Good day, everyone, and welcome to today's program. [Operator Instructions] It's now my pleasure to turn the conference over to Mr. Bob Palle, Chief Executive Officer.

Good morning, everyone. Welcome to Blonder Tongue's Third Quarter 2016 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, 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-K for the year 2015, 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 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. Before I start my presentation, we want to confess that the press release has an error in the page with the table Financial Information. And that error shows a gross profit in 2016 for the 3 months ended September 30, 2016, $3,531,000, which is the additive inverse of the gross profit. It should be $1,901,000. And the correct numbers are reflected in the Q, which was also released today. So that being said, I'll start my presentation. First of all, the essence of the press release comments bear repeating. Our results for the third quarter 2016 fell short of expectations. Although sales were only slightly less than expected, several factors adversely impacted gross margin when compared to the second quarter of 2016, specifically, increased internal facilities expenses, a reduction in overhead and inventory value as a result of overhead expense reduction and a less favorable product mix. We believe that net sales will remain flat through the remainder of 2016 and into the first quarter of 2017. On a positive note, we received several significant orders for newly introduced products during the quarter, and sales of those products should increase as 2017 unfolds. In the near term, we remain focused on achieving positive EBITDA, refinancing the revolver and the term loan with a new lender and completing the development of the new products that are also expected to contribute to increase sales in 2017. 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-Q, which is filed today, included a going concern qualification given uncertainty regarding our liquidity, which was first discussed in our Form 10-Q, which was filed in November of 2015. We believe this qualification is primarily driven by the 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 dates since February of this year. It is currently set to expire on December 1, 2016. Santander has continued to be a strong partner for us as we navigated through this projected period of depressed sales. We believe that they will continue to support us as we regain our footing. As noted in the Form 10-Q, we have taken a number of steps to alleviate our liquidity situation, including executing certain operational and financial processes. In addition to implementing 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 to secure an extension as well as with other lenders who could refinance our existing indebtedness. I refer you to our Form 10-Q for more detailed description about our liquidity as well as our plans to enhance our liquidity. Net sales decreased $272,000 or 4.8% to $5,432,000 for the third quarter of 2016 from $5,704,000 for the comparable period in 2015. Net loss for the 3 months ended September 30, 2016, was $642,000 loss or a loss of $0.08 per share for 2016 compared to a loss of $1,958,000 or a loss of $0.30 per share for the comparable period in 2015. The decrease in net sales is primarily attributed to a decrease in analog video headend products, partially offset by an increase in sales of digital video headend products. Sales of analog video headend products were $559,000 and $930,000, and digital video headend products were $2,763,000 and $2,610,000 in the third 3 months of 2016 and 2015, respectively. For the 9-month period ended September 30, 2016, net sales increased $1,328,000 or 8.4% to $17,057,000 in 2016 from $15,729,000 in 2015. Net loss for the 9 months ended September 30, 2016, was a loss of $857,000 or a loss of $0.12 per share compared to a loss of $4,635,000 or a loss of $0.72 per share for the comparable period in 2015. The increase in net sales is primarily attributed to an increase in sales of digital video headend products and data products, offset by a decrease in analog video headend products and contract-manufactured products. Sales of digital video headend products were $8,889,000 and $7,115,000. Data product sales were $1,592,000 and $499,000. Analog video headend product sales were $1,789,000 and $2,843,000, and contract-manufactured product sales were $994,000 and $1,144,000 in the first 9 months of 2016 and 2015, respectively. Now I'd like to turn the call over to our Q&A session.

[Operator Instructions] We'll take our first question from Richard Todaro from Todaro Capital.

I have not read through the Q. I just read the press release. And I said -- I know you said the reference out for liquidity. But I guess, that big-picture question is, do you -- you're saying, this quarter, next quarter is kind of similar. You got some bigger orders, you're hoping for '17. Do you think you have a liquidity to make it to the bigger orders whenever you -- hopefully, the turning point happens for the business?

Yes, we do.

Easy enough. Do you -- when you say the size of -- is there any way to bracket the size of the quarters that you referenced?

Well, what we're -- we've talked about this before and there's probably $7,500 million worth of this type of business that we're chasing annually, split amongst the -- presently, the 3 competitors that we have. So we think we're targeting and we believe we're going to get a piece of that. And that share -- the market share will increase in '18 and '19. So that's really our plan.

