Greetings, and welcome to the Blonder Tongue Laboratories 2015 Fourth Quarter and Year-End Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Bob Palle, Chief Executive Officer. Thank you. You may begin.

Good morning, everyone. Welcome to Blonder Tongue's Fourth 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 the 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 you -- that you refer to our prior SEC filings, our Form 10-K for the year 2014, our Form 10-Qs from prior quarters and Form 10-K for 2015, which will be filed later today, for additional information concerning factors that could cause actual results to differ from the information discussed this morning. With me today are Eric Skolnik, Blonder Tongue's Chief Financial Officer; and Steve Shea, Chairman of the Board. 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 this year and especially in the fourth quarter. The information in the press release summarizes the company's position fairly well and bears repeating here. December 31, 2015, brought a close to the company's most difficult year in more than a decade. Our sales decreased at an unprecedented rate from the prior year, and these diminished sales levels have continued into 2016 and are not anticipated to recover to historical norms until 2017. We worked hard in 2015 to implement cost reduction programs, which began in the first quarter of 2015, but these reductions could not offset the impact of our reduced sales levels. We anticipate annualized savings of more than $1,500,000 in 2016 from these efforts. In an effort to ease our liquidity issues, we restructured our subordinated convertible loan arrangements to increase the amount available to the company from $600,000 to $750,000. Our existing senior lender has been working with us as we seek a long-term solution to our overall capital requirements from alternative lenders. We see 2016 as a challenging year, but one which we are much better equipped to navigate as we redouble our efforts to increase sales, which we believe is essential to restore the company to financial health. In addition, there are some bright spots that are mentioned. As indicated in the financial portion of the press release, there were increases in sales in both contract manufacturing and data product areas. The uplift in sales in the contract manufacturing category resulted from securing a new substantial contract manufacturing customer in 2015. These CM sales should continue in 2016. Also, as part of the CM initiative, we recently completed ISO 9001:2008 certification, which is essential to being successful in the contract manufacturing area. The increase in sales in the data product category resulted from introducing a pocket community data delivery solution that is being successfully deployed throughout the U.S., initially in the hospitality sector. Sales of those products should continue to increase in 2016. BT's public education and government targeted encoder, or PEG encoder, is approved by and being deployed at 5 of the 6 largest CATV multiple system operators. Those sales should also continue to grow in 2016. As everyone knows, we are deep into the first quarter of 2016. And although our prognostications have not been very accurate in the past, we do expect that sales will be somewhat better in the first quarter 2016 compared to the first quarter 2015. Now I'd like to turn the call over to Eric Skolnik, the company's Chief Financial Officer. And following Eric, we will have an open question-and-answer session. Eric?

Thank you, Bob. The company's Form 10-K to be filed today will include a going-concern qualification giving -- given uncertainty regarding our liquidity. We believe this qualification is primarily driven by our current status of our line of credit with Santander Bank, which, as you know, has been on successive relatively short-term extensions of the maturity date since February of this year. It is currently set to expire on June 1, 2016. Santander has been a very strong partner for us as we have navigated through this protracted period of depressed sales, and we believe that they will continue to support us as we regain our footing. As noted in the Form 10-K, 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 profitable at a lower level of net sales, we are also in detailed discussions with Santander as well as other lenders who could refinance our existing indebtedness. With regard to additional capital, Bob Palle and 2 of our outside directors have provided a commitment to lend up to $750,000 pursuant to senior subordinated convertible note financing. This facility replaces the $600,000 facility provided by Mr. Palle earlier this year. I refer you to our Form 10-K for a more detailed description about our liquidity, our plans to enhance our liquidity and these potential transactions to raise additional capital. Regarding sales, net sales decreased $850,000 or 14% to $5,214,000 for the fourth quarter of 2015 from $6,064,000 for the comparable period in 2014. Net loss for the 3 months ended December 31, 2015, was a $2,136,000 loss or a $0.32 loss per share in 2015 compared to a $672,000 loss or an $0.11 loss per share for the comparable period in 2014. For the year ended December 31, net sales decreased $8,186,000 or 28.1% to $20,943,000 in 2015 from $29,129,000 in 2014. The net loss of the 12 months ended December 31, 2015, was $6,771,000 loss or $1.05 loss per share compared to a $902,000 loss or $0.14 loss per share for the comparable period in 2014. The decrease in sales for the year is primarily attributed to a decrease in sales of digital video headend products and analog video headend products, offset in part by an increase in sales of contract manufactured products and data products. Sales of digital video headend products were $9,628,000 and $14,310,000; sales of analog video headend products were $3,555,000 and $7,829,000; sales of contract manufactured products were $1,553,000 and $344,000; and sales of data products were $1,051,000 and $17,000 in 2015 and in 2014, respectively. Now let's turn the call over to the Q&A session.

