Good day, ladies and gentlemen. And welcome to Blonder Tongue First Quarter 2019 Results Conference Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host for today, Mr. Bob Palle, President and CEO. Sir, the floor is yours.

Thank you very much. Good morning, everyone. Welcome to Blonder Tongue's 2019 first quarter financial reporting teleconference. We thank you for your participation. Before we begin our presentation this morning, 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. For additional information concerning factors that could cause actual results to differ from the information that will be discussed this morning, I would ask you to refer to our prior SEC filings, including our form 10-Qs for prior quarters, including the first, second and third quarters of 2018 and the first quarter of 2019 and our 10-Ks for years 2018, 2017 as well as our 8-Ks. With me today are Steve Shea, Chairman of the Board; Ted Grauch, Chief Operating Officer; and Eric Skolnick, Chief Financial Officer. Our presentations will follow in that same sequence. And following the presentation, all of us will be available to answer any questions you may have during the question and answer period. First, in my letters to you for the years 2016, '17 and '18, we outlined the areas within which we needed to achieve major improvements in order to affect a successful turnaround in our financial performance. And as a result of those major improvements drive an increase in stock overvalue. We remain committed to achieving those goals. Second, we provided a comprehensive status and forward-looking report in the previous investor teleconference on April 1st just six weeks ago. Not much has changed since that call. Regardless, we believe that our comments in the press release this morning bear repeating. We are disappointed in the sales for the first quarter 2019. We believe that the decline in sales was due to several factors, the temporary government shutdown, the market uncertainty due to the ongoing trade conflict with China, and the fact that the company’s largest customer further slowed purchases of BTs data and digital video products. On the other hand, in February, we completed the sale lease back transaction for the Old Bridge, New Jersey facility, which has positively improved our balance sheet and provided the working capital we need to accelerate the initiatives that we believe will reverse the sales decline and restore the company to a period of sales growth and profitability. And this will be over the second half of 2019. Although, we are still concerned about the first half of 2019, the plan we have outlined for the remainder of 2019 includes accelerated promotion and sales of the BT NeXgen Gateway product line, and an IPTV-based set-top-box sales initiative. The company recently secured its first CATV Tier 1 MSO provider customer for next gen gateway. The IPTV setup box initiative started in the first quarter and its one that we anticipate will add several million dollars of incremental revenue as a remainder of 2019 on unfolds. Now, I’d like to turn the call over to Ted Grauch, BD’s Chief Operating Officer. Ted?

Thanks, Bob and good morning everyone. During the first quarter in line with Blonder Tongue's goals to create higher value systems focused products for our current customers and new customer targets, BT initiated an IPTV set top box value added reselling or VAR program, aimed at a number of Tier 2 and Tier 3 U.S. cable operators, as well as municipal fiber operators and telephone operators. The first public introduction of this product line was announced during the NCTC National Cable TV Cooperative Winter Educational Conference that happened on February 25th and 26th in Atlanta this year. These new VAR products are associated -- and the associated sales initiatives were extremely well received during that trade show, as well as indirect sales initiatives before and after the public announcement. This is giving rise to the referred comments in the press release this morning. And as Bob has already mentioned, this initiative is now expected to positively impact our revenue in 2019. And we will keep our investors up-to-date on this and all of our key strategic systems related and other initiatives as they unfold in the coming quarters. Now, I would like to turn the call over to our Chief Financial Officer, Eric Skolnick. Eric?

Thank you, Ted. Although, the first quarter 2019 sales were down 23.9% as compared to prior year, our gross margin excluding the effect of the right down of the non-recurring inventory of $693,000 increased to 43.7% compared to 41.5% in the prior period. Our operating expenses for the first three months of 2019 were up approximately 33.8% as compared to the comparable period last year. This increase is primarily due to salary and headcount increases, which were necessary due to the company’s prior continued efforts to contain and reduce these related costs. As mentioned in the previous call, the Old Bridge facility sale lease back now allows us to have the resources to implement an aggressive strategy that we anticipate will be able to reverse the downward trend as the second half of 2019 unfolds. We have not made any adjustments to the credit facilities since our last call. However, we still expect that further changes to accommodate our progress will be made in the coming months. Now I’d like to open up the call for question and answer session.

