The Singing Machine Company, Inc.
Q1 2022 Earnings Call Transcript

Published: 17 Aug 2021

[Operator:]

Good day, everyone, and welcome to today’s Singing Machine Announces First Quarter Earnings. At this time, all participants are in a listen-only mode. Later, you’ll have an opportunity to ask questions during the question-and-answer session. Please note, this call may be recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn today’s program over to Brendan Hopkins. Go ahead.

[Brendan Hopkins:]

Thank you. Good morning, everyone, and thank you for joining us. We have a brief safe harbor and then we will get started. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Gary Atkinson, CEO of Singing Machine.

[Gary Atkinson:]

Thank you, Brendan. Hi, everyone. Good morning. I want to thank everybody for attending our first quarter earnings call. My name is Gary Atkinson, Company’s CEO. I’m also joined this morning by Lionel Marquis, Company’s CFO; and Bernardo Melo, our VP of Global Sales and Marketing. I’m going to start the call today by saying it’s been a truly historical last few weeks for the Company. For those that have been following us for a while, you will all likely know that for the last 14 years, we have been majority 50% owned by our former Chinese manufacturing partner. Last week, we closed on a significant private placement, where we raised $10 million from a mix of very large, well-known, well-respected U.S.-based funds. We also have announced that Stingray Group, our long-time strategic content partner, participated in this recent private placement. This morning, prior to this earnings call, we’ve also announced how we intend to use a large portion of the capital that we raised, which is to buy back all of the approximate 19.6 million shares that was held by the 50% majority owner. So, in effect, what we’ve done is we’ve restructured our shareholder base by swapping out our large legacy majority shareholder and replacing him with a number of high-quality, long-minded U.S. funds and our strategic technology and content partners. We believe this private placement and share buyback will be transformative to our business, not just from an operational and strategic perspective, but also from an important corporate governance perspective. By removing the majority owner and replacing that shareholder with multiple institutional and strategic investors, today, the optics of the business were completely different than we did a few weeks ago. We are now aligned with investors that want to see the Company grow that have confidence in our business, confidence in our management team, share our vision for transforming the Company, and I believe they have the means and the willingness to support us. Further, by removing the majority shareholder, we have removed an obstacle that will potentially -- that would have potentially prevented a future national exchange uplist application. Further to all of these news, all of these transactions, we will also be completely restructuring our Board of Directors to include a new appointment from the Stingray Group, adding myself on to the Board and also adding a soon-to-be-named list of well-respected individuals from the industries of retail, technology and capital markets. We have put a lot of -- we have a lot of plans that our team is already hard at work pursuing. But for now, I’ll start by saying, we are thrilled with what we’ve accomplished over the last few weeks. We look forward to beginning our plans to transform this business from a primarily hardware-based company to a more fully integrated technology and hardware-software business with recurring revenue. So, with all that being said, I want to turn the call over to Lionel, who will help talk us through some of the important first quarter updates. Please go ahead, Lionel.

[Lionel Marquis:]