[Operator Instructions] Our first question comes from William McKinley from McKinley Associates.

Yes, I have -- first question is, have you thought about revamping your sales methods and force, indicating to -- your situation indicates to me that your major problem is sales. That's my first question. I have a number of others.

We are trying to adapt our sales to the situation and change it always, but we are committed to our distribution partners. That's a big part of our sales. And we're committed to penetrating these large blue-chip companies. And that's what we've been working on, continue to work on. We think we have the right contacts. We think we have the right engineering plan and the right products plan, but we're not there yet.

My next question -- are you ready for my next question?

Yes, sir. Go ahead.

Have you explored the possibility of mergers?

Not extensively, no. We're not -- we haven't engaged a firm to represent us to do that.

Well, I mean, the stock is down to $0.28. This morning, it traded as low as $0.28. I think that's -- personally, I think we have to start doing something here. My next question is, what is the value of your building and grounds on the real estate market?

North of $6 million.

$6 million. And how much indebtedness on that?

Well, don't forget, our entire deal is cross-collateralized, right? So all of our debt is collateralized. So...

Okay. All right. Now have you rightsized your workforce relative to your sales?

We think that we're stabilized now for neutral or positive cash flow, and that we feel like that's the appropriate place for us to be. And of course, we're always contemplating whether we need to do more in the way of cuts. We don't think we can cut ourself out of this situation. We have to increase sales to get ourselves out of this situation primarily.

Therefore, the first question is a relative question. You need to revamp your sales force and your methods to get -- to have this effect on your sales.

Well, we've been at this a while, months and months, not years and years. And the sales cycle for these products that we engineer and sell is around a year, north of a year, little north of a year. So we're working it. We think we're working it properly. And if we cut much more, then we cut into the real meat that we need to go forward with the products and the contacts that we have at the major prospective customers. These are good questions, by the way. So...

Well, I mean, I've been a stockholder and I have a lot of stock right now. And I see it at $0.28, that doesn't bode well for my investments and it's just frustrating to me. Plus, the other thing is the communications aspect of it. I happen to be a stockholder through Vanguard. And when I look on the information sheets, and I believe we discussed this before, the last information that has been publicly disseminated on -- that at least goes through Vanguard was October 15, 2015. I show no mention of this conference call. I have other friends who are stockholders as well and that was the reason I knew about this conference call. He was -- one of them was unavailable to participate today. And that's -- therefore, I'm here. Well, I don't know how long it's going to take. I mean, you're at, let's say, $0.40 now. I think something has to happen here. Because if you look at your past history, I think you were at $15 at one point. That was about maybe 20 years ago. Now you're $0.28, $0.40, whatever, at $0.20, $0.30. I think we're getting to the end of the game here. So I'd appreciate if you take my questions and do something about them, okay?

Well, we're redoubling our efforts and we're here every day. We work hard, and we think we have the right plan. But you're right to criticize us because our performance so far, certainly in recent history, has been pretty horrible.

Absolutely. I agree with that, and I wish you all the luck, but you're going to have work. If you're working 12 hours, you'd better start working 16 hours. That's all I can say.

I can say -- it's Steve Shea. I can say Bob Palle has -- as well as being the largest shareholder, is also working for $1 a year. So...

Yes, I understand that. I understand that the former gentleman there was pulling $0.5 million out of the situation. He's no longer there. I understand Mr. Palle has reduced his remuneration. I understand that. But the problem is that isn't the problem. The problem is we have to start making sales. There's the problem. If you do the sales, you won't have a problem.

