Genius Products, Inc. Reports Results for the Second Quarter Ended June 30, 2006.SANTA MONICA Santa Monica (săn`tə mŏn`ĭkə), city (1990 pop. 86,905), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1886. Tourism and retailing are important, and the city has motion-picture, biotechnology, and software industries. , Calif. -- Genius Products Genius Products (also known as Genius Entertainment) is a home video company based in Santa Monica, California. On December 5, 2005, Genius Products, Inc. announced a distribution joint venture with The Weinstein Company called Genius Products, LLC,[1], and , Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : GNPI GNPI Gross Net Premium Income ): --Generates Record Second Quarter 2006 Gross Revenues of $102 Million - 174% increase over the first quarter 2006 gross revenues of $37 million and 217% increase over the full year 2005 gross revenues of $32 million --Achieves second quarter non-GAAP adjusted net income of $0.5 million Genius Products, Inc. (OTCBB: GNPI) today announced results for its second quarter ended June June: see month. 30, 2006. As previously announced, Genius Products, Inc. completed its strategic transaction with The Weinstein Weinstein is a German surname meaning wine stone and may refer to:
TWC Time-Warner Cable TWC Texas Workforce Commission (also seen as TWFC) TWC The Wellness Community TWC The Washington Center TWC Teachers & Writers Collaborative TWC Trustworthy Computing ") on July July: see month. 21, 2006. The quarterly results included the releases of multiple TWC theatrical films on DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. including "Hoodwinked", "Doogal", "Transamerica", "Wolf Creek Wolf Creek may refer to several places in the United States: Cities
Second Quarter Highlights Financial Results Second quarter results reflect a significant improvement in revenues and gross profit largely as a result of releases from the TWC relationship and early success from the Company's recently announced new content relationships. Gross revenues increased to $102.4 million for the second quarter of 2006 from $5.2 million during the comparable period last year. Sales returns, discounts and allowances were $27.3 million for the second quarter of 2006, compared to $1.3 million for the second quarter of 2005. This increase coincides with the increase in overall gross revenues. Sales returns, discounts and allowances increased marginally to 26.7% of gross revenues in the second quarter of 2006 compared to 24.6% of gross revenues for the comparable period last year and decreased compared to 30.9% of gross revenues for the full year 2005. The increase in returns related to management's cautious approach to avoid out of stocks on the first few TWC video releases. The Company continued to enhance its new inventory management system during the second quarter of 2006 which resulted in noticeable improvements in forecasting returns related to the most recent releases, and the Company expects continued improvements in sales forecasting Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. and monitoring going forward. Gross profit for the second quarter 2006 improved to $14.8 million or 19.7% of net revenues, compared to a gross loss of approximately $1.7 million for the comparable period last year. The improvement was primarily due to higher net revenues coupled with the culmination of the shift away from the historic Genius Products value business. Sales and marketing expenses, which are primarily recoupable expenses, increased to $11.0 million in the second quarter of 2006 from $0.6 million in the comparable period last year primarily due to the increased level of expenses incurred in connection with releasing TWC titles. General and administrative expenses increased to $7.4 million in the second quarter 2006 compared to $2.6 million in the second quarter 2005 primarily due to one-time non-recurring general and administrative expenses of $3.4 million associated with the TWC transaction and the resulting ramp-up of our infrastructure. Excluding these expenses and non-cash compensation expense related to rule FAS 123R of $0.7 million, G&A totaled $3.3 million in the second quarter 2006 or 4.3% of net revenues. For the second quarter of 2006, net loss was $4.0 million or $0.07 per share compared to a net loss of $5.3 million or $0.13 per share for the second quarter of 2005. The second quarter 2006 net loss included non-cash compensation expense related to FAS 123R of $0.7 million, depreciation, amortization, and taxes totaling $0.6 million, net interest income of $0.2 million and one-time non-recurring general and administrative expenses of $3.4 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the TWC transaction and the resulting ramp-up of infrastructure. Excluding these items, the Company recorded adjusted net income on a non-GAAP basis of $0.5 million or $0.01 per share for the second quarter 2006. A reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net