Genius Brands (OTCBB: GNUS) Sees Bright Future for Baby Genius(R) Brand

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.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Wal-Mart (NYSE: WMT) probe could cost some executives their jobs

Northern, WI (StreetBeat) 4/23/12 -- Allegations that Wal-Mart Stores Inc (NYSE: WMT) stymied an internal investigation into extensive bribery at its Mexican subsidiary are likely to lead to years of regulatory scrutiny and could eventually cost some executives their jobs.

The New York Times reported on Saturday that in September 2005, a senior Wal-Mart lawyer received an email from Sergio Cicero Zapata, a former executive at the company's largest foreign unit, Wal-Mart de Mexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

Wal-Mart sent investigators to Mexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company's leaders shut down the investigation and neglected to notify U.S. or Mexican law enforcement officials, the Times reported.

Legal and retail experts said that the allegations, if proven true, could badly hamper the company and its management for years. They could lead to a time-consuming global probe, substantial financial penalties paid to U.S. authorities, and the departure of some executives.

One option Wal-Mart will have is to remove some of those involved in the alleged bribery or cover-up as this could make it easier to reach an out-of-court settlement with the U.S. Department of Justice concerning possible breaches of the Foreign Corrupt Practices Act (FCPA), a U.S. law that forbids the payment of bribes to foreign government officials.

"Among the remedial actions is 'house cleaning' of anyone involved in illegal conduct," said Richard Cassin, a lawyer who is an expert on the FCPA and writes a blog about it. "If a company can say those involved in the questionable conduct are already gone, the DOJ is likely to look more favorably on the company and current management."

Wal-Mart said it had disclosed its probe to the DOJ and the Securities and Exchange Commission. The company also said it had taken steps at the Mexico unit, which is widely known as Walmex, to boost internal controls to make sure it was FCPA compliant.

But, according to the Times, the disclosure came only after it informed Wal-Mart that it was looking into the bribery allegations, years after the bribes were said to first come to management's attention.

A spokesman at the SEC said on Saturday he did not have any comment on the Times article. A DOJ spokeswoman declined to comment.

"Because of Wal-Mart's inaction for a very long time, it's likely its exposure is only going to increase," said Michael Koehler, a professor at Butler University and an expert on the FCPA.

According to the Times, current Wal-Mart Chief Executive Mike Duke and former CEO Lee Scott, who still sits on the company's board, were among senior executives allegedly aware of the situation. Duke was put in charge of Wal-Mart's international division in 2005.

"DEEPLY CONCERNED"

The newspaper also reported that the whistleblower Cicero had identified former Walmex CEO Eduardo Castro-Wright as the driving force behind years of bribery.

Castro-Wright became CEO of Walmex in 2003 and was named CEO of Walmart US in 2005 and became a vice chairman in 2008. He led Wal-Mart's e-commerce business from 2010 until January this year, and is set to retire on July 1 after the company said last September that he was going to leave to spend more time with his family. He could not be reached for comment.

Wal-Mart said in a statement on Saturday it was "deeply concerned" about the allegations in the Times report. It said it began an investigation into its compliance with anti-bribery laws last autumn. The company declined to make Duke or any other executives available for comment, and said the investigation was continuing.

On Sunday, Wal-Mart spokesman David Tovar said Duke had instructed the company to conduct a worldwide FCPA compliance review in March 2011.

"Mike is fully supportive of the independent investigation being conducted in Mexico with oversight by the Audit Committee, including ensuring that all resources necessary are available to pursue the independent investigation aggressively," Tovar said.

On Friday, Walmex announced that one executive named the next day in the Times report, its general counsel and secretary to the board Jose Luis Rodriguezmacedo, had been assigned to other duties. He was removed from his role "in the interest of the investigation," Walmex spokesman Antonio Ocaranza said in an email, adding that he could not give further details about Rodriguezmacedo's status at Walmex. Calls to Rodriguezmacedo were referred to the spokesman.

COSTLY AND FAR-REACHING

Experts in bribery laws said Wal-Mart will be forced to devote millions of dollars and enormous amounts of manpower to its internal investigation. In many FCPA cases involving large companies, they do a large part of the investigation themselves and then hand the results over to the authorities.

"This is very likely to last two to four years for Walmart. These worldwide investigations tend to take two to four years in the normal course of business; it simply takes time," said Koehler.

Cassin said Wal-Mart faces an uphill battle to convince U.S. regulators that its problems are confined to Mexico. The U.S. retailer also has major operations in the UK, Brazil, Japan, China and Canada, and it is also seeking to expand rapidly in emerging markets such as India and parts of Africa.

"Before any resolution with U.S. authorities is possible, the company has to look under every stone for possible corruption. Are there any similar issues in China or other countries? That's what U.S. authorities will want to know. Wal-Mart's shareholders will be asking the same question," said Cassin.

The allegations could prove a huge problem for Wal-Mart if proven true, said Deutsche Bank retail analyst Charles Grom. "It would put a broadside in the growth engine of the company," he said. "Unlike prior bad PR stories in recent years, this will be a material distraction for Wal-Mart on multiple fronts."