Any other color you guys just how you're feeling about the business? Any other besides just kind of standard press release and anything on competitors, market dynamics? Anything else you guys want to tell us?

Well, we had -- on the sales front, we had targeted last year several key initiatives that we needed to turn around. I don't want to go into detail on those. And you've heard my speech about this before because it just leads the competitors to those large opportunities. And we have had some success, a fair amount of success, but if you know anything about the large companies' clock, it's at least a 1-year cycle. You have to get budgeted in, then you're written in, and then the order start to flow and then they increase as time progresses. So I can tell you that we've had some pretty good success at turning these relationships around. So -- but I can't really promise anything, let me just tell you that we've had success with the testing phase and that's about all I want to say about it.

Your confidence level in the business, is there any way to verbalize or characterize how you're feeling about not just getting through liquidity, but maybe getting the business to profitability someday?

Exactly. So if you've read all the filings, it is buried in these filings that my wife and I have staked our life savings on this and we don't give up easy. So I don't -- how much more we personally can do, but Eric knows the numbers. Eric knows how much dry powder we have. And he's looking at his scope and his immediate yes to your answer about do we have enough liquidity, should have been enough to answer the question, I think.

Okay. Well, that answered the liquidity question, just it didn't answer your thoughts on will these big orders hopefully get you to profitability once they start to ramping -- ramp?

Absolutely. Yes, that's the whole idea.

We'll go next to a private investor, Dale Norton.

Got us a couple of bookkeeping kind of questions here. G&A seemed a little bit higher than I was kind of looking for. Is it my just lack of understanding? Or was there a little bump in there that I might not have looked for otherwise? That's first question.

Compared to what?

Last year at the same period compared with the second quarter. So my little model was just looking for a little bit less than what happened. And I'm just wondering if I need to improve my modeling? Or if there was a one-timer in there?

We had some a little bit extra JV. If you're comparing it to second quarter, if that's what you're asking?

Yes, and compared with trend in prior years, too, as well.

Well, if you're comparing it to prior years, it's lower than prior years. That's why I'm confused...

Of course, of course. But relatively speaking, you've taken costs out, so I'm looking to see how much. And maybe a next question is, do you have more cost reduction impact yet to come in, say, Q4 versus Q3? So that's twofold question so far.

Sure. There may be some more in Q4 compared to Q3. Q3, there's some, as Bob alluded to, some of the things that we had to do. We're reconfiguring some of our space here to potentially lease out a portion of our building to -- just to increase our cash flow. So some of that...

Okay. That would account for most of it, I think, probably. Okay. Inventory reserve seemed to drop a little bit more than I would have thought. What was going on there, please?

The inventory reserve process, if we have a scenario where we have items that are fully reserved and we're able to find a new use for them and reposition them in some way, it's then, therefore, the inventory reserve would be reduced accordingly.

Okay. All right. Let's see, any guidance on capital spending for the year? Because the number that I saw in the first couple of quarters was, of course, quite low and then it popped up relatively substantially relative to those first couple of quarters in Q3. What do you...

We don't anticipate there to be significant capital expenditures for the balance of the year.

Okay, bear with me here. I can barely read my own handwriting, but it's taken me years to get to the point that it's legible. All right, I guess, that's it for the moment and I will be listening to the remainder of the call, of course.

We'll go next to a private investor, George Gessler [ph].

Just could you highlight, again, I don't have the numbers in front of me from your release this morning. But your current debt position and equity -- shareholder equity position, and where are you on negotiating? Are you required to negotiate a new debt agreement at this point? Or is this concluded?

No. The -- we're -- right now, we have done the extensions through December 1, and we're pursuing an -- a further extension accordingly. And we're in talks with some other financial institutions to refinancing the -- to refinance the existing debt facility.

Okay. And what do have on the debt side now and the shareholder equity side? What are those numbers?

Sure. The -- we have approximately $6,890,000 of stockholders' equity. And then I don't know if you want the total debt including the accounts payable? Or you're just looking at...

Long-term debt, current debt?

Sure. Sure. Well, the debt itself -- the current portion of long-term debt is $3,443,000 and we have a line of credit outstanding at September 30 of $1,910,000. And then the long-term portion of the debt is $52,000.