loss to adjusted net income, a non-GAAP measure, is provided in the attached tables. The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) measures, are useful because that information is an appropriate measure for evaluating the Company's operating performance. Internally, the company uses this non-GAAP information as an indicator of business performance, and evaluates management's effectiveness with specific reference to these indicators. These measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. Strategic Achievements --Announced the addition of several major content brands in sports, family and genre categories including: --ESPN Home Entertainment - Genius entered into an exclusive distribution agreement with ESPN ESPN Entertainment and Sports Programming Network and through Genius Products, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (the "Distributor") is expected to distribute a minimum of 15 titles per year through 2011 including ESPN Original Entertainment titles such as "3", "Four Minutes", "The Junction Boys The Junction Boys is the name given to the “survivors” of Paul “Bear” Bryant’s 10 day summer football camp in Junction, Texas beginning September 1, 1954. ", "Playmakers Playmakers is a TV series on ESPN that depicted the lives of the players on a fictional professional football team. The show starred Omar Gooding, Marcello Thedford, Christopher Wiehl, Jason Matthew Smith, Russell Hornsby and Tony Denison. ", "Through the Fire", "Tilt", and the upcoming "Ali Rap", along with major branded programs from SportsCentury, ESPN Classic, ESPN Outdoors, X Games X Games Sports medicine The official Olympics of 'extreme sports' sponsored by ESPN, held annually during the summer. See Extreme sports. , ABC ABC in full American Broadcasting Co. Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. Sports, and college sports titles (please refer to the 8-K filed on July 11, 2006) --Classic Media - Genius acquired the rights at this year's Tribeca Film Festival to distribute "Lassie Lassie canine star of popular film and TV series. [TV: Terrace, II, 13–15; Radio: Buxton, 135] See : Dogs " on DVD. Roadside Attractions A roadside attraction is a feature along the side of a road, that is frequently advertised with billboards to attract tourists. In general, these are places one might stop on the way to somewhere else, rather than being a final or primary destination in and of themselves. and Samuel Goldwyn Films are expected to release the new critically acclaimed ac·claim v. ac·claimed, ac·claim·ing, ac·claims v.tr. 1. To praise enthusiastically and often publicly; applaud. See Synonyms at praise. 2. feature film, Lassie in theaters on September 1. Written and directed by BAFTA Baf´ta n. 1. A coarse stuff, usually of cotton, originally made in India. Also, an imitation of this fabric made for export. Award-winner, Charles Sturridge ("Fairytale", "Longitude longitude (lŏn`jĭt  d'), angular distance on the earth's surface measured along any latitude line such as the equator east or west of the prime meridian. ", "Shackelton"),
"Lassie" has been heralded as "a new classic" by the
BBC BBCin full British Broadcasting Corp. Publicly financed broadcasting system in Britain. A private company at its founding in 1922, it was replaced by a public corporation under royal charter in 1927. . --Dragon Dynasty An application development system for enterprise client/server environments from Dynasty Technologies, Inc., Houston, TX (www.dynasty.com). Introduced in 1993, it is a repository-driven system that supports Windows, Mac and Motif clients and NT, OS/2 and major Unix servers and databases. - Genius, through the Distributor, will manage all home video output of The Weinstein Company's dynamic new label, Dragon dragon, mythical beast usually represented as a huge, winged, fire-breathing reptile. For centuries the dragon has been prominent in the folklore of many peoples; thus, its physical characteristics vary greatly and include combinations of numerous animals. Dynasty, under which all The Weinstein Company's Asian titles are expected to be released, including "Ong Bak 2", "The Protector protector /pro·tec·tor/ (-tek´ter) a substance in a catalyst that prolongs the rate of activity in the latter. " (aka "Tom Yum Tom yum (Thai: ต้มยำ, IPA: [tôm jām], also sometimes romanized as tom yam or dom yam) is a soup originating from Thailand. Goong"), "Born to Fight", "Kill Zone", "Seven Swords" and "Dragon Squad". The Weinstein Company's Dragon Dynasty library already includes films starring some of Asia's hottest actors such as Jackie Chan Jackie Chan SBS, (born April 7, 1954), also known as Sing Lung in Cantonese (Traditional Chinese: 成龍; Simplified Chinese: 成龙 , Jet Li, Stephen Chow Stephen Chow Sing-Chi, (also know as Stephen Chiau) (Traditional Chinese: 周星馳; Simplified Chinese: 周星驰 , Donnie Yen, Michelle Yeoh Dato' Michelle Yeoh Choo-Kheng (Traditional Chinese: 楊紫瓊; Simplified Chinese: 杨紫琼; Pinyin: and Sammo Hung Sammo Hung Kam-Bo (Traditional Chinese: 洪金寶; Simplified Chinese: 洪金宝; Pinyin: Hóng Jīnbǎo , as well as titles from legendary filmmakers John Woo For other uses, see . John Woo Yu-Sen (Chinese: 吳宇森; Pinyin: Wú Yǔsēn , Yuen Woo-ping
