Redline Performance Products, Inc. Reports Third Quarter, Year-End Results
SAN DIEGO & MINNEAPOLIS--June 29, 2004--Redline Performance Products, Inc. (AMEX:RED), which designs, engineers and markets Redline(TM) snowmobiles, today reported financial results for its fiscal 2004 fourth quarter and year ended March 31, 2004."While fiscal 2004 was challenging for Redline, it was also a landmark year that we believe ended with several positive developments," said Mark Payne, President and Chief Executive Officer. "We shipped our first snowmobile in the fourth quarter - culminating years of hard work and dedication on the part of the entire Redline team and our supply-chain partners."
To date, Payne said 53 snowmobiles have been shipped and the company has orders in hand for approximately 340 more. The company believes the 800 Revolt snowmobile continues to be well received by the Redline dealer network as well as the snowmobile community. In the future, the company expects to expand its product line with additional products, including additional snowmobile models and an ATV.
In May 2004, Redline engaged Manchester Companies as an outside advisor to evaluate Redline's business and strategies. Since then, Redline announced it has raised $750,000 in a private placement and extended the maturity date of its $2.4 million debt facility. The company also realigned its senior management team.
FINANCIAL RESULTS
As a development-stage company, Redline reported revenues of $10,140 for the three- and twelve-month periods ended March 31, 2004. In the early stages of production, the company experienced production delays and higher-than-expected parts costs, resulting in negative gross profits. The $1.3 million inventory write-down in the fourth quarter resulted from the cost of materials exceeding their market value. This adjustment is intended to reflect the higher cost than market for the approximately 400 units anticipated to be produced and shipped this fall. The company believes this to be a one-time inventory write-down, and expects improved per-unit margins in the future through higher production volumes, more competitive sourcing activities and engineering modifications.
The net loss for the fourth quarter of fiscal 2004 was $3.4 million, or $0.69 per diluted share, versus a net loss of $1.5 million, or $1.41 per diluted share, for the fourth quarter of fiscal 2003. The net loss for fiscal 2004 was $8.8 million, or $2.04 per diluted share, versus a net loss of $3.7 million, or $2.96 per diluted share, for fiscal 2003.
Weighted average shares outstanding for the three- and twelve-month periods ended March 31, 2004 increased by 350% and 242%, respectively, from the comparable prior-year periods due primarily to the effect of the shares issued in conjunction with the company's initial public offering in May 2003.
The increased net losses for the fiscal 2004 three-month and twelve-month periods are due primarily to higher selling, general and administrative expenses (primarily personnel), valuation of inventory and higher research and development costs. These increases are related to the introduction of the 800 Revolt snowmobile. Interest expense decreased significantly in the fourth quarter of Fiscal 2004 from the prior year's fourth quarter as a result of the company repaying substantially all of its long- and short-term debt with the proceeds generated from the May 20, 200403 initial public offering.
Based on the company's significant losses, the requirement for additional financing and lack of working capital, Redline's auditor, Virchow, Krause & Company, LLP, has issued a going concern opinion.
ABOUT THE 800 REVOLT
Redline's 800 Revolt is a high-performance, 800cc snowmobile designed for trail riding. The 800 Revolt incorporates patented and patent-pending technology - including a T-15 rear suspension system and clutch isolation drivetrain system - to produce a snowmobile that Redline believes provides better handling, a smoother ride, greater durability and more attractive styling. For downloadable images of the 800 Revolt, please visit www.1redline.com/pages/press2.html.
ABOUT REDLINE PERFORMANCE PRODUCTS, INC.
Redline Performance Products, Inc. designs, engineers, markets, manufactures and sells snowmobiles under the Redline(TM) brand name. The company maintains its principal executive offices in San Diego and also has an office in Minneapolis. To learn more, please visit www.1redline.com.
FORWARD-LOOKING STATEMENTS
This news release includes "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 as set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "should," "expects," "plans," "anticipates," "believes," "estimates," "intends," "proposed," "scheduled," "continue," or the negative of these terms or other comparable terminology. Forward-looking statements are estimates and projections reflecting the Company's judgment and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Although the Company believes the forward-looking statements made in this news release are reasonable, the Company's expectations may prove to be incorrect. The Company cautions you to not place undue reliance on these forward-looking statements, which reflect management's view only as of the date of this news release.
