NTEK Annual Shareholder Meeting Notes - January 2018
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Posted On: 01/19/2018 8:06:55 PM
NTEK Annual Shareholder Meeting Notes - January 2018
Meeting adjourned. Many, many thanks to David and the team for putting this together today. Lots of positives ahead.
Rough notes below. Not every single thing was captured, but hopefully this helps.
Some may complain that there weren’t enough real-time updates ready to launch TODAY but to me this meeting paved the way for a very exciting 2018 and beyond. Clearly it has taken a while to overcome some of the setbacks of the past few years, but it feels like we’re finally in a place where we are going to make some big things happen. Studios want us. TV Manufacturers want us. 4K users & consumers just need to learn about us and then we’ll be golden.
93,391,935 votes counted. All motions of Proxy Vote passed. Board Members voted in with 96-99% approval rate per individual (David at 99% rate)
Company now has direct contact with 60% of shareholders and looking to continue to grow this outreach.
Plans in the works to have a weekly update and quarterly call to update shareholders.
Agreement in place to settle Longside settlement. "Just need to write check."
Rod Riegel knows principals of K2 and D3. Making contact with them over next few weeks to address those settlements.
Regarding Caveat Emptor:
-needed Board of Directors to submit paperwork. Now that Board of Directors was voted in and in place, they are submitting paperwork with transfer agent to remove caveat emptor. Also hired legal help who specializes in Caveat Emptor.
Rod Riegel - new UltraFlix CEO.
-has calls with LionsGate and Paramount this week regarding
-strong relationship with “the Big 6”
-”significant chunk of work already done. Many movies already remastered etc. As a result as we sign & finalize contracts we can go live with movies the next day.”
Myron Nash - running Ultra Media Group
-will help get into traditional offerings as well due to his background
-going to big brokers
REVENUE PROJECTIONS
2018
-$13M Revenue
-$3M Gross Profit
-$1M Net Profit
2019
-$38M Revenue
-$29 M Gross Profit
-$11M Net Profit
*projections above account for paying back ALL investment debt
Funding from $21M Bridgeport financing will commence this month.
-straight loan with 2 year pay back term
-all funding should be in place over next 2 months, again with first half in place January 2018
-”$21M will let us to do everything in plans laid out today”
-they have the right to a board member if desired once fully funded
*Additional $26M expansion budget is more or less immediately available for new commitments and M&A’s BEYOND what was discussed today.
HOW DO WE ACHIEVE THOSE REVENUE LEVELS?
Ultraflix: will remain Pay Per View
-2018: 1.5M Users (currently 530K users)
-2019: 5.0M Users
Iron Dragon TV: subscription based model
-2018: 50K Users
-2019: 100K Users
Rev TV: subscription based model
-2018: 50K Users
-2019: 175K Users
*Revenue plans based on projection of getting 2 rentals/year per user. But could very well achieve 3-4 rentals per user per year with A-list content.
AUDITS & UPLISTING
-audit is $250k cost
-would allow for uplist to OTC-QB/QX
-will occur when revenues can justify making this investment, but sounds as if good
-uplist to NASDAQ requires showing $10M in profits, likely won’t happen this year
ACQUISITIONS
-plan to acquire studios down in Hollywood
-studios do not like films being physically transferred up to San Jose (San Jose office moving to Los Gatos)
-as a result will be focusing ALL TV & content work in LA
-looking to acquire a color studio that focuses on color & HDR
-also looking at acquiring two technology companies
NEW HIRES IN THE WORKS
-CEO & CFO for Nanotech. Not named yet.
-second half of 2018: full time social media employees
-New accounting firm out of East Bay
STUDIOS
“Studios primarily care about one thing: getting a sizable check upfront”
>preliminary contracts with:
-Sony
-MGM
-Lions Gate
-Universal
Again, Ron has relationships with the Big 6 and making inroads to help skip the initial “wooing” process
>focus is on getting new releases ASAP
Typical rental relationship with Studio is 60/40 (60% of rental profits to Studio and 40% to NTEK)
We are in a unique position where we can remaster videos for studios to better quality that they can then re-press to new DVD’s & BlueRays, letting them sell previous content all over again in “Brick & Mortar” fashion. Through this proposition, we can reduce the $50K per movie guarantee a Studio would normally charge for access/licensing of a film down to around $5K per movie for a minimal guarantee. Unique to NTEK thanks to 4K Studios. Other companies like Deluxe would charge $250K to remaster movies
Paramount contract
-300 movies at moment, but all older
-adding new releases and David & Ron are “hand picking” other films from older era selections
Hybrik
-they allow us to use left over inventory from Amazon
-we only pay for the time we’re encoding
-time to encode down from 18 hours per movie to ~15 minutes per movie
Sony DADC Deal (owned by Sony but separate company)
-digital distribution house
-they have some of the biggest bandwidth
-will let us get fiber drops much closer to end user
-big upfront cost, but will ultimately let us reduce cost of movie delivery to user from current $0.65 to $0.12 per movie/user. This is SIGNIFICANT.