--BKN Home Entertainment Ltd - A library of 16 classic children's properties; the slate expected to be released on DVD in 2006 and 2007 including: "A Christmas Carol", "Ali Baba Ali Baba 40 thieves concealed in oil jars. [Arab. Lit.: Arabian Nights] See : Concealment Ali Baba uses magic to find thieves’ storehouse of booty. [Arab. Lit. and the Forty Thieves For the 19th century New York street gang, see . Forty Thieves is a solitaire card game. It is quite difficult to win, and relies mostly on skill. It is also known as Napoleon at Saint Helena, Roosevelt at San Juan, Big Forty and Le Cadran. " and "Kong Return to the Jungle jungle [Hindustani jangal=desert, forest; from Skt. jangala=wasteland, uncultivated land], densest form of tropical forest (usually second growth or later) found throughout tropical lowland regions. ". Operational Achievements and Outlook --Closed the strategic transaction with TWC on July 21, 2006 providing Genius Products, LLC with the exclusive U.S. home video distribution rights for virtually all TWC's filmed entertainment and direct-to-video product (please refer to the 8-K filed on July 26, 2006) --Continued enhancements to the new retail inventory management system to advance the Company's vendor managed inventory Vendor Managed Inventory (VMI) is a family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's program --Reorganized and enhanced the Company organizational infrastructure to manage the significant growth in business from the TWC relationship and other new content relationships --Expanded the Board of Directors of Genius Products, Inc. from four to six members with the addition of two TWC executives, Larry Madden mad·den v. mad·dened, mad·den·ing, mad·dens v.tr. 1. To make angry; irritate. 2. To drive insane. v.intr. To become infuriated. , Executive Vice President and CFO See Chief Financial Officer. of TWC, and Irwin Reiter, Executive Vice President of Accounting and Financial Reporting of TWC --In the third quarter, the Company expects to release, through the Distributor, four TWC theatrical titles on DVD: "The Matador matador In bullfighting, the principal performer, who works the capes and attempts to dispatch the bull with a sword thrust between the shoulder blades. Most of the techniques used by modern matadors were established in the 1910s by Juan Belmonte (b. 1894–d. ", "The Libertine lib·er·tine n. 1. One who acts without moral restraint; a dissolute person. 2. One who defies established religious precepts; a freethinker. adj. Morally unrestrained; dissolute. ", "Scary scar·y adj. scar·i·er, scar·i·est 1. Causing fright or alarm. 2. Easily scared; very timid. scar Movie 4" and "Lucky Number Slevin", and 9 IFC (Internet Foundation Classes) A class library from Netscape that provides an application framework and graphical user interface (GUI) routines for Java programmers. IFC was later made part of the Java Foundation Classes (JFC). See JFC, AFC and AWT. See also ICF. (Independent Film Channel) theatrical titles on DVD including, "Manderlay", "CSA (1) (Canadian Standards Association, Toronto, Ontario, www.csa.ca) A standards-defining organization founded in 1919. It is involved in many industries, including electronics, communications and information technology. : The Confederate States of America Confederate States of America: see Confederacy. Confederate States of America or Confederacy Government of the 11 Southern states that seceded from the Union in 1860–61 until its defeat in the American Civil War in 1865. ", "Sorry Haters" and "Lonesome lone·some adj. 1. a. Dejected because of a lack of companionship. See Synonyms at alone. b. Producing such dejection: a lonesome hour at the bar. 2. Jim" --The Company, through the Distributor, expects to release two direct-to-video titles during the third quarter of 2006 including "Kill Zone", a Dragon Dynasty title and Bridezillas "We are now among the fast growing companies in the entertainment industry. With the closing of The Weinstein Company transaction and the exclusive ESPN distribution agreement in place, we have successfully positioned Genius Products, LLC as a leading home entertainment distributor in the industry. Many content providers are re-thinking how to more effectively distribute home entertainment content to the public, and we believe we offer a premiere solution. With our strong management team, proven infrastructure and solid retail relationships, we remain focused on adding many additional strategic branded entertainment Branded Entertainment, also known as Branded content or Advertainment, is the combination of an audio-visual program (TV, radio, podcast, etc.) and a brand. It can be initiated either by the brand or by the