We agree with you, 100%.

We totally agree.

Okay. That's all I can say. I appreciate allowing to be a participant in this effort.

Thank you, Mr. McKinley.

Our next question comes from Richard Todaro from Todaro Capital.

So are you saying that you guys think you'll be neutral to cash flow positive like as soon as this quarter and every quarter maybe going forward through '16?

We're working on that. We think we have enough liquidity to make it through the year, and we're contemplating cuts to -- when we talk about cash flow, we're talking about EBITDA, we may not be EBITDA positive. But we don't think that we're slipping any further behind in our cash position, and that's what we're focused on.

What do you show as your breakeven for the business today, not from a cash flow perspective, but...

For net earnings?

Yes.

It would be north of $20 million, maybe $22 million, $23 million, even higher.

And you had talked about lowering your breakeven in prior calls down to the $20 million. Do you think that the level you have it at today because you're not going to burn in any more cash, you're comfortable staying at that level.

Well, what we -- and I may have misspoken. I tried to correct that a couple of quarters ago is that we think that maybe $20 million might be EBITDA neutral, but we didn't say that we would be net earnings neutral at $20 million.

So can you give us a -- your thoughts on being able to structure some sort of longer-term financing and refinance the debt with either your current bank or another bank?

Yes, we're still working, and we have some concepts and ideas out there, and obviously, stuffs not baked yet, but we expect to be able to obviously refinance.

And would that be before the June time frame when the line's up?

Oh, yes. Well, let's put it this way. Either it would be for that or we would -- the anticipation would be that we would have another extension, a short-term extension, till we close our financing.

So in prior calls, you guys have talked about some potential big contracts and in prior press releases. And you don't think the actual business picks up until '17. Is that contingent on those bigger contracts? Or are these singles and doubles?

Well, the uplift that we're forecasting for 2017 has to do with the transition to new products and trends that are in the marketplace for new products. What we've identified is what's going to be needed and what -- and how long it's going to take for us to get to The Street with those products. So they're not -- it's not project related or specific contract related. And the larger opportunities that we had identified, we are acting on those. We've been successful in some of them. And the results in prior periods, we hope, will show that the company has stabilized, but there aren't any guarantees.

Here's my dilemma, and if -- I'm on the board of a couple of public companies. And I've seen that you guys are doing your best to try to refinance the debt yourself, and directors are putting in money and capital. The dilemma I would have, if I was a director at your company, would be I would want to make sure that any of those -- that The Street understands what potential could happen or not because I would hate to -- I personally wouldn't do, if I was on the board of your company, do a financial transaction, knowing that 2017 could be really big or not, without like having that disclosed to The Street. Otherwise, you're going to have people selling at $0.30 thinking you're going to go bankrupt and the insiders have a better insight into what's going on. And that would be, I think, would be a major conflict of interest. And I understand that you guys are doing what you can to put in capital. It's wonderful. I just don't think your disclosure to The Street on the outlook of the business is adequate relative to what the insiders know when they're doing a transaction. If you guys weren't doing these transactions, I think that that's one situation. But given that you guys are doing transactions in the stock at this price, I think that you guys owe it to The Street to give more disclosure about potential contracts however you want to hedge them. You could say they may not happen, they may happen, whatever. But do you understand my thoughts?

Yes, I think it cuts -- it's Steve Shea again. It cuts both ways. You got to remember that we clearly don't want to be overly bullish. Now in terms of contracts, I think we do. The company does not typically operate on a backlog basis where we have major, major contracts. However, we do have one with Best Buy right now, which we did put out on The Street. So it's...

But you guys are saying you think 2017 is going to be a better year, but you're not -- you see what I'm saying? You're not -- you have something internal that's telling you '17 is better. You're doing transactions, insider transactions, based on that.

No.

But you're not telling The Street what that data is.

I think, Bob...

So -- Steve, let me -- let me help you.

Yes.

Okay. So there's been no public announcement on any major retailer deals. And the -- except in 2014 where there was a $4.5 million deal. There was no announcement on anything recently, and the...

