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Genius Products Finally Files Annual Report

8 May, 2007 By: Erik Gruenwedel

The Santa Monica, Calif.-based company ditched its predominantly children's slate, morphing from budget video aggregator Genius Products Inc. to major distributor Genius Products LLC following the closing of its 70% acquisition by The Weinstein Co. (TWC) last July.

As a result, the distributor's fiscal year 2006 results are divided into two segments, a 202-day period prior to TWC transaction and 163 days after.

The complicated accounting required to meld separate companies in one fiscal year resulted in numerous filing delays and a delisting warning from the National Association of Securities Dealers (NASD).

Genius Products Inc. generated $119 million in revenue from Jan. 1, 2006 to July 21, 2006, due primarily to DVD sales of TWC titles Derailed, Wolf Creek, Mrs. Henderson Presents, Hoodwinked, Transamerica, The Matador and The Libertine.

It recorded an extraordinary gain of $54.2 million, after taxes, which represented the 70% interest in the company formally relinquished to TWC on July 21. As a result, Genius posted net income of $8.8 million through Dec. 31, 2006.

For the 162-day period from July 22 to Dec. 31, Genius Products LLC generated $155.6 million in revenues, primarily as a result of DVD sales from TWC titles Scary Movie 4, Lucky Number Slevin, Pulse, Feast and Clerks 2, and separate unit sales of ESPN and World Wrestling Entertainment (WWE) titles.

From July 22 through Dec. 31, Genius Products LLC posted a net loss of $19.7 million.

Genius segments its distribution into four areas, including theatrical and independent films, sports titles, lifestyle fare and family and faith content.

It owns or licenses content from 36 content providers, including Tartan Video USA, Discovery Kids, Wellspring, Bauer Martinez Entertainment and the Independent Film Channel.

As of March 31, 2007, Genius Products LLC had paid TWC $82.8 million in relation to net sales of its DVD product.

Since April 10, Genius has distributed more than 50 TWC titles on DVD, not including Arthur and the Invisibles due May 15, Hannibal Rising May 29 and Miss Potter with Renee Zellweger and Ewan McGregor June 16.

Interestingly, Wal-Mart accounted for 29% of Genius' revenues, compared to 40% in 2005, followed by Target with 27% and Dollar Tree Stores with 26%.Genius did not disclose revenues or costs associated with its distribution of exclusive TWC rental titles to Blockbuster Inc.

Spearheading Genius' transformation in 2006 proved financially rewarding for CEO Trevor Drinkwater. The 41-year-old executive earned almost $2.4 million in salary, bonuses and awards, according to the filing.

Drinkwater, a former sales executive with Warner Home Video, also held 3.1 million in stock options as of Dec. 31.

Should there be a “change in control” at Genius, Drinkwater would receive a post-employment payment of more than $3.4 million.

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