Algorhythm Holdings Inc (RIME) 2003 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Singing Machine fiscal 2003 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (CALLER INSTRUCTIONS). As a reminder, this conference is being recorded Tuesday, July 15th of 2003.

I would now like to turn the conference over to Y.P. Chan, CEO for Singing Machine.

Good morning, and thank you all for joining us this morning for our conference. For those who do not know me, my name is Y.P. Chan. I am the new CEO with the company. Today, April Green, our CFO, will join me for this conference. First, I remit (ph) a brief statement about some of the issues concerning our company. Then, April will expand on our financial statement for fiscal year 2003. Finally, we will have a Q&A session.

The first issue, ongoing concern and banking facility. I would like to repeat footnote number two from our 10-K, to be filed today. On March 14, 2003, the Company was notified of its violation on the net loss covenants of the loan and security agreements. This is commercial lender, and the Company was declared in default under the agreement. The lender amended the agreement on June 30th, 2003, but did not release the condition of default. This condition of default raises substantial doubt about the Company's ability to continue as an ongoing concern. (indiscernible). Now, let me provide you a bit of background information on this. On March 14, 2003, (indiscernible) informed us that we were in violation of net worth covenant in our agreements. In this letter, LaSalle also advised us we were in default under the credit agreement, and that it could accelerate the payment of all liability due (ph) under this agreement at any time. On June 30th, 2003, LaSalle extended agreements to July 31st, 2003, but did not raise the condition of default. Under the main credit facility, LaSalle Bank (indiscernible) up to 70 percent of the Company's eligible accounts receivable, plus up to 20 percent of the eligible inventory cap of $6 million, plus up to 60 percent of letter of credit cap of $3 million, minus the shares (ph) as set forth in the loan agreements. This effectively gave the Company more than $4.5 million of usable working capital from July 1st to 31st. However, one of the conditions of this last amendment was that we obtained $2 million in subordinated debt financing by July 10, 2003. As of July 10, the Company obtained $1 million in subordinated debt financing. On or about July 10, 2003, certain officers and directors advanced $1 million to the Company. The term of this management loan had not been finalized. However, the Company's admitted use (ph) and access to the $1 dollars in funding, it is presently expected that the loan will be a short-term loan, which will be deemed (ph) on or before October 31st, 2003. However, the Company has not determined the interest rate nor if any compensations such as warrants (ph) will be awarded to the management investment group for their loan. The Company is also in the process of finalizing a $1 million standby ELC (ph) from an outside investment group. Currently, two banks, LaSalle and the (indiscernible) investment group, have finalized the language for the ELC (ph), and we will hope to close this transaction within days. However, there can be no assurance that this financing will be completed on the term presently contemplated. Therefore, as of now, the Company is technically in violation of the net covenants and also the amendment 12. We are working with LaSalle to restructure (ph) the loan for the remainder of fiscal year 2004. However, there can be no assurance that such negotiation will be successful.

I presented the facts related to this matter. Now, I will go on the next issue of class-action lawsuit. Regarding the class-action lawsuit that has been filed against the Company, I can say that we believe these suits are completely without merit. And we will defend ourselves vigorously, and at this time, there is nothing more I can add, and we will not address any question concerning litigation.

Then I want to address our common business. We have learned some painful lessons in fiscal year 2003, but we still believe that the fundamentals of our business (indiscernible) this year, we have made a decision not to provide revenue nor earning guidance moving forward. However, we are committed to information transparency and shareholder value. We believe that stock price is a byproduct of running a good business, not the other way around. Now I would like to update you (indiscernible) on our business. This year we have maintained our customer base, despite the competition. At the same time, we have added new customers such as Walgreen's, Kohls, KayBee and RadioShack. Our business in Europe is expanding very rapidly. Two years ago, our shares were virtually zero (ph ). Last year, we did a little bit over $15 million for international, and this year, our confirmed order for the international sales has (indiscernible) more than $32 million.

