Red Giant Entertainment, Inc. (fka REDG)

[37thirtyseven37]

REDG Shareholder Video Report – TYPED OUT – Summary!

August 2015

Video starts off with a nice REDG Logo introduction. Benny and David were co-sponsoring the video. They took turns answering the plethora of investors questions, which kept it from being awkward or having pauses or “um’s” like the prior videos. This video was also of higher quality and better laid out than normal, with some nice REDG posters in the background.

1:10-6:00min - Current Status of GSL?
Due to advertisers and distributors and all involved, they will be cutting back to 500k copies a week for the 1st year ONLY, and then after that they will bump it up to 1 million. This makes it more comfortable for all involved until proven. Advertisers have set budgets for the quarters or even the whole year, $35k a week can be hard to hit for smaller gaming companies. So to start with 500k copies it can be anywhere from $12.5k-17.5k a week and makes it easier for them to enter into the GSL as an advertiser. They want the model proven first, so this is the agreed upon number to make everyone happy. This also expands their market to allow smaller companies to advertise with REDG. So instead of delaying they will continue with GSL on Nov 4th. Toys-R-Us will still get the Lions share and the ones who will get less will be the comic book stores (They will try to get each store who wants comics at least 1 box.) The comic stores will still also be able to get the completed set books that will be available for purchase.

Long story short – REDG is now 500k books a week for the 1st year, to make everyone happy and make ad slots easier to sell until we are proven.


6:48-16:30min - Funding the GSL?
Factoring. They did and are doing, currently, a trial run on the factoring with a Texas based finance company (who has worked with advertising sales factoring before, predominately digital). The company likes REDG model since they have a set amount of books, and most other companies do not have that and only have estimates. The money ads will runs through Geek Riot Media (Chris Longo Company). Chris Longo gets 10-15% commission for all his work. Factoring will take 1% off the top per month that they have ‘pre-paid’ us the ad money. In time we will work our way off of factoring. The factoring company will for instance on 1 mil, hold 10% and give REDG $900k right up front, the factoring company will automatically seamlessly split $800k to REDG and $100k to Geek Riot Media, then when the ad companies pay Geek Riot, the check goes back to the factoring source, lets say its been 4 months, so $40k (4%) is kept by the Texas financing, and then the last 6% ($60k) is sent to us. They will likely factor all the ads up front until costs can be covered on their own. The ad companies will not know we are factoring.

Long story short - It’s a 1% per month fee for factoring. So on $1mil, held for 6 months, we get $940k, or 94% of the money. Geek Riot (Chris Longo) gets 10-15%.

12:15min-14:30min – Where are we printing?
Transcontinental Printing in Canada (Founded in 1976, TC Transcontinental Printing has grown steadily over the years to become the largest printer in Canada and the third largest in North America. - See more at: http://tctranscontinental.com/en/about/profile/tc-transcontinental-printing#sthash.ZKTg9Jkr.dpuf)
They did a test run with GSL #1 and went very smoothly. They chose this because for 3 reasons: the time is super quick turn around, the price was negotiated extremely low, and the TRU bags can be filled there are well.

Long story short – Start Printing in Canada (Low cost, High quality, Fast, and can handle TRU bags!)

16:30-23:00 min – What Marketing Campaign?
We will be doing full core press, re-activating a lot of website stuff, online and print advertising, as much as we can to reach out to our target, the retailers. The readers at the end of the day are not the model we want interested to get our books out because the retailers will be giving them to the readers so we have to target the retailers, we need the retailers to see and utilize this as a means to drive new traffic to their stores to build up their audiences. Toy’s-R-Us will surely have their own marketing blitz which will be aimed at the readers.
This is essentially free Comic book day every week, except for free comic book day costs the stores .20-.50 per book that they give away. REDG books will cost the stores nothing, they just have to Opt In, so if you have a store in your area that you want to have them call them and tell them to Opt in on DCD (Diamond Comic Distributors) for the FREE comics from REDG. Likely hood in the 1st year the comic book stores will likely be shorted. At comic con, retailers were coming up super excited saying that they were ready for the books to stamp/sticker with their store name and to hand them out at hospitals or at events they go to and things like that to drive new readers to their store. Use it as incentive to bring readers. It will help create buzz in the whole industry. Which helps the entire industry.

Long Story Short – Yes, big marketing blitz, both us and TRU.