Thank you [Operator Instructions]. We’ll take a question from [Gregory Urbin], a Private Investor.

Let’s look at revenues, number one, could you -- I get from what you've shared already that you're looking for the set top box initiative to bring this toward the black going into second half of the year.

It’s not only the set top box initiative, but that will help a lot if it’s as successful as we projected to be. The other major initiative is our NeXgen Gateway. And we've secured our first Tier 1 operator in Q1 with actual orders and shipments.

Noticing the drop off in revenues from head end data equipment. Is that primarily due to customers delaying orders, or is it related more to the transition to the NeXgen equipment?

I think it's little bit of a combination. But we're disappointed that the traction on the NeXgen Gateway was difficult to get started with the major guys, but we're now over that hurdle at several operators. And when you said the head end equipment on, give me just a second I want to look at…

You say digital down, analog was up…

Exactly. So what we call head end is classically is the analog and that was up, and that's why I was going to check the numbers, because I could have sworn that was up and it is.

And as I understand it, the move is going to be to the NeXgen the backbone?

Yes.

And is that to occur over quarters or over years?

Well, I think that it's going to occur over quarters and years. So I think we're going to step up and maybe Ted could comment on the progress also.

If you look at the market for NeXgen is a combination of cable operators and communication operators doing upgrades to expand the ability of their core networks to deliver more IPTV in different ways. Coupled with a separate sub-market, which is the demarcation points between these cable operators' distribution networks and the business-to-business interactions that they have. So for example, when a cable -- when a large multiple system operator has a customer that's a hotel chain in their operating area, they have a demarcation point on that property that they have to terminate their distribution system and redistribute those same video data content within that property. So that's a separate submarket for the NeXgen. So to answer the question on timing and to expand on what Bob just mentioned in that area, there will be quarters of increased sales of the NeXgen we believe that have to do with the current customer base that we started to win in the Tier 1 and in the Tier 2 markets, those will come more in quarters. There are other bigger fish that we're going after, other Tier 1 operators that we'd like to win. Those tend to be long sales cycles. And those will take more in the half year and year, or potentially even multiple years to win over. So we're going after all those segments and sub-segments and we're saying that we've won our first major Tier 1 operator in the last quarter, and we’re very close to winning some others we believe. So we’ll just accelerate the sales and marketing efforts to close these deals.

With respect to addressing the needs of the larger fish, as the R&D progressing such and turning out the necessary new modules to satisfy those needs currently. Are those available…

We actually believe that 90% of the modules that are on our technology roadmap will be finished before the end of the year currently, so those are looking very good.

Now since they're making this transition within the facility I assume to the next gen product. What about the inventory? Because as I see there was some write-off of inventory this time [Technical Difficulty] related to the transition to the next gen product or obsolescence might there be in the future…

No, we don’t believe that there is going to be a significant amount of obsolescence as a result of this transition. The reason for the write down in the first quarter had to do with taking a much more conservative position on our current inventory. So that was the main reason for it. It wasn’t necessarily driven by changes that have occurred as a result of the NexGen.

Is that a non-recurring, or are likely to see that in Q2?

No, we are not likely to see that in Q2.

So Greg, as you noticed probably over the last three or four years that non-current inventory has been descending from a very high number to very low number. And then consistent with or at the same time as the building sale, we decided to take a conservative view and write-off the rest of it, which was $500 or $600 grand, it’s in the Q exactly what we did.

And looking at the revenue, of the three main factors that impacted this quarter, how about China? And what’s going on in the tariff world, and what that’s going to mean to Blonder?

