Robert Palle - Chief Executive Officer and President Steven Shea - Chairman of the Board Emily Nikoo - Executive Vice President Eric Skolnik - Senior Vice President and Chief Financial Officer

Ken Hensel - Blonder Tongue Richard Todaro - Todaro Capital Richard Greulich - REG Capital Advisors George Gaspar - Private Investor Peter Abrahamson - Private Investor

Greetings, and welcome to the Blonder Tongue Laboratories second quarter 2015 earnings call. [Operator Instructions] It is now my pleasure to introduce your host, Bob Palle, Chief Executive Officer of Blonder Tongue Laboratories. Thank you, Mr. Palle. You may begin.

Good morning, everyone, and welcome to Blonder Tongue's second quarter 2015 financial reporting teleconference. Before we begin this morning with any details of performance, I'd like to preface my remarks with those made by other Blonder Tongue representatives, who may be speaking today, by reminding you that we'll be discussing certain subjects, which will contain forward-looking statements, including management's view of our prospects and evolving trends in the marketplace. As you know, the future is impossible to predict, and so I caution you that actual results may differ from those that maybe projected in our comments this morning. I would ask you to refer to our prior SEC filings, our Form 10-Ks for years 2013 and 2014, and our Form 10-Qs from prior quarters, for additional information concerning factors that could cause actual results to differ from the information discussed this morning. With us today are Blonder Tongue's Chairman of the Board of Directors, Steve Shea; Executive Vice President, Emily Nikoo; and Eric Skolnik, our Chief Financial Officer. All of us will be available to answer any questions you may have following our presentations. As stated in press release, we were extremely disappointed in the results for the second quarter and the first half of 2015. However, before getting into details, I would like to clear up a statement that I made regarding profitability during the last conference call, as follows. The commitment from management is that the company will make the necessary adjustments to be profitable beginning in the third quarter 2015. Perhaps this will be better characterized as follows. The company will continue to make the necessary additional adjustments to transition to become EBITDA and cash flow positive during the third quarter of 2015. As a reminder, BT has already completed phase one and phase two of adjustments and is presently in the process of completing a phase three. What was not discussed in the last investor conference call, the necessity and reasons for a phase three should be clear from the financial results for the first and second quarters. On the sales front, we continue to work for large incremental sales opportunities as well as maintaining core sales. Regardless, we can prognosticate the following; we will work diligently to build sustained growth for the company through a variety of strategies, including acquisitions and positioning the company to provide the next-generation products and solutions to the marketplace we serve, especially providing products and solutions to the blue-chip service providers, as discussed in previous investor conference calls. We continue to make steady progress with those blue-chip service providers, and Ms. Emily Nikoo, the company's Executive VP will share more detailed information and updates on these in her prepared remarks. But first, I would like to turn the call over to Eric Skolnik, the Chief Financial Officer. And following Eric will be Emily; and following Emily, we will have an open question-and-answer session. Eric?

Thank you, Bob. Net sales decreased $3,545,000 or 40.2% to $5,283,000 for the second quarter of 2015 from $8,828,000 for the comparable period in 2014. Net income or loss for the three months ended June 30, 2015, was a loss of $1,262,000 or a loss of $0.20 per share in 2015 compared to income of $347,000 or $0.06 income per share for the comparable period in 2014. The decrease in sales was primarily attributed to a decrease in sales of digital video headend products and analog video headend products, offset by an increase in contract manufactured products. Sales of digital video headend products were $2,396,000 and $5,122,000, analog video headend products were $873,000 and $1,990,000 and contract manufactured products were $526,000 and $134,000 in the second three months of 2015 and 2014, respectively. For the six months period ended June 30, net sales decreased $4,381,000 or 30.4% to $10,025,000 in 2015 from $14,406,000 in 2014. Our net loss for the six months ended June 30, 2015, was $2,677,000 loss or a loss of $0.43 per share compared to $814,000 loss or a $0.13 loss per share for the comparable period in 2014. The decrease in sales in the six month period is primarily attributed to a decrease in sales of digital video headend products and analog video headend products, offset by an increase in contract manufactured products. Sales of digital video headend products were $4,505,000 and $7,526,000, analog video headend products were $1,913,000 and $3,661,000 and contract manufactured products were $697,000 and $214,000 in the first six months of 2015 and 2014, respectively. Now, I'd like to turn the call over to Emily. Emily?