23:00-24:00min – ALA?
Everything is in place with Diamond Book Distributors (DBD) and they are available and everything is ready to go, but right now we are focusing marketing and money into GSL and after we have some free cash to go full blitz on ALA marketing, we will, so this will follow after GSL.

Long Story Short – ALA is ready, but will be marketed after GSL.

PRODUCTION QUESTIONS

24:00-25:00min – What is the printing schedule?
Two weeks. They can print 500k in about an hour. They could turn it around in 1 day. But they say two weeks to give them a spacious comfortable time to be able to turn around and have time to box it up and ship it out and all that. They will ship DCD directly to the DCD warehouse.

Long Story Short – 2 weeks..

25:00-28:00min – How long does it take to proof?
1 hour, it is all digital proofing with Trans Printing. They will send us a high quality proof digitally with all the trim and bleed. Transcontinental spent millions with Kodak to research and create this system. It is wonderful. You can switch out 1 page at a time, or modify by moving things or whatever you need. The old days you would have to send it to them and they print it and mail it and you lose a week per edit. This company makes sense cause we can proof in a few hours or less. If we have a house Ad, and we sell an ad last minute, we can just switch that one page out and it is instant.

Long Story Short – 1-3 hours.

28:00-30:27min – Status of TRU bags?
David spoke to them today about that. They have been fiddling with what to do with the bags because the machine is high powered and the TRU bags are thin, so it would rip the bags, so we have had the printer and TRU work together to get a bag without the gussets and are a bit thicker and can handle the fast insertion process, so the bags will still have TRU logo, but will be a new bag that can handle the process and all parties are happy with this! So a small fine tune things to complete, but TRU isn’t complaining about the higher quality bag.

Long story Short – Almost, almost done, nice bags with TRU logo and Transcon Printer will bag them!

30:20-31:30min – How much lead time do the distributors need?
Pretty much the same time frame. Two weeks. They can shave some days off this, but 2 weeks is comfortable.

Long Story Short – Two weeks for distributors.

31:30-32:30min – How far out are the stories, art, and advertisers lined up?
Stories and art are up to 5 issues out, but some stories are newer and not written as far out. Since we replaced the horror books (Darchon and Shadow Children) which are great but not TRU type stories, so those are not as far written for AMPED etc. The advertisers have different ranges since they all choose different options.

Long story short – It varies, up to 5 stories pre done per line.

32:30-34:30min – What is up with Darchon and Shadow Children?
They are 2-3 books written so far and they are going to hold those until next year and the free line GSL is out there, so when we put those out we do it right with full money behind it as well as the other books we have.

Long story short – After GSL.

34:30-35:50mins – What kind of revenue split will there be for Markiplier Comic?
Generally it is 50/50 after expenses. Its $1500 per ad in DCD etc etc. So when we pay off the costs, we split the expenses. Except for GSL, the creators are given a flat bonus of $10k plus whatever page rate they cost, they do not get 50%. GSL is all ours.

Long story short - 50/50 after expenses for Marks comic only, not the other GSL stories.

ADVERTISING QUESTIONS:

36:15-39:40mins – Status of Ad sales?
We are working on it, we have more prospects then we have pages, both in advertisers and pages. We are sitting roughly around the go no go 50% mark with those who have already committed. We need in essence around 18 ad slots to be able to do this and still be profitable, and looks like we will fill up the rest of the ads. Some of the bigger partnerships are going to take 4-5 ad pages at a time, so we are good, things look to be on track. By the time we pay for printing and everything we are looking at .20 per book including that and shipping and bags, its .19-.21, the bulk of the costs are that. No other large fees, we are close to .18 in China but time is more important now. .02-.03 adds up over 25 million copies but we will get there, but time value of money.

Long story Short – Have about 18 ads (profitable and a go for GSL) already committed and many others still looking to sign, should not be a problem. ~.20 per book.

39:40-40:30mins – Target CPM?
We begin at 50cpm, but few have spent that due to multi-buying, commitment discounts, etc. We are saying our average is ~$35. The lowest we offer is $25. Most will average out to $30-$35.

Long story Short - $30-35 avg.