Some retail experts said they thought that Wal-Mart would be unlikely to sacrifice Duke in the investigation and any related talks over a settlement with the government.

"I don't get the sense that Mike Duke's going to lose his job over this," said Joseph Feldman, senior retail analyst at Telsey Advisory Group. "I think that they'll try to put the spin on it that they have been putting on it - that it happened years ago, they rooted it out and it doesn't happen anymore."

The company's corporate structure may also reduce the chances of outside pressure from shareholder activists and others leading to drastic changes in the executive suite. The family of Wal-Mart founder Sam Walton owns nearly 50 percent of the shares and Walton's eldest son, S. Robson (Rob) Walton, is chairman, and his younger brother Jim is also on the board.

According to the Times, Rob Walton, Duke and Scott also had received an anonymous email in January 2006 saying Wal-Mart de Mexico's top real estate executives were receiving kickbacks from construction companies.

IMAGE STRUGGLES

Wal-Mart, which employs 2.2 million people and runs more than 10,000 stores around the world, is often targeted by labor and community activists who argue that it underpays its workers and its sprawling stores undercut smaller shops, often putting them out of business. It has fought hard to improve its image in recent years with a number of campaigns, including one to make its operations more environmentally friendly.

Wal-Mart executives have, though, been active in a lobbying group that is pushing to scale back the FCPA. A 2010 tax return for the U.S. Chamber Institute for Legal Reform lists Jeff Gearhart, Wal-Mart's general counsel since 2009, and Thomas Hyde, who retired in August 2010 as Wal-Mart corporate secretary, as two of 40 people who served as board members.

The board includes top lawyers and executives from other major corporations. Dow Chemical Co, Exxon Mobil Corp and State Farm Insurance each had two people among the 40 listed board members during 2010.

The U.S. Chamber Institute for Legal Reform is associated with the U.S. Chamber of Commerce, the largest business lobbying organization in Washington, D.C. It wants lawmakers to make several changes to the corruption law, for example by adding a provision that would protect a corporation from liability if one of its employees circumvented compliance measures.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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TWA: What's The Time?

Palm Beach, FL 12/13/11 (StreetBeat) --So the Fed’s Open Market Committee meets this week. Yeah, I know, how excited can we get about a gathering that does not include the star power of Merkozy traipsing down the red carpet, but sorry, Bernanke, Yellen, et al is the best we can do this week. Don’t worry, there is sure to be another previously unplanned EU summit sooner rather than later, but until then the FOMC will have to do.

Besides, it’s not as though the Fed won’t discuss Europe and its implications for the US economy. As a matter of fact they may have a little bookkeeping to do based on what they did on behalf of the continent in the last couple of weeks. When the Fed reduced its charge for dollar liquidity from 100 basis points down to 50 basis points for various central banks including the ECB, they made it possible for European banks to borrow dollars last week at 0.59%. Although the Fed funds rate is closerthanthis to zero, the Fed’s Discount Rate, formally called the Primary Credit Rate, which is an emergency facility open to a broader range of US depository institutions than are the Fed funds, has long maintained a charge of seventy-five basis points. Although demand at the Discount Window has been in steady decline since the post-Lehman peak, these funds, which are borrowed from the regional Fed banks, remain in consistent demand in the New York District and for smaller amounts across a smattering of other Fed Districts; so a reduction in the rate not merely a symbolic nod to fair play. However, the Dallas and St. Louis Fed bosses, Fisher and Bullard respectively, do not necessarily think the Fed has be quid pro quo on the Discount Rate and in recent months the Kansas City Fed board has been clamoring for a twenty-five basis point increase in the emergency rate. So a Fed move on the Discount Rate does not appear to be a unanimous conclusion.

But if the Fed wants to send a signal that further easing may be on the way, then lowering the Discount Rate is one way to do that. The economy is, at the very least, conflicted. On the one hand the Black Friday sales results were a record. On the other hand the country’s biggest retailer continues to give a very downbeat assessment of its core customers. In a teleconference presentation last week WalMart (NYSE:WMT) executives noted that “we still see our core customer under significant pressure and we still see a very dynamic and I’ll call it dramatic, paycheck cycle.” At the time of month when the “folks get their benefits electronically, coming in the night before and really walking through the registers right after they activate their benefits. And this continues in our business cycle.” They also see their customers “trading down from a national brand to one of our private brands or from a number one brand to a number two or three brand within a category. We’re also seeing them change pack sizes, so they’ll buy a half-gallon milk rather than full-gallon milk.”

Fair enough, even though the consumer is seventy percent of the economy this example may be too narrow a slice to be representative of the whole pie.

So let’s look at the growth rate of the entire economy to see if the Fed will be anxious to tip their hand. But once again there is conflict. The latest reading of the GDP, for the third quarter, is +2.0%, quarter on quarter annualized. While this is nothing to write home about it is not something that in and of itself is going to set the Fed’s hair ablaze. But there are two broad measures of the economy and the other one, Gross Domestic Income (GDI) was +0.4% on a quarter on quarter annualized basis in the third quarter and was up just 0.2% in the second quarter; results that warn of trouble up ahead.

