Good day, ladies and gentlemen, and welcome to your Blonder Tongue Laboratories Second Quarter 2020 Earnings 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, Ted Grauch. Sir, the floor is yours.

Thank you. Hi. Good morning, everyone and thank you for joining us and participating in the Blonder Tongue Laboratories 2020 second quarter earnings call. I'm Ted Grauch, President and Chief Executive Officer of the company. As we give our remarks this morning, we will be discussing certain subjects that will contain forward-looking statements including management's view of our prospects, and evolving trends in the market. As you know, the future is all but impossible to predict. And so I caution you that actual results may differ materially from those that may be projected in our comments. We would ask you to refer to our prior SEC filings including our Form 10-K for 2019, and our filed Form 10-Q for the first quarter of 2020, and our second quarter 2020 results press release issued this morning, and our Form 10-Q for the second quarter of 2020, which we anticipate to file on or before August 14, 2020. All of which include additional detailed information concerning factors that could cause actual results to differ from the information we will be discussing this morning. With me today are Steve Shea, Chairman of the Board of Blonder Tongue Laboratories; and Eric Skolnik, our Chief Financial Officer and Senior Vice President. Eric's remarks will follow mine and will focus on the financial results. Following our presentations, all three of us will be available to answer any questions that you may have during the Q&A session. For the first half of 2020, the company has been working through a significant disruption in the markets that we serve caused by the global COVID-19 pandemic. This disruption began to impact our business during the last week of February this year. Eric Skolnik will review and provide details on the numbers. But overall, our sales in digital video products were significantly lower compared to the same period last year. And a large portion of this decrease is coming from several market segments that we serve, namely, the Cable Telecommunications and Municipal Fiber or Service Operator segment, as well as the MDU and Hospitality Technology segment. Both have been actively locking down their capital spending and delaying infrastructure and technology upgrades. The swiftness of these changes in our customer's buying patterns and the overall market slowdown in response to the onset of the global crisis were incredibly fast at the end of Q1, and have continued to impact our business since that time. During the first half of 2020 and compared against the same period of 2019, our sales in endpoint devices otherwise known as Consumer Premise Equipment, CPE, as well as DOCSIS related data delivery and modem products did increase modestly. This increase was associated with two main factors. First, is the trend that we've seen particularly in the second quarter of this year, and service operators focusing their operations on supporting growth in the residential use of their services. This has yield upgrades in CPE as well as some active technology, air upgrades in that area. This growth appears directly in response to COVID creating a higher demand on residential services, but in very narrow and targeted ways. The other factor is simply coming from the fact that our CPE programs were initially launched in Q1 of 2019 and thus began with low levels of initial sales by comparison with the first half of 2020. As I've publicly discussed several times since moving into the CEO role in January 1 of this year, the company has been focused heavily on completing several major initiatives critical to managing through the current crisis. First, we recently completed and we'll be concluding a number of key features and functions associated with our NXG or Next Generation Gateway, IP digital video processing platform. And we're completing a few remaining product derivatives in our groundbreaking new video clear view encoding and transcoding platforms. Second, we've been focusing on reorganizing our U.S. based manufacturing organization, further streamlining our operations in research and development segments and implementing updated sales and marketing strategies for the company. As previously discussed last quarter, our focus on operational efficiencies has yielded significant monthly savings in our costs of running the business. A portion of these savings are exceptional and expected to be short-term associated with the current COVID-19 situation. But the larger portion have been structured and are intended to lower our cost of doing business for the long-term and to ensure that we are lowering the revenue levels associated with a company breakeven point. These efforts are continuing and are being further expanded in August and September. The company has a number of additional operating expense areas we're working on; that we are confident will yield further improvements. On the topic of the health and wellbeing of our workforce, I'm happy to report that the company has still not had a single employee report a positive COVID case. And we believe that this is at least in part due to the seriousness our operations team took with the situation back in February and proactively began enhanced cleaning and disinfecting practices in our facilities, instituting changes in work location, spacing, personal distancing, availability of hand cleaning stations within our factoring headquarters as well as educational processes and information shared with our entire staff. As mentioned in our last call, we had previously transitioned many roles capable of being performed as work-from-home to be done from home, companywide. We have now more recently begun transitioning a portion of those roles back to our headquarters facilities, when we felt it was both safe to do so as well as with a mind to increase the working efficiencies of those specific roles. Only those roles with a need for closer interaction with other staff members on an hourly and daily basis have begun any partial or full transition back to our offices. In conclusion, although we still cannot forecast any specific timeframes for a return to our markets, back to an expected or normal level, the company has prepared for a wide range of eventualities and timeframes for market recovery, including the possibility that we have an extended period of reduced economic activity in our markets through the end of the year or even into 2021. Overall the company is taking a very conservative situation and we will watch and report more on our quarterly earnings as things develop. Next, I will hand over the call to Eric Skolnik, our Chief Financial Officer. Eric?