Thank you, Gary, and good morning, everyone. I just wanted to take you through the highlights of Q1. Net sales were almost double in Q1 from $3.1 million to $6.1 million. It was primarily due to the timing of one major retailer who generally takes their Black Friday seasonal goods, okay, in the second quarter. But, due to anticipated slowdowns in logistics or logistics issues that were anticipated, they placed their orders a lot earlier this year and we were able to take advantage of moving some of that revenue, not all of it, into Q1. So, that accounted for most of the pickup on the revenue, more of a timing issue. Gross profit margin was $1.6 million versus $1 million or a $600,000 increase. And this, again, was primarily due to the increase in the Black Friday shipment of goods to that one major retailer. But those goods, this increase, if you will, in gross profit margin was somewhat offset by the fact that we did have the increase in the Black Friday shipment of goods because those goods carry a significantly less gross profit margin than others. Direct import, they don’t have any marketing programs associated with them, no freight associated with them. So, their yield is about 19% compared to our normal goods that are shipped domestically that carry approximately 34%, 35% margin. So, approximately 5.5. We did -- gross profit margin was 26% this quarter versus 31.5% in the prior period. That was a drop of about 5.5%. Our operating expenses were $2.1 million versus $1.7 million, as an increase of approximately $400,000. It was mostly in variable selling expenses, commissions, royalty and freight and commensurate with the sales increase. G&A was relatively flat. General and administration expenses only increased by approximately $60,000. So, taking a look at the operating expenses as a percentage of sales, our operating expenses were only 34% of net sales as opposed to 57% in the last year same quarter. And with keeping the G&A flat, that would definitely have a positive effect on the amount of operating expenses as a percentage of net sales. In other income, we had $300,000 of other income net versus $500,000 in other income net in the previous quarter last year. We received a Paycheck Protection Program forgiveness of approximately $448,000 worth of debt compared to the prior year where we had damaged goods receipts. We were starting to receive insurance proceeds on the damaged goods issue that we had from the prior year and -- as well as forgiveness on accounts payable from the vendor who caused the issue. That was about $522,000. So, those two kind of offset each other. We did have -- this was offset by an increase in interest expense of about $70,000 as we only had the recent financing that we had put in place with Crestmark and Iron Horse, wasn’t in for the first quarter of the fiscal year last year versus this year where we have minimum interest requirements that we had to pay out. So, it was about a $70,000 differential. So, looking at everything in total, we had a net loss of approximately $100,000 versus $200,000 in the prior year. So, we improved that by about $100,000. Our accounts receivable, taking a look at the balance sheet, was up $5.6 million versus $1.8 million in the prior year at this time, again, primarily due to the sales increase. Inventory was up $8.4 million versus $6.9 million, about $1.5 million higher than last year at this time. In anticipation of the logistical issues and some of the news that you’ve been hearing about global logistic issues around the world, we’ve ordered our stock -- tried to order our stock a lot earlier this year in an attempt to get some of that inventory in sooner. And we did manage to get a good portion of some of the stuff into our stock before all the real hard-nosed logistics issues started to happen. Accounts payable was up accordingly, $6.3 million versus $2.5 million. That’s pretty much the financial issues. We just wanted to talk about the private placement for a bit. Net, it raised approximately $9.8 million in cash. The buyout of the 50% owner is approximately $7.2 million. The cost of the transaction is going to be approximately $8 million, and that would give us working capital of approximately $1.8 million, after everything is said and done. So, that is my report. And I’ll turn it back over to Gary.

[Gary Atkinson:]

And one quick correction on -- Lionel, on that. I believe you just said the cost of the capital raise was about $8 million. I think, you meant to say about $800,000.

[Lionel Marquis:]

Yes. Sorry about that. That’s correct. $800,000.

[Gary Atkinson:]

Okay. All right. Just wanted to clarify. All right, Lionel. Thank you for that presentation. At this point, I want to turn the call over to Bernardo, who’s on the line to give us a bit of an update where we are with retail sales as we move into our important holiday quarters.

[Bernardo Melo:]