In the September 1, 2008 TWA I wrote about the differences in these two measures of the economy, quoting from a Fed paper from 2004 called Integrating Expenditure and Income Data: What to do with the Statistical Discrepancy?; “the better known measure, gross domestic product (GDP), is the sum of private and government consumption and investment (including inventory investment) and net exports. A second measure, gross domestic income (GDI), is the sum of factor and nonfactor payments paid to input providers; these payments include compensation, profits and profit-like income, production and import taxes (formerly known as indirect business taxes), and the consumption of fixed capital. GDP and GDI conceptually measure the same thing, but because the two are calculated using imperfect source data, the two measures differ by what is called the statistical discrepancy.” In simpler terms GDP is a consumption based measure while GDI is income based, highlighting things like personal income and corporate profits.

But the dirty little secret of these economic data points is that for the last couple of decades, “the GDI, despite its relative obscurity, has been the more accurate measure of output growth more often than not,” said Fed economist Jeremy Nalewaik, who has done extensive research on the pair, in an interview with FT Alphaville earlier this year. Not only that, but “since the mid-1990s, GDP has tended to revise toward GDI, and not the other way around,” Nalewaik says. Maybe it’s the economic shift towards the service sector and away from manufacturing that is the cause of the GDI superiority, but that it is more accurate is not in question.

But even more important for this discussion of the Fed is that the GDI is the more prescient of the two measures of growth in regards to signaling the possibility and onset of recession. In Nalewaik’s 2006 paper Estimating Probabilities of Recession in Real Time Using GDP and GDI he concludes, “the main finding is that, no matter what benchmark one uses, real time GDI has done a substantially better job recognizing the start of the last several recessions than has real time GDP.” But in addition Nalewaik has looked at the predictive power of both measures of growth to see if they indicate a recession will follow when the economy has fallen into an “economic stall speed”. In a nutshell he defines stall speed as a level of quarterly growth below one percent, from which “the economy has tended to move into a recession within a fairly short time span.” In his 2011 paper Forecasting Recessions Using Stall Speeds he says there is “a considerable amount of evidence and logic showing that GDI provides a better measure of output growth than GDP, its better-known counterpart, and in our work here, while stall phases are evident in GDP, they are more plainly visible in GDI.” In this paper he shows that for GDI “sixty four percent (14 out of 22) of expansion observations of below one percent growth were in the four quarters prior to recessions. For GDP, a little less than half (12 out of 25) of expansion observations of below one percent growth were in the four quarters prior to recessions.” While the probability that a stall speed GDI will lead to a recession is of interest so too is the likelihood that a recession was preceded by a stall speed reading of this measure of growth. As Nalewaik says in this paper, “eighty two percent of postwar recessions (or 9 out of 11) were preceded by a GDI growth rate of one percent or less in al least one of the four quarters prior to the recession, with the 1953-54 and 1973-75 recessions being the only exceptions.”

My phone message to Nalewaik on the current situation, and whether or not the two consecutive readings of stall speed GDI, +0.2% in Q2 and +0.4% in Q3, will increase the probability of a recession in coming quarters, has not yet been responded to. But I would hazard a guess that it doesn’t hurt as an indicator.

The 2008 TWA on this topic was called A Man with Two Watches, because of the French proverb that says, “A man with one watch knows what time it is; a man with two watches is never quite sure.” But with the current readings of the GDI and with the trouble in Europe threatening to be an unwelcome export, it might be later than we think. The Fed may not be ready to move this week, but they may indicate that they hear the clock ticking and won’t wait for long before they do, especially if they focus on the GDI.

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Wal-Mart Opening Stores at Mid-Night on Black Friday

Wal-Mart plans to open most of its stores at midnight the day after Thanksgiving, the company said Monday, becoming the latest in a series of retailers to expand hours to lure in shoppers who want to get a head-start on holiday bargain shopping.

The world's largest retailer also is offering shoppers a sneak preview of the discounts it has planned, from laptops to jeans.

As of Oct. 31, Wal-Mart Stores Inc. operated 3,792 Walmart stores, of which 2,882 are supercenters. The company's super centers are typically open around the clock. But the rest of its stores previously opened at 5 a.m the day after Thanksgiving.

Starting at midnight, Wal-Mart will offer discounts on a wide range of items from toys to clothing, including $9 Wrangler jeans and $15 Lego tubs. The company's big electronics sale will start at 5 a.m. Friday, featuring $298 15.6-inch HP Laptops, $198 Emerson 32-inch LCD HDTV TVs and $59 Kodak Digital cameras.

Sears Holdings Corp., which operates Kmart and Sears, Roebuck and Co., said recently that its Sears, Roebuck stores will be opening on Thanksgiving Day for the first time in its history. Toys R Us announced last week that it will open its stores at 10 p.m. Thanksgiving Day.