Important factors that could cause the Company's actual results to differ materially from estimates or projections contained in the forward-looking statements include our ability to develop and execute a plan to operate in the future, our ability to raise additional capital in the immediate and near term to fund our production and other operations, our ability to enter into arrangements with our creditors and vendors to continue to receive parts and services while delaying the obligation to make payments to these groups and to operate as a going concern, timely compliance with applicable snowmobile safety and other regulations, our ability to obtain high-quality parts and subassemblies in a timely and cost-effective manner, the timely and successful assembly of snowmobiles by our contract assembler and the assembler's ability to quickly ramp up production, having sufficient capital available to us to fund our production and other operations, compliance with the terms of our loan and related agreements, the overall quality and performance of Redline snowmobiles and the level of any warranty expenses, the number of dealers engaged by us, the number of purchase orders received from dealers, the demand for our snowmobiles from potential purchasers, and other factors described in the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2004, and other documents, filed with the Securities and Exchange Commission.
REDLINE PERFORMANCE PRODUCTS, INC.
(A Development-Stage Company)
SELECTED BALANCE SHEET DATA
March 31,2003 March 31, 2004
-------------- --------------
ASSETS
Cash and Restricted Cash $37,305 $148,597
Accounts Receivable - 31,144
Inventories, Net 393,720 2,226,566
Prepaid and Other Current Assets 9,158 231,856
Property and Equipment, Net 694,545 1,099,575
Other Assets 690,058 90,534
-------------- --------------
Total Assets $1,824,786 $3,828,272
============== ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Total Short Term Debt $2,396,446 $2,279,310
Accounts Payable 912,073 2,543,569
Other Current Liabilities 615,281 309,100
Long Term Liabilities 36,405 161,238
-------------- --------------
Total Liabilities 3,960,205 5,293,217
-------------- --------------
Total Shareholders' Deficit (2,135,419) (1,464,945)
-------------- --------------
Total Liabilities and
Shareholders' Deficit $1,824,786 $3,828,272
============== ==============
REDLINE PERFORMANCE PRODUCTS, INC.
(A Development-Stage Company)
STATEMENTS OF OPERATIONS
For the three months For the twelve months
ended March 31, ended March 31,
------------------------- -------------------------
2003 2004 2003 2004
------------ ------------ ------------ ------------
Sales $- $10,140 $- $10,140
Cost of Sales - 11,158 - 11,158
Inventory Writedown
to Market - 1,315,000 - 1,315,000
------------ ------------ ------------ ------------
Gross Profit - (1,316,018) - (1,316,018)
Operating Expenses
Selling, general
and
administrative 412,139 927,507 1,373,658 3,376,358
Research and
development 214,634 864,056 534,335 2,043,976
Loss on
impairment of
property and
equipment - 163,560 - 425,755
------------ ------------ ------------ ------------
Total
Operating
Expenses 626,773 1,955,123 1,907,993 5,846,089
------------ ------------ ------------ ------------
Loss from
Operations (626,773) (3,271,141) (1,907,993) (7,162,107)
------------ ------------ ------------ ------------
Other Income
(Expense)
Interest expense (908,720) (103,222) (1,819,875) (1,702,025)
Interest income 727 233 2,502 17,478
Other income
(expense) (1,568) - 6,841 32,724
------------ ------------ ------------ ------------
Net Other Expense (909,561) (102,989) (1,810,532) (1,651,823)
------------ ------------ ------------ ------------
Net Loss (1,536,334) (3,374,130) (3,718,525) (8,813,930)
Preferred stock
dividends - - (23,341) -
------------ ------------ ------------ ------------
Loss Attributable
to Common
Shareholders $(1,536,334) $(3,374,130) $(3,741,866) $(8,813,930)
============ ============ ============ ============
Loss per Common
Share -- Basic and
Diluted $(1.41) $(0.69) $(2.96) $(2.04)
============ ============ ============ ============
Weighted Average
Common Shares
Outstanding --
Basic and
Diluted 1,091,560 4,911,473 1,263,460 4,320,343
============ ============ ============ ============