Good day, ladies and gentlemen, and welcome to your Blonder Tongue Laboratories Third Quarter 2020 Earnings Call. [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, and good morning, everyone. Thank you for joining us and participating in the Blonder Tongue Laboratories 2020 Third 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 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 forms 10-Qs for the first and second quarters of 2020 as well as our third quarter 2020 results press release issued this morning. Also note, we anticipate filing our Form 10-Q for the third quarter of 2020 on or before November 16, 2020, which is this coming Monday. All of these filings, press releases and documents include additional 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 financials of the company. Following our presentations, all of us will be available to answer your questions during a Q&A session. During the third quarter of 2020, the company has continued to work through a very difficult market for telecommunications and cable television transmission and distribution equipment, due specifically to effects from the global COVID-19 pandemic. Eric will review and provide details on the numbers shortly. But to summarize, we have had an overall 21% decrease in sales in Q3 of 2020 versus Q3 of 2019. The majority of that decrease was focused on our traditional HFC, or Hybrid Fiber Coax, technology and digital video transmission as well as our DOCSIS data delivery equipment. Our Q3 DOCSIS products were particularly impacted as our customers for DOCSIS equipment are over waited in the hospitality industry, which has been heavily impacted by travel restrictions and overall limited consumer travel brought on by the virus. The DOCSIS segment is starting to come back, but it's only been recently that we've seen that uptick in shipments or any evidence of a positive trend. We also experienced a decrease in our contract manufacturing business for the quarter, this is a small segment where we produce products for 2 specific customers, and we believe the impact will be short-lived and recover back to previous levels in the near term. Despite the overall lower sales levels in HFC and DOCSIS products, we have seen positive initial market reception for our new ClearView video encoder and transcoder product line that have brought in $937,000 in new revenue from the beginning of the year through the end of Q3. And we're now getting very close to our end of 2020 monthly revenue targets for those specific product introductions. We are also about to introduce several more products in that same product line with a focus on trying to bolster late Q4 and early 2021 sales and build upon the initial ClearView product success that began in Q2 and Q3 of this year. Our CPE, or Consumer Premise Equipment, related business was steady during the early part of Q3 and then grew modestly by the end of the quarter. Sales of those products are demonstrating reasonable growth as Q4 develops and as we transition into 2021. On the company's flagship NXG, or Next Generation Gateway, video digital signal processing product line, we're in final processes of completing the company's more than 3-year investment cycle into that product, and we have now begun redirecting a portion of our R&D team into other product areas that will focus on newer and growing technology segments within the cable and telco service operator businesses. Those last few projects on NXG technology includes some video security improvements to qualify the NXG for deployment in some larger markets we're going after as well as increasing the number of conditional access technologies, also known as video scrambling technologies that we are interfacing with and that will be in order to help a large number of smaller operators transition their networks into an all-IP or what's also known as IPTV video delivery. One of the main things we've learned through Q3 this year is just how dynamic and reactive the markets that we serve have been to changes in the overall sentiment associated with the COVID situation. We actually saw a very rapid market recovery through the majority of June and then have that turn very quickly into a very cautious and slow market in July and August as COVID effect began to be seen more widely in suburban and rural areas across the Midwest, South and Southwest at that time. In response to these situations, we've had to take a number of aggressive actions inside the company during Q3 to reduce our operating costs. Those included an extended factory shutdown for over 6 weeks, as well as our short-term furloughs -- as well as short-term furloughs and additional reorganization measures, which will bring longer term financial benefits. Overall, we've now eliminated in excess of $0.25 million per month in manufacturing and operating expenses compared with similar time frame since the end of Q2 2019. We believe these changes to be sustainable into and beyond 2021. On the topic of the health and well-being of our workforce, I do have to unfortunately report that the company saw our very first employee test positive for COVID last week. That person does not work in a factory or production environment, and we currently believe that the possibility of exposure to other employees was either very low or 0. To take the same conservative approach as we have been doing since February, we've asked all staff working in the same general areas to work from home for a period of time to error on the side of caution. We believe our policies on workspace distancing, mandatory mask usage and wide availability of personal protective equipment such as hand sanitizers and masks as well as other policies we've put in place continue to keep our workplace safe. Next, I will hand over the call to Eric Skolnik, our Chief Financial Officer. Eric?