40:20-42:00mins – Total Ad Slots?
We went from 36 to UP to 40 when we went to TransContPrinting, but not sure if we will do 40. There is no cost difference to do 68 pages plus cover and 72 pages and a cover. So we do have 4 extra pages, we may or may not fill all those pages. We don’t want to overrun the book with ads and want it to be realistic and balanced. So that is another reason why we are doing native / content advertising.

Long story Short – 36-40 total spots

42:00-55:30min – What about Native content advertising?
This is bigger than we have been able to comment on. Lets take Company XYZ has 50 content IP, and they take XYZman IP and tis an old story with bad graphics but is nostalgic, this is a ripe IP for reviving, so we will do content or native advertising, so we serialize a story about XYZman IP that is across the whole month, so there would be 20 ads throughout the 4 weeks, and would be a running story about XYZ throughout all those ads with that company. A serialized ad run, so 5 ads in a row but instead of ads they are now actually content, so people are more engaged into the ads and will follow along with these side stories as well. This is the most powerful advertising because it engages the consumer. Next month they pull another old IP and run another 20 page story comic about ABCman. But now we can take XYZ man and create a paid comic book series comes out from REDG that is 50.50 split on profit. 2 million in print plus digital and web so up to 14 million views. Reaches an immense audience by the time XYZman number 1 comes out. If we do this with only 1 of our partner companies - Based on a standard comic book price, 1 paid comic every month comes out. Based on a .5% capture rate, we (REDG) would make…
The advertiser companies would be able to make their ad money back after the 1st year(500k comics) and in the second year cover their ads (for 1 mil comic) and clear 6 million. The 3rd year (1mil copies) they would cover ads and clear 20mil return on investment. This is 50/50 split so we would make above that since we are not paying for ad spots. That is just 1 company partnership for native. And we are talking to 4-5 of these companies who want to do this. Reviving dead property has value; back when we did Lost in space and it was so successful there was a movie for it. This is a great idea, not only for dead IP but also for new content. It is a no risk situation. Advertising is pure tax reduction. They can give this money to advertise with us to make them more money, or they can give it to Uncle Sam, so it makes more sense for them to pay for the ads to have a built in audience of millions. It is win/win for these guys. Lets say we do 3 companies, that is now 15 pages of extra content and 15 pages of less ads for GSL. Benny would like to make it nearly all native content advertising. And this is why it is taking so long, it is SO integrated and these are multi-billion dollar companies, its multi-division merchandising and gaming and mobile and action figure and cartoon divisions. So it takes a while to round them all up together.

Long story Short – Its awesome and engaging a 5ads in a row each week for a month so it’s a mini 20 page comic story throughout a month of GSL, about old IP that is being revived. And then a paid comic about that IP is now coming out from REDG and will be a 50/50 split on revenue. 1 company every month = big $$ (millions) for the ad companies and for us, and we are talking to 4-5 companies to do this.

FINANCE:

55:30-1:01:00min – Taken out any new notes? And how many left?
We have a few tranches left on existing notes. There are not many left. We have been phasing out as many notes as we can. The audits were behind and we got hit with some penalties which all hit at once and we had it planned so the conversions wouldn’t have hit at once and they would have been spread out and less affecting, but that’s what happened with the auditing delay. The delay backpiled and 6 converted. This week should be the last of all those onto the market. It has really lowered the price. Its just the dump, it has nothing to do with the business viability or model. It is completely separate then the company right now, eventually the stock will catch up to the company. Come November and the announcements of finance will most likely have the biggest effect. 3 of them are now completely done and gone. Trying to see if the company will just cancel their note and let them go. The maturity dates there are a few that are a few months out. Nothing right now. November will affect anything between now and then.

Long Story Short – Few tranches left. The auditing delay caused them all to hit at the same time, which was bad. So all 6 hit June-Now.


1:01:00 – Planning a R/S?
We have answered this numerous times. IF we are going to do an R/S it will be long after conversions so it will be beneficial to the stockholders, we do NOT want to hurt the stock holders.

Long Story Short – No R/S

1:02:00min – Buyback shares?
We had discussed this a long time ago and the objective was to take down the debt and combat shorters. We did a test run and it stopped the shorts and then the funding source backed out so we did not pursue that further. So we could do another buy back campaign after we are cash flush and look at that again.

Long story short – not until we launch GSL and then will consider again.

1:03:30mins – conversions?
It would seem the conversions are over with this week. They may or may not have liquidated but all requests have completed.