Hey everyone. Thank you for joining and taking interest in our Company and on this call. I want to go through some of the success and some of the things that we’re working on now throughout Q1, but also for the back end. But before so, I just -- I want to bring recognition to the entire team in the Company. Our Asian team, our Fort Lauderdale team and also our California team that have really put us in a position to be successful, even though that there’s a ton of issues and challenges out of the Orient, domestically with freight, securing containers, production challenges. It’s been an interesting year and a year like no other that I’ve been in the Company. And it is truly -- it truly has worked out because of all the efforts that the entire team has done. I mean, there is shortages of containers, and we’ve been able to secure containers. With partnerships being stronger than ever, we have been able to secure programs much, much earlier this year. Usually, we get commitments towards March and April. And a lot of the retailers have worked with us to secure programs earlier. Easily, we set the floor in September and October. We are now setting the floor in as early as July and August, which is reflective of some of the sales that have happened in Q1 and going into Q2. And it’s mostly because they do recognize some of the challenges, but also because of the success of the karaoke segment during the off-peak season. We’re still experiencing the post-pandemic results, even though things are opening up. As everyone knows, people are traveling more. And that this -- that income that was applied to other categories have gone a lot in to travel, but that hasn’t slowed karaoke down. I mean, last year, we had a real big uptick with Carpool Karaoke when it became popular and with TikTok. And although that same sort of uptick hasn’t happened this year, our other products have maintained or increased our sales. I mean, if you look at the data from Target, from Walmart, from Costco.com, Walmart.com, everyone is still showing a significant uptick in sales, if you remove the onetime gain of Carpool Karaoke. And even if you put in the Carpool Karaoke, we’re still averaging either flat sales or were up. So, it’s a true testament to the team and I just wanted to make sure I recognize them on the call. We have people that are working hard, all types of hours, coordinating with Asia to secure things. And we were able to predict, work with retailers but also took an opportunity to bring in inventory because, as you know, this year, whoever has inventory’s going to win. And we’re positioned right to have the right amount of inventory, for the most part, to supply our main customers. Another thing that we started doing in switching gears is becoming a lot more efficient in really trying to grow those customers that are getting behind the category that have shown year-over-year success and continue to support, not only the karaoke segment, but in particular with the Singing Machine. So, we’ve shipped a lot of stuff out of the Orient, but also domestic sales have been up. Even if the inventory wasn’t coming in on time, say, for Walmart or Target or Amazon, we were -- we caught the buzz early enough to make sure that we had inventory to ship on time So, traditionally, dotcom is a good sign of how things are going to be towards the back end and we’re showing significant sales there. We’ve already participated in Prime Day with Amazon, which was a success. We’re doing a lot more business now that is non-promotional. We’ve even passed some of the price increases, which have forced retails to go up, and we have not seen a significant decline or a decline at all with some of those retails that have gone up. We are planning to do another round of price increases here, September 1, just to cover some of the cost associated with the up cost in containers. So, beyond the lookout for the category, I mean, we have a good program at Walmart. Target has set -- is setting early this year. We’ve already transitioned some of the older SKUs and started to transition some of the newer SKU. Higher price points continue to be a big success for us. We’ve also seen really good sell-through on the accessory portion of the business, which carry a little bit higher gross profits for us. We transitioned into Bluetooth microphones, which have been traditionally Chinese off-brands, and we started to cut into that market share, and we’re really positioning ourselves to continue to develop a product that focuses on that market. We also have some big programs that are very -- that are going to drive the app portion and the digital music portion of the business. So, that’s good news. We are going into Montreal this week to continue to see how we expand that for the rest of the year and moving forward into 2022. So, we have a good plan. We have a good structure. We’re coming out earlier with some products this year. On the kids’ side, we’re going to be able to distribute and test out here in October so that we know how to forecast and we know how to prepare for the upcoming future. We’re releasing Carpool Karaoke 2.0 with a good marketing buzz in August, mid-August, which is already out, but the rest will be towards September. So, we’re excited about that to introduce what our popular item was for last year, but now with new features, a new price point going back up to $59.99. And already, Amazon has done a presale. They’ve already started shipping that, and we’ve already started doing some positive reviews online. So everything is looking well. We are extremely excited about what’s happening. We’re partnering with Sam’s Club to release some higher price points, but also some good price points for kids. And we are just going after the home entertainment market, not just the karaoke. We’re looking to really be top of mind for the home entertainment market, which would allow us to continue to distribute among the retailers through different departments and we’re in conversations to do so. So, besides that, I just -- everything is setting. And I just want to leave more for questioning in the back end. As you guys know, Q1 numbers have been really good, and that’s really a good sign for us, because we’re going to be setting the floors earlier and we’re going to give ourselves a better chance to sell through throughout which helps inventory in the fourth quarter, just like it helped inventory in the fourth quarter this year. So, with that, Gary, I’ll pass it over to you. And I’ll just make myself available for additional questions in the back.

[Gary Atkinson:]

Perfect. All right. We appreciate the update, Bernardo. We are mindful of time. So, I want to make sure that we address any questions that are out there. So, why don’t we open it up for some Q&A?

[Operator:]

We will take our first question from Corey Deutsch from Paradigm. Your line is open.

[Unidentified Analyst:]

Hey, guys. First and foremost, I want to congratulate you on a tremendous quarter. So, really nice job and strong execution. Secondly, can you just talk about this early revenue recognition and how you guys view it with regards to relevant implications? Is this revenue that is recognized in Q -- in this quarter that won’t be recognized next quarter, or do you see this as being any sort of enhancement to top line? And then, like, I know you mentioned margins, et cetera. Can you just double click on the benefits that this early revenue recognition had on the Company’s financials?

[Gary Atkinson:]

Yes, sure. This is revenue that came in earlier than what it normally would come in. So, it’s a timing issue more than anything else. But more importantly, as far as the financials are concerned, this is definitely a good thing for us in terms of, one, resolving a worldwide global logistics problem. The fact that we’re getting that stuff out early is going to help us get, like you heard Bernardo say, an earlier step. And our sell-through should be a lot better because the product will be out there longer and it should mitigate some of the take back of stock or returns of stock at the end of the year as the inventory to retailers is out. Second of all, from a cash flow perspective, we’re always very tight with cash in the fourth quarter -- I’m sorry, in the first quarter, going into the second. This puts a lot of working capital on the table for us, because once I get the receivable I am able to borrow against it, and it certainly helps the cash flow situation on our side.