$52,000, okay. So this extension that you're seeking beyond -- is it December 1? Is that with current banking connection or you're looking elsewhere?

No, the extension itself would be with our current credit lender.

I see. Okay. And then, earlier, I believe it was the first questioner asking questions about new product developments. And I understand that you don't want really relate much and give anything away to your competitors. But could you speak to any changes and trends that are appearing just recently because of all the mishmash going on between the cable side of the business and the telephonic side of the business, the mergers and where that all is going in? And do you think that because of all these mishmash going on that it has delayed some of the order potential that could be out there for you?

I'll take that. I believe it definitely is delaying the orders that are out there for all of us, actually. So if you look at this, the hang-ups there, they're wanting to have a vertically-integrated company, where starting with the content all the way through all the delivery processes. So you noticed this latest Time Warner acquisition. So I think they're all looking to start with content and go all the way to the end. And while they're working on that, they tend to ignore other parts of the business, so they slow it down or whatever. And all these acquisitions definitely slow down the ordering.

I see. Okay. All right. And in terms of the breakdown of the shareholder ownership at this point in time, how much -- can you just give me an idea, current numbers of how much is held inside the company? And how much is outside the company and -- outside shareholders?

Just -- well, there's so many factors, okay. The -- if you -- I think the most recent proxy would give you the best guidance. Have you looked at that?

Okay. No, I haven't. No.

Okay. So you'll see in there that my wife and I have north of 30%, but a lot of it is declared because there's a subordinated debt agreement and that we have not exercised the right to convert that into stock. But the 35% includes the fact that we do have the right. So they -- you have to read the notes carefully. And then, I don't know, I don't feel comfortable estimating the amount but I would say insiders close to 40%, I would think, altogether.

I think it's a little above that, Bob.

Okay. Well, see, Steve has a little bit better sense of that. But I don't believe it's north of 50%, if that's your question. But going with your question. And that would be all in, if everybody converted, blah, blah, blah. I don't think it's north of 50%. Could be, but if it is, not very much.

Okay. All right. Well, and then just a last comment. It just looks like the possibility here if you're getting things turned around. And I just -- for your size company and the relative lesser number of shares outstanding that you really have an opportunity here to start accelerating your earning power once you hopefully get into 2017 and get some expanded technologies that can broaden your sales base.

Correct.

We'll go next to Gregory Irvin [ph], private investor.

First, the good news, it looks to me, and if you would confirm this that, one, the cash flow from operations remain positive I think for the second quarter in a row. And secondly, that you haven't drawn any more against this subordinated debt.

That is true.

Quarter-to-quarter.

Correct.

All right. So both of those, similarly, I take as positive indications from my own consolation, I might say. Looking at the results of operations, the beta products and the reporting for the quarter quarter-by-quarter wasn't lifted. Is there any significance to that?

No. It's -- we certainly...

If you look at the 9 months, the results of operations was about $300,000, which was down from Q2, but it wasn't recorded in the breakout from the 3 months.

It is. But there was a timing of a particular shipment from the Far East that affected that adversely.

What might we expect looking forward concerning beta products?

You would look for those sales to increase.

All right. And the analog seemed to be -- sales seemed to be stable quarter-to-quarter. I expect that is going to continue to taper following this.

The analog products are tapering down. And the -- I don't think what you said is correct.

Okay. I think one of the previous callers referenced that these extraordinary -- well, I'm calling, extraordinary expenses you incurred this quarter with respect to allocation of your building space, your operating space look for a similar level. Or from what you said before, it's not a -- it's just a onetime charge, that we'd expect to see that substantially decrease in Q4.

Yes.

I don't know. Eric and I are maybe going to disagree on this. The work continues into Q4. It's not completely done. And -- but I would say that it's not going to be through the entire portion of Q4 so it should be less. But it depends on -- we may have to do a little build out depending on whom we lease to, so -- but I think that Q4 should be hit.

When might we expect revenues from that leasing out or renting out space to hit the top line?

It depends on how long it takes to take to find a tenant, et cetera. It could take several months.

So once you make the math that you don't have one, what do your own negotiations look at this time?

Correct. We do not have anyone in work at this time. Correct.

All right. Okay. Well, about the change, I think that have been brought up in prior calls and a little bit, too, in prior calls. And finally, revenue, we're still looking maybe breakeven revenues for $25 million on annual basis? Or any change in the estimates there?

