Greetings, and welcome to the Blonder Tongue Laboratories 2015 Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Bob Pallé, Chief Executive Officer. Thank you. You may now begin.

Good morning, everyone. Welcome to Blonder Tongue's Third Quarter 2015 Financial Reporting Teleconference. Before we begin this morning with any details of performance, I'd like to preface my remarks and those made by other Blonder Tongue representatives who may be speaking today by reminding you that we will 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 may be projected in our comments this morning. I would ask that you refer to our prior SEC filings, our Form 10-Ks for the years 2013 and '14 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 me today are Blonder Tongue's Chairman of the Board, Steven 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 previous press releases and conference calls and repeated in the press release this morning, we are disappointed in the sales results so far this year and especially in the third quarter. In an effort to stabilize our financial performance, we implemented Phases 1 and 2 of cost reductions and announced in the last call the implementation of a Phase 3. Phase 3 was implemented the last week of August and took effect the month of September. Implementation of Phase 3 was intended to align the company's EBITDA for positive at the $21 million sales level. Further analysis of our forecast indicated that Phase 3 would not be enough, and as a result of this, we implemented a Phase 4 last Friday. The forecasted impact of Phase 4 is intended to ensure the company's EBITDA performance will be positive at the $18 million sales level. Also, as detailed in our 10-Q for the third quarter 2015, we are addressing the short-term liquidity issues. On the sales front, we continue to work the large incremental sales opportunities and work hard to maintain core sales. We have successfully introduced a new data product line and expanded our contract manufacturing sales. Although these efforts are clearly not enough to provide positive results in the third quarter, they are key elements to stabilizing and positioning the company for future growth. As stated in the last call, we are positioning the company to provide the next-generation products and solutions to the market we serve, especially providing products and solutions to the blue-chip service providers. We continue to make steady progress with those blue-chip companies, and Mrs. Emily Nikoo, the company's Executive Vice President, will share more detailed information and updates on these in her prepared remarks. Now I'd like to turn the call over to Eric Skolnik, the company's 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. The company's Form 10-Q filed today included a going concern qualification giving uncertainty regarding our liquidity. As noted in the Form 10-Q, we have taken a number of steps to alleviate our liquidity situation, including certain operational and financial processes. In addition to a number of cost reduction programs to reposition the company to become more profitable on a lower level of net sales, we are also in detailed discussions with our existing lender, other lenders who could refinance our existing indebtedness and other sources of additional debt and equity capital. With regard to additional capital, Bob Pallé has provided a commitment to lend up to $600,000 pursuant to a senior subordinated convertible note financing. We're also in discussions with a Taiwanese electronics manufacturer, ZyCast Technology, about possible strategic initiatives that would include a proposed $1 million equity investment in our common stock. As noted in the Form 10-Q, both of these financial opportunities are subject to a number of conditions, and therefore, there could be no assurance that either of these transactions will be completed and the funding received. In light of the complexity of these matters and the various terms, conditions and particulars, some of which are still being negotiated, we will not be taking questions on these matters. Rather, I refer you to our Form 10-Q for a more detailed description about our liquidity or our plans to enhance our liquidity and these potential transactions to raise additional capital. As far as sales are concerned, net sales decreased $2,955,000 or 34.1% to $5,704,000 for the third quarter of 2015 from $8,659,000 for the comparable period in 2014. Net income or loss for the 3-month period ended September 30, 2015, was a loss $1,958,000 or a $0.30 loss per share in 2015 compared to $584,000 of income or $0.09 of income per share for the comparable period in 2014. The decrease in sales 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 and data products. Sales of digital video headend products were $2,610,000 and $4,508,000; analog video headend products were $930,000 and $2,318,000; contract manufactured products were $447,000 and $82,000; and data products were $314,000 and $2,000 in the third 3 months of 2015 and '14, respectively. For the 9-month period ended September 30, net sales decreased $7,336,000 or 31.8% to $15,729,000 in 2015 from $23,065,000 in 2014. Our net loss for the 9 months ended September 30, 2015, was $4,635,000 or a $0.72 loss per share compared to a loss of $230,000 or a $0.04 loss per share for the comparable period in 2014. The decrease in sales is primarily attributed to a decrease in sales of digital video headend products, analog video headend products and HFC distribution products, offset by an increase in contract manufactured products and data products. Sales in digital video headend products were $7,115,000 and $12,034,000; analog video headend products were $2,843,000 and $5,979,000; HFC distribution products were $2,802,000 and $3,260,000; contract manufactured products were $1,144,000 and $296,000; and data products were $499,000 and $15,000 in the first 9 months of 2015 and 2014, respectively. Now I'd like to turn the call over to Emily. Emily?