1:04:00 – add board members?
We would like to maybe add one more, but it’s a big deal to add another member we would like to have 7 so we have odd number for voting purposes to majority rule. We would like to bring in a new aspect of expertise of an industry we do not have yet, there are a few prospects but nothing yet. We are also considering an advising board members that are not voting members. But video game tv experts and etc. to share advice and bring in contacts.

Long story Short – 1 more member would be good to have 7.

1:05:45 – Are you in danger of bankruptcy?
Yeah no, that is a crazy rumor, people think the share price affects us more than it does, it affects us personally because that’s my stock too and I have put a ton of my own money into it (benny), and it sucks to see it low, but the share price is not what affects what we are doing. We are not in danger of that.

MOVIES QUESTIONS:

1:06:42 – Magika and Hulu:
The reality is that we are trying to work still with Hulu and how everything works with them, when we put it out in Dec, it was the end of the quarter, they pay out quarterly. So it wasn’t until March that we got anything from them, so then it was June by the time we got the second data. But the data they sent us doesn’t make sense because the way they have it laid out, They have no real time data. We can see what we have sent over to them, but that is it. What we were trying to do with this process by working with Hulu exclusively, but there is some weird thing with how hulu is tracking their data that isn’t lining up, so we also go through a distributor, so we are trying to line it all up, but our distributor is very transparent and shoes us what they had for numbers. So we are all working together to figure out the true numbers. Because of how slow the reporting process is on our test. We are not trying to put tons of money into marketing unless we know it will pay off, we would put $100 in and expect to get $300-500 back in revenue, but its very hard with their reporting mechanism to see if the results paid off to know if we want to put in $10,000 to get back $50,000 type thing. Right now it is a risk that we do not want to take, given the last of information. However there are many other plate forms that we are investigating. We even went silent on advertising and the movie still stayed up well and was in the top movies for a good long while. We are looking to see what else we can do with Magika, a second feature or a TV series. We have plans for both. Preferably series and then movie 2 to end the series. GSL will influx more viewers.

Long Story Short – Hulu is quarterly pay out and their numbers are not lining up so trying to sort that out first before spending any money into advertising that more.

1:14:00mins - What about Last Blood?
The last notification out there was the director was in casting. This was absolutely true. However, we had a financing party involved and they committed X million dollars to finance the film but wanted approval of cast, but they had unrealistic expectations for what their budget would bring in. We would bring in actors but they were not Johnny Depp but he would cost 5-10million by himself, which was unrealistic for the budget. That contract has expired so we are going down some other avenues to put this together realistically. We have been asked repeatedly about Markiplier being in the movie, that probably will not happen as he is not up to be a movie star. A lot of the key people are still involved. And the effects guys and all that.

Long Story Short – Last blood is getting new financers that are more realistic and no mark will not be in the movie. Still ongoing.

1:18:00min – Wayward sons?
Still where its been, they are having discussions with several key writers, a script has been written, and that is why all these large people are involved, and the script is great, but now we have to hire a holly-wood write to finish it. A lot of the writers that they are talking to is Epic. It is a 5000 year long story, so they are trying to figure out when in the story they want to film. They have taken the script from the movie that is already there and they are making it into the GSL comic form. So after GSL comes out will likely push things along. This applies to everything else this is why we have GSL. This is our incubator. The ads is good revenue but it not our end game, the end game is the exploitation and development into all media. We do not want to make the same mistake as marvel back in the 80’s. It wasn’t until iron man that Marvel actually made money. And this is what set off the chain of events, all the fantastic four, blade, daredevil, xmen, captain America all these movies that marvel had sold all the rights and made no money. So we (REDG) are not going to sell the rights to our stories, so we will wait until we can partner or finance on our own to get the Lions share. Ergo we will wait.

Long story short – Still ongoing, will be more viable after GSL for holly-wood to figure out which part of the story they want to make the movie.

DIGITAL QUESTIONS:

1:28:15mins – The status of Bandai Deal?
It is still out there and we still have the agreement. Wayward sons app game, Its called Skinning, taking the existing game and structure and change all the artwork and other things to make the game and content wayward and they thought it would be easy and quick, and then they went to the developer and the developer got bought out so the company that took over had trouble with the process. Bandai was the distributor and marketer. It threw a monkey wrench into it and it is easy money for them so it is still in the works.

Long story Short – will be still coming out when the new distribution company finishes it.