Thank you, Ted. Net sales decreased $1,606,000 or 29.5% to $3,831,000 for the second quarter of 2020 from $5,437,000 for the comparable period in 2019. Net loss for the three months ended June 30, 2020, was a loss of $1,194,000 or $0.12 loss per diluted share compared to $891,000 or a loss of $0.09 per diluted share for the comparable period in 2019. Decrease in sales was primarily attributable to a decrease in sales of digital video headend products. Sales of Digital Video headend products were $745,000 and $2,244,000 in the second three months of 2020 and 2019 respectively. For the six months ended June 30, 2020, net sales decreased $1,638,000 or 17.2% to $7,881,000 from the $9,519,000 for the comparable period in 2019. Net loss for the six months ended June 30, 2020, was a loss of $3,274,000 or a loss of $0.34 per diluted share, compared to net earnings of $4,434,000 excuse me, or $0.44 per diluted share for the comparable period in 2019. The decrease in net earnings for the first six months of 2020 relative to the first six months of 2019 is primarily driven by the $7,175,000 gain recognized in the first quarter of 2019 from the sale and leaseback transaction of our headquarters facility in Old Bridge, New Jersey. The decrease in sales was primarily attributable to a decrease in sales of digital video headend products, offset by an increase in sales of DOCSIS data products, and CPE products. Sales of digital video headend products were $1,802,000 and $4,190,000; DOCSIS data products were $1,572,000 and $1,105,000; and CPE products were $1,672,000 and $1,193,000 in the first six months of 2020 and 2019 respectively. As disclosed in the company's most recent Annual Report on Form 10-K, the company experienced a decline in sales, a reduction in working capital, a loss from operations, and net cash used in operating activities in conjunction with liquidity constraints. These factors raised substantial doubt about the company's ability to continue as a common concern. As of June 30, 2020, the above factors still exist. Accordingly, there still exists substantial doubt about the company's ability to continue as a growing concern. The financial statements which will be filed next week, do not include any adjustments relating to the recoverability of the recorded assets where the classification of liabilities that might be necessary should the company be unable to continue as a growing concern. Finally, regarding the company's current liquidity as of June 30, of 2020, the company had approximately $1,798,000 of availability under our Midcap credit facility. Now I'd like to open up the call to the question-and-answer session.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions]. We'll take our first question from Gregory Irvin, Private Investor. Please go ahead.

Eric, first, would you repeat the liquidity available from Midcap?

Sure, at June 30, there was $1,798,000.

Available now?

As of June 30.

As of June 30?

Yes.

All right. What's the status or the draw on the subordinated loan?

We had the subordinated loan, was a committed of $1 million, $900,000 has been drawn on it.

And that means that the tranche was the C hasn't been drawn on at all?

Correct.

Correct.

I think that's pretty much the same as the prior quarter.

Correct.

That's right.

And the current working cap?

The current working capital, is that what you're asking?

Yes, yes.

One second, let me check that one. Working capital at June 30 was approximately $3,518,000.

Okay, thanks. And finally with regard to the balance sheet, Ted, how do we stand on the $1.7 plus million the PPP that carries at one. Have you determined you have how much of that might be forgivable?

No, we have not. And they're still in flux with regards to the application process with our bank. So that's not going to be probably until Q3 or Q4 before we would be able to provide that information.

So the whole thing is showing on the liability side?

Correct. And we're staying there until it actually is approved for forgiveness.

Okay. I think that's all I have on the balance sheet side. Cash flow wise, the operating cash flow, do you have that?

Sure. The cash flow from operations was approximately for the six months ended June was $2,029,000 cash used in operating activities.

Till end of June, all right. Now to the -- what I regard the more positive side on the income and it's obvious you really improved operating efficiencies, I mean the gross margins have gone from something like and I'm comparing that Q1 to Q2 gone from something like 13% to around 32% which is a move back towards normal. And also given the fact that I looked at the total revenue for the quarter again Q2 and Q1 for this quarter was down 5%. But the overall -- the net loss was reduced 47%. Again, both of those tell me that operating efficiencies have really improved so that's obviously to your credit to all of you.

Thanks so much, Greg.

The -- I see the increase in the CPE and go -- particularly the CPE seems to have really taken off as you said from low level, is that sustainable?

So it's specifically why I made the comment Greg on to not get overly excited about that comparison because it is a comparison against a period of time, when we're just launching the product line, right. So it's one of these sort of numerical factors you kind of have to disregard a little bit in the same way you kind of disregarded divide it by zero, kind of number, right. You can start from somewhere, right, and you're ramping it up and you're comparing it against a very, very early second time, we just launched the product. So that -- that's kind of what I was getting at there. So I kind of separate the numbers that you're seeing from your question. Your question is, is that sustainable? We currently believe it is sustainable. We have not written our notes, but I'll share verbally on this public call. We did have a decent June. Well, I take that back. I did mention it briefly in the press release in the quotation section. We did have a decent June and it was very -- it provided us some optimism in the middle of what is otherwise a very, very difficult situation for all companies out there -- most companies out there and us as well. So that that optimism did was unfortunately short-lived. We did see sort of a leveling off and actually a decrease in weekly sales there at the very end of June and it did extend into July. So we're -- we don't want to get overly optimistic about any element of the revenue streams. The CPE and the DOCSIS piece seem to be sustaining themselves better through the crisis than the others. But separate from the crisis. So if you see such a crisis situation aside, we're having a number of operators and a number of the customers embrace our CPE product line. We do believe that the economics on that product line are sustainable. We know we need to get the margins up and we've been actively working on that for several months now. And so we do have optimism that at least that product line is sustainable and will grow in the future but there's just wait so many -- there's so many factors going on. It's a complex market because of the crisis. And there's a lot of things that you just can't predict now that you could have otherwise more reliably predicted in the past.