Good morning, everyone. In previous calls, I've explained our place in the market where we delivered to or from the enterprise space, so places like hotels, schools, government, retail, restaurants, et cetera. Much of that information really hasn't changed. Our opportunities do still exist. It has not gone away. We're developing exciting new products like the PEG and LiveCast encoders and new offerings that offer really unprecedented price points for amazing quality. The M&A activity in the marketplace is hurting BT sales considerably and the sales of others in our market. For the operators who are merging and selling their systems, they aren't going to be spending the capital. If you're selling your home, you paint it and spiff things up a bit, but you don't start major renovations. Significant shipments of the PEG encoder have begun in 2 of the top 3 MSOs, and we're approved in 5 of the top 6. Again, the primary trigger for these are public, education, government deployments when franchise agreements are being renegotiated, and these will roll out over many months. And we believe 2016 will be a growth year for BT in this application. The BaR GameChanger with the iPhone and Android apps that I mentioned before is gaining momentum on the satellite delivery front to bar and restaurant establishments utilizing one of our encoders, which is the HDE-8C. If you'd like to better understand this and other BT Drake products, you can visit our YouTube channel. We have a number of videos that go through just an overall level of implementation as well as the feature set. Another product that you can see there is called the STEP, which stands for scalable transcoder encoder platform. And STEP sales have begun and is being evaluated by a significant number of operators. And why this is important is because it's not a traditional BT Drake product in the fact that it's based on what we call a virtual machine or a server-based off-the-shelf platform hardware. We just add the software product that provides processing of digital IP video for optimization and delivery to multi-screens, so phones, tablets as well as the television set. And Bob also mentioned, and Eric, the addition of a number of data products that we've added that you'll also be seeing in the coming weeks and months, some releases on that. We have a lot of our products are where you do delivery from the edge. And this is an Edge CNTSis one of the most important pieces that are added to that. Lastly, you may have noted an increase in our contract manufacturing sales. BT has a 130,000-square foot manufacturing facility with a lot of capability. And frankly, we're criticized for it. Not one share quarter call has gone by without someone asking why don't you sell the building and close the factory. And we are more than capable of moving product overseas, and do so with great partners when it makes sense. And as the country is trying to move manufacturing back into the U.S., at Blonder Tongue, we're trying to keep the heart of our production capability here. The majority of our resources are used to build our own product, but we have capacity for contract manufacturing, which you've seen in the past and you've seen now also recently. In addition, we do box builds that are flexible and amazing in both performance and quality. We look to make the most of that capacity and further grow this segment of our business and continue to be made in the U.S.A. So now we'll open up for question and answers that you may have, so I'll go ahead and pass it back on to our operator. Thank you.

[Operator Instructions] Our first question comes from Ken Hemphill [ph] from Blonder Tongue Laboratories.

There's a tone of optimism, I know it's been a disastrous quarter and 3 quarters. That being said, at the low, extremely low price -- I always ask this same question because no one is closer to the facts than you guys -- why aren't the insiders buying at these low prices?

Well, I acquired 110,000 shares and putting $600,000 into the company for a convertible note from savings. Is that not enough?

No, I'm not criticizing that, I'm just saying that the whole company of 6.5 million shares outstanding at $0.50 a share, the whole company is only worth $3 million on the market and inventory alone is $9 million.