But you have something that tells you and say that '17 would be better.

Let me go on. I'm not done, sorry. I know I'm cutting you off, I don't mean to. But I want to respond fully to what you said. So as Steve says, we're trapped between having given more positive prognostications in the past than we were able to pull off. So we're very, very reticent to do that. Yet you're saying that, well, we know something's going to be positive, so we're lining our pockets with inexpensive stock because we know that there's going to be something really, really positive. There's -- nothing is certain. This stuff is really, really hard work. However, as we said with one of our products, we're in 5 of the 6 top multiple system operators. This is where we need to be, is in the top tier relationships, and we're doing fairly well. They respect what we've accomplished so far. It leads to other product areas. Those products need to be developed. It takes months to develop them, not weeks and sometimes, a year. And if you know anything about these large companies, they do a budgetary process. So the sales cycle has got to be a year because you've got to be in the budget the prior year in order to be able to sell the following year. So that's the reason for us saying what we're saying. We want to talk in general terms because any more details just gives our competitors a road map of exactly what we're doing and so it just invites greater competition in the areas where we think we're strong and where we have a lead. So that's the reason for it. And do you guys -- if you want more information than that I think it's -- I don't think it's in anyone's best interest, certainly not ours.

Well -- and I'm not -- look, I think you guys are doing a great job and you're trying your best. I'm saying from my own personal standpoint, if I was on your board and I saw this transaction going on, I'd say no, we need to give more detail on this data before we allowed any transactions. For example, you talk about these contracts and you talk about it could be better in '17. What could one of those 5 customers do to the business, even range? You guys know that. You're transacting on it.

Okay, so let's just go back in history when Jim Luksch and I took over the company in 1989. We figured out where the market was. We knew what we could sell and to whom we could sell it. And we did about 20% to 25% annualized compounded growth rate from '90 to '94, '95 when we went public, okay? So that's our -- and we were about at $50 million. And so that's our current plan, to give you a detailed road map of how we're going to accomplish that, I don't think is in the best interest of the company and the competitive environment that we're in.

Well, I disagree because if you give more data, then when the transaction happens and you do a convertible debt deal, maybe because The Street understands what you understand, maybe that transaction goes off at $1 versus $0.30 and it's not so dilutive to shareholders. So it is in the best interest for full disclosure for everybody to make sure that the transactions that are happening are happening at a fair price. And I'm not saying that there's not, but...

Hold on, hold on, hold on. This is all very futuristic, and these are products that aren't even fully defined by the prospective customers. And we're giving you full disclosure all the way. I'm just not going to give you a detailed road map of who it's with and exactly what the functionality may wind up being.

Okay, I'm not asking for that. But you guys thought there's a lift in '17 at what -- when you say a lift, how much is that?

Let me give some -- yes, let me give you a clarification. I think Bob was referring to a lift. In terms of the products with the big cable companies, nobody knows because it's in a cyclical downturn. The products have to be accepted. There's lots of engineering. There's a lot of what ifs in terms of that whole program, but that's what we do every day. That's our business. When Bob was referring to '17, he was pointing to '17 in the same context as we look at what happened in '15. There was a major, major depression in capital equipment purchases in the industry overall, not just in multiple system operators, but with private operators as well. That downturn's experienced by everyone in the industry, and it was very similar to -- the industry's experience is very similar to our experience. When he refers to '17, he's referring to the recapture of that lost business in the industry. So that's what we think. Do we know? We don't know, but we think that in '17, we don't see it happening in the next 12 months or at least in the next 6 months.

I understand, but all I'm asking for is you said you're in with 5 of 6. What does a typical cable company like that order under a contract like this? Just one of them, what's a range?

It's north of $1 million, between $1 million and $2 million.

Okay. That's a bracket of something that I was looking for.

Yes, well...