broadcaster. partnerships in the near future," stated Stephen K. Bannon, Chairman. "This is an historic moment for our company and the beginning of what we hope will be sustained profitable growth. The majority of our focus has been devoted to the build-out of our infrastructure, the successful distribution of TWC content and the expansion of our product portfolio," commented Trevor Drinkwater, President and Chief Executive Officer. "Within the first 100 days of our operational relationship with TWC commencing with the DVD release of "Derailed" on March 21 to the end of this quarter, we have achieved two #1 DVD releases: "Derailed" the number one rental title in its debut week and "Hoodwinked", the #1 sell-thru DVD in its debut week, and added a number of new content providers including ESPN, Classic Media and BKN BKN Broken (aviation - very cloudy) . We also announced the launch of the Dragon Dynasty brand in partnership with TWC. Our ability to attract these premium content providers validates the thesis of our transaction with TWC." "Genius is beginning to experience the potential operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. our business model is capable of achieving. This is clearly demonstrated by the adjusted net income of $0.5 million for the second quarter 2006," remarked John Mueller John E. Mueller (born 1937, Saint Paul, Minnesota) is a political scientist in the field of international relations as well as a scholar of the history of dance. He is recognized for his ideas concerning "the banality of ethnic war" [1] , Executive Vice President and Chief Financial Officer. Beginning with the Company's Form 10-Q Form 10-Q See 10-Q. for the third quarter of 2006, the Company will account for its investment in Genius Products LLC (the "Distributor") on its financial statements using the equity method of accounting. Under the equity method of accounting, only its investment in and amounts due to and from the equity investee will be included in its consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . On its statement of operations See Income statement. , the Company will record its 30% share of the Distributor's profit or loss as equity in net earnings (losses) from investee. Commencing after July 21, the closing date of the TWC transaction, substantially all of the Company's results from its own business and from releasing TWC product will be reflected in the financial statements of the Distributor. The Company will include separate quarterly and audited annual financial statements of the Distributor in a note to its financial statements (for additional information please review our quarterly report on Form 10-Q filed on August 14, 2006). The Company will host an investor conference call to discuss the results today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Investors are invited to listen to Genius Products' conference call by dialing 866-831-6234 and using the passcode 56016164. International callers can dial 617-213-8854 and enter the same passcode. There will also be a simultaneous webcast available at www.geniusproducts.com. A replay of the call will be available until August 28 and can be accessed by dialing 888-286-8010 from the U.S., or 617-801-6888 for international callers, and using the passcode 81983074. A replay webcast will also be available at www.geniusproducts.com. About Genius Products, Inc. Genius Products, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). BB:GNPI), along with The Weinstein Company, jointly own Genius Products, LLC, a leading independent home-entertainment distribution company that produces, licenses, and distributes a valuable library of motion pictures, television programming, family, lifestyle and trend entertainment on DVD and other emerging platforms through its expansive network of retailers throughout the U.S. Genius handles the distribution, marketing and sales for such brands as Asia Extreme(TM), Baby Genius(R), Dragon Dynasty(TM), Dimension Films, ESPN(R), IFC(R), NBC News NBC News (along with NBC News + HD) is the news division of American television network NBC, a part of NBC Universal, which is majority-owned by General Electric. Its current president is Steve Capus. It is the top-rated broadcast news division and has been for a decade. (R), Sundance Channel Home Entertainment(R), Wellspring well·spring n. 1. The source of a stream or spring. 