We only have a period of 10 days each -- Steve Shea talking, only have a period of 10 days or so each quarter, and it has to occur after we've released all pertinent information. So I personally have bought a lot of shares and expect to continue to do so.

But for the last quarter, there's been a number of days that the stock's been -- go ahead.

We haven't had the ability, based on SEC rules, for insiders to purchase stock based upon information that we knew that the public did not know. But I have been a buyer and will continue to be.

This Phase 4, can you share any of the details of that?

It's personnel realignments. It's -- that's what dominated Phase 1, 2 and 3, Ken, pretty similar [indiscernible].

These are all variable costs or direct costs -- no direct costs or...

There's -- okay, so the areas attacked are all the below-the-line expense categories, so the G&A, marketing and sales and engineering; and above the line, the factory overhead, which is -- those are what dominate the expenses, and those are where the expense reductions are useful in increasing the profitability. If you need direct labor to build stuff to ship, you need direct labor to build stuff to ship. And so it's a positive thing, so...

So basically at the present sales level, you feel that we could -- the company can still return to profitability by executing Phase 4.

I was talking about EBITDA positive, so no, I was not talking about earnings. Net earnings will be more difficult and probably a little bit more protracted.

But there'd still be a positive cash flow?

Exactly, that's what we're attacking.

Are you happy with the results now that it's down -- we're down the road a lot further with the Drake acquisition and what that's done and has it helped at all or what?

It definitely has helped, but of course, it's disappointing, similar to the way we're disappointed with our overall performance. But there are several opportunities around the Drake team, the Drake technology, the Drake new products and the Drake relationships from the past. They represent a lot of opportunity for us, and those would be 2016 and 2017 opportunities and...

What -- excuse me, has the Drake business evaporated or is it more the Blonder Tongue business that disappeared?

No, they're both down. I think that Drake is more down than Blonder Tongue, but that doesn't mean that there aren't -- a couple of years ago, we had several-million-dollar contracts with some blue-chip providers for Drake stuff, and then that was an upgrade. And then it didn't -- it's not the kind of thing you expect to repeat from that same provider. But we have really serious opportunities for them looking into '16. So I don't want to get into the detail, but it's very optimistic.

I know Eric said you don't want to talk about the ZyCast deal, but just can I ask one question, was that share -- was that share...

Well, their shelf is -- should be self-explanatory. Have you taken the time to read the stuff that we provided?

I read the 10-Q, but I'm just wondering is the stock coming out of treasury? Or is it going to be sold in the open market or from the insiders or what?

Out of treasury.

Out of treasury. In reading the -- and hearing the fact that even your own statement says that there's a very good chance the company would not be able to continue, as a going concern. If the inventory's worth $9 million on the books, what would -- if it had to be fire sold, would it have any value? Or is it all proprietary stuff for Blonder Tongue?

No, it has value, of course.

So what would you say in the market you would get in a fire sale, $0.50 on the $1?

General-purpose stuff, there's -- there are people that are in the business of net liquidated or forced liquidation value. I'm not in that business. But I would think that if it ever came to such a thing, that you would be able to recover the costs in its entirety.

Although it seems to me that this price of $0.40 a share is ridiculously -- I know it's only 9,000 shares sold today.

There you go.

There's not a lot of people buying and selling, but...

You're correct, the market value is significantly less than the book value of the company, you're correct.

Our next question comes from Richard Todaro from Todaro Capital.

Tough times for you guys, I appreciate all the hard work you're going through to try to fix the business. Just at the current expense cuts that's going on, how soon do you think you would be at EBIT breakeven?

We're trying to -- okay, so in a particular quarter, it's a little bit lumpy. So what we're trying to do is implement this as quickly as we can in the fourth quarter. So I would say first quarter, not fourth quarter, because we just are implementing now. And we could get a lift. We normally do get a lift in December in our sales. But apart from that, I'm thinking that next year on a quarter-by-quarter basis, January, February, March taken together, April, May, June taken together and so on.