Well, we are positioning ourselves such that to mitigate what -- or tends to be now an additional sweeping increase in tariffs on increasing number of categories. We are prepared to move in cooperation with our partners that have been supplying us finished goods to move the production, especially the final assembly and test to here in New Jersey. But we’re not sure how much of that we’re going to be able to do, or whether we decide doing 100% of what is in mind right or whether we wanted doing 50%, but we’re definitely going to do some. It’s a matter of when they formalize this next wave of categories, which at the finished goods level, we have been and a bunch of our contemporaries, have been in major categories not impacted dramatically by the tariffs. This next wave that Trump is saber-rattling about is a whole different kettle of fish. And we will have to have a major initiative to move stuff, either back Far East from China into our factory, because we moved it there in the first place from our factory. So that's a doable task. But it's hard to do in like 10 days or something, more like six months, eight months. But we've been talking about this and doing the ground work and preparation in the event that it went this way, which it certainly in newspapers it looks like it's go on this way.

Now, the other factor that you mentioned, the fall-off in business from either World Cinema or Toner Cable, that look like that began last year. Is that relationship at risk, what's going on there…

The relationships are not at risk. They're not at risk and it has to do with product mix and product approach, and we are doing stuff about that.

So do you expect that to stabilize, or revenues to stabilize from those sources or not?

Well, we really expect to have improvement, especially from the first quarter. But if you use the first quarter as a basis, we expect a significant improvement. We anticipate significant improvement. I think is the way I'm supposed to phrase those forward-looking statements.

Now turning to expensive. What are we looking at as far as SG&A over the rest of the year?

That's a very good question, because the SG&A was as you could see, it was extremely high for this quarter compared to the first quarter of 2018.

So I would expect that the SG&A should decrease slightly as we go through the year. What remains to be seen exactly how much we close as we alluded to earlier, we have several initiatives. And with a lot of these sales initiatives come obviously related costs. So it's a little hard to prognosticate at this point, but I would say that it would definitely be lower. But I would expect it to be lower going forward.

What's the total headcount now?

I believe we're somewhere around 114 employees all-in.

So you haven't ramped up the sales and marketing from the…

We've selected the key guys and they may not have hit a full quarters' worth, but they're on -- either onboard or almost on board. So we don't, at this stage, take increase in dollars on the sales side. We do have one or two more key people we want to hire but that's…

If I can add some more color to that. With any company you have to allocate your resources accordingly. So what we've done is we've evaluated our SG&A structure. And where we believe that there was some areas that we could reduce, we did so and took those funds and then redeployed them into the initiatives that we were referring to. So even though you may say that we haven't spent the money that's probably more accurate presentation of what happened.

And we have shifted resources…

Yes, correct.

Has there been any progress on the sublease of the available space?

Yes, we have a couple of interested parties and we anticipate and believe that we would be able to report on that next quarter.

Couple more things. Given that -- it's hard for me to figure out what the cash -- where we said cash flow was and looking at the minimum liquidates covenants that you have with Sterling. I just wondered if there's any worries about staying in compliance with that given the cash burn on the first quarter?

Currently, we do not anticipate there to be any worries. At March 31st, we had with -- including the cash in bank and the excess availability over the minimum liquidity covenant, we still had $2.7 million in excess of that. And yes, we may have burnt a little bit of cash. But if you think about it, we're currently not in our line of credit. So what's happening, of course, is that our accounts receivable as it turns over, that's the cash that we're using to fund our operations and pay our expenses accordingly.

Okay, that's good to hear. And finally and I'll let you go. And Mr. Grauch, you mentioned in the previous call about moving into new verticals, new markets…

Yes.

What's the status there, any elaboration…

Well, what we first announced in February related to the set top box value added reselling program is one of those verticals we had previously alluded to. There are some others that we're working on that we're not quite ready to discuss publicly but there are several.

Might they be of same size?

Differing size with different sales initiatives and markets and sub-markets that we're going after that we had not before, with both current product lines tailored to a new market type, as well as new systems sales that we're looking to happen.

Thank you very much. That's all I have now, and look forward to hearing from you in August.

Thank you so much.

[Operator Instructions] And there appear to be no further questions at this time. I'll turn the conference back to management for any additional or closing remarks.

Thank you very much. And thank you all for participating in the Blonder Tongue financial reporting teleconference. We look forward to speaking with you at the next teleconference. Have a great day.

Thank you. Ladies and gentlemen, that will conclude today's teleconference. We thank you for your participation. You may disconnect your phone line at this time. And have a great day.