Ladies and gentlemen, (indiscernible) nothing to do about the past. We are looking forward to the future. Now, I would like to hand it over to our CFO, April, to review the numbers. Then, I will be back with additional comments and the Q&A session.

Thank you, Y.P. And good morning to everyone. Please note that this conference call will include forward-looking statements. These statements are based on current expectations, estimates and projections about our business, based in part on assumptions made by management. These statements are not guarantees the future performance, and actual results may differ materially. A more detailed discussion of these risks and uncertainties is contained in this morning's press release and Singing Machine's various filings with the SEC. Statements made during this call are made only as of the date of the call, and we undertake no obligations to update these statements.

Fiscal year 2003 was both a good and a bad year for the Singing Machine. Our net sales increase to $95,613,000, from $62,475,000 in fiscal 2002, an increase of 53 percent. Sales increases can be attributed to our emergence into the European market. Our growth in this area was tremendous, from 0 sales in fiscal 2002 to 15.7 in fiscal 2003. The Company believes that this market is in its infant stages, and expects continued future growth in this area. The Company also saw growth in its music revenues, increasing from 6.3 million in fiscal 2002 to 8.9 in fiscal 2003, and 41 percent growth.

The guaranteed sales contract that was entered into and completed in fiscal 2003 caused a $2.5 million loss to the Company. This was recorded in accordance with generally accepted accounting principles as a reduction to sales. Gross profit as a percentage of sales decreased over prior year to 24.4 percent of sales. This is predominantly due to the fact that a large part of our growth was in sales from our subsidiary to international customers. Sales to international customers historically maintain a lower gross profit margin, because there are no other variable expenses that are normally incurred in domestic sales. These expenses include such things as handling fees, warehousing costs, commissions, advertising allowances and returns of product.

The Company also undertook a revaluation of its inventory in fiscal 2003. Because of our liquidity situation, management determined that a portion of the carryover inventory would have to be sold at substantially reduced prices. Therefore, a decrease in the value of specific inventory items was made. This had the effect of decreasing gross profit in the amount of $3.7 million, or 4 percent of sales. Operating expenses increased from $13 million in fiscal 2002 to $21.6 million in fiscal 2003. Primary factors in the increase include the following. Increases in advertising of $2.6 million. This was due to increases in both cooperative advertising with our customers and increased costs of direct advertising. Increased depreciation, $238,000, due to the addition of (indiscernible) for new product additions. Increased compensation expense (technical difficulty) million dollars. The office of (technical difficulty) in Hong Kong added key personnel last year to assist (technical difficulty). Increased freight and handling charges to customers amounted to $873,000. Expansion of the California warehouse and its related expenses, incurred to handle our high level of inventory, was $580,000 over last year. Increases in product development fees for the development of future products were $571,000.

The next topic is the income tax expense. As we have stated in our previous press releases, we are restating 2002 and 2001 financial statements for increased tax provisions. Subsequent to the issuance of the Company's fiscal 2002 and 2001 consolidated financial statements, management reassessed its position on the taxation of its subsidiaries' income by the United States and the Hong Kong taxing authorities. With regard to taxation in Hong Kong, the Company's subsidiary has applied for a Hong Kong offshore claim tax exemption based on the locality of profits of the Hong Kong subsidiary. Management believes that the exemption will be approved because the source of all profits of the Hong Kong subsidiary is from exporting to customers outside of Hong Kong. Accordingly, no provision for income taxes was provided in the original audited financial statements for the years ended March 31st, 2002 and 2001. However, full disclosure was previously reflected in the audited financial statements for those years of the estimated amount that would be due if, in fact, the exemption were to be denied. Although the Company has not received a decision on the approval of the application for exemption, due to the extended time that the application has been outstanding, management has determined to restate the 2002 and 2001 consolidated financial statements to provide for such taxes. The effect of such restatements is to increase income tax expense by $748,672 in fiscal 2002 and $468,424 in fiscal 2001. With regard to United States taxation of foreign income, the Company had originally taken the position that the foreign income of the Hong Kong subsidiary qualified for a deferral under the Internal Revenue Code, allowing for such income to be indefinitely deferred and not taxed in the United States until such income is repatriated. Full disclosure of the amounts and natures of the indefinite deferral for the fiscal year of 2002 was reflected in the income tax footnote of the consolidated financial statements for that year. The Internal Revenue codes regulations and case law regarding international income taxation is quite complex, and each case is determined based on the individual facts and circumstances. Accordingly, eligibility for the deferral is subject to interpretation, and the possibility exist that the Internal Revenue Service may reach a conclusion that differs from management's. Although management believes their general position can be supported, providing for the deferral of U.S. income taxation of the subsidiary's income, and the Company is not currently under any examination by the Internal Revenue Service in regard to these matters, management has determined to restate the fiscal 2002 consolidated financial statements based on its reassessment of the probability that it will prevail in its original position. The effect of such restatements is to increase income tax expenses in the fiscal year 2002 in the amount of $1,027,545.

