I am back. Sorry it took so long today. Trying to catch up.
Genesis Media Group (GNNX)
Present at Meeting
Don Logan, CEO, Genesis Media Group, Inc.
Carl Conte, Genesis Media Group, Inc.
Tony Nichols with Dutch Associates, Inc.
Dennis Jacobson (telcom contract portion)
Let me start off by saying the information below is my true and honest opinion regarding Genesis Media Group. The information was given directly to me from the people listed above. Since I signed a three page long Confidentiality and Non-disclosure Agreement, I will have the specific approval from Genesis prior to posting. I will also share my thoughts and observations about the company and the players. I will be as factual and unemotional about these guys as possible. I have to tell you up front, It was hard not to come away from Genesis a little pumped.
Regarding the contracts, which is, in my opinion, one of the main reasons I went there. I looked at all of the contracts (did not read every word). I was told by Tony Nichols that the Form 10 will have all pertinent information regarding the contracts. Other than the possibility of fraud (wouldn't they have to be pretty freak'in stupid?), the contracts are there, signed and fully executed. Period.
When I first arrived I was not very impressed (sorry Don). I guess I expected a nicer building and interior improvements. Although a nice area of the city, and well located, definitely not a class "A" building. Low rent I guess. On the plus side though, good for the bottom line. Everyone I met was wearing a suit and looked very professional.
While meeting with Don, he was in and out a couple of times on the phone working on deals. The guy is definitely a deal maker. Not a bullshit kind of guy. Just a deal maker.
The sound stage was just a big ass room with soundproofing. It had two back sides (versus three). The guy that gave me the tour said it was not a problem. I think he said they have two other stages. There were also offices and additional rooms for the use of the production companies. They just finished taking down the set for the filming of Halloween. Yum! Jamie Lee Curtis! OK, where was I? The sound stages are rented out on a deal by deal basis. Above the large stage is an adjoining room from the sound studio. When the new digital equipment is installed, a new room will allow the production companies to edit and have direct and full control over the sound and stuff (not 100% up on this).
The sound studio will be equipped with all digital equipment from Thompson. Don mentioned they will be getting two cameras ($50,000 each), from Thompson at no charge. Genesis will rent them out for $800.00 per day. Also, they are a dealer for Thompson, so they will bring prospects to Genesis to demo the equipment. If they sell, Genesis gets paid. While I am thinking of it, Don knows how to work every angle.
I did not ask all of the questions that you guys gave me. I did the best I could. I got the impression that there was nothing on the list they would not have answered. They all were very open and helpful. Although, Tony should be an accountant (maybe he is). Very conservative on the numbers and would not let the others say much about the future. He was kind of pissing me off, but I guess its his job. I was with these guys for over three hours.
Some of the things that I did not think too much about before my meeting:
James Dean Diaries
I did not think this was a big deal. It is. This could potentially be a very big money maker for them. Just today, Don increased his split from 30% up to 50% with his partner on the James Dean Diaries. As most of you know, it is 60% finished. Will finish the 1st of July. One of the scenes requires winter (snow and stuff). They will do this with their new digital equipment. Also, I don't know if you guys have seen commercials with dead stars (ie John Wayne, Fred Astaire, Humpfrey Bogart), well there is a possibility they will have a scene with the narrator (big star) shaking hands with James Dean. This will also be done with the new equipment. Very cool.
I reviewed the contract with Tin Type for the documentary. Signed deal.
There may be other possibilities for additional revenues generated from the diaries. James Dean currently generates over 400 million dollars a year from memorabilia (not to Genesis).
On one deal with another country, they have already made back their costs on making the diaries. In fact, I think they said they were up 250K once the project is completed.
They will also market and distribute the video and sell to other countries.
Keep in mind, not only will this documentary provide substantial revenues, the exposure and credibility it will provide Genesis will be priceless. Can you imagine if they were to do a major motion picture?
Some items I was a little disappointed on:
The production studio had no equipment in it. They just moved out the analog stuff. I know because you could still see the marks on the carpet. Their web site talks about the digital studio and it will not be up and running for another three weeks. I thought it was already in.