Thank you, Ted. Net sales decreased $1,107,000 or 21% to $4,171,000 for the third quarter of 2020 from $5,278,000 for the comparable period in 2019. Net loss for the 3 months ended September 30, 2020, was a loss of $1,787,000 or a loss of $0.18 per diluted share compared to a loss of $1,334,000 or a loss of $0.14 per diluted share for the comparable period in 2019. The decrease in sales is primarily attributed to a decrease in sales of digital video headend product, DOCSIS data products and contract manufacturing products, offset by an increase in our transcoder products. Sales of digital video headend products were $801,000 and $1,292,000, DOCSIS data products were $235,000 and $884,000, contract manufacturing products were $28,000 and $319,000 and transcoder products were $543,000 and $0 in the third 3 months of 2020 and 2019, respectively. For the 9 months ended September 30, 2020, net sales decreased $2,745,000 or 18.6% to $12,052,000 in 2020 from the $14,797,000 for the comparable period in 2019. Net loss for the 9 months ended September 30, 2020, was $5,061,000 loss or $0.52 loss per diluted share compared to net earnings of $3,100,000 or $0.31 per diluted share for the comparable period in 2019. The decrease in net earnings for the first 9 months of 2020 relative to the first 9 months of 2019 is primarily driven by the $7,175,000 gain recognized in the first quarter of 2019 upon the consummation of the sale and leaseback transaction of our headquarters facility in Old Bridge, New Jersey. The decrease in sales is primarily attributed to a decrease in sales of digital video headend products, contract manufacturing products and analog video headend products, offset by an increase in sales of transcoder product and CPE product. Sales of digital video headend products were $2,603,000 and $5,482,000. Contract manufacturing products were $101,000 and $393,000. Analog video products were $838,000 and $1,249,000. Transcoder products were $937,000 and $33,000 and CPE products were $3,051,000 and $2,691,000 in the first 9 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, loss from operations and net cash used in operating activities in conjunction with liquidity constraints. These factors raise substantial doubt about company's ability to continue as a going concern. As of September 30, 2020, the above factors still exist. Accordingly, there still exist substantial doubt about the company's ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability of the recorded assets, whether classification of the liabilities that might be necessary should the company be unable to continue as a going concern. Regarding the company's current liquidity, as of September 30, 2020, the company had approximately $1,403,000 of availability under the MidCap credit facility. Now I'd like to open up the call to question-and-answer session.

[Operator Instructions] We'll take our first question from [ Gregory Urban ], private investor.

What a quarter? Can you hear me?

Yes. Yes, we can hear you.

Okay. Eric, for the quarter, and it wasn't in the press release, what were -- are the CPE sales?

For the quarter?

For the quarter. I don't have those or the NeXgen or that I'm most interested in.

Sure. Okay. Sure. For the quarter, the CPE sales were $1,379,000. And NeXgen was $89,000.

I'm comparing to quarter 2, and I see CPE is up some and NeXgen is down a bit. The cash flow for the quarter, operating cash flow?

Operating cash flow, well, I don't have the operating cash flow for the quarter, I have the operating cash flow for the 9 months. The operating cash flow for the 9 months was net cash used in operating activities of $2,149,000.

For 9 months, correct?

Yes, sir.

I see. Balance sheet is somewhat scary. What the -- what capacity are we operating now, factory wise?

On an average basis?

Out of the shutdown or the...

Yes. Yes, we are. On an average basis, if you exclude the 6-plus weeks shutdown, we're operating in the factory at about 75% duty cycle.

Currently, despite the...

Currently, and that's the current plan, at least for the next couple of months, unless we see a change.

I did appreciate the elaboration on what you're doing with each segment. As there -- and refresh my memory regarding the listing with the exchange, where do we stand with that?

Sure. So we had submitted a plan, and the plan was accepted. However, we were not in compliance with the first milestone for the end of Q3. And we are in the process of preparing a updated plan to submit to the New York Stock Exchange American at the end of next week.

Will there be some kind of announcement or filing regarding the outcome of that?

As there's dialogue with the NYSC American through the process, if there is anything that changes that affects the business in a material way, we will absolutely file, of course.

Thank you. Okay. Let's see, we have $1.4 million available, all right. The staff or the staff reduction, but the 10% pay cuts, I presume that those are going to continue for a while.

They're going to continue at least at that level until the economic situation changes, and we start seeing an improvement in the company's bottom line.

And with the improved improvements in operating efficiency at the month, the -- the figure given the $250,000 per month reduction is substantial. I assume there's been a cutback, furloughs or maybe layoffs of the factory personnel?

[ Greg ], we've done everything under the sun. Yes, all the aboves and every combination of it, both the short-term and long-term actions, permanent actions, temporary actions, cost reductions, salary reductions, both temporary and permanent and reorganizations. So there's no way a company of our size could have gotten to those level of operating efficiency changes over the last year if we didn't do a lot of extreme measures in a lot of detailed work throughout the entire organization.

Right. Correct me if I'm wrong, but I think, again, comparing with quarter 2, the revenue was up a bit, and -- but the margins were down. Am I reading that wrong?

I think that's correct.

And the reason for the operating margin then to be down would be what?

Product mix predominantly.

Okay. All right. And finally, and I have to apologize my internet and connection. I haven't been able to get to the data as I normally would. But anyway, was there any -- what are your thoughts about what happened with the stock movement over the last quarter? I mean, it just -- it was just unbelievable. The amount of shares. I think we had 90 million shares