[Unidentified Analyst:]

Got it.

[Bernardo Melo:]

And I’ll answer from the sales point of view. One of the things that happened this year is there’s a lot of pressure to ship some of these goods earlier because of how, especially Walmart works in terms of organizing their logistics and organizing their annual event inventory. So usually, we had things that would be scheduled for that Q1, but there are many production challenges. This year, we were ready. We were ready earlier, and we were able to meet some of the shippings that are traditionally set for June. The other thing that has happened is, we are turning over older SKUs into newer SKUs. So, they were able to sell those things through in May and June. So, they needed to be ready with the replenishment items, which were able to ship in the end of June time frame. So, you will see maybe a Q2 number slightly lower, but the upside to it is that it will get in the stores earlier. And therefore, sales will happen earlier. And they need to then reorder for the back half and the spring of next year, which we have already received those commitments from two of the largest retailers. So, we’ve already started to see end of like December and early January and February, we’ve already started to see reorders because of how the sell-through is going now in the beginning of our fiscal year.

[Unidentified Analyst:]

So, is it fair to say that just in the nature of your business, obviously, this is a seasonal business, but what you’re able to do is kind of diversify that revenue stream into unique quarters in an enhanced manner and you’re seeing the benefits. And second, as you see those benefits, how do you think about going forward, how you can continue to kind of spread out that revenue, so to speak, by recognizing those orders earlier going forward?

[Bernardo Melo:]

Yes. And again, it’s a timing issue. We separate out everything between selling into the retailers and then selling out. And by continuing to move things earlier in the year, we’re just really giving ourselves that sell-out opportunities in the late spring summertime, which traditionally was the time that we were shipping items from the Orient. But now since we’re shipping earlier, they’re setting earlier and we’re seeing some of those sales that we had not seen before in that spring summertime. So, this is now year two of the experiment for Sam’s Club. This is year two for the experiment for Walmart. And in some of the earlier -- in some of the conversations that we’re having now that are already targeting 2022, we’re seeing those -- that trend and those conversations continue. So, we’re excited about that. Yes -- we’re excited about that. And yes, we’re hoping that this continues for years to come.

[Unidentified Analyst:]

That’s great. And then, sorry, one more question, which is, obviously, the entire world experienced for the last 18 months, this global pandemic. Many -- majority of businesses suffered from it; for others, it created opportunity. And you guys touched on that, the opportunity that it caused for you. How do you take that opportunity, or how do you guys think about that opportunity that COVID created where it brought a lot more awareness to the business and kind of in-home activities, right, in your karaoke offering? And how do you make that temporary tailwind kind of like a permanent capitalization going forward?

[Bernardo Melo:]

Yes. That’s a great question. And first and foremost, we’re addressing that with product development. We are focusing on two spectrums of the business that could really continue to capitalize on that momentum. And we’ve already started being challenged with retailers. So, we are focusing on two ends. Number one, the kids market, the pre-eight-year old market. We’ve touched on it before, and we’ve distributed before. But, we have a couple of product offerings that we’re working on right now that are really going to continue to capitalize on that market that also starts cutting into that licensing opportunity that we’ve moved them up against. So, by recognizing that and by launching a couple of product items in that segment, we believe that we could continue to position ourselves as a go-to company for home entertainment, even pre-eight years old. And then, what we’re doing is also starting and continue to develop integrated products with our digital partner in Stingray, so that we could enhance the family experience and better integrate the hardware and software. So, now that people have maybe one of our current machines and they’re enjoying the karaoke entertainment at home, then now we start releasing some -- a little bit higher end, a little bit more feature-driven product that would also take care of that home, family environment.

[Unidentified Analyst:]

Yes. That’s great to hear. Because, again, you can say, great, we achieved a onetime COVID tailwind revenue bump or you can say, hey, we just captured a new audience. What is the innovation and high-touch approach we can do to continue to capitalize on that as a growth factor going forward? And it sounds like you guys are thinking about it the right way. So, again, congrats on a great quarter and impressive business, and really excited about the milestones that you guys will achieve in the upcoming quarters.

[Bernardo Melo:]

Thank you, Corey. I appreciate.

[Gary Atkinson:]

Thanks, Corey.