4K Studios
-Focusing on two things:
1)Improving recoloring process
2)Recoloring entire library in HDR so that when we launch 3.0 everything will already be in HDR. Massive leg up on competition. Most other streaming providers just take film from studio and upload it to their network without any kind of re-touching or quality improvement. UF is 100% focused on quality over quantity and it shows and manufacturers & studios are picking up on this!
-Enough internal work to be done at 4K studios that will not be taking any external work over upcoming year+ beyond licensing deals that we’re working.
IRON DRAGON TV:
-we 100% own Iron Dragon TV
-again, subscription model only
-all movies in HD already
-if user wants 4K, will have to access through UltraFlix
-200 titles currently in library, looking to add 100 more each year
-Janell Smith will help with getting rights to theatrical movies from China, exclusive to UF
-anything Janell has (i.e. live fighting events, etc), we will be able to stream and then archive
-we will likely never stream UFC fights since they own rights to their own network and plan to keep that way
REV TV
-separate product, but 100% owned by NTEK
-curation of videos, documentaries, movies, etc. you would find on channels like Discovery, Velocity, etc
-”one stop shop place to get all auto video in 4K”
TV MANUFACTURER RELATIONSHIPS
Hisense
-David on phone with Hisense this morning.
-they were very pleased with how CES went and what we brought to the table for them
-their market is currently comprised of: 32% North America, 32% South America, 8% Europe…
Vizio
-Vizio is the other manufacturer currently very keen on what we’re creating and interested in us
Apple
-Apple TVs represent a very small percentage of total TV’s sold
-they also go straight to the studios for their content
-as a result, nothing in the works with Apple right now
MARKETING & ADVERTISING
-current UF user base is 35-50yo males, but changing as we see more and more 4K users & TV purchasers
-$1.2 million budget for marketing this year, spread across:
>podcasts
>TV manufacturers
>in store retailers
-most of that budget will be dedicated to getting prominently featured with TV manufacturers, including buying into their commercials for premium placement, being front & center of their boxes and packaging, and including a free rental to users when they open the box / register their TV. (the ability to soon deliver a movie at only $0.12 per user thanks to the pending Sony DADC deal will make this an extremely cost effective way to get awareness out to new 4K TV owners)
-need A-list content in place to make the above happen, as Best Buy type stores and TV manufacturers need to show new releases in their promos & demos, not older content like what we have now.
“A-list content will be turned on this quarter”
>”we do not need to wait for 3.0 to be released to start featuring A-list content. (These things are not mutually exclusive)
It takes about 4 months for TV manufacturers to change their packaging, so we should see this type of marketing in the next 6 months between A-list content being uploaded this quarter and then the 3-4 month timeline for manufacturers to change their packaging afterward.
Podcasts:
-approximately 10 podcasts identified that we will launch marketing on this year which cater to target demographic
1) Adam Corolla podcast (great for auto enthusiasts! Could be Rev TV promotion opportunity?)
2) Joe Rogan podcast (*sidenote: I am a longtime avid listener of Joe Rogan’s podcasts and this is very significant in my opinion)
3) Bert Kreischer podcast
About 6-7 more, not named today…
The first 3 podcasts mentioned above reach 2 Million people in the target demographic EACH WEEK
Leo’s “This Week in Tech” podcast too expensive. (About 3x the going rate)
-Focus of PR’s will be on generating user awareness of UltraFlix & consumer knowledge (growing user base)
FOXXUM
-Rod Riegel ”looking at which studios we want to turn on within which region”
-separate licensing fee for each region, why we need to be smart about where we grow into
-Market priorities are:
1) North America
2) South America
3) Europe
4) Southeast Asia
5) India
*China: every piece of content brought into their country needs to be vetted by a company beforehand. Too much red tape and too costly to focus on right now.
300M 4K TV’s expected to be sold in 2018. We just need to tap into a few % of that to make these projection models work.