Good morning, everyone. I'm going to frame my remarks in the same manner as the Q1 call, so that you can gauge our initiatives and progress across the full gamut of opportunities, whether it be for a specific operator, application or technology. Again, keep in mind, that if it involves video delivery to or from the enterprise base, so hotels, schools, governments, retail, restaurants, et cetera, we can have a play in it. My intent is to not overtly repeat information that I already talked about for the Q1 call. But if I missed something and you have any questions regarding my comments, please don't hesitate to ask. So as Bob mentioned, many of our bigger opportunities didn't come to fruition in the second quarter, but as stated previously some of that's to be expected, for instance, a piece of the MSO, PEG encoder. So PEG, if you remember is the public government and educational channel, as the MSOs were. With the M&A activity and the primary trigger for the PEGs being renegotiated franchise agreements, these are going to be rolling out over many months. We're now approved by five of the six of the top MSOs, and we've started shipping to three of those, but obviously just not in significant enough quantity to make up for the MSO business that we had in 2014 in the same period. On the satellite delivery front, BT just launched a new iPhone app. And we have a few apps that we've done that are marketing based, but this app has generated a lot of interest, it's called the BaR GameChanger. And it combines sport and entertainment channels with one of our encoders, which is the HDE-8C. The manager or bartender or waitress can easily select programs from a tablet or phone for either a group of TVs or individual TVs or a mixture of both. Now, this is part of our initiative to, get out of the box. As you know, we're traditionally a hardware-based company who makes boxes, but we've steadily been moving to IP and software products. And the BaR App is just one facet of that initiative, which is the ability to simply configure and manage the system, which is required in the IP realm for IPTV. In the last shareholder call, we discussed three other initiatives: the retail store deployment, again compared to 2014; our H.265 or High Efficiency Video Coding platform, which is for improved bandwidth requirements, especially when you're doing a 4K kind of delivery; and our LiveCast broadcast encoder, it utilizes public internet network as a way to deliver studio-quality IP video. At this time, I don't have any anything I can report. But as we complete these initiatives and get customer approval to do so, we will be making further announcements. So please look for our future releases. I'm going to hand it back to Bob.

That completes our prepared remarks and we'd like to move into the Q&A session.

[Operator Instructions] Our first question comes from the line of Ken Hensel with Blonder Tongue.

I see the stocks drop rapidly after the announcement of the financial information for the last quarter, but I think it's down to $0.55, as I speak. How many more quarters do you think the company could absorb like this one, before I guess you would have to say, you have to declare Chapter 11 or whatever you would do?

I don't mean trivialize your question, but we're making the adjustments, so that we would never be in a position to have to have to file or so.

Was there any plan in place, if things don't improve to deal with the disastrous sales picture?

Well, I think you can see we're settled in around $20 million and we think the incremental opportunities should be able to boost us beyond that.

But how is the backlog right now?

A backlog is about where the backlog has been. We ship almost everything we possibly can each month, so we're not backlog-driven. And it's got to be the 80th conference call in a row that we've said that, meaning to be mean-spirit or anything, but that's something what we repeat in every call.

Well, the third quarter is half over. Does the third quarter look much better than the second quarter?

We don't do any comments like that and that's another thing that we're pretty clear about in each call.

I know the building is -- how many hundred thousands square feet?

128,000 square feet.

And what would that be worth, fair market value, would you say?

$6 million.

$6 million. And the book value of that is probably, what would you say, Eric?

It's maybe $2 million.