2. A source: a wellspring of ideas. wellspring Noun (TM) and The Weinstein Company(R). Use of Non-GAAP Financial Information Adjusted net income as presented in this press release and management's audio presentation is a non-GAAP financial measure that represents GAAP net income excluding the effects of a variety of charges and credits that are required to be included in a GAAP presentation, including non-cash compensation expense related to FAS 123R, depreciation, amortization, taxes, interest income, interest expense, TWC transaction-related expenses including legal, accounting and tax advisory fees and one-time expenses associated with the ramp-up of operations including recruitment, consulting, software and occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal . Adjusted net income may differ from non-GAAP measures used by other companies and is not a measurement under GAAP. Management believes the adjusted net income presentation enhances an overall understanding of Genius Products' financial performance from operations, and it is used by management for that purpose. The Company believes adjusted net income and per share adjusted net income provide useful information to investors about the Company's financial performance because it eliminates the effects of period to period changes in non-cash compensation expenses, depreciation, amortization, interest income, interest expense, taxes and non-recurring expenses associated with the TWC transaction and the resulting ramp-up of operations, all of which the Company believes are not reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of the underlying performance of its ongoing operations. Measures similar to adjusted net income are also widely used by the Company and other companies in the industry to evaluate and price potential acquisition candidates. In addition, the Company presents these measures because the Company believes they are frequently used by analysts, investors and other interested parties in evaluating companies such as Genius Products. Since Genius Products has historically reported non-GAAP results to the investment community, management believes the inclusion of these non-GAAP financial measures provides consistency in its financial reporting. There are limitations inherent in non-GAAP financial measures such as adjusted net income in that they exclude a variety of charges and credits that are required to be included in a GAAP presentation, and do not therefore present the full measure of Genius Products recorded costs against its revenue. Management compensates for these limitations in non-GAAP measures by also evaluating performance based on traditional GAAP financial measures. Accordingly, investors should consider these non-GAAP results together with GAAP results, rather than as an alternative to GAAP basis financial measures. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Except for historical matters contained herein, the matters discussed in this press release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . The forward-looking statements reflect assumptions and involve risks and uncertainties that may affect Genius Products' business, forecasts, projections and prospects, and cause actual results to differ materially from those in these forward-looking statements. These forward-looking statements include, but are not limited to, statements relating to our profitability and revenues in 2006 or beyond, increased sales volume and improved profitability, our anticipated growth of revenues, our ability to forecast returns, our ability to successfully position ourselves as a leading home entertainment distributor, the number of anticipated releases per year, the anticipated timing and financial performance of new releases including "3", "Four Minutes", "The Junction Boys", "Playmakers", "Through the Fire", "Tilt", "Ali Rap", including releases from SportsCentury, ESPN Classic, ESPN Outdoors, X Games, ABC Sports, and college sports titles, "Lassie", "Ong Bak 2", "The Protector", "Born to Fight", "Kill Zone", "Seven Swords", Dragon Squad", BKN titles such as "Christmas Carol", "Ali Baba and the Forty Thieves" and "Kong Return to the Jungle" and TWC titles such as "The Matador", "The Libertine", "Lucky Number Slevin", "Feast feast, commemorative banquet symbolizing communal unity. Generally associated with primitive rituals and later with religious practices, feasts may also commemorate such events as births, marriages, harvests, and deaths. ", "Clerks II", and "Pulse" and any other statements relating to such new release that are not historical statements of fact. Actual results could vary for many reasons, including but not limited to, our ability to continue to attract and keep experienced management, acquire and keep valuable content or expand the distribution partnership, the unpredictability of audience demand, the success of TWC titles at box office and the popularity of our titles on DVD, especially TWC and ESPN titles, our ability to perform under the terms of our agreement with our content providers, especially with TWC and ESPN, our ability to continue to manage our significant growth, the effect of technological change and the availability of alternative forms of entertainment, our ability to maximize our operating leverage. Other such risks and uncertainties include the matters described in Genius Products' filings with the Securities and Exchange Commission. Genius Products assumes no obligation to update any forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date of this press release.