The net effect of the above two adjustments is to decrease our net income in both fiscal 2002 and 2001. This amounted to a decrease in income per share of approximately 25 cents on basic and 23 cents in diluted for fiscal 2002, and a decrease in fiscal 2001 of approximately 7 cents basic and 6 cents diluted. Due to all of the factors stated, our net income after tax was $1,217,812 or 14 cents per diluted share at March 31st, 2003.

At this time, I'll turn the call back over to our COO, Y.P. Chan, to discuss further comments.

Now, we're ready for Q&A. We're ready for the first questions.

(CALLER INSTRUCTIONS). John Demergian (ph), Bishop Rosen (ph).

Well, I must say I don't like this balance sheet. It stinks. But I've got a question. In recent conversation -- recent being the last month and a half -- with senior officers of your company, it was suggested you were going to pay off the LaSalle bank loan and establish a new banking relationship with an international bank in Hong Kong called HSBC. What's happened to that, since you're now seemingly re-dependent again on LaSalle? And did HSBC turn you down?

John, thank you for the question.

Hold it, I'm not through. I have a second question about your inventories. And were the orders to begin to decrease that inventory level, your accounts receivable level are up considerably, as are your accounts payable. So can you address those three items also, please?

Okay, John, I will take the first question and I will let April take the second questions. We were in discussion with other financial institutes looking at (indiscernible) source of financings. As you know, our business expanded 10 times in the past five years. We are looking at a different alternative financing with Halsey (ph) Capital. We were in discussion, and the discussion was not fruitful, and therefore, I think that was -- we want to still continue working with LaSalle, and LaSalle has been very supportive of our business that they extend our loan, and that's the situation as of now.

And to address your other question, John, inventories -- our inventories are substantially higher, and we have stated that in prior calls, as well. We have already received in-house orders to help to move down our inventory position, and we are committed to reducing our inventory position this year back to industry standards throughout the year. As far as accounts receivable is concerned, our accounts receivable is well within line of industry standard for the quarter. They are current receivables, and there are no charges against them. Accounts payable is predominantly because of the increased inventory.

Can I add a further question, please? Your prior loan agreement with LaSalle Bank called for a clean floor of inventories. Does that exist still in the terms of the current extension of the loan, or are they giving you any leeway to carry more than a clean floor? A clean floor to me means zero inventory levels.

Okay. To clarify on that a little bit, the covenant was actually to bring (indiscernible) against inventory to a zero balance. The Company has to have some inventory in-house in order to continue operations on a day-to-day basis. Unfortunately, we did not bring it down to that level. LaSalle did not waive that covenant; they changed it. They actually gave us additional inventory financing to help us through this time.

Jerry Bloomberg, Montauk Financial.

