Hannover House Inc (HHSE)

[speckulater]

New Filing: Additional Information Requests







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HANNOVER HOUSE, INC., f/k/a TARGET DEVELOPMENT GROUP, INC.


TDGI Cusip Number: 87620A / HHSE Cusip Number: 410685 101



MANAGEMENT DISCUSSION OF ADDITIONAL INFORMATION REQUESTS

3/19/12

ITEM I – Management Discussion of Additional Information Requests from Shareholders, relating to the Period Ending Dec. 31, 2011. In compliance with the specific list of disclosure requirements as detailed by the OTC Markets, Company believes that year-end report filed on March 14, 2012 (covering the period ending Dec. 31, 2011), constitutes full compliance of all required disclosures and reports. However, in response to questions posed by some shareholders, Company will address additional issues for which further clarification and explanation are requested.

1) Clarification Of Company’s Primary Business – Company operates within the entertainment industry sector. The goal, of course, is to make money through the distribution of entertainment products, and the Company has been pursuing the revenue streams that provide (or have been expected to provide) the greatest return on capital expenditure. The Company releases films to theatres, films to television, films to Video and VOD, and books to the various publishing platforms. The Company has been operating since 1993, and has been profitable each of the last eight consecutive quarters.

During 2010 and 2011, the Company pursued a more aggressive strategy of releasing films to “theatres” whereas the prior business model in years past was a concentration almost exclusively on direct-to-video releases. During these two years, the Company pursued three separate theatrical releasing strategies: a). Multi-city simultaneous launch (“Twelve” and “All’s Faire In Love”); b). Targeted Markets simultaneous launch (“Racing Dreams”) and NY / LA exclusives launch (“Cook County”). In analyzing the overall revenue results from these three releases (i.e., combining theatrical, television, home video and VOD grosses, as a comparison against the capital expenditures for each film’s theatrical release), none of these three scenarios generated a better return, or measurably higher ancillary sales, than those levels that the Company would have likely generated under a direct-to-video release. While there are multiple factors at play, including the commercial value of the releases themselves, competitive timing, manner of promotions and more, the Company has reached the general conclusion that theatrical release activities should be reserved for a rare handful of extraordinary films, or for films with an easily identified and reached target market.

Accordingly, during the first half of calendar year 2012, the Company is focused almost exclusively on mining sales from its direct-to-video releases. The Company will continue to pursue theatrical titles – and, in fact, is looking at a potential sponsorship venture to support the upcoming theatrical release of “Toys in the Attic.” But from a standpoint of total quantity of releases, the direct-to-video titles will likely outnumber theatrical releases by a margin of four-to-one during 2012 and possibly into 2013.

In analyzing the bottom-line results of recent theatrical releases, the Company is looking for ways to maximize shareholder value. Even a modest theatrical release (such as “Cook County”), has cost the Company close to $200,000, and not yet returned that expenditure. Conversely, a direct-to-video release such as “Boggy Creek” required less than $10,000 in launching costs, but has already generated more than $200,000 in sales. The Company does recognize that theatrical release activities are required for a title to “break-through”the sales ceiling that is generally applicable for direct-to-video releases. So the overall strategy in 2012 and 2013 will be to implement more efficient theatrical campaigns for the limited number of titles that merit such release.

2). Payables Matters – Over the past 15-months, the Company Managers have reduced the overall debt load by more than 42%. During this same time frame, the Company has released eight new titles to the Home Video and VOD markets, and generated approximately $5.2-million in gross sales, and booked approximately $1.6-million in profits. The Company Managers have balanced the various needs and priorities each month by allocating available resources to address the ongoing needs of: operations, new release activities and payables management. Resources have included cash flow from product sales and releasing activities and a debt conversion venture last year. Surprisingly, the Company has reached these goals with a minimal change in its share structure, due to a commitment from managers to minimize shareholder dilution through new equity (or debt-to-equity) share issuances.

Company has received some Shareholder inquiries requesting additional information on a few matters of accounts payable and potential litigation. With respect to the Company’s Y/E 12-31-2011 filing, all current legal matters as of the reporting period were already included and disclosed. Additionally, although not required, the Company included information on matters known up to filing period date of March 14, 2012.