That's fair. Maybe a little lower. That's a very fair assessment -- conservative assessment.

Okay. Well, I wish you luck. It's -- this is really dragging out. But amazingly, you're hanging in there, and it sounds like you say you have a very substantial stake in making this work. And I wish you the best.

We'll go next to Richard Greulich from REG Capital Adviser.

Two questions. What were the revenues in the quarter from contract manufacturing?

That's a good question. I have to -- let me see. See if I have that document here with me this morning.

And I was going to follow that up with saying -- to ask what they were last quarter, not a year ago, but just in the second quarter?

Well, you can see they're down for the 9 months of like 10% or something. So I don't know -- I don't think they're that lumpy. I think that probably tracked that same thing Q1, Q2 and Q3. So I don't think that's -- I don't have the quarter -- the documents for this quarter here in the room with me. I'd have to run and -- run off and go get them and come back.

I'll just -- I can follow it up later on.

Yes. It was -- you can see that it's -- they're only down 10%, so they're with an arguing range of being flat. So I think that you would find, once we do a deep dive into 1 and 2 and 3, all would probably be similar. But they might be lumpy. But -- it's -- we're not depending on those to float the business. So I don't -- I just track it that it's -- the relationship is still secure and we have a very good partner in the main CMs that we have. And then the second one is selling -- reselling products that we make here that were collaboratively designed, and that market and that customer have been struggling a little bit. And I think we didn't get the sales at the end of Q3 that we thought we were going to get with him, and that probably accounts for the total being down the $100,000 that it's down. But it's a pretty -- it's not our main focus, okay, to manage that business quarter-to-quarter. All relationships are square. The products are doing great and...

So then I had a question regarding the inventory and the reserves. So it looks like from June -- it looks like in the third quarter, gross inventories before any of the reserve was down about $700,000. And the reserves were down about $700,000. So -- and you had a worsened gross margin. So should I conclude that some of the heavily reserved inventory were shipped out in the third quarter like about $800,000 worth?

No. No. There was no one-time event in the $800,000 range or probably even in the $80,000 range so.

But inventories were down significantly quarter-to-quarter.

That's true, that's the result of managing the...

Yes, repurposing products.

Correct.

It's a deliberate cash management strategy.

[Operator Instructions] We'll go next to Kenneth Hemphill, a private investor.

I'd looked at your balance sheet. I noticed that the $3,443,000 current portion of long-term debt, almost gives you a 1:1 working capital ratio. And a long-term debt is like much, much like a fraction of that. That tells me that you're going to pay this off within a 12-month period?

No, it's classification purposes, right, because it expires within the 12-month period.

Oh, I see. So you could renegotiate it and still put all that back into the current debt.

That's the plan.

The plan would be right to reclassify it as long term.

So basically you got to rely on renegotiation as opposed to having a deal that would put more of it in long-term debt?

Correct. We need to renegotiate, correct.

And what -- just one other question. What do you think the effect of the election is going to have in your business, if any?

That's very difficult. I do not see any huge negatives at all. The man is talking about infrastructure projects. That always bodes well for a company like Blonder Tongue that sells infrastructure products, but we don't know exactly what he's talking about so.

I remember when I worked for the school district as business manager, my last work, we put all your products into a system we are putting into conference room. Do you guys sell a lot stuff to these colleges and high -- and public school systems?

Yes, we do. The educational market is where we've been specified in for years and we benefit a lot when that spending goes up.

Now has that been staying steady, up, down?

I think it's been tapering off. They've been starving the schools to tell you the truth.

What about colleges? They got all the money in the world.

No, they don't have the money in the world. But it's -- I would say it's steady, the university market is steady.

[Operator Instructions] We'll go next to Dale Norton.

This isn't a question, but because I've already input some info into my little model here, contract manufacturing was $465,000 in '16 versus $447,000 in '15 and against the second quarter of $293,000, and in '15, $526,000. There you go.

And currently, there are no further questions in the queue.

That concludes our Q&A session, and thank you very much for participating in our teleconference. And I hope everybody has a great day and a great week and a great year.

Thanks, everybody.

Thank you.

Thank you. This does conclude your teleconference for today. We appreciate your participation. You may disconnect at any time.