So even the book value of the company, I mean, inherent worth is substantial. I mean, I'm not trying to sound like gloom and doom, but then this quarter is very scary. And I just like your company and I always believe in your company, but this last quarter really is little frightening to me. But any way, well, I hope you do better than the third quarter and fourth quarters.

Our next question comes from the line of Richard Todaro with Todaro Capital.

Have you lost any sales or has they slipped out or is this kind of the run rate you're anticipating in sort of the back half of the year ramp?

Without the large increases in the two large opportunities last year, this is I would say, a core without incremental opportunities and without the benefit of the projects that we've been working on that it should be a tide lifts all boats, so to speak.

And the opportunities that we've had, we've not lost. We lost -- there was only one that has been lost, but everything else is pretty much and the list is not short. We have basically maintained and they've just pushed. The activity in our marketplace specifically is leaded.

We don't want to hide behind the veil of -- our whole sector is down, but our whole sector is down, regardless what's going to lift us as these opportunities that we've been working on, and they have shifted to the right, but they're still there.

And you've talked about cutting again and that you're talking about kind of a core run rate of $20 million. I haven't done the math of the recent cut, but are you basically breakeven at your core run rate based on your expense rate? Or how do you see where your breakeven is?

Well, the promise that we're making to ourselves, if we don't get there, we will get there. It may take a month extra or something like that, but we will get there.

And when you say, I was reading the Q that you believe sales will rebound to a more normal level in Q4, is that the $6 million to $8 million range or what do you guys consider a bracket of a more normal range?

I think that without the incremental opportunities, the $20 million to $24 million is a reasonable range.

But you're expecting some sort of rebound above the normal range in Q4, is that's what you said?

We honestly don't know. The malaise in the marketplace and the disruption by the M&A activity and the delay and people doing anything because of the M&A activity, but the key customers that we have last year, it's just daunting and very, very difficult to project with any certainty when that's going to fix itself or correct.

When you talk about large opportunities, whether you're talking about a rebound or whatever, if you get these multi-quarter opportunities, can you bracket, you talked about that there's some big opportunities out there, how big are they, what could they mean to the business?

Well, we talked about the PEG and then we talked about PEG encoder, and we're now in -- this is two MSOs, the same ones that are involved in all this M&A activity and all the hesitation. But we're talking about something that would sustain increased sales for several years, because they are going to rollout, she said over many months, but it's really several years of deployment. This is some cost to them, so they spend the money at the last minute when they absolutely have to get the check the franchise re-signed, but there is a transition unlike the digital, but to HD and all of these. And we now have approval in five of the top six. We've had reasonably brisk sales to one of those, but the largest of those, people who all were approved, it's still not ordered in quantity yet. So these are stuff that kind of we're confident we're going to secure significant market share in that area. And then there are other opportunities that are, if you will, I'm going to build out my entire population offsite and that would be a one-time hit, that would not sustain the company for many years like the PEG encoder and other initiatives similar to the PEG encoder sold to the blue chip service providers, the MSOs and the horizons of the world.

And you don't think the cuts that you're happen to make is kind of restricting you from being able to do anything?

We will not jeopardize future business by the cuts. We will not.

And then, as it relates to the question from the prior gentleman, obviously I went through your Q and went through your credit agreements and all the rest of that. Can you say that you guys think liquidity will be sufficient, and rest of that? But one, can you step through the way you feel that liquidity is sufficient? And then two, if that doesn't work, what are your options?

I guess, are you asking a question that, if sales were continuing to drop as they did from year-to-year, from Q this year to Q last year, that that kind of a drop continued, is that your question?

Let's say that orders get pushed and something happens to economy, sales drop a little bit further, and you're still trying to cut expenses, but you're losing a couple of hundred grand and you break covenants, the bank doesn't work with you or whatever, what options do you have?