This one is kind of for Eddie, in a way. I know Eddie was on margin and had to sell, unfortunately, a lot of stock. And I guess he probably -- or if he's listening, he wouldn't have been on margin if you didn't think the Company was going to continue to do well. I just want to know why, basically, he went on margin. And also, the second part of this is about Roth Capital. Did they have any inkling as to what was going down with the tax issues and the banking issues before they came out with their report as kind of a buy recommendation a few months ago?

Jerry, let me try to answer the best I can this particular question, because this is a private matter with an officer of the company. One thing I understood -- let me state (ph) correctly is the margin was placed two years ago, and unfortunately, the stock dropped and there was a margin call. It was not a preplanning shares of a stock by a particular officer of the company.

Okay. I'm not sure that quite answered the question, but --

I think is better to ask this question to Eddie directly.

Unfortunately, this is a personal margin, and the Company cannot make a comment on personal investments.

How about the second part of my question, Y.P., about Roth Capital, and their report, and did they know anything before they made this report?

Which report do you refer to?

I think they put out a buy recommendation a few months ago. I was wondering if they had all the information at that time.

Jerry, (indiscernible) we are giving information to all the stakeholders, in the same manner we provide to everybody else. And I believe that Roth Capital had done their independent study, they arrived certain (ph) number, which is solely on their part.

Okay, I guess that answers that question to some degree.

Ian Gilson (ph), Roth Capital Partners.

(multiple speakers) you recorded was below the Company's recent guidance? And was there any restatement of revenue, or where was the shortfall and why, since that guidance was given and reiterated on at least one occasion?

The Company's guidance given in February of this year was higher than what we came out with at the end. A couple of reasons for this -- because of our liquidity situation, because of our loan situation with LaSalle and the excess of inventory. Unfortunately, we could not meet those guidelines. And that is one of the reasons why we are going to be focusing on our core business and not focusing on the market.

Let me further clarify this issue on the inventory. I think (indiscernible) I want to add the comment in here. As of December 31st, 2002, we have about $30 million in inventory. And that tap (ph) our cash. As you know, our business was seasonal, and we did about 85 percent of our business for August through December of the year. Our peak selling season is only in September, October and November. And initially, we were hoping that we do not get in the situation of a liquidity situation, we do not have to share some of this inventory. But because the Company really was under tremendous pressure from a cash flow, and therefore we had no choice but have to sell the inventory at non-peak season. Of course, as it is non-peak season, by now in the summer, and we could not get this inventory at a better price. And therefore, (indiscernible) below our margin a little bit and subsequently, we had to write down (ph) in the inventory. So that was part of the reason that our gross margin reduced by the $3.7 million, because $3.7 million of write-off in inventory. And it will have (indiscernible) funding, we didn't have (ph) cash flow this situation might be different.

Currently, as of the end of the year, your inventory is significantly higher than it has ever been at year end.

No question about it. And I think, if you look at last year, our inventory was about $9 million, and this year our inventory is about 25. And the management is moving very actively to sell our inventory, and we have, let's say, from (indiscernible) forward number, but I think we have sold a significant amount of inventory on hand that is based on commitment (ph) and (indiscernible) in the next couple of months. And that we'll have to (indiscernible) cash, because after all, our company cashed out (ph) the inventory.

But why is that inventory high? Is it residual inventory from last selling season, or is it new inventory for the next selling season?

The inventory, if you look at it as of March 31st, was $30 million. And then, as of (indiscernible) $30 million inventory, March 31st, it was about $25 million in inventory, and also one thing you need to realize, in our peak selling season is ended in December. We do have a normal return from a customer that includes our (indiscernible). We took a net effect (ph) and we did move out some old inventory.

Also, to add on that, we estimate that we lost approximately $3 to $5 million due to the (indiscernible) port strike (ph), because two of the new products for last year could not be pulled off the port in a timely manner to get --

Really, April, that does not answer my question. My question was, is the inventory you currently have new inventory from new production or a holdover in inventory from last year?