The -- you spoke of the margins and I think on the previous call, you mentioned that the margins on both the CPE and the DOCSYS compared to the headend products are lower. But despite that, as I stated that your gross margins are up, so something has improved there.

Yes.

And you're selling more in other words of the lower margin products, but you're -- despite that the gross margins are up?

Yes that's absolutely right.

The next-gen, do you have, wasn't posted in the press release the numbers are for the quarter of the next-gen products?

Sure. I'll give you that. Just give me one second. Yes.

Eric will answer that.

Okay. The next-gen for the quarter was approximately $285,000.

That's a dip from the previous quarter. The final pieces to that, are the sales of that being held up in anyway because you have yet to roll-out a full line of plugins or --?

Yes, there are -- there is a few factors related to that, that I'll touch on based on your question. First and more primary is, and I touched on this in my comments, that product in particular is really focused on fairly significant sized service operators. And we've won a couple of big companies with that product. We've won a number of mid-sized service operators as well. And we're working on sales for pretty much everybody you know of in terms of brand names in the service operator business in North America. So we're making significant progress in the process of getting positioned for future sales. And so that has always led us to be optimistic about the product line in general. The COVID situation absolutely has had significant impact on the bigger operators locking down any part of their infrastructure and networking, that that is not directly related to making it more cost efficient for delivering residential services. That's the only bright shining star in as a sub segment within the markets that we serve. Everything else is there been as tight as they possibly can because they're seeing the same uncertainty in their markets as we see. And it's all flowing through from the ultimate demand down to us as an equipment supplier. So that that's the biggest factor that has been slowing down the sales of that particular product line, in my opinion. There is as you built into your question, absolutely some pent-up demand for a modest quantity of units waiting on some features and functions to get finished. We even have some orders on the books for things that are waiting, pending features and functions to get finished as well. So we know that there's a wider range of sales that we will achieve once those new -- those new features and functions are released. Some of them were already released over the last four, five, six weeks. Some are coming up in the next four to eight weeks. But we do believe in the next quarter that all the major R&D functions related to next-gen or next-gen gateway will be completed and available for sale in the market. So that's creating some internal optimism. But I also don't want to exclude as I pointed out, I believe in my comments earlier, we're getting a lot of great interest in our Clearview encoder and transcoder product line. Fundamentally, the breakthrough elements of that product are more around the combination of video -- a high level of video quality, a high level of reliability, sort of the reputation of Blonder Tongue equipment for 40, 50 years has been you put them in a closet, you let them run and they just sit there and just chunk along without a lot of involvement for years and years and years and years and years. So it's -- that's -- we've extended that that reputation of reliability in this new Clearview product lines. The differentiation is high quality video, super high reliability and then the groundbreaking pieces we're doing that at a very, very attractive price, a very high value, I don't want to say cheap. But compared to our major competitors in that space, we're really -- we're really putting some pressure on them. So that has led to an awful lot of interest in that. And those products will also all be completed and shipping all the derivatives of that product line before -- certainly before the end of the year and more likely before the early or middle part of Q4. So we know that even if the COVID market situation really continues in depressing the availability of the market, we do know that adding those products to the product lineup are going to help. I don't want to sit here on a public forum and try to estimate, how much it's going to help but we know it will absolutely help our revenues in some levels.

All right, thanks. The Clearview being sold as -- or will be sold standalone as well as part of the next-gen?

Yes, in fact, I'd say the large majority that 80%, 90% will be sold standalone.

All right, okay. Well, that's good to hear and thanks for your elaborations.

Sure. We always appreciate your questions, Greg.

Well, as I asked on last call regarding delays versus cancellations, hopefully it's more delays.

Of the things we've had delayed or canceled, both of them very large majority have been delays. I can't think of anything overly significant that was cancelled off the top of my head.

Okay, well, that's all I have. And I'm glad to hear that no one is -- has come down with COVID that's -- that again is to your credit and you're apparently comfortable enough to bring those, some of those folks back in-house.

Yes, yes, exactly.

Okay. Well, good luck. Look forward to hearing in November.

Thanks so much.

We really appreciate your support, Greg. Thank you very much.

[Operator Instructions]. And sorry, we don't have, no further questions.

Okay. I guess with that, we conclude the second quarter. We're completing the Blonder Tongue Laboratories 2020 second quarter earnings call. Thank you all very much for your support. I hope everybody stays safe and look forward to talking with our investors, analysts, and interested parties in next quarter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. And we thank you for your participation. You may disconnect your lines at this time and have a great day.