When you guys talk about '16, I mean, you're lending money to the company for a convertible note, you bought stock, I believe you're not really even taking a salary if I'm correct...

You're correct.

Yes, which is unbelievable, right?

Yes, exactly.

For you to go through all the [indiscernible], I applaud you for that. So can you just talk about what potential positives there could be for the business? Because right now, it's all losses. Is there -- can you talk about the potential for '16? And when I say that, I'm not saying all the upside things, but just is there moderate positives at all coming in '16 that you would think could come through?

We think there is. But I don't want to get into those details, because as you know, this conference call is a subset of investors, it's not everyone. But we think that we have some really positive things we're working on. And I don't like putting them in a press release or anything, because it's -- we promised -- we've said too much in advance in the past and it hasn't come to pass, it moved to the right. The malaise in the marketplace, because of the mergers and acquisitions activity, it just cannot be overstated, it's impossible to overstate on the market in general and on us in particular.

[Operator Instructions] Our next question comes from Dale Norton [ph], a private investor.

Question here, as I've looked at that Q and all the prior stuff, I'm certainly aware of the amount that you're taking out of the business. But having looked at the balance sheet, I really haven't seen nothing in the way of reserves, which tells me that anything that you've done with respect to termination costs are being completed within the quarter. Would you be willing to offer us guidance as to what that might have represented in the third quarter and what you anticipate this is going to represent in the fourth quarter, so that we can get some kind of idea as to what you're running rates in the various categories are?

Well, I'm pretty sure that we -- I even had it in my press release quote about reserves -- a chunk of the reserves that we took $900,000.

No, I'm -- excuse me, I'm not talking about inventory reserve, I caught that. What I'm talking about is the termination-related expenses. Those -- again, I've looked in the balance sheet, and I don't see anything that you've set up. So what I'm seeing is that any of the program-related costs, Phase 1 through 4, these are being accomplished within the quarter, and therefore, the expenses that are represented and have been represented not only represents your ongoing costs but also represent charges associated with the termination of whatever it is, people, that are not going to be hitting you beyond that. So we've got $2,100,000, $750,000 for the first 3 programs and an indication that it's going to be about another million annualized, but that really gives us less than an understanding of what -- until some point in next year, where this is all going to settle out. So with respect to the, say, the fourth quarter, clearly, your overall expenses are going to be down, and I would presume that your period costs within cost of goods would be down as well. But because you're implementing additional reductions, you're going to be having those hit the fourth quarter as well.

Right now, it's about $90,000 a quarter on severance. The impact of the addition of Q4 hasn't been calculated yet in that respect. But obviously, it's going to be more.

But not that significantly, it's not.

And just on -- yes, with respect to the analog products, which, as I understand it, are produced in People's Republic of China and sent over here. I would have to think that those would be a dollar contract, and therefore, your margins would be fairly steady and predictable. Is that fair?

That's fair.

Okay, and where do those lie? In your 2013 annual report, you'd indicated that you felt that you were going to be gaining market share within a fairly rapidly declining market. All things being equal, one would think that as time goes on, as one of the surviving producers, you would be able to recoup a reasonable margin on that. Therefore, I'm asking, are you seeing any margin relief in this particular product category?

No, it's about the same. And if we were to try and grab a big bunch of market share, we would probably have to take a little bit less gross margin, although maybe not a lot.

No, I understand that. Would you be willing to share with us what your headcount was at the end of the third quarter and where it is now? The last we've seen, of course, is what we saw in the 10-K.

We're not really prepared to offer that information, I don't have those numbers in front of me.

Okay, now, let's see. Okay, one final thing, kind of a diddly thing, when I read about the amendment fees associated with Santander, are these reflected in cost -- I beg your pardon, in general administrative as a cost within the period or are they amortized over the remaining life of the agreement?

No, the waiver fees get put into G&A as a period cost.

[Operator Instructions] We appear to have no further questions. I will turn the call back over to our speakers for closing comments.

That concludes our conference call. Thank you very much for participating. And we look forward to talking to you in the next quarter.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.