Blog
Wednesday, February 23, 2022
Form 10 / Audit Issue Updates
Greetings HHSE Friends & Followers - There's some exciting news to share with respect to HHSE facilitated productions (including COWBOYS OF CANNABIS and THE LEGEND OF BELLE STARR). But the subject of most shareholder inquiries has been "what is the status of Form 10" and filings. In this respect, we will share with you information on the filings, and save the project updates for later.
There were three issues posited by the Auditors that the company is already working to resolve.
Firstly, the company's prior recognition of on-boarding and mastering costs for MyFlix titles as REVENUES are better off being reversed out of the 2020 and 2021 income reports - and then recategorized as "contingent receivables." This is because the enforcement / collection of said mastering costs cannot occur until after the MyFlix site has been launched. This observation will require that HHSE re-submit the 2020 year-end report to the OTC (and obtain a revised attorney opinion letter for 12-31-2020). The year-end for 2021 was purposely not yet filed with the OTC markets as we wanted to await any such comments or observations.
Next, the balance sheet detail of payables (both current and long-term) need to be reconciled with revised balances (especially with respect to judgment settlements); settlements need to be evidenced as "performing" and not just "as agreed."
Finally, we were advised that the Audit Letter supporting the Form 10 CANNOT ignore the valuation of the company's film library. Hannover House had requested that the auditors opine on all issues except the film library - due to the stale aging of the 2010 report, as well as marketplace paradigms that have replaced DVD sales with streaming revenues. One or two years ago, a registration filing with the library value being excluded from the auditor's opinion may have passed review. But the more stringent S.E.C. rules on OTC issuers - and stricter PCAOB guidelines - no longer enable such a choice. Accordingly, HHSE has moved to immediately obtain a qualified Film & Library Valuation Report completed - which we are told will take ten (10) days or less. HHSE will then incorporate the updated Library Valuation letter into the existing Form 10 and the auditors can complete their opinion letter.
While it's still possible that these steps will be completed prior to March 11 (the date of the HHSE Shareholders Meeting), we have decided to delay the Shareholder's Meeting by ONE (1) week - to March 18, 2022.
Our goal is to file the registration as quickly as possible - but to take all reasonable steps to assure that comments from the S.E.C. are minimized so that the company is recognized as a fully-reporting entity. Stricter rules and PCAOB guidelines have made it harder for issuers to meet these standards. But we are complying and working to achieve this corporate goal.
Thanks again to our loyal longs who have endured many challenges with HHSE over the years. The news is not always peachy-fun, but we're getting the job done. Next Up? Exciting programming / production news that will help move MyFlix to the next level.
AI