Genius Products, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
2006 2005
------------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $43,489,769 $30,597,164
Accounts receivable, net of allowance for
doubtful accounts of $942,361 (June 30,
2006 - $1,238,061) and sales returns of
$5,966,428 (June 30, 2006 - $19,658,690) 48,457,391 2,406,658
Inventories, net 18,564,106 5,567,953
Prepaid expenses 446,718 703,875
Notes receivable, related party - 750,000
------------- ------------
Total current assets 110,957,984 40,025,650
Restricted cash 303,353 -
Property and equipment, net 736,434 396,358
Film library, net of accumulated
amortization of $4,027,308 and $4,850,312 22,926,070 19,727,179
Notes receivable, related party 1,712,353 1,712,353
Goodwill 14,487,917 14,487,917
Deposits and other 206,583 15,545
------------- ------------
Total assets $151,330,694 $76,365,002
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,591,524 $9,242,560
Notes payable 200,000 5,379,296
Remittance due to Licensor 61,674,457 -
Accrued expenses 20,346,505 3,307,893
Deferred revenue 10,549,480 -
Customer deposits 189,423 189,423
Debentures payable - 50,750
Redeemable common stock 424,121 414,471
------------- ------------
Total current liabilities 100,975,510 18,584,393
Deferred tax liability 1,380,338 1,380,338
Deferred gain, related party 1,148,907 1,212,353
------------- ------------
Total liabilities 103,504,755 21,177,084
------------- ------------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.0001 par value;
10,000,000 shares authorized; no shares
outstanding - -
Common stock, $.0001 par value; 100,000,000
shares authorized; 60,438,154 and 61,002,626
shares outstanding 6,100 6,044
Additional paid-in capital 96,211,014 93,919,755
Accumulated deficit (48,391,175) (38,737,881)
------------- ------------
Total stockholders' equity 47,825,939 55,187,918
------------- ------------
Total liabilities and stockholders'
equity $151,330,694 $76,365,002
============= ============
Genius Products, Inc. and Subsidiaries
Consolidated Statement of Operations
Three Months Ended June 30, 2006 and 2005
Three Months Ended June 30,
Adjustments
to 2006
2006 GAAP Non-GAAP Non-GAAP
------------- ----------- -------------
Revenues:
Video and DVD $101,925,551 $- $101,925,551
Theatrical 138,291 - 138,291
Audio 244,501 - 244,501
Royalties, licensing and
other 53,877 - 53,877
------------- ----------- -------------
Gross revenues 102,362,220 - 102,362,220
Sales returns, discounts and
allowances (27,349,625) - (27,349,625)
------------- ----------- -------------
Net revenues 75,012,595 - 75,012,595
Costs and expenses
Cost of revenues:
Video and DVD 59,518,611 - 59,518,611
Theatrical - - -
Audio 181,123 - 181,123
Amortization of production
masters and film library 428,623 (428,623) -
Warehouse expense and other 78,844 - 78,844
------------- ----------- -------------
Total cost of revenues 60,207,201 (428,623) 59,778,578
------------- ----------- -------------
Gross profit (loss) 14,805,394 428,623 15,234,017
Operating expenses (income):
Product development 504,471 - 504,471
Sales and marketing 11,025,945 - 11,025,945
General and administrative 7,400,260 (4,197,049) 3,203,211
Gain on sale, related party (23,179) (23,179)
------------- ----------- -------------
Total operating expenses 18,907,497 (4,197,049) 14,710,448
------------- ----------- -------------
Income (loss) from
operations (4,102,103) 4,625,672 523,569
Interest expense (8,315) 8,315 -
Interest income and other 237,887 (237,887) -
------------- ----------- -------------
Loss before provision for
income taxes (3,872,531) 4,396,100 523,569
Provision for income taxes 107,000 (107,000) -
------------- ----------- -------------
Net income (loss) $(3,979,531) $4,503,100 $523,569
============= =========== =============
Basic and diluted net loss
per share $(0.07) $0.01
============= =========== =============
Basic and diluted weighted