It's holdover inventory from last year.

Thank you.

Alan Adler, Alan Adler Enterprises.

Mr. Chan, you talked about transparency. But most of the questions that have been asked have not been answered directly. I would just caution you that obfuscation is not exactly an answer. Let me try and rephrase for questions or five questions and see if you would like to answer them directly. $95 million in sales you explained with a $2.5 million reduction due to a bad contract, but your estimate had been for over $100 million. Can you explain what the difference is? I believe your $100 million estimate was made well past February, in other words, well past the end of your year.

Number two, you have been asked repeatedly about inventory. Is the inventory right now considered clean, from a businessman's standpoint? And could you give an indication of your inventory as of today, as of the middle of July, as opposed to the end of March? How much has been sold, and what sits there now?

Number three, you say that you're comfortable with LaSalle. Cutting through all the amendments, are they going to be able to finance your business, or are you going to turn to Hong Kong and Asian sources to finance your production going into the fall season, or will you have to talk about a lack of financing to make new products going forward?

Four, when would you expect the income tax issues to be settled? What are the chances that you will have to pay that? I think you can at least give us your best estimate there.

And lastly, you said something that I think was very annoying, that you are going to focus on your core business, not the market. This must have been copied from a company that was under litigation. It is not outside the realm of possibility to talk to your shareholders and stakeholders truthfully and periodically and concentrate on your core market. That's not a question, that's a comment. So if you would address the first four questions, I would appreciate it.

Thank you for your comments. In terms of the $100 million referred to, I am new to the Company. I just get the information from a previous announcement we had.

My concern is that I was told Ms. Green was gone because she was not up to the task. Now I hear her on the call, and you say you're new to the Company. This company made an estimate. It's not the $2 million, it's the fact that you didn't know what your sales were that bothers me, after the year ends.

Do you want to give me a chance to address your questions?

Sure.

Okay. In our latest estimate, we did say that sales is about $98 to $102 million. Okay? And our actual sales came down to about $95 million. There was a couple of things that caused us to not able to meet the target. As discussed previously, there was a consignment deal with customers that actually (indiscernible) about $11 million an order. And there was (indiscernible) profits to this particular customer, 2.5. And there was also the L.A. port strike that cost us between $3 to $5 million. If you add all these up together, if these things will not happen, we would able to make our (indiscernible) forecast. Okay, that's question number one.

Question number two, in terms of inventory. As of last week, we had total approximately -- I'll look at this number here -- approximately $25 million inventory. We have sold, okay, we have sold (indiscernible) about 12.5.

I'm sorry; I don't know understand. You had 25 million at the end of March, you still have 25 million, but you have orders against the 25 million for how much?

About 12.5.

12.5?

We are (indiscernible) first to understand (indiscernible) together is about 12.5. (multiple speakers).

I'm sorry. You have orders for 12.5, and is the other 12.5 inventory going to be, as the gentleman asked you before, all carryover inventory that you have to write off later? Or is that salable inventory?

It is salable inventory. The inventory is carryover inventory, and we believe it is salable inventory. And the management team are looking into sell further of this inventory.

So therefore, if you 12.5 million in inventory, how much more inventory will you need to produce over the next months leading up to your October/November shipping season for Christmas, and what will you finance that with?

Okay. According to our forecast, we are looking at approximately $10 to $12 million in new (indiscernible), but a lot of this has been ordered against customer. For example, Walgreen's, RadioShack. And they order it from Hong Kong. We are going to bring those goods in, and against the order that we have commitment for.

And do you have financing for that new production also?

The financing -- actually, looking at the way our business has been financing is our financing comes from a couple of source. Definitely one is from the bank in the United States. We are also working with our bank in Hong Kong. For example, last year, our line of credit with the bank was $5.5 million, and at the same time, we get a lot of support and financing from our factory. And that has been very supportive of our operations, and they will give us a lot of financing support, as well.