1:30:45 – Whats up with RedGiantComics.com?
The architecture is all done and ready. All reformatted and artwork done and we are looking at launching it with GSL or a little earlier. It is not the same as keenspot, it will be higher resolution and ad friendly. We are happy with that. We wanted it to launch with GSL. It will have all old and new stuff and our content ads will also be on there. It will become a huge site quickly.
Long story Short – will come out with or before GSL.

1:32:20 – Anything else?
We have Print, web and digital ads. What is the difference? Web Is keenspot, redgiantcomic and websites. Yes you can see those on mobile devices. But its not mobile. Digital is unique, we are developing an App, our OWN app that no one else is doing, first off you will be able to buy and download the comic and it will be on your device and you will own it. If you don’t want to buy any comics on the app, you can get the comics for free if you don’t want to buy because we have streaming ads. If you want to take and download tesla number 1, but if you want to stream GSL action, as you are reading every page, in between the ads pop up and the ads are on a timer of lets say 5 seconds and the ads are interacting and you will be able to click on, but you will never download the free version, so lets say a month later someone new comes in and watches it, then there will be new ads of whoever is now buying into the ads, so it is an impression based ad slots. If you don’t mind the ads and free, you get those, Orr you can pay and not have ads and download and own the comic on your device.

Long story short – Mobile app in development with REDG.

MISC QUESTIONS:

1:35:40mins – Hows Baby James?

He is doing good, growing like a weed, he doesn’t realize he is a premie. He is growing leaps and bounds. Caught a small cold, but otherwise doing good.

Long Story Short – Baby is good.

1:36:45mins – Rules of Facebook, why am I banned?
As rules of publishers we hate censorship, but we cannot have stock related or soliciting the buying or selling of stock. So we use it as a means of information to investors and fans. So we don’t want to but we have to when we have asked repeatedly! And they are refusing and outright blatant. It is disheartening. And when potential advertisers want to look at our page then they see all this it doesn’t help. Benny doesn’t care what you call him, but he is looking to make this a long-term company. We are doing the best we can, but it doesn’t help when the perception is going to be negative on our page when we are trying to bring in advertisers, positivity will help the investors better. That has happened, so we don’t want to have to explain. Most of it is not content; it’s about the frustrations of stock price.

Long story short – you talked about stock buying and selling. PS negative talk doesn’t help your stock price. Advertisers do look at these pages.

1:41:30mins – Partnership deals? Worth a mint?
Coming out of San Diego – They … it’s a new platform that is revenue generating. We are excited and will let you know as we progress. We are both excited.

Long Story Short – In talks, new platform, will update when we can.

1:43:30 – anything to say before last question?
What about the surprise deal from new york and new jersey, that was the Markiplier comic, he wanted to make the announcement at SDCC< This is a BIG deal. Variety magazine rated him as number 6 most influential among teens, above taylor swift.
His fans are insatiable. Before he even arrived, they were lined up around our booth, covered the Marvel booth and went down the row all the way to the front door. Security freaked out on us, and we have to take half our staff to manage the line the rest of the day. People were taking laps around to get that spot. But we had to keep dispersing the crowd. He was at 8mil at SDCC and is now at 9MIL already that’s 1 mil jump in just a month. And he is a firm believer of what we are doing here. This will be as a paid comic an immense hit. We will be doing numerous versions. He signed and numbered 300 pages for the hardcover version for what we are doing. We hope this will go well.

Long Story Short – Mark is HUGE, his COMIC is HUGE! Its paid comic. He signed 300 copies for us already

1:49:00mins – As CEO what grade do you give yourself?
I don’t need to grade myself that’s not done by me, at the end of the day, what is going to matter is how Nov goes, grade me then, see how we perform.

Long story Short – Grade me after Nov!

I want to end with this, and Dave I am sure too, we do care about what is going on, we cant always discuss the stock so it seems we don’t care. But we do, we are not taking your money, I take this responsibility tremendously to heart, I care about investors, the fans, and then industry. If we don’t do something then who is, We can sit here and complain or be apart of the solution and I feel that we are doing something now. I care about all of you and the artists, this is why we are working so hard. Active Media has printed at cost for REDG from the beginning and now we are even using a different company for the betterment of REDG, even though it wont help me personally since I am not gaining any financial payment because we are not using Active media.