3.0 RELEASE
-next 6 months for conservative estimate
-A-list movies could still be loaded to UF 2.2 version in meantime as new studio deals are signed
-Could easily see up to 2,500 additional films loaded in next 6 months (separate from Iron Dragon, Rev TV, etc)
-will greatly benefit devices like Vizio & Android which have low CPU computing power or slow processing, etc
-tweaked interface based on analytics studies of keystroke patterns by users
-will always remain Pay Per View channel
-alternate language tracks on the fly
-real time language switching, HDR, etc (can technically show HDR on 2.2 version now, but many movies not currently set up to do so in current version)
NTGL Distribution
-cash transaction/purchase in the works to get those shares back under NTEK for distribution
-prior management clearly screwed us as everything is still under their books and thus can’t be distributed by NTEK until above transaction takes place
BUYBACK
-individual offers to shareholders can’t be made
-by law, if NTEK offers one shareholder a price for their shares then they must offer to all
-as a result, sounds like purchases will be made on open market
GOOGLE
-ready to bundle with us on their streaming devices
F1 STREAMING
-right now Liberty Media is looking at their own streaming solution. We are still keeping in close communication with them and if things don’t transpire on their end we may have a chance at helping/partnering down the road
-SKY TV: coverage in America for Formula One is terrible. Chance we could create relationship where we pull and host SKY TV broadcasts post-show/race
NFL:
-nothing in the works here for at least next 2 years
-$10-12M bid for streaming rights
-Twitter paid over $10M for their NFL licensing deal
MISCELLANEOUS NOTES
-”we may want to see a bigger board down the road”
-confirmation that Mitch Lowe & Jeff Foley no longer involved in any way
-this year we will see legal involvement aimed at countering and stopping many of the false rumors currently being spread online about the company (forum bashers, etc)
-once we have consistent revenue and growth, this will also take care of the basher & short issue
-we will be ready for 8K in 2-3 years as needed
-no relationship or likelihood of future relationship with Verizon. Effort involved for revenue earned simply doesn’t make sense
-in summertime, rentals dip dramatically. Everyone is on vacation or outside, not at their TV's.
As a result, we will likely see revenues really start to pick up after Summer 2018 once 3.0 is launched, A-list content is loaded and brick & mortar stores and manufacturers have redesigned their packaging to prominently feature us (again, about a 4-month process)
Meeting adjourned. Many, many thanks to David and the team for putting this together today. Lots of positives ahead.
Rough notes below. Not every single thing was captured, but hopefully this helps.
Some may complain that there weren’t enough real-time updates ready to launch TODAY but to me this meeting paved the way for a very exciting 2018 and beyond. Clearly it has taken a while to overcome some of the setbacks of the past few years, but it feels like we’re finally in a place where we are going to make some big things happen. Studios want us. TV Manufacturers want us. 4K users & consumers just need to learn about us and then we’ll be golden.
93,391,935 votes counted. All motions of Proxy Vote passed. Board Members voted in with 96-99% approval rate per individual (David at 99% rate)
Company now has direct contact with 60% of shareholders and looking to continue to grow this outreach.
Plans in the works to have a weekly update and quarterly call to update shareholders.
Agreement in place to settle Longside settlement. "Just need to write check."
Rod Riegel knows principals of K2 and D3. Making contact with them over next few weeks to address those settlements.
Regarding Caveat Emptor:
-needed Board of Directors to submit paperwork. Now that Board of Directors was voted in and in place, they are submitting paperwork with transfer agent to remove caveat emptor. Also hired legal help who specializes in Caveat Emptor.
Rod Riegel - new UltraFlix CEO.
-has calls with LionsGate and Paramount this week regarding
-strong relationship with “the Big 6”
-”significant chunk of work already done. Many movies already remastered etc. As a result as we sign & finalize contracts we can go live with movies the next day.”
Myron Nash - running Ultra Media Group
-will help get into traditional offerings as well due to his background
-going to big brokers
REVENUE PROJECTIONS
2018
-$13M Revenue
-$3M Gross Profit
-$1M Net Profit
2019
-$38M Revenue
-$29 M Gross Profit
-$11M Net Profit
*projections above account for paying back ALL investment debt
Funding from $21M Bridgeport financing will commence this month.
-straight loan with 2 year pay back term
-all funding should be in place over next 2 months, again with first half in place January 2018
-”$21M will let us to do everything in plans laid out today”
-they have the right to a board member if desired once fully funded
*Additional $26M expansion budget is more or less immediately available for new commitments and M&A’s BEYOND what was discussed today.