So are you saying that you are going to ship approximately $12.5 million, reducing your current inventory, be able to sell the other $12.5 million and get various sources of support to produce the inventory you need for the fall? And you have confidence in that, and you have numbers to support that?

That's correct.

And does Ms. Green agree with that? Would you like to be on record saying that you agree with that?

Yes, I do agree with that.

And you have numbers that would support a cash flow out, and LaSalle has seen those, and they are going to give you the money that you need if your Asian sources do not?

Okay. Let me just (indiscernible) of the financing. We are working with LaSalle, and the situation -- we have provided all the information they are asking for, and as I mentioned before in a statement, there is no assurance that this will be successful, by working with LaSalle and restructuring (ph) our debt for the remainder of the year.

But if they asked you for $2 million of subordinated debt, you have got something less than that in terms to be later determined, one would have to assume that they are either going to be satisfied with less than 2 million and sign off on that, and that secondly you are not going to do anything with that 2 million to grant those $2 million a disproportionate share of the equity.

I could not comment on what exactly LaSalle's position is, because I'm not in their shoes. So far, we have been working with them very closely to come up with a restructuring plan that works for the Company for the remainder of the years.

But you don't sense a desire on their part to pull the plug because they know you don't have other financing?

So far, I think we have been in technical default or violation of net covenant since December 31st, 2002, and up to this point -- it's July 15th -- they are still supportive of our operations. But I could not make any forward-looking statements.

Would you care to publish a cash flow that would show the receipt of funds from the liquidation of inventory, so that we can see how this Accounts Payable amount would be paid down and how your future production would be financed? Could you give us that in rough numbers on a spreadsheet?

Some of this information are extremely sensitive. It has a lot of competitive information that is detrimental to our business.

I assure you your competitors are telling all your customers you're going out of business.

I think there's nothing we can control what our competitors say or do not say. Okay. What we assume is that at least we are controlling what we can do with this business.

I'm just -- fine. So having said that, we're just looking for -- as I'm sure everyone is -- just looking for some reassurance that you are going to get to the next selling season and not be out there with old goods that can't be sold or customers who don't want to buy because they are not sure you can deliver. I think that's a reasonable question.

As I mentioned before in our statements, this year, we have not lost a single account. (indiscernible) we get more account as LaSalle (ph) of our expanded business, so we hope the results speak for itself.

Eric Connerly, Boston Partners.

Two questions. Number one, how much have you committed to your marketing partners like Nickelodeon to produce for this upcoming Christmas season? And how much inventory do you have to carry for them? And number two, have you been contacted at all by the SEC about the insider sales just before this press release went out?

First of all, about the insider sales, the only insider sales were margin call sales -- those are fully in compliance with SEC regulations, and all specific form 4's (ph) have been filed. I would leave that to legal counsel.

And the second thing, on --

The royalty agreements are confirmed. We have specific commitments with our royalty partners, with the merchandise licensers. We have committed to doing sales and keeping a small amount of inventory in-house to cover those sales. We don't believe that the payment of these guarantees will hurt the operations of the Singing Machine in any way, shape or form, going forward.

And are these cancelable by your royalty partners?

Yes, it's a contract. Any contract has cancelability.

Linda Donnelly, Franklin Management Group.

My first question is of the karaoke market, what percentage of that market do you have?

Okay. That is a good question; it is about market share. It depends on which (indiscernible) you have got in terms of market size. And the last time we get a report from A.G. Edwards, they estimate the karaoke business between $200 and $300 million on hardwares (ph). And the music is now $200 or $300 million in the U.S. And for last year, we did total of about $95 to $96 million. If you take from a hardware perspective, our percentage, you take $95 minus $8 million music, gives you 87 divide by approximately 200 million, that's giving you about 40-some percent of the marketshare. And the music is basically 8 million out of $200 million, we have 4 percent of marketshare.