And today, you guys have $16 million -- you show up with $16 million in assets and you're saying the building is underappraised by $2 million relative to what shows up on the books. So it would be $18 million. You have liabilities of $9 million. So you have an equity position of, let's say, whatever, roughly $8 million. But your market cap's $2 million. What are your guys' thoughts on as far as shareholders? Have you done the math on -- by the time you do the converts and you pay the interest and you pay the bank? Is there anything left for shareholders from a profitability standpoint? That by the time you divide it up on the shares versus selling the business or -- which I'm on the board of a brokerage firm that does liquidations of businesses and acquisitions, mergers. If you guys need contacts there, I'm sure you have people. But the market cap, relative to the liquidation of the business versus the ability to actually generate profits, that will be split up by shareholders in an equitable manner that will justify the difference in the liquidation value and the stock price today. Basically, if you have a $2 million market cap, you have $8 million in equity plus, so there's $6 million. That's $1 a share. What would it take, and you got 6 million shares, to make $1 a share back for shareholders from running the actual business? And have you done that analysis?

Well, where the company has been, Eric can respond to that specifically. But in terms of the -- what the business has been doing during 2015 is driving our breakeven way down from where it's been historically. And what we're also driving is a sales effort to get back to where we were historically. When that's going to happen, nobody knows, but that's been the goal. When that occurs, the combination of 2 things, driving down the overhead and try getting the sales back to where they need to be, this company will be hopefully profitable, i.e. anywhere north of $30 million. With our breakeven point at where it sits today, we will make plenty of money. And with only 6 million shares outstanding, there should be earnings for the shareholders.

Yes. I would just ask that the board goes through that analysis...

We do.

At least internally and says, "Okay, if we do a convert debt here or some sort of debt instrument, we end up with 9 million shares." Now all of a sudden, the math doesn't work or 12 million or whatever the math...

No, we're nowhere near. We're nowhere near that level. And we've resisted doing any form of diluted deal until this very -- until very recently. But the chips were down. And when the company need the money, it needs the money. And we're at the point where we need a bank that's at going to continue to support us. And so we -- that's why we stepped to the table because we're working hard and we believe in the company.

Yes, I understand. But some point, if it had continued, then you would dilute it so much. At some point, you wouldn't get any, the...

We're not out doing pipe deals. We're not out selling 30,000 shares off a trading debt somewhere. We're not doing that. The deal we've done is significantly -- a significant premium to the market, and we think it's fair. We're...

What was the exercise price of the convert?

$0.54.

$0.54.

Okay. I want to make sure you guys know I'm not trying to criticize you guys, and I think you guys are trying your best. I'm saying that when I see the stock trading where it's at and then I see transactions going off and then talk about sales lifts, it would concern me, being on the board from a shareholder lawsuit standpoint, that you guys -- I'd want to make sure I disclose as much as I can about potential contracts and why I think '17 could be a lift and the range and all that stuff. Because if you guys have internal models showing that, which I'm sure you do, then you're transacting on data that shareholders don't have that is significant.

With the reduction in sales that we had in 2015, our focus has been getting this company to the point where it's cash positive. That's been our focus. That's been our exclusive focus, along with keeping in place the people necessary to continue to do business in our industry. And as to the $750,000 subordinated deal, it's tied directly to the bank financing. So you have to pick your poison. And I'm a director. I don't disagree with anything you're saying, but it sure beats the alternative.

Well, that -- I guess, that's what we're after -- shutting down the business, is there $8 million in liquidation if the business got shut down. So everybody gets a $1 a share when you shut it down.

Well, that perhaps is -- would be -- if we didn't get financing, that would be the next discussion. But where we want to be is in a position where we can start getting to good things happening in 2017 when and if the market comes back, or even if it doesn't come back. But there's -- that's -- there's no grand plan. We don't have a ball where we're rubbing our hands together. Assuming that's going to happen, and we're walking away with a big prize in doing this deal.

Well, but it's a fair question. Where does this forecasted uplift in sales in 2017 come from? I was the one who wrote the sentence. So where it comes from is that we're in the process of working with these large customers for their next thing that they're going to need for their systems, that they're budgeting for a little bit this year and increasing it next year and so on. And we don't see us getting real sales from that effort until 2017. And talking about the specifics of what those products are, we're just not going to talk about that. Also, there's a huge mergers and acquisitions activity going on in our marketplace right now. And I'm thinking that by 2017, that will be cleared up and they will be trying to compete with their competitors and as the newly formed merged companies. And they will be back to buying product again. So those are the data. Those are the key pieces of data. And I think that we have been open about that. But if you think I haven't been open about that until just this last paragraph, I apologize.

