Hannover House Inc (HHSE)

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ANNUAL REPORT (FINANCIALS) FILED OTCMARKETS BEFORE REQUIRED DEADLINE



F 6 (OTC ITEM “4-G”)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDING 12-31-2021

The following notes refer to those items marked on Item F1 (consolidated balance sheets) as indicated with red note reference markers.

(1) Accounts Receivable has been adjusted to include newly invoiced on-boarding & metadata services performed for MyFlix program suppliers. It is relevant to note that the majority of Accounts Receivable are for deferred on-boarding / mastering fees on MyFlix supplier titles, which must be earned-out from digital deliveries of titles in a first position priority payment. The other receivables, the majority of which
are to Cinedigm (as principal wholesaler to Walmart, Target & Best Buy) are disputed by Cinedigm due to a claim of offset for marketing fees;

(2) Notes Receivable includes additional loans of $184,827 made by the Company to Snowy Morning, Inc. to assist with production costs for the film “WILDFIRE,” which loan is to be considered as a fullyrecoupable 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 has taken an additional $10,000 write-down for depreciation with respect to antiquated office computers, fixtures, equipment and film gear, including items no longer functioning or possessing little or no resale value due to changing technologies;

(4) The Hannover House Film & Television Library report was conducted ten years ago, and may no longer accurately represent the realistic and anticipated revenues that each title in the library (approx. 476) will
ultimately generate during the term of their sales agency representation by Hannover House. For instance, the DVD and BluRay video projections have not been realized over the past few years, whereas the sums
previously projected for digital streaming have been exceeded in most cases. As of this filing, the Company is awaiting final completion of a new, updated library valuation report – as now listed as an
auditor’s requirement for the Form 10 disclosures. It is relevant to note that in the motion picture industry, a Film Library is not a physical or liquid asset, but is essentially an informed projection of the
likely revenues that a particular title should generate from the applicable media represented by the sales agency. This form of “ultimate” valuation impacts the timeframe for the application of capitalized
marketing costs, prepaid producer advances or recoupable marketing expenses, and may contribute to a lender’s analysis of a distributor’s likely ability to generate future revenues. Most of the titles in the
Hannover House Film & Television Library are represented by the Company under sales agency agreements, which do not allow the sales rights to be sold, transferred or otherwise disposed of by Company or successors; a majority of the titles additionally include provisions allowing for the
termination of sales rights in the event that Hannover House ceases to operate or that Eric Parkinson (as “key man”) ceases to perform his duties as principal executive of Hannover House. These are customary
protections that independent producers usually require when engagingindependent distributors for the representation of their title assets;

(5) The Company continues to work to reduce Accounts Payable based upon available cash flows,.

(6) During Q4, Company filed a motion to set aside the Daisy Winters – Shuttlewoods default judgment, which was granted. The sum previously listed as a liability has been removed.

(7) Notes Payable – although the Company did enter into new loans during Q4 totaling $173,000 - the additional sums listed are after reconciliation of all prior notes and activities and allocation to the proper line-item description.



NOTES TO GENERAL & ADMINISTRATIVE EXPENSES
Adjustments were made during Q4 to address to line items in Q3 which had been improperly expensed. Travel during Q3 including $19,245 which had been expensed in Q3 when it should have been capitalized (as a recoupable sum paid on behalf of WILDFIRE talent travel); Utilities and Internet reported for Q3 included $9,650 for MyFlix website development costs which should have been capitalized.

https://www.otcmarkets.com/otcapi/company/financial-report/326297/content