[Operator:]

We will take our next question from Eric Nicholson from Third Century.

[Unidentified Analyst:]

Just a quick one for Bernardo. First, been reading pretty much across the board in the toy industry, they’re looking at approximately 20% to 25% price increases. Are we -- are you figuring to be about in line with that with the price increases that will be necessary this year to cover the supply chain issues?

[Bernardo Melo:]

Yes. That’s going to be our biggest challenge. Unfortunately, we set programs very, very early. I mean, for 2021, we were already probably setting programs in 2020 before this crisis hit. And we’ve been having those conversations with the retailers, very intense conversations to try to cover those things. So, I don’t know if we’re going to be able to recoup 100% of the cost, but we have partnered with some of the retailers to take those price increases. And then, we will also raise retails to be in line with that. So, 25%, probably a little bit high for our business because we’re more on to the electronics side. But, yes, it’s probably our biggest challenge, moving forward.

[Unidentified Analyst:]

Okay. All right. I want to look at this restructuring deal and drill down to where the devil resides a little bit. First, on the sells side, we’re selling off, if I understand it right, something like ultimately, 33 million shares, 16.5 million right away, and the other 33 million -- or the other $16 million when the warrants exercise five years down the road. And what’s the pricing on that unit? I guess, it’s a share of stock and a warrant.

[Lionel Marquis:]

That’s correct. So, we sold the unit as being a -- 1 unit of common stock and 1 unit of a common warrant at $0.30.

[Unidentified Analyst:]

Right. I understand that the clock doesn’t even start on these five-year warrants until you’ve registered all 33 million shares.

[Lionel Marquis:]

Yes. I believe you’re correct. Yes.

[Unidentified Analyst:]

Okay. Then, looking on the buy side, do we have a solid deal now with the seller as to the pricing and as to -- whether the deal is going to -- for certain going to happen?

[Gary Atkinson:]

We just announced this morning that we have closed on the buyback of the majority owner shares. So, we will be buying back 19.6 million shares from the previous majority owner. I’ve noticed, though, however, that the -- our stock transfer agent hasn’t -- it seems like on their end, they haven’t closed it because when I look at the number of shares outstanding, like on Yahoo! Finance or OTC Markets, I’m still seeing about 55 million shares outstanding, which is not reflective of the actual buyback. So, once that buyback finalizes through the transfer agent, we should start seeing the number of shares outstanding drop by approximately 20 million from the 55 million.

[Unidentified Analyst:]

Well, my understanding from Brendan was that those shares would initially come in into treasury, become treasury stock, and then shortly after that, you’re planning on retiring them. But -- so, they’re not going to be outstanding at the time -- they’ll no longer be outstanding at the time that you bring them in, right? So, they should disappear from account?

[Gary Atkinson:]

They should. They should. Yes.

[Unidentified Analyst:]

Yes. Okay. And what’s -- what do you happen to pay for that stock?

[Gary Atkinson:]

So for that stock, we had to pay approximately $7.1 million, $7.2 million, which works out to roughly $0.365 a share.

[Unidentified Analyst:]

Yes. All right. That’s a pretty big spread. It’s unfortunate that you guys couldn’t design these things so that it would happen that sort of both sides would be contingent on the other side, closing.

[Gary Atkinson:]

I can elaborate a little bit on that, too. I mean, I imagine that’s probably a question that’s on the mind of a lot of shareholders. And it’s quite common. I mean it’s very common in the micro-cap world, particularly in companies where there is a majority owner that that controlling block, that 50% majority ownership does carry a premium. So, there is a premium to control of the Company. And so, we had outside valuation analysis done. We had engaged with accounting firms and valuation firms. And they’ve looked at this transaction from a number of different ways. And the conclusion was this is very much in line with what is common practice, particularly in the sort of micro cap world where there is a controlling owner. So, the premium that the Company paid to buy back control is very much in line with what is sort of standard practice in the industry across multiple different markets.

[Unidentified Analyst:]

Okay. I’m familiar with that. You got to pay up a little bit if you want to accomplish something beyond buying any stock. I guess, I’m more concerned about the sells side. I mean, that’s a super deal, and I’d point out that I’m not -- I represent an institution, and we have almost 5% of the Company already, and I’ve been around for a long time, and nobody offered me this deal. How to jump down with both feet? Probably about $0.5 million to $1 million on the table to buy that unit of $0.30. So, I think you gave a sweet deal there. And I think I know who’s shorting the stock, by the way, Brendan, if those guys that are getting their shares, they’re going to cover with the shares they get and do less with the warrants for free.