No. I think that what was helpful was when you started to bracket the size of contracts that those customers could give. That's, I think, is an important data point that shareholders wouldn't know, that you would know. Or if you say you're working with 5 customers and each one's $100,000 potential customer, we don't have an idea. And you're saying that's $1 million to $2 million potential, maybe 0. Customer may order 0, but you're at least [indiscernible]. That's helpful.

Yes. And sorry if I -- if you thought I was withholding that deliberately. I was not. I'm just trying to be conservative with our prognostications because we have been too cavalier with our prognostications in the past, and we're paying the price for it right now.

I don't believe you were at all. I wouldn't -- I'm not trying to accuse you guys of that. I'm just saying you have -- think of an outside shareholder right now that's owning the stock at $0.30, sees an insider transaction. There's losses. The debt looks like it's constantly being rolled. They're thinking, "This is going bankrupt. I'm going to sell it." Yet insiders are putting in transaction -- putting in money, so you don't know what's going on. You have no idea. And so some sort of clarity to bridge that gap and at least let them know what -- there's risks. They could go -- you guys could go under. There's also a reward. I just don't think there's been enough discussion on the reward side to help educate the shareholders to make a decent transaction. And you guys helped clarify that today, and I appreciate you spending that time.

Okay. Was it adequate? Or are we done with that? Or you need more?

No, I think that that's good. I mean, is there anything on the contract manufacturing side or anything else that you guys are positive or negative on that you haven't talked about?

Well, we think we can be a strong regional player. And we're going to a regional show next month in April and showing off what we can do and trying to secure additional clients.

And again, it's incremental. We have so much capacity, manufacturing capacity, that we're looking it from a -- we're not looking at that as a business we want to be in long term but a business that can be attractive cash flow business, which today is our primary goal, increasing cash flow.

The next question comes from Gregory Irvine [ph], who's a private investor.

Part of my -- some of my questions were answered by the previous discussion, which I appreciate. What -- I've been unable to access the 10-Q. What was the cash flow for the Q4?

The Q4 number, I don't have handy for the actual quarter, but I can tell you what it was for the entire year. For the entire year -- bear with me 1 second. I'm sorry. And the reason why you have not been able -- the 10-K, the reason why you have not been able to access the 10-K is because, as we said earlier, it's going to be filed later on today, okay? For the year, the net cash provided by -- excuse me, used in operating activities was $798,000 we -- in operating activities, we used.

For the year. Well, that isn't bad considering. And we only have to wait 45 days or so to see what Q1 is going to yield. The current lineup, well, number one, do you expect over the next year that the contract manufacturing data is going to add much? Is there much growth potential with either of those to make up the difference until some big orders flow in?

The -- I don't see the -- the contract manufacturing in the scale of $1 million, I don't see increasing, if at all, in 2016. But if we're successful with finding new clients, because that sales cycle could be 3 to 6 months, then that also would be an increase in 2017.

And the data products?

The data products, I think, could increase. I hate to speculate, but we think the data products could increase, yes.

The current -- in the digital headend encoders, transcoders and all that, are they reaching the end of their lifetime? Or are you more dependent on what's under development?

They are not reaching the end of their lifetime. We just saw a contraction in the purchasing of our core products in 2015 because of the mergers and acquisitions activity in the marketplace generally.

So in other words, it's not in any way related to not having what the market wants. It's just the overall slowdown.

The overall slowdown, and I think that we see some opportunities where we need to do new products to serve the market for what they need. And come on, we have contemporaries that are doing $50 million, $75 million, $100 million. And if we had -- if we were active in those particular products, then that's where we would be, and that's what we're going to do in the future.

At some point along the way here, I assume you've thought about, or someone has at least brought it up, of moving from focus, so much focus, on the -- what you've been doing for decades now, the cable business, into other manufacturing. You have the technical capability to do that. Are you looking down other completely different avenues?