These guys are into so much and the telcom stuff is so complicated, I would have liked to have had a better understanding of it.
I did not fully understand the Auto-Plus/Dealer Direct Program and the Elite Sports Alliance.
Questions
I could not ask every single question, but here is what I did get (keep in mind a lot of the questions I listed had been answered before):
Why it was merged with HST, etc.
Done simply to obtain a public vehicle without all the hassles. HST was basically a dormant shell (with some baggage).
Did they have a difficult period? why, and how to overcome it.
I gathered the most difficult time was when they had to clean up the mess from the other company (HST). Don says it is clean now.
Does GNNX generate sufficient cash internally to fund business needs or will they go to the outside credit markets to raise cash, when needed?
Currently they have no need. If and when they do, they are not sure what approach they will take.
Why their stock cannot hold up over $1.50 - feelings/concerns about their stock price
Need to get off the BB exchange. Take care of the MM and their shorts (did not say specifically, but they do have a plan) Revenues need to be there. Not press releases. Don said several times he was almost reluctant to do press releases (good thing/bad thing). He does not want the rate of increase like the recent jump due to news. Wants a steady rise. Which he will get when they get off BB. More about this later. Also, the day last week we had our big drop is the same day Jay left.
How do the telephone contracts work?
The bottom line is that Genesis is a marketing firm. They do not have equipment per se. A partially owned subsidiary, GenX, leases the switches and equipment. They buy the time from the large telcos and resell it. They make the spread. Big numbers!! The clients provide Genesis with a large deposit and provide a Letter of Credit from their bank to guarantee payment to Genesis. The agreement states that after a very short time of non-payment, Genesis can go to the LC. Genesis gets paid on a weekly basis. I reviewed all of the contracts (not word for word). Keep in mind, the amounts in the press releases are minimums. They can go much higher. Also, the contract states if the client does not take all of the minimum time in the contract, they will be billed a certain amount as a penalty. Can't say how much, but it looked to me that Genesis is almost better off if they don't use the time. I also have the breakdown of the projected income stream for each of the contracts.
Are telephone lines to be installed (or what other infrastructure might be necessary)?
They are currently under negotiations for their own fiber running from Mexico to LA, not much in the way of equipment.
Can he show you the receipts of income for the first installments already paid?
The money from the contracts are just now starting. Partial in the second quarter and it really wont make a dramatic jump until the third quarter.
How are subscribers achieved?
One of the main guys, Dennis Jacobson has been in the long distance business for 15 years. He has the relationships for the contracts done and working on.
How many middle men are there in the telecom contracts?
They are different. Mexico has the most at two. The others have one. Keep in mind that there may not be a "middle man" but there are costs like commissions and platform charges. They are working on moving up a notch (with switches) to get a lower price on the bulk minutes.
What are anticipated net revs off of the various contracts (each one individually)? What are the telecom contract margins and business risks
From the current 200 million in contracts, they will net 5 million. I did get a breakdown on each contract by month for the year. See spreadsheet. Regarding risk, they seem to have covered their bases with the Letter of Credit. But, hey who knows? Shit happens. Oh! I almost forgot. Carl Conte said that even if they did lose a contract, they have the ability to put another company in the deal.
What stands in their way?
Too much, too soon. They could have signed many more contracts to date. They said they are turning down business because they want to "crawl before they run".
How many contracts do they expect to sign? including those on the table.
No comment. How many continents are there? (my question)
Why the partner names need to be protected?
I think this question means the telcom clients. It is a very competitive business. If it were released, the companies selling the bulk minutes would have to explain why they need a small company like Genesis to get the business. And other competitors of Genesis would go after them, I guess. I can just relate it to my business. I tell people what they need to know. No more. No less.
Projection of this quarter and year end.
Not that anyone said. But I think if they did, the accumulated EPS would probably look something like this:
1st Quarter .02
2nd Quarter .10
3rd Quarter .25
4th Quarter .50
This is if no other business came in. Like they did not sign any other contracts in any other countries in Asia or the Middle East or domestic (which is very competitive with low margins)
Might they anticipate a buyout?
