|
|
|
469,389
|
|
|
|
|
|
469,389
|
|
|
Notes Receivable and Net Recoupment
|
|
|
41,641
|
|
|
(2)
|
|
|
41,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
9,174,050
|
|
|
|
|
|
9,182,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY & EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
Office Furnishings, Equip. & Film Gear
|
|
|
154,725
|
|
|
|
|
|
154,725
|
|
|
Less Accumulated Depreciation
|
|
|
(37,164
|
)
|
|
|
|
|
(37,164
|
)
|
|
Vehicles
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Less Accumulated Depreciation
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Real Property
|
|
|
-
|
|
|
|
|
|
-
|
|
|
TOTAL PROPERTY & EQUIPMENT
|
|
|
117,561
|
|
|
|
|
|
117,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
FILM & TV LIBRARY (incl. VODWIZ)*
|
|
|
27,413,517
|
|
|
|
|
|
27,413,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER ASSETS
|
|
|
27,413,517
|
|
|
|
|
|
27,413,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,705,128
|
|
|
|
|
|
36,713,558
|
|
ITEM
F 1 – (continued)
|
|
|
3/31/2020
|
|
|
|
|
6/30/2020
|
|
|
LIABILITIES & SHAREHOLDER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
9,115
|
|
|
|
|
|
19,365
|
|
|
Accrued Royalties
|
|
|
94,065
|
|
|
|
|
|
94,065
|
|
|
Acquisition Advances Due
|
|
|
285,399
|
|
|
|
|
|
285,399
|
|
|
Accrued Wages
|
|
|
122,182
|
|
|
|
|
|
122,182
|
|
|
Payroll Taxes Payable
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Deferred Income Tax Payable
|
|
|
-
|
|
|
|
|
|
-
|
|
|
NB Cal AFIL P&A Loan
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Hounddog P&A Note (EFG)
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Interest on Hounddog Note
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Shuttlewood Investments
|
|
|
-
|
|
|
(3)
|
|
|
-
|
|
|
Interest on Shuttlewood Note
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Graham Financial Services Note
|
|
|
98,825
|
|
|
|
|
|
98,825
|
|
|
Interest on Graham Note
|
|
|
2,051
|
|
|
|
|
|
2,051
|
|
|
All Other Notes Payable
|
|
|
576,685
|
|
|
|
|
|
576,685
|
|
|
Interest on Above Notes Payable
|
|
|
51,201
|
|
|
|
|
|
51,201
|
|
|
Bank of Fayetteville Note
|
|
|
15,000
|
|
|
|
|
|
15,000
|
|
|
Interest on B.O.F. Note
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
1,254,523
|
|
|
|
|
|
1,264,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Payables
|
|
|
1,033,382
|
|
|
|
|
|
1,033,382
|
|
|
Executive Salary Deferrals
|
|
|
766,415
|
|
|
|
|
|
766,415
|
|
|
Lewin Foreign Judgment
|
|
|
1,629,442
|
|
|
(4)
|
|
|
1,629,442
|
|
|
Contingent Legal Liabilities
|
|
|
727,022
|
|
|
(5)
|
|
|
727,022
|
|
|
Officer Notes Payable
|
|
|
115,670
|
|
|
|
|
|
115,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LONG-TERM LIABILITIES
|
|
|
4,271,931
|
|
|
|
|
|
4,271,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OF ALL LIABILITIES
|
|
|
5,526,454
|
|
|
|
|
|
5,536,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
27,272,077
|
|
|
|
|
|
27,212,387
|
|
|
Retained Earnings
|
|
|
3,906,597
|
|
|
|
|
|
3,964,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDER’S EQUITY
|
|
|
31,178,674
|
|
|
|
|
|
31,176,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,705,128
|
|
|
|
|
|
36,713,558
|
|
CONSOLIDATED
STATEMENT OF INCOME
FOR
THE 3-MONTHS ENDING 6-30-2020
|
|
|
Q1
|
|
|
Q2
|
|
|
|
|
2020
|
|
|
2020
|
|
|
REVENUES
(all media, fees & licenses)
|
|
$
|
90,541
|
|
|
$
|
75,319
|
|
|
Net, Collected Revenues
|
|
|
3,769
|
|
|
|
14,919
|
|
|
Additional Invoiced
Sales
|
|
|
86,772
|
|
|
|
-
|
|
|
Reserve
for Potential Returns
|
|
|
-
|
|
|
|
-
|
|
|
ADJUSTED
REVENUES FOR PERIOD
|
|
|
90,541
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
75,319
|
|
|
COST OF SALES
|
|
|
|
|
|
|
|
|
|
Commissions
|
|
|
-
|
|
|
|
-
|
|
|
Sales and Marketing
|
|
|
-
|
|
|
|
-
|
|
|
Video Mfg &
Releasing Costs
|
|
|
-
|
|
|
|
-
|
|
|
Film & Book
Royalties
|
|
|
-
|
|
|
|
-
|
|
|
Freight
|
|
|
-
|
|
|
|
-
|
|
|
Other
Expenses (Ads, PR, Publicity)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COST OF SALES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
90,541
|
|
|
|
75,319
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL AND ADMINISTRATIVE
EXP.
|
|
|
40,642
|
|
|
|
9,848
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
|
49,899
|
|
|
|
65,471
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSES
|
|
|
7,502
|
|
|
|
7,601
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (SALARY
DEFERRALS)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE TAXES
|
|
|
42,397
|
|
|
|
57,870
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
42,397
|
|
|
$
|
57,870
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS (Beginning of Period)
|
|
|
3,864,200
|
|
|
|
3,906,597
|
|
|
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS (End of Period)
|
|
|
3,906,597
|
|
|
|
3,964,467
|
|
STATEMENT
OF CASH FLOWS
FOR
THE THREE MONTHS ENDING 6-30-2020
Hannover
House, Inc.