Well, actually, I don't think so. I think we're staying in our main genre, and there's a lot of opportunities in the CATV multiple system operator market. And then they compete with the telecommunications operators and the satellite operators. And there's -- you see the telecommunications operators and the satellite operators combining so that they have a decent force against the CATV multiple system operators. So there's a lot of activity. Those blue-chip companies are still going to prevail and be the primary service providers for this type of stuff going into the future. And we need to focus on deepening our relationships with those companies and expanding our sales. That's the largest opportunity. For us to go off into a completely different area, I think, is extremely risky and we don't have a contact base for it. And...

Right, not that desperate. I understand that you could -- feel you couldn't compete, and I believe you could compete in the market. It's just given the liquidity issues, being able to stay in the game long enough to be there when things turn around overall.

Well, we're -- we think the key people inside the company are putting their money where their mouth is. And we think we can in a similar way that we did from 1989 to 1995. We need to repeat that strategy, repeat those successes. And it's something that's doable and within our reach. It's in our wheelhouse technically. So...

Right. Well, I appreciate your efforts. It's been difficult. I can't imagine being in your shoes. But I hope you have a good health and just keep it up.

Your next question comes from George Gaspar [ph], who's a private investor. Your next question comes from William McKinley from McKinley Associates.

Go ahead.

Yes, with your subordinated debentures and your options in that type of -- those securities, are they going to be coming from the company? Or are they going to be purchased on the open market?

We believe we have enough treasury shares at this point to support that.

So all your options and all your subordinated debentures, convertibles, they're all going to come out of the treasury stock?

Well, not all of them. But based on the -- like you said, you brought up a point about the options, because of the fact that a significant number of the options that are outstanding are significantly underwater, that's the issue, right? So the ones that are in the money and some of the convertibles, we should be able to haggle a good portion from treasury.

Okay, I know. And what's the bottom price that most of that -- those items are priced at?

You mean, what's the lowest?

The call price, the floor.

The floor? I believe the price -- on the current convertible, well now, we have some options that are out there at like $0.40.

$0.40.

Yes. And then of course, as you said, we have the convertible debentures...

$0.54. They're at $0.54.

Yes.

And the floor, that's the floor?

Correct.

If it goes higher, it's at a premium.

Correct.

To the stock price.

Well, that's what I'm talking about. Because today, it's, what, $0.30. So you have some options at $0.40.

Correct.

And some at $0.54. What -- how many shares in total would -- or approximate, how many shares fall into those categories?

We don't have a lot. Like I said, most of our options are underwater. You'll see when you look at our 10-K. The -- for example, at the end of the year, we have about 1,044,000 shares of options that are exercisable under our employee plan. And the weighted average exercise price of all of those shares is $1.49. And then on the directors' side, it's 349,000 shares that are exercisable and that's a weighted average of $1.27. So you could kind of put it into perspective of where those exercise prices are relative to...

Yes. That $0.40 to $0.54, how many -- ballpark, how many shares you have at $0.40 and $0.54?

We have no shares issued at $0.54. The $0.54 is the convertibility aspect of the debenture.

Okay, the one you're going to -- when you're going to -- the company's borrowing your money from the director...

Correct, correct.

And that's $0.54.

Correct. And then on the options side, we have about 250,000 shares -- 250,000 options, excuse me, at about $0.40.

That would be like employees and that type of thing?

That's correct.

Our next question comes from Richard Greulich from REG Capital Advisers.

Just have a couple of quick questions. What is the board's policy toward repricing of options?

We haven't repriced any.

We don't.

Okay. Secondly, I can't remember. On the terms of the $750,000 loan, convertible loan, is there a maturity date on that?

3 years.

And there's -- has that actually occurred at this point, the financing?

The commitment is in place, and $300,000 of it has already been put into the company. An additional $200,000 of it will be coming within the next day.

Okay. And I just wanted to kind of clarify one more time. So the $0.54 convert is set in stone.

That's the floor. As Steve alerted -- as mentioned earlier. It's a function of -- I believe it's the -- off the top of my head, I think it's the 10, the average closing price, right? 110% of the average closing price over the last -- of the previous 10 days prior to conversion and with a floor of $0.54.