HOW DO WE ACHIEVE THOSE REVENUE LEVELS?
Ultraflix: will remain Pay Per View
-2018: 1.5M Users (currently 530K users)
-2019: 5.0M Users
Iron Dragon TV: subscription based model
-2018: 50K Users
-2019: 100K Users
Rev TV: subscription based model
-2018: 50K Users
-2019: 175K Users
*Revenue plans based on projection of getting 2 rentals/year per user. But could very well achieve 3-4 rentals per user per year with A-list content.
AUDITS & UPLISTING
-audit is $250k cost
-would allow for uplist to OTC-QB/QX
-will occur when revenues can justify making this investment, but sounds as if good
-uplist to NASDAQ requires showing $10M in profits, likely won’t happen this year
ACQUISITIONS
-plan to acquire studios down in Hollywood
-studios do not like films being physically transferred up to San Jose (San Jose office moving to Los Gatos)
-as a result will be focusing ALL TV & content work in LA
-looking to acquire a color studio that focuses on color & HDR
-also looking at acquiring two technology companies
NEW HIRES IN THE WORKS
-CEO & CFO for Nanotech. Not named yet.
-second half of 2018: full time social media employees
-New accounting firm out of East Bay
STUDIOS
“Studios primarily care about one thing: getting a sizable check upfront”
>preliminary contracts with:
-Sony
-MGM
-Lions Gate
-Universal
Again, Ron has relationships with the Big 6 and making inroads to help skip the initial “wooing” process
>focus is on getting new releases ASAP
Typical rental relationship with Studio is 60/40 (60% of rental profits to Studio and 40% to NTEK)
We are in a unique position where we can remaster videos for studios to better quality that they can then re-press to new DVD’s & BlueRays, letting them sell previous content all over again in “Brick & Mortar” fashion. Through this proposition, we can reduce the $50K per movie guarantee a Studio would normally charge for access/licensing of a film down to around $5K per movie for a minimal guarantee. Unique to NTEK thanks to 4K Studios. Other companies like Deluxe would charge $250K to remaster movies
Paramount contract
-300 movies at moment, but all older
-adding new releases and David & Ron are “hand picking” other films from older era selections
Hybrik
-they allow us to use left over inventory from Amazon
-we only pay for the time we’re encoding
-time to encode down from 18 hours per movie to ~15 minutes per movie
Sony DADC Deal (owned by Sony but separate company)
-digital distribution house
-they have some of the biggest bandwidth
-will let us get fiber drops much closer to end user
-big upfront cost, but will ultimately let us reduce cost of movie delivery to user from current $0.65 to $0.12 per movie/user. This is SIGNIFICANT.
4K Studios
-Focusing on two things:
1)Improving recoloring process
2)Recoloring entire library in HDR so that when we launch 3.0 everything will already be in HDR. Massive leg up on competition. Most other streaming providers just take film from studio and upload it to their network without any kind of re-touching or quality improvement. UF is 100% focused on quality over quantity and it shows and manufacturers & studios are picking up on this!
-Enough internal work to be done at 4K studios that will not be taking any external work over upcoming year+ beyond licensing deals that we’re working.
IRON DRAGON TV:
-we 100% own Iron Dragon TV
-again, subscription model only
-all movies in HD already
-if user wants 4K, will have to access through UltraFlix
-200 titles currently in library, looking to add 100 more each year
-Janell Smith will help with getting rights to theatrical movies from China, exclusive to UF
-anything Janell has (i.e. live fighting events, etc), we will be able to stream and then archive
-we will likely never stream UFC fights since they own rights to their own network and plan to keep that way
REV TV
-separate product, but 100% owned by NTEK
-curation of videos, documentaries, movies, etc. you would find on channels like Discovery, Velocity, etc
-”one stop shop place to get all auto video in 4K”
TV MANUFACTURER RELATIONSHIPS
Hisense
-David on phone with Hisense this morning.