Consolidated
Statement of Cash Flow
For
the Three-Month Period Ending June 30, 2020
|
|
|
6/30/2020
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
57,870
|
|
|
Increase in Accounts Receivable
|
|
|
12,251
|
|
|
Decrease in Prepaid Expenses
|
|
|
-
|
|
|
Decrease in Other Current Assets
|
|
|
-
|
|
|
Increase in Notes Payable
|
|
|
-
|
|
|
Increase in Accounts
Payable
|
|
|
10,250
|
|
|
|
|
|
|
|
|
Cash Provided By
/ Used in Operating Activites
|
|
$
|
80,371
|
|
|
|
|
|
|
|
|
Cash
Flow from Investing Activities
|
|
$
|
-
|
|
|
Cash Provided By
/ Used in Investing Activities
|
|
|
(84,192
|
)
|
|
|
|
|
|
|
|
Cash
Flow from Financing Activities
|
|
$
|
|
|
|
Cash Provided by
Financing Activities
|
|
$
|
-
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
$
|
(3,821
|
)
|
|
|
|
|
|
|
|
BEGINNING CASH BALANCE
|
|
$
|
4,849
|
|
|
|
|
|
|
|
|
ENDING CASH BALANCE (12-31-2019)
|
|
$
|
1,028
|
|
|
|
|
|
|
|
STATEMENT
OF SHAREHOLDERS EQUITY
FOR
THE THREE-MONTH PERIOD ENDING 6-30-2020
|
|
|
Common
Stock
|
|
|
Retained
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Total
|
|
|
Balance
at Mar. 31, 2020
|
|
|
811,029,996
|
|
|
$
|
27,272,077
|
|
|
$
|
3,906,597
|
|
|
|
31,178,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Adjustments
to Equity
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Adjustments
to Retained Earnings
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
|
|
|
|
|
|
|
$
|
57,870
|
|
|
$
|
57,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June
30, 2020
|
|
|
811,029,996
|
|
|
|
26,518,209
|
|
|
|
3,964,467
|
|
|
|
31,236,544
|
|
GENERAL
AND AMINISTRATIVE EXPENSES
FOR
THE THREE-MONTH PERIOD ENDING 6-30-2020
|
|
|
3-Months
|
|
|
|
|
Ending
|
|
|
CATEGORY
|
|
6/30/2020
|
|
|
Auto
|
|
$
|
-
|
|
|
Bank Charges
|
|
$
|
105
|
|
|
Consulting
|
|
$
|
-
|
|
|
Employees and Officers
|
|
$
|
-
|
|
|
Entertainment
|
|
$
|
-
|
|
|
Equipment
|
|
$
|
-
|
|
|
Fees
|
|
$
|
-
|
|
|
Insurance
|
|
$
|
-
|
|
|
Labor
|
|
$
|
-
|
|
|
Legal and Accounting
|
|
$
|
2,500
|
|
|
Misc / Marketing & Promotions
|
|
$
|
-
|
|
|
Office
|
|
$
|
435
|
|
|
Rent
|
|
$
|
6,150
|
|
|
Payroll Taxes
|
|
$
|
-
|
|
|
Telephone
|
|
$
|
658
|
|
|
Travel
|
|
$
|
-
|
|
|
Utilities
|
|
|
|
|
|
TOTAL OF GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
$
|
9,848
|
|
NOTES
TO FINANCIAL STATEMENTS
FOR
THE THREE-MONTH PERIOD ENDING 6-30-2020
The
following notes refer to those items marked on Item F1 (consolidated balance sheets) as indicated with red note reference markers.
Additional
Footnotes to Balance Sheet
(for
the three-months ending June 30, 2020)
|
|
(1)
|
Accounts
Receivable has been adjusted to include mark-downs for DVD price reductions, as well
as other reconciliation activities relating to the application of credits for returns
and other payment credits.
|
|
|
(2)
|
Notes
Receivable includes a loan made by the company to Snowy Morning, Inc. in the amount of
$41,641 to assist with production costs for the film “WILDFIRE,” which loan
is to be considered as a fully-recoupable advance against Snowy Morning’s share
of theatrical revenues in the film. Company holds a lien against other revenue sources,
in the event that the producer’s share of net theatrical revenues from “WILDFIRE”
is not sufficient to fully repay the loan.
|
|
|
(3)
|
Company
is line-item listing the $0 balance due under the Mutual dissolution agreement (to
discontinue distribution of the film “Daisy Winters”); however, Company
has added in a line-item for “Contingent Legal Liabilities” (see footnote
9), in the event that Company’s upcoming court proceedings in Arkansas in this
dispute do not result in a favorable outcome consistent with the Mutual dissolution agreement.
|
|
|
(4)
|
Company
has engaged counsel to move to set-aside this foreign judgment and locally filed writ,
on the basis of fraud, personal jurisdiction and subject matter jurisdiction. The absence
of an agreement between Company and Lewin, as well as the additional prohibition on HHSE
officers from issuing “personal guarantees” as represented by Plaintiff Lewin,
will support the motion for dismissal. These legal responses from Hannover House are
temporarily on hold until the local courthouse reopens from COVID-19 closures.
|
|
|
(5)
|
Upon
advice of counsel, Company is also reserving an additional amount of $727,722 regarding
three foreign cases, as the potential liability that could occur should the Company not
prevail in actions for dismissal or adjudication in Arkansas.
|
Hannover House (PK) (USOTC:HHSE)
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