Okay. And Bob, I had a question. This regards the potential business with some of the larger carriers that you're going to be working hard this year to develop some products for that you think could have an impact possibly in 2017. Is it fair to characterize some or a large amount of that business that those products might generate as being something where you've identified a need at the customer that is either already being met with competitor products? Or is it something that is not already met yet, but that you will then use your expertise to design the product for it to fit their needs at what I would probably guess would be a lower price than the competitor?

The latter.

Okay. And in terms of a time line, so you'll be looking and working with their engineers in a sense while you're designing your product. Is it likely that once having done that, would they do more than simply test it? Or would they put it out for other bids?

That's unknown. I believe that in some cases, we would get a commitment to complete, and in other cases, it would go out for bids. So...

Yes. Okay. How should you...

Richard, and it's in the U.S. So they're free to do whatever they want to do. You have to make the sale. You have to have the best product at the lowest price. So -- you know the drill.

But here's what I'm, I guess, speculating is the -- in the last year to 2 as you've gotten in closer with some of these larger customers, they've seen the value. They've seen the quality of the products. And I think my guess is they would be much more comfortable working with you now than, let's say, 2 years ago, particularly if in a situation where they may not need another bidding process if you come in with a good price to begin with.

Well, believe me, they're going to protect themselves. They're going to have more than one supplier. And if you think otherwise, you're really just kidding yourself. And the way to wind up being the dominant supplier is to satisfy as many people in the organization as you can possibly satisfy. And you keep them satisfied every day that you can keep them satisfied. So you have to stay on this day after day after day with each person that's a potential no vote, and there are lots of them. So it's just normal stuff. It's just normal stuff. It's just normal stuff.

And last question. Has -- is there any possibility that with the convert issue, that 5% ownership changes would possibly limit the ability of the use of tax loss carryforwards?

I don't believe so.

Your next question comes from George Gaspar [ph], a private investor.

Can you hear me?

Yes, sir.

Yes.

Just a broad question. There's been a lot of discussion on a lot of things. In looking for your view on the innovation that is starting to come about in terms of moving, WiFi, general signaling with the bandwidth problem that exists on amplifiers that the cable industry is dealing with, there's a lot of innovation taking place in moving -- starting to move WiFi through streetlights. And there's some testing going on in Connecticut and one small community already has put it in. And there's going to be another test the west of Chicago. And this seems like there's some real innovation coming about here in how to move signaling. And is there -- do you envision that there's some changes that would come about where you would fit in to broaden your business?

Oh, quite frankly, we have not thought about or participated in that innovation. So -- but I can tell you this, that data over power line has been tried a multiplicity of times and it's -- it has failed. But I don't know about the streetlights. There's just some real technical challenges when using those physical structures for moving high-speed data, very limiting and easily -- any arcing and stuff that you see associated with streetlights, that destroys high-speed data and that's the primary reason why the data over power line initiatives have fallen flat so far. Maybe there's some secret sauce, but it's been tried not less than once. It's been tried 2 or 3 times. And each time, they seem to think they have a more immune, inoculated technology and it hasn't worked out yet.

I see. Okay, all right. Well, you might just want to keep track of what's going on because I got some first-hand thought process on this and it's utterly fantastic, the results so far. And another thing too is in terms of sending your communications within a facility, is there any thought about trying to interconnect that with LED lighting systems that are being installed?

So you're talking about using the LED lighting and the light that the LEDs emit carrying communications data over the light that the LED then emits, is that your point?

Yes, and/or if it could be -- if your system might be interconnected into an LED high bay lighting system as an add-on, in let's say, a large commercial building.

Okay. So is the purpose of the interconnection is to control the LED lighting or the purpose of the interconnection is to use the light rays that are emitted by the LED lights to carry communications?

Light rays.

Sorry?

It would be your second thought there, the communication of light rays.

It's an interesting thought. We haven't -- we're not participating in that science at this time.

I'd like to turn the floor back over to management for any closing remarks.

Okay. Well, thank you, everyone, for participating in our teleconference, and I hope you guys all have a great day and a great year. Talk to you soon.

Thank you. This concludes today's conference. You may disconnect your lines at this time.