[Gary Atkinson:]

Well, I can’t speculate…

[Unidentified Analyst:]

Don’t get me wrong here, Gary. Overall, I’m pleased with what’s going, I really am. And you did fine…

[Gary Atkinson:]

I mean, I think, Eric, the way we look at this is -- you can look at it from a short-term perspective, but we’re generally long-minded on this. And I think the short-term price that we paid to buy back control and to bring in these very well-known, reputable U.S.-based funds to help us fuel growth in the future. From the long-term, I just don’t think you can put a price on that. I think, the Company, over the course of the coming years, will have a lot more doors open to us and a lot more access to capital than we’ve ever had in the past. And I just really think that there’s obviously a cost to everything. And so, we weighed the pros and the cons, and we felt like long-term for all of the shareholders, that this was the price worth paying to unlock a lot of this potential growth in the future.

[Unidentified Analyst:]

Yes. Okay. Like I said, I’m with you on this. Like I said, few little details rankle a bit, but I think you did the right thing, and I’m glad it happened. And I think you’re making the right assessment of what the future looks like. So, I am done. Thanks very much. Good quarter.

[Gary Atkinson:]

Okay. Thank you, Eric.

[Operator:]

We will go ahead and take our next question from Mike Schellinger from MicroCapClub.

[Mike Schellinger:]

Yes. So, I was wondering, with the financing, how does that change your relationship with Stingray? And does it enable anything new to be done?

[Gary Atkinson:]

Yes. Thanks for that, Mike. So, this certainly enhances the relationship with Stingray, right? I mean, before this private replacement, they were just a partner of ours. Now, they are a strategic investor. We’re going to be welcoming them onto our Board of Directors. So, they obviously have a lot of keen interest in being very active in our company. And I think if you -- for Stingray, I mean, they’re obviously a much larger company than we are. They’re about $0.5 billion market cap publicly traded company. So, for them to take the interest in making this strategic investment in us, I think it speaks to what they see as potential. And my belief is that there are a lot more opportunities that Stingray and Singing Machine can pursue together in terms of building out our hardware-software integration and turning more of our karaoke machines. I mean, last year, we put 1.6 million Singing Machine devices out into the market into people’s hands. And only a very, very, very small percentage of those machines that went out there have the capability of recurring revenue. And so, that’s the opportunity, right? You get close to 2 million devices into people’s homes and you start converting more and more of those devices into things that can get on to the internet and convert into paying subscribers. That’s transformative. That’s huge. And that’s what I believe Stingray sees as the opportunity. That’s where we see the future of the business. So, we’re all aligned on the same vision. And that’s where we want to start transforming into as a company.

[Mike Schellinger:]

Got it.

[Operator:]

We will take our next question again from Eric Nicholson, Third Century. Your line is open.

[Unidentified Analyst:]

Yes, just a quick one about Stingray. What -- how much stock have they bought?

[Gary Atkinson:]

I don’t know if I’m at liberty to disclose. I know that at some point, we’ll be putting out the beneficial ownership table. I’m not sure -- I’ll have to check with you on that, Eric, and maybe get back to you. I don’t know if…

[Unidentified Analyst:]

Surely, they’ll be a 5% holder. They’ll have to disclose that anyway, okay?

[Gary Atkinson:]

I would imagine so. Yes, I would imagine they definitely would. I mean -- I’ll say, it was certainly in excess of 5%. So, I would imagine they’ll have to be putting out an SEC disclosure. I just don’t know off the top of my head, if that’s something that I’m not allowed to disclose at the moment.

[Unidentified Analyst:]

Okay. That’s all I had. Thanks. Thank you.

[Operator:]

It appears that we have no further questions at this time.

[Gary Atkinson:]

Okay. Well, I want to thank everybody for taking the time this morning to learn a little bit more about our first quarter results and obviously, a lot of the news that we’ve been putting out over the last few weeks. I do believe -- just to restate what I had said at the top of the call, I do believe this private placement and share buyback to be a truly historical event for the Company. I do believe it to be very, very transformational to the Company. I think optically, the business looks different to outside investors and shareholders in a positive way. And we’re already hard at work, starting that transformation plan. So, we look forward to giving everybody an update here as we move into our next holiday quarter. So, thanks, everybody. And we’ll be talking to you all soon.