Now, I wanted to pursue something on the consignment problem. I thought that sometime in the past you addressed this, and you said you were not going to be doing consignment selling going forward. Is that correct?

That is correct, with one very small exception. With our Best Buy agreements, we have discontinued consignments on all of our machines, but they will be carrying our music on consignment for the next year.

Now, when we had the conference call reporting the third quarter and nine months, the loan payable at that time -- well, as of December 31st -- had been a little more than 10 million. And at the time of the call, you said it had gone down to 4.7 million. Is there any clear explanation of why it's now -- or it was at March 31st -- back to about 6.8?

Due to our high level of inventory, we had also a high level of payables against that, plus we needed to fund ongoing operations. Therefore, we needed to borrow on our line of credit.

Now, I believe you said you are filing your 10-K today. When that is filed, will there be a restatement of the quarterly earnings for the past two years?

The restatement of the quarterly earnings for the last two years will be filed subsequent to our 10-K filing today.

So that will be in the future?

That's correct.

And another question I had for you -- on the income statement, because you're showing advertising in a separate line, now I understand part of this was warehousing. But there was a big jump in SG&A. What, aside from the warehouse, was the cause of that?

In the SG&A, compensation. Obviously, those were separate line items. We had a lot of variable expenses in there, royalties and that type of thing, product development fees, depreciation, which was not separated in line items. These are all issues that have I discussed prior to this.

(CALLER INSTRUCTIONS). John Demergian (ph), Bishop Rosen (ph).

What say you about the first quarter, which has ended as of the end of June? Has anything happened operationally, revenue-wise?

John, as I mentioned before, we have made a decision not to provide any (indiscernible) guidance for cash, and therefore we cannot comment on the specifics of what the quarter number looks like.

Well, it's not guidance; it's already happened. It's past history. Don't you think we ought to know something about what happened with the last three months?

You will (multiple speakers) in August, and you will see the number as we announce it.

(CALLER INSTRUCTIONS). Tristen Barr (ph), MTB Capital.

I was a little confused as to whether or not you actually had the full 2 million in place. It sounded like you had 1 million committed from insiders and a possible 1 million committed from outsiders. Are those definite, or what exactly is the status of that additional funding?

(multiple speakers) the $1 million has been put up by the officer and Board of Directors and was wired to LaSalle's bank account on July 10. And before that, we were able to secure an investor who will put $1 million standby ELC (ph), and the bank of the investor provides standard ELC (ph) language to LaSalle, and before the deadline, they are now in the positive finalized the ELC language. Once the ELC language are finalized, we expect these investors will deposit money into the bank. That is the situation as of today.

You mentioned insiders sales being part of a margin call. With the stock down at these levels, are insiders considering purchasing shares when the blackout period expires?

Let me put it this way. I think the insiders -- they will need to act individually on their own. As a company, we have not made any recommendation to buy or sell the stock. It is up to individual officers and Board of Directors to make their own investment decisions.

What about you? How you personally? Are you looking to purchase shares with the stock at 2.76? Granted, you're not giving guidance, but the impression that you've been giving is that sales should be increasing year-over-year.

Let me answer your question differently. I put my personal money as part of the $1 million (indiscernible) LaSalle. As subordinated debt, I put my own money. Does this answer your question?

No, not really, because we still don't know what the terms are of that debt. What would answer my question is if you put your own personal money into acquiring shares in the open market.

And I am going to talk to my investment adviser and looking at what is the best thing to do. I have been really focusing on running the business, and I have got my hands full. So I will -- if I am to make a decision you will see an announcement.

Linda Donnelly, Franklin Management Group.

Do you have a week, at this point in time, in which you think you might be reporting the first quarter?

We will definitely be reporting the first quarter prior to the 15th, which is our deadline date. Probably that week we will be releasing earnings.

Okay. Thank you very much, everybody, for joining us today. We look forward to speaking with you again when we announce our fourth-quarter results next month. Goodbye.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

(CONFERENCE CALL CONCLUDED)