Atlanta, GA 6/29/12 (StreetBeat) -- 2012 has been tough on many small cap companies –as well as many big board plays – but a down market can provide value opportunities. After reporting revenue that slid more than 20 percent in the first quarter of 2012 as compared to the same period in 2011, Genius Brands International, Inc. (OTCBB:GNUS), a developer and marketer of entertainment products including the award winning Baby Genius® line of music and education-based products and characters, could be a company to keep an eye on in the second half of the year for numbers that start topping last year’s figures.
The reasoning is really pretty simple. Sales dipped from $1.31 million to $1.03 million in the first quarter of 2012 as compared to Q1 2011 because of the termination of a toy licensing deal with Battat Incorporated and subsequent royalty payments falling short of the year prior quarters. The nearly $400,000 that was missing from Q1 2012 because of the Battat deal being over was partially offset by Genius Brands actually boosting product sales by 12 percent, or $107,959, during the quarter.
Genius Brands has now inked a new licensing deal with JAKKS Pacific’s (Nasdaq:JAKK) Tollytots® division which is scheduled to launch a line of 20 toys by the third quarter 2012. The upcoming revenue from JAKKS could dwarf the deal with Battat in the mid-term.
Further, Genius Brands reduced their debt load substantially in the first quarter as four members of the management team converted their long term-subordinated notes to the Company in the total amount of $1,572,161 into equity. These moves decreased the company's long term debt by 80% from $2,143,178 in the period ended December 31, 2011 to $429,687 in the quarter ended March 31, 2012. Total equity on March 31, 2012 was $86,572 compared to $(1,120,633) on December 31, 2011, an increase of $1,207,205.
Today, Genius Brands again increased its future potential by signing a new licensee agreement with Sunscape Eyewear, a 17-year old eyewear company that has grown from a small retail operation to an internationally known brand with a presence in Los Angeles, New York, London and Milan.
The two-year agreement, which is slated to debut during the 2012 holiday season, grants Sunscape rights to manufacture and distribute worldwide Baby Genius®-themed eyewear for boys and girls ages 0-4 years featuring the beloved Baby Genius® characters. Product categories include sunglasses, eyewear and eyewear accessories such as croakies and cases. High profile retailers such as Walmart (NYSE:WMT), Toys 'R' Us, Babies 'R' Us and Target (NYSE:TGT) will be carrying the brands, which should certainly bolster sales during the busiest shopping season of the year for Genius Brands.
"The brand enthusiasm that children have for Baby Genius® characters will help drive demand for these new Sunscape sunglasses. Baby Genius® DVDs and CDs are currently sold at some of the mass retailers that carry Sunscape eyewear, creating a growing line of Genius branded products in the nation's largest stores," said Genius Brands Chairman and CEO, Klaus Moeller.
With JAKKS kicking-off the fall season for Genius Brands and the follow-up by Sunscape in the fourth quarter, it should be anticipated that Genius Brands could post record numbers in the second half of 2012 and into 2013.
At the opening bell today, Genius Brands had a market cap of around $12 million, which could be deemed as an undervalued proposition considering the recent moves to minimize debt and the deal with JAKKS. Bringing the new agreement in with Sunscape, shares have edged higher in today’s trading by 11.45% to $0.185 per share, which is still well below the 28 cent mark that shares hit around this time in June 2011. A quiet company that is generally thinly-traded, investors may want to take a closer look at where Genius Brands could be in another six or nine months. Proper due diligence is, as always, encouraged.
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