They want to build the company bigger with more established accounts and on a different exchange. Although they did not say. What board has mostly entertainment type companies? What about Genesis buying a foreign telco?
Logan - In your own words, what is it within you that provides you the drive that is required to lead a company into the future?
I did not ask this specific question but my guess is the guy is a deal junkie.
In the interest of the company's shareholders, what can you offer them to maintain their level of confidence in the company's future?
Did not ask this.
How are they going to run two different divisions? how to integrate them to achieve a
high margin business?
Did not seem to be a problem. These guys have some great ideas and possibilities.
Any specific plan to move GNNX to NASDQ?
What requirements have you NOT fulfilled to get on the large NASDAQ exchange? (besides share price)
Like I asked before, what is the exchange that most entertainment companies go on?
To break thru MMs, they need to do a lot of campaign. Are they aware of MMs shorting? how are they going to deal with it?
Yes, they are very aware of the shorting and know exactly the amounts and who is doing it. They would not tell me what they are going to do to shake the MMs out.
Will any more shares be issued for any reason?
Only to pick up more talent.
Is the publication of the Form 10 still on track?
Is Friday soon enough?
At what dates do the RESTRICTED shares (not in the float) start becoming unrestricted. For example, they just issued 10M this year.... when do those become unrestricted and fall back into the float.
Did not understand the response. Said it would fall under the 144 rules. Help.
Genesis Media commercial on FOX around 5 pm today (Sunday).
They did not know specifically. If it was Morton Downey Jr. pitching the Auto Plus Dealer Direct Program, it was them. By the way, Don mentioned he has worked on putting this deal together for over three years.
Although you are very responsive to email, would someone in the company respond to the SI thread from time to time?
They are very aware of SI. Once a week staff puts together a summary of the important posts and general thoughts and gives it to Don Logan. That is why we got the "open door" letter. He will not come on-line to chat or look at the thread on a regular basis. Too busy. Carl told me 16 hour days. They did express an interest in having some kind of conduit to our group. Maybe the leadership of this thread can come up with a way to do this.
Could u also talk to other people in the co. beside CEO. say, CFO, workers, and
etc. are they satisfied with their work? how long have they worked there? problems?
these little things may help u get the morale in this co.
Did not get a chance to do this. Almost missed my flight out. The people I did see seemed happy. The receptionist was very nice (and attractive).
It looks like they will handle the PR in-house.
I also asked if they had plans to box up some music from the library and market on the Internet.
You never know where the internet will go. Web design. Marketing for clients. Distribution. Lots of options. You should see the list of artists.
They did say they have the Frank Sinatra recordings that they will market and distribute when the time is right. Which will probably be soon.
Also, there is a possibility that the Glassmaster contract will be increased from one million to four million.
I think that is about it. After writing this, I feel a little like a cheerleader, which I do not want to be (skinny legs). If anyone thinks I am hyping this stock, too bad. I really went over there to see for myself what was going on. If I could let you guys know my thoughts and it helped you, great. To be honest, I was getting a little nervous before the trip. I have been doubling up on my position as it has gone down. I have way more in this stock than I wanted. Before I went I told a couple of people on this thread (privately) that I would not buy or sell based on my trip. However, I do not think anyone would mind if I bought more (well, except my wife). You guys do what you think is right. If this goes bad, I do not want anyone to be upset with me. I use my real name on this thread and in my business my rep is all I have and I plan on being on SI for a long time.
Hope this helps
Thanks,
Dan Wesson
PS to Bill L - Sorry I was so brief with you when you called, but it was early in the meeting and I did not know how long I would have Don in the room. I did not have the time for lobster. I did get to go to IN n OUT. For those of you who have never had the privilege of eating a double-double cheeseburger at the IN n OUT, you don't know what you are missing.
KEEP IN MIND THAT I HAD TO SIGN A CONFIDENTIALITY AGREEMENT, SO I MAY NOT BE ABLE TO ANSWER YOUR QUESTIONS. What you see here was approved by Genesis Media Group.
Disclaimer (short version) - Do your own due diligence. I do not warranty or guarantee the above information (except the cheeseburger was really good). If you lose money, its not my fault. |