2-a). Foundation for Progress – Company was aware of a balance due for a $1,500 principal to this supplier for book advertising, and this amount (plus interest) is already reflected on the payables detail within the Company’s financial filings. Company made an offer to fully retire this matter late last year. However, no response was received, due to a subsequent change of representation of the creditor. Without prior communication or notice to the Company or to our counsel, the new representative for the creditor filed a motion for Garnishment, which the Company was made aware of on Friday, March 16. Due to the absence of a dispute as to the bill’s veracity, and due to the insignificant sum involved, Company instructed counsel to immediately retire the balance in this matter from Company funds already on deposit in the client trust account. Company does not anticipate the need to advertise with this supplier in the future.

2-b). Technicolor Labs – Company’s counsel was contacted on Thursday, March 15, by counsel representing Technicolor, informing him that a lawsuit had been filed and that service was pending. As the Company has not yet seen this complaint, specific commentary cannot be rendered at this time. However, Company does already have a sum included in its payables summary on the financial filings for 12-31-2011, reflecting the amount due to Technicolor, based upon contracted rates negotiated prior to the release of the film “Twelve.” Through counsel, Company will respond to this complaint, vigorously defend Company and will seek a resolution based on a full reconciliation of sums already paid by Company to Technicolor, against the contracted rates for each of the services provide. Company does not anticipate utilizing Technicolor Labs for future theatrical release services.

2-c). 42 West – Company is unaware of any complaint or any balances due to 42 West, from the promotion of the film “Twelve” during the summer of 2010. Company paid over $88,000 to 42 West for P.R. Services, and disputed only those charges received after the conclusion of the campaign. If served a complaint, Company will defend its position. Company does not anticipate a need to utilize their PR services for any future releases.

2-d). New York Times – Company acknowledges a balance due to the New York Times, and this sum is included in the financial filings. However, Company is unaware of any formal complaint in this matter. If served a complaint, Company would respond and seek a resolution of the proper balances due. In previous business models, it was thought that advertising a movie in the New York Times was imperative to assuring theatrical success. In today’s marketplace, such advertising is no longer effective at assuring successful box office results, and many independent studios have seen a better return on capital through a variety of advertising alternatives. Company does not anticipate the need for upcoming advertising with the New York Times, due to greater efficiencies available through other, more targeted means. Company has previously disclosed all known legal matters as of the reporting and March 14, 2012 filing date. The Managers do not believe that these above items pose any material threat to the operations of the Company. The amounts due (if applicable) have already been included in the Company’s year-end payables summary as posted in the financial filings.

3). Complaints Against Stock Trader – Company has received multiple complaints from Shareholders regarding suspected attempts at manipulating the price of the Company’s stock by a specific and identified individual. Company has notified FINRA of this matter and provided supporting materials for their investigation. Shareholders have noted that the timing of criticisms by this individual correspond with trading periods during which large blocks of shares have been “shorted,” suggesting an organized effort to drive down the share price in order to cover such short sales. Company is considering and / or pursuing its other legal rights and remedies in this matter.

4). Conference Call – As discussed at Company’s Annual Shareholder’s Meeting in January, Company is organzing a Quarterly “Shareholder’s Conference Call” to discuss these and other, relevant issues of concern with qualified Shareholders and investors. A separate filing and press release will be posted this week to disclose the details of the Conference Call, and the manner for submitting questions.

5). New Release Schedule – At the request of Shareholders, Company will release a more formal schedule of current and upcoming title releases by month for 2012.

6). Market Maker – At the request of Shareholders, Company will expeditiously move to complete the agreement for the engagement of a “Market Maker” in the Company’s stock, which negotiations are already in process.

7). New Symbol Change to “HHSE” – At the request of Shareholders, Company will provide an update and timeline for the expected date of formal rebranding of the stock to “HHSE.”

http://www.otcmarkets.com/financialReportViewer?symbol=TDGI&id=75133

http://www.otcmarkets.com/stock/TDGI/financials





TDGI/HHSE