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Genius Seeks Nasdaq Listing, Investors

9 Oct, 2007 By: Erik Gruenwedel

Genius Products Inc. is proposing a reverse stock split aimed at making the DVD supplier eligible for listing on the Nasdaq Global Market.

The Santa Monica, Calif.-based distributor's board is currently considering reverse stock split ratios from 1-and-5 and 1-and-8, according to a regulatory filing.

The minimum stock price required to list shares on Nasdaq is $5 per share. Genius stock closed Oct. 9 up 11 cents to $2.75 per share.

“We believe that current and prospective investors will view an investment in our common stock more favorably if our shares are listed on Nasdaq … than if our common stock trades on the OTC Bulletin Board,” said Genius CEO Trevor Drinkwater, in the filing.

As of Aug. 31, Genius, which is 70% owned by The Weinstein Co. (TWC), had more than 67 million shares of outstanding common stock.

Addressing an investor conference Tuesday in New York, Stephen Bannon, chairman of Genius, said the distributor was the fastest growing company in the entertainment industry.

He reiterated Genius' aim to become a dominant supplier of independent film, sports, faith, family and lifestyle DVDs to Wal-Mart, Best Buy, Target and Blockbuster.

“Consolidation at retail has really added to our strength,” Bannon said. “We are in the business of helping to program retail. We come up with programmatic solutions for retail.”

He said Genius is on track to generate from $750 million to $800 million in gross revenue this fiscal year, including $200 million from non-Weinstein titles, which Bannon said generate higher margins.

The executive said Genius earns a 5% fee for the 20 to 25 feature films and 60 to 90 direct-to-video (TWC) titles it distributes.

In fiscal 2006 Genius generated $387 million in revenue, of which 83% originated from TWC and the remainder primarily from DVD sales of ESPN and World Wrestling Entertainment content, according to Bannon.

This year Genius intends to increase from 17% to 25% the percentage on non-Weinstein titles in the overall revenue mix.

Indeed, Genius said it inked a production and distribution deal with veteran producer Quincy Jones' QD3 Entertainment for a series of urban DVDs.

Last week, Genius reported it had borrowed $6 million (with rights for an additional $2 million) from its corporate parent to pay TWC as part of a distribution agreement.

CFO John Mueller told investors Genius had about $5 million in cash on its balance sheet, had just closed a $70 million credit facility and had more than $100 million in accounts receivables.

Bannon said Genius would continue to focus on specialty fare and leave the blockbuster titles to the major studios.

“Retailers don't make money on the big titles, such as ‘Harry Potter' and ‘Spider-Man,’ he said. “They have to make money in the specialty traffic and that is where we come in.”

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