Seven Arts Entertainment Inc. Announces Letter To Stockholders Regarding Reductions In Trading Price And Filing Of Year End Financials

LOS ANGELES, Oct. 5, 2012 /PRNewswire/ -- Seven Arts Entertainment Inc. (OTCQB: SAPX) ("Seven Arts" or the "Company") announced today that its Chief Executive Officer, Peter Hoffman, has sent to stockholders the following letter: 

Fellow Stockholders:

I am taking the opportunity to write to you regarding the events since August 31, 2012, which have seen such a dramatic reduction in the market price of our common stock despite the publication of important and positive news regarding the Company's operations in this period.  As we stated in an earlier press release on August 31, 2012, we announced a 1-for-70 reverse stock split effective September 4, 2012 in order to meet the $1 minimum bid price required to maintain our NASDAQ listing, reducing our total shares outstanding on September 4, 2012 to about 2,600,000 (of which 2,000,000 were in the free float).

This announcement was met with a wave of selling that we believe was by persons who were not our stockholders, who had not borrowed common stock, or who otherwise had not complied with short selling rules.  This massive selling pressure – again after the publication of important and positive news – continued until it became apparent that the Company would not be able to meet the NASDAQ minimum bid price requirement by the previously announced date of September 20, 2012. 

As a result, the Company moved its trading to OTC Link and the OTC QB effective September 14, 2012.  The massive selling pressure continued after that announcement at massive equivalent pre-split daily volume levels (up to 50 million shares) that could be explained only by short selling.

The Company's market capitalization is now about $1,000,000, even though the Company's net stockholder's equity in our last reported financial statements was in excess of $25,000,000.  The Company has in release DMX's new album "Undisputed" and has at least one other DMX album completed and ready for release in our current fiscal year ending June 30, 2013, together with at least one Bone Thugs-n-Harmony album.  The Company has announced at least four and perhaps as many as seven new genre film releases in this fiscal year as well.  The Company further expects additional revenue from its major productions and continuing library sales in this fiscal year.  Through what management believes is judicious debt conversion, the Company's funded debt has been substantially reduced.

We do not believe that the current trading activity and common share price reduction represent any change in Company fundamentals or prospects, but only trading strategies that may be illegal in whole or in part.  The Company has appointed counsel and is investigating the principal brokerage house responsible for the massive selling pressure in the last few weeks, and intends to bring an action against any parties to whom the evidence leads.  Ultimately, the financial results of operation will be our answer to those who seek to profit based on trading strategies and misinformation, to the detriment of those stockholders who have supported us through these trying times. 

Our long-term goals are results of operation that support a common stock price at or above or net stockholders' equity and then to list on one of the major exchanges.  In the short term, we also will seek to move our listing to the OTC QX, for which we expect to qualify by the end of November.  We also expect to have further announcements regarding our film activities shortly.  We hope that our stock price will ultimately reflect our intrinsic value and that our loyal stockholders be rewarded for their patience.  It is perhaps understandable to blame management for decline in a company's common stock, but this fails to take into account the nature of common stock trading as it is conducted today.  Sometimes common stock prices have nothing to do with actual financial conditions and results of operations, as we think is the case here.

We will be filing the permitted fifteen day extension of the due date for our Annual Report on Form 10-K for our fiscal year ended June 30, 2012, as we have in previous years, and will file the 10-K in that extended time period.  Management expects to accrue the projected tax credit receipts for one post production facility at 807 Esplanade Avenue in new Orleans, and as a result, to report an operating profit for this fiscal  year.

We'd like to thank our loyal stockholders for continuing to support us through these difficult times.

Very truly yours,

Peter M. Hoffman

About Seven Arts Entertainment Inc.:

Seven Arts Entertainment Inc. is the successor to Seven Arts Pictures Plc, which was founded in 2002 as an independent motion picture production and distribution company engaged in the development, acquisition, financing, production and licensing of theatrical motion pictures for exhibition in domestic (i.e., the United States and Canada) and foreign theatrical markets, and for subsequent worldwide release in other forms of media, including home video and pay and free television.

Cautionary Information Regarding Forward-Looking Statements.

Forward-looking statements contained in this press release are made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995.  Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated.  The information contained in this release is as of October 5, 2012.  Seven Arts assumes no obligation to update forward-looking statements contained in this release as the result of new information or future events or developments.

Contact:

Seven Arts Entertainment Inc.
Peter Hoffman
323-372-3080
[email protected]

SOURCE Seven Arts Entertainment Inc.