average shares 60,797,241 60,797,241
============= =========== =============
Genius Products, Inc. and Subsidiaries
Consolidated Statement of Operations
Three Months Ended June 30, 2006 and 2005
Adjustments Restated
Restated to Non- 2005
2005 GAAP GAAP Non-GAAP
------------ ----------- ------------
Revenues:
Video and DVD $3,797,130 $- $3,797,130
Theatrical 467,469 - 467,469
Audio 494,707 - 494,707
Royalties, licensing and
other 429,803 - 429,803
------------ ----------- ------------
Gross revenues 5,189,109 - 5,189,109
Sales returns, discounts and
allowances (1,276,659) - (1,276,659)
------------ ----------- ------------
Net revenues 3,912,450 - 3,912,450
Costs and expenses
Cost of revenues:
Video and DVD 2,751,420 - 2,751,420
Theatrical 1,155,663 - 1,155,663
Audio 699,600 - 699,600
Amortization of production
masters and film library 1,036,801 - 1,036,801
Warehouse expense and other - - -
------------ ----------- ------------
Total cost of revenues 5,643,484 - 5,643,484
------------ ----------- ------------
Gross profit (loss) (1,731,034) - (1,731,034)
Operating expenses (income):
Product development 216,839 - 216,839
Sales and marketing 631,194 - 631,194
General and administrative 2,632,162 - 2,632,162
Gain on sale, related party - - -
------------ ----------- ------------
Total operating expenses 3,480,195 - 3,480,195
------------ ----------- ------------
Income (loss) from operations (5,211,229) - (5,211,229)
Interest expense (76,948) (76,948)
Interest income and other - -
------------ ----------- ------------
Loss before provision for
income taxes (5,288,177) - (5,288,177)
Provision for income taxes 8,175 - 8,175
------------ ----------- ------------
Net income (loss) $(5,296,352) $- $(5,296,352)
============ =========== ============
Basic and diluted net loss per
share $(0.13) $(0.13)
============ =========== ============
Basic and diluted weighted
average shares 41,754,657 41,754,657
============ =========== ============
We believe that certain non-GAAP measures, when processed in
conjunction with comparable GAAP measures, are useful because that
information is an appropriate measure for evaluating our operating
performance. Internally, we use this non-GAAP information as an
indicator of business performance, and evaluate management's
effectiveness with specific reference to this indicator. These
measures should be considered an addition to, not a substitute for, or
superior to, measures of financial performance prepared in accordance
with GAAP.
Genius Products, Inc. and Subsidiaries
Reconciliation of GAAP to Non- GAAP Measures
Three Months Ended June 30, 2006
Net income
Net income (loss) per
(loss) share
---------------- ----------------
GAAP basis measures $(3,979,531) $(0.07)
Transaction costs (1) 2,356,589 0.04
Severance and outside
consulting (2) 1,052,665 0.02
FAS123R option compensation
expense (3) 730,210 0.01
Amortization of film library 428,623 0.01
Depreciation and amortization 57,585 0.00
Interest, net (229,572) (0.00)
Provision for income taxes 107,000 0.00
---------------- ----------------
Total adjustments 4,503,100 0.07
---------------- ----------------
Adjusted net income (non-GAAP) $523,569 $0.01
================ ================
(1) Transaction costs: Operating results for the three months
ended June 30, 2006 were affected by the increased investment banking
fees, legal fees, and audit fees related to the transaction announced
with The Weinstein Company.
(2) Severance and outside consulting: Operating results for the
three months ended June 30, 2006 included severance charges and
non-recurring charges from outside consultants primarily related to
the increased sales volume anticipated as part of the new relationship
with The Weinstein Company.
(3) FAS123R option compensation expense: Operating results for the
three months ended June 30, 2006 included share-based compensation
related to options granted to employees.
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