Algorhythm Holdings Inc (RIME) 2006 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to The Singing Machine fourth quarter and year-end results conference call.

During the following presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS).

As a reminder, this teleconference is being recorded on Friday, June 30, 2006.

It is now my pleasure to turn this conference over to Danny Zheng, Chief Financial Officer.

Please go ahead.

Thank you, operator, and good morning, everyone.

After my prepared remarks, Chairman, Jay Bauer, interim CEO, Y.P.

Chan and I will be able to answer questions.

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 of future performance and actual results might differ materially.

A more detailed discussion of these risks and uncertainties is contained in this morning's press release and The Singing Machine's various filings with the SEC.

The statements made during this call are made only as of the date of the call and we undertake no obligation to update these statements.

I am pleased to report that we made progress toward all of our primary goals in fiscal 2006.

Operating costs declined significantly and we [set] further decrease in fiscal 2007.

We also strengthened our core karaoke business.

We signed a new distribution agreement for our karaoke music production products with WEA Corp, as well, as well as two-year licensing agreement with MGA entertainment to produce and distribute a variety of karaoke products based on MGA's BRATZ franchise, one of the world's leading toy lines in girl's lifestyle brands.

Additionally, we entered a three-year licensing agreement with top-grade children's (indiscernible) hi-fi to produce and distribute karaoke music and hardware based on this popular television show.

As a result, we believe we have repositioned ourselves to stabilize or perhaps slight increase our sales in fiscal 2007 versus fiscal 2006.

The new consumer electronic product will launch during the year to supplement our traditional karaoke product line and reposition The Singing Machine as the broad-based home entertainment company, where we [are received] by our customer.

While our line of the high-quality [iPod] docking stations, portable DVD systems, electronics drum sets and other innovative products did not generate significant revenue for us in fiscal 2006, we believe that the attractive value proposition we offer will support greater success in fiscal 2007.

In fact, we recently received firm orders totaling $1.1 million for electronic drum set from one of our major customers for delivery in this fiscal year.

Just as important, we stabilized our financial position and set the stage for renewed growth with retirement of $4 million convertible debt and the recent $3 million equity investment in The Singing Machine by Starlight International Holding Ltd.

We look forward to working with Starlight, our key supplier and new majority equity owner, to lower our production costs and expand our customer and consumer electronics business in years to come.

For the twelve months ended March 31, 2006, net sales declined 15% to 32,306,000 from $38,210,000 for fiscal 2005, primarily the result of lower sales of karaoke hardware and music.

Gross margin declined to 22% from 24% for fiscal 2005.

Total operating expense declined 15% for fiscal 2006 versus prior year, reflecting reductions in every expense category.

As previously announced, The Singing Machine has subleased its remaining excess warehouse space in California, which is expected to reduce annual leasing costs included in general and administrative expenses by approximately $200,000 beginning in fiscal 2007.

Additionally, the Company expects to save approximately $500,000 annually with the consolidation of its Hong Kong office into Starlight's facility, which is expected to occur this summer.

The loss from operations for fiscal 2006 was [$2,159,000] and adds to a loss from operations of [1,628,000] for fiscal 2005.

On March 14, 2006, the Company announced that it had retired the entire $4 million subordinated debenture, which came due on February 20, 2006 plus accrued interest of $270,000 for a total cash payment of $2 million.

The Company reported one high gain in fiscal 2006 of $2.2 million related to this transaction.

The net loss for fiscal 2006 was $1,905,000 or $0.19 per share.

This compares to a net loss for fiscal 2005 of $3,592,000 or $0.39 per share.

At March 31, 2006, The Singing Machine reported cash and cash equivalents of $424,000 compared to cash and cash equivalents at March 31, 2005 of $617,000.

Inventories declined to $1.6 million at March 31, 2006 from $3 million in March 31, 2005.

The working capital efficiency at March 31, 2006 was 4.2 million.

This includes income tax payable to Hong Kong Tax Authority of $2.4 million.

The Company continued to believe that it owed no tax to Hong Kong Tax Authority.

The working capital efficiency also reflected the previous announced $2 million bridge loan from Ever Solid Ltd., a Hong Kong subsidiary of Starlight, that was used to retire subordinated debenture.

Today, Singing Machine announced that shareholders of Starlight have approved the $3 million equity investment.

The portion of these funds was used to retire bridge loan.

The remaining approximate $1 million has been added to working capital.

The Starlight subsidiary will receive approximately 12.9 million newly issued on registered shares of Company's common stock. (indiscernible) approximately 56% of total number of share issued in outstanding.

These transactions will be reflected in the Company's financial statements at June 30, 2006.

Operator, we are waiting for the first question.

(OPERATOR INSTRUCTIONS).

Linda Donnelly, The Singing Machine.

Thank you.

I have two questions actually.

The first one is, where on the financial statements did you recognize the 2.27 million onetime gain?

Linda, that was recorded under other income.

Okay.

And the second question is, do you anticipate the additional 12.9 million shares coming into effect in your second fiscal quarter of '07?

The 12.9 million shares will be issued (indiscernible) by next month and that will increase our equity.

I don't think adding impact to our income statement by issuing those shares.

(OPERATOR INSTRUCTIONS).

Mr. Bauer, there are no further questions at this time.

I will turn the conference call back to you.

Please continue with your closing remarks.

Thank you, ladies and gentlemen.

I just would like to confirm to you that in addition to what Danny is saying, our Chief Financial Officer has already said, the Company is certainly well-positioned right now to regain some of its leadership position and the new infusion and the transaction with Starlight is giving us not only great comfort from a financial point of view but also access to their manufacturing capabilities, which will allow us at The Singing Machine to handle some of the second-tier products in electronics that we will distribute for Starlight.

And I thank you for your patient's to our Company and I assure you that we will be in touch with you and will report any future new development that will happen in the times to come.

Thank you very much.

Ladies and gentlemen, that does conclude the presentation for today.

We thank you for your participation and ask that you please disconnect all lines.