-they were very pleased with how CES went and what we brought to the table for them
-their market is currently comprised of: 32% North America, 32% South America, 8% Europe…
Vizio
-Vizio is the other manufacturer currently very keen on what we’re creating and interested in us
Apple
-Apple TVs represent a very small percentage of total TV’s sold
-they also go straight to the studios for their content
-as a result, nothing in the works with Apple right now
MARKETING & ADVERTISING
-current UF user base is 35-50yo males, but changing as we see more and more 4K users & TV purchasers
-$1.2 million budget for marketing this year, spread across:
>podcasts
>TV manufacturers
>in store retailers
-most of that budget will be dedicated to getting prominently featured with TV manufacturers, including buying into their commercials for premium placement, being front & center of their boxes and packaging, and including a free rental to users when they open the box / register their TV. (the ability to soon deliver a movie at only $0.12 per user thanks to the pending Sony DADC deal will make this an extremely cost effective way to get awareness out to new 4K TV owners)
-need A-list content in place to make the above happen, as Best Buy type stores and TV manufacturers need to show new releases in their promos & demos, not older content like what we have now.
“A-list content will be turned on this quarter”
>”we do not need to wait for 3.0 to be released to start featuring A-list content. (These things are not mutually exclusive)
It takes about 4 months for TV manufacturers to change their packaging, so we should see this type of marketing in the next 6 months between A-list content being uploaded this quarter and then the 3-4 month timeline for manufacturers to change their packaging afterward.
Podcasts:
-approximately 10 podcasts identified that we will launch marketing on this year which cater to target demographic
1) Adam Corolla podcast (great for auto enthusiasts! Could be Rev TV promotion opportunity?)
2) Joe Rogan podcast (*sidenote: I am a longtime avid listener of Joe Rogan’s podcasts and this is very significant in my opinion)
3) Bert Kreischer podcast
About 6-7 more, not named today…
The first 3 podcasts mentioned above reach 2 Million people in the target demographic EACH WEEK
Leo’s “This Week in Tech” podcast too expensive. (About 3x the going rate)
-Focus of PR’s will be on generating user awareness of UltraFlix & consumer knowledge (growing user base)
FOXXUM
-Rod Riegel ”looking at which studios we want to turn on within which region”
-separate licensing fee for each region, why we need to be smart about where we grow into
-Market priorities are:
1) North America
2) South America
3) Europe
4) Southeast Asia
5) India
*China: every piece of content brought into their country needs to be vetted by a company beforehand. Too much red tape and too costly to focus on right now.
300M 4K TV’s expected to be sold in 2018. We just need to tap into a few % of that to make these projection models work.
3.0 RELEASE
-next 6 months for conservative estimate
-A-list movies could still be loaded to UF 2.2 version in meantime as new studio deals are signed
-Could easily see up to 2,500 additional films loaded in next 6 months (separate from Iron Dragon, Rev TV, etc)
-will greatly benefit devices like Vizio & Android which have low CPU computing power or slow processing, etc
-tweaked interface based on analytics studies of keystroke patterns by users
-will always remain Pay Per View channel
-alternate language tracks on the fly
-real time language switching, HDR, etc (can technically show HDR on 2.2 version now, but many movies not currently set up to do so in current version)
NTGL Distribution
-cash transaction/purchase in the works to get those shares back under NTEK for distribution
-prior management clearly screwed us as everything is still under their books and thus can’t be distributed by NTEK until above transaction takes place
BUYBACK
-individual offers to shareholders can’t be made
-by law, if NTEK offers one shareholder a price for their shares then they must offer to all
-as a result, sounds like purchases will be made on open market
-ready to bundle with us on their streaming devices
F1 STREAMING
-right now Liberty Media is looking at their own streaming solution. We are still keeping in close communication with them and if things don’t transpire on their end we may have a chance at helping/partnering down the road
-SKY TV: coverage in America for Formula One is terrible. Chance we could create relationship where we pull and host SKY TV broadcasts post-show/race
NFL:
-nothing in the works here for at least next 2 years
-$10-12M bid for streaming rights
-Twitter paid over $10M for their NFL licensing deal
MISCELLANEOUS NOTES
-”we may want to see a bigger board down the road”
-confirmation that Mitch Lowe & Jeff Foley no longer involved in any way
-this year we will see legal involvement aimed at countering and stopping many of the false rumors currently being spread online about the company (forum bashers, etc)
-once we have consistent revenue and growth, this will also take care of the basher & short issue
-we will be ready for 8K in 2-3 years as needed
-no relationship or likelihood of future relationship with Verizon. Effort involved for revenue earned simply doesn’t make sense
-in summertime, rentals dip dramatically. Everyone is on vacation or outside, not at their TV's.
As a result, we will likely see revenues really start to pick up after Summer 2018 once 3.0 is launched, A-list content is loaded and brick & mortar stores and manufacturers have redesigned their packaging to prominently feature us (again, about a 4-month process)
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