Well, that's a doom stage scenario. So you would have to make further cuts, so you didn't break covenants, so you didn't lose your banking relationship, pretty simple stuff. We're certainly not prognosticating that. And I'd like to see the data upon which a prognostication could be made.

And I just realized, your equity market cap right now is about $3.5 million and the stock at $0.50, so I'm just trying to run through scenarios that basically that assumes you're going to zero somehow, and I want to make sure how you guys are thinking about that? And I'm not saying, you are, but I'm just trying to -- when your stocks get below dollar, people just sell or buy and they don't really have a lot of rationale, and I'm trying to put some rationale behind the way you guys are thinking of your liquidity as far as options that you have to keep the business viable?

Well, I guess, apart from the answers we've given, I am confused -- I have to admit I'm confused by your question.

So you believe liquidity is sufficient?

Yes.

And in February 16 when it's up for renewal, do you feel that they'll renew your credit line without substantial changes?

I don't know about the substantial changes, I think that we're going to be okay as far as our financing is concerned.

Do you guys own that building that was mentioned?

Yes.

You do?

Yes.

So you own it outright, there's no lease?

No, it's not leased. It's encumbered, of course, but no, there's no.

Have you thought of doing, say, a lease back, if you had to or something under that scenario for capital?

I mean, certainly it's something to consider, but the problem is the debt service or something like that could be a little daunting.

Once again with your market cap at $3.5 million, it starts to kind of become ridiculous. Is there some sort of -- could you sell the company? Are there people that are interested in your business, if liquidity became a problem, or would you fit into another business that -- I am just trying to make sure what the options are on the table and what you guys are thinking?

We can certainly fit into several, but that's not contemplation and we're not working on it.

Our next question comes from the line of Richard Greulich with REG Capital Advisors.

I might have missed a little bit. I'm on a road and I'm just trying to pickup the cell on this, but what exactly is the situation now with Santander? Are they going to take the $0.5 million away then come September?

Did you asked, because the disclosures in the 10-Qs, that that Santander gave us some extra advance of $0.5 million until September 30, and are they threatening to take that away from us?

What happened was there was a Temporary Overadvance Facility that was executed on March 30, 2015. But then we entered into an Eighth Amendment on May 14, 2015. And the Eighth Amendment changed the formula on the advanced rate from eligible inventory from 25% to 35% until September 30, 2015, and then this became in lieu of the Temporary Overadvance Facility that was executed in March.

So come September 30, the eligible percentage would be going back down again?

That is correct.

And I'm sorry, I'm repeating myself, but I don't have internet access where I'm right now, so I haven't seen the current 10-Q. I don't if you have filed that yet?

Yes, we filed.

Have inventories gone down quarter-to-quarter?

Yes.

How much?

From quarter-to-quarter, inventory is down -- hang on one second, net inventory is down by, I believe, it is about $800,000 or so.

And Bob, I thought on the last call somebody had asked the question about roughly where breakeven was on an annualized run rate basis. And if I remember right, wasn't that around $26 million or $24 million, so my question is, is the next round of cost cuts going to be able to bring the breakeven well below $24 million?

That's the objective, yes.

Our next question is a follow-up question from the line of Ken Hensel.

Are there any new players in the market like some company from China coming in and stealing the show?

No, I guess, the feedback that we get that we're on this like white on rice from our major resellers, which are no agents, pun intended. Our resellers are telling us that it's not -- from our premier distributor group, the top four, five, six distributors, they're telling us that it's not just us, their sales are down, in this entire sector. And in fact, so if we look at that individually, we don't publish what they are individually, but some of them are actually holding their own with respect to us, but they are down with everyone else. So that should be checkable, verifiable by looking at our contemporaries financial results, the ones that participate in this sector. Did I answer the question adequately?

Yes. As the market softens and the compensation gets a little tougher, does that erode the margins?

It hasn't so far.

And my last question, Eric. What's a date when the insiders are going to start buying again?

You ask that every quarter.

I got to write it down this time.

Exactly, it's two days from now.

Two days from that?

Yes.

And I know, you won't answer this question, but is everybody going to be buying at $0.55?

I don't know myself. I did buy some recently, but not at $0.55.

Our next question comes from the line of George Gaspar, Private Investor.

Just want to pursue a little bit more about the question that came at you on various options on the table. And you probably don't want to spend a lot of time on this, but is there not possibility that you still have a product line that could be very important? Is there not a strategy to maybe find another small company that you could both amalgamate into a merger in kind that would make both companies more comfortable with how they pursue the business that you're in going forward? It seems like sometimes you could gain strength through finding another modest company that may have been through the wringer and is looking for an opportunity to get together and become a stronger company on a combined basis. Have you got anything to say about that?

Yes, that's a very reasonable suggestion. We have looked, and looked, and looked, and I mentioned the word acquisitions in my prepared remarks, so we've been looking at acquisitions and mergers for some time. First of all small companies like ours, the principles are generally esoteric thinking, and so its many times difficult to make a reasonable deal because that's their own baby, kind of things. We would like to think -- we don't think this way. We don't have much of that thinking inside Blonder Tongue and that we think your suggestions are reasonable one. We haven't found any one that's of a comparable size, because for your strategy to have a very positive effect immediately, it would need to be a company similar to what we did when we made the Drake acquisition, we think that's turned out to be very positive for us. But there just aren't many of those opportunities out there right now with the valuation that we have in the currency that we have to trade.

Do you see from your perspective any changes going into 2016 in the communication transfer market on moving data across cable lines and are there right connective systems where there appears to be a serious problem on bandwidth coming back from the customer as opposed to going out to the customer and the need to create a much broader amplification market. Do you get mixed into this kind of thing or understanding of what could be going on, because -- ?

Absolutely. Yes, we think there is going to be a continuum of upgrades and frequency, bandwidth extensions on the cable plan. We think that's a continuum that's been going on since I got in the business in 1970, '71. So I think it's an important aspect. It's an important opportunity for all of those providers, not just us. It's certainly an opportunity, but how fast those demands and those upgrades would take place is difficult to forecast, because as you know, there's a lot of CapEx that they have to come up with to execute on such frequency expansion or bandwidth expansion or data capacity expansion plans.

Well, one final, just a general comment to you. You guys have spent a lot of time trying to orientate towards the future of the market, and this is a tough thing to go through. But I would want be more confident about and hopeful for you guys to get this turned around and be a little more optimistic versus some of the previous questionnaires.

Our next question comes from the line of Peter Abrahamson, a Private Investor.

I've had a question on the, I guess, the cost reductions. Looking at the SG&A in Q2 it was roughly the same as Q1 at $2.7 million, and I know there has been some cost. When are the full cost going to appear, I guess, in the SG&A line? And what's the run rate expected to be on that line item?

Well, if you recall though, the important thing to remember is that when we prognosticated the savings, we were referring to an annualized cash savings as compared to 2014. So that's one thing to be a mindful of. And then, the answer to your question, if you recall, we didn't really start implementing our phase ones and phase twos, until the beginning to middle part of Q2. So we'll start to see the benefits of it in Q3 and then going forward.

If you remember, Bob mentioned that in the last call on, in terms of the timing.

No, I understand. I just thought there would be something in Q2. It looked like SG&A was flat. And then some of it's going to be in cost of goods sold, right?

Correct.

I guess the cost of good sold margin was roughly the same in Q2 as Q1.

Part of it has to deal with the fact that, if you're going to start to drive down the overhead, it's going to have an impact to cost to goods sold.

I'm just trying to get my arms around that. I don't know -- share where you think the SG&A is going to be on a run rate basis?

I don't think that we really prefer to prognosticate that, because of whole part of the prognostication prospect.

There no further questions at this time. I'd like to turn the floor back over to management for closing comments. End of Q&A

All right. Well, thank you everyone for participating in the conference call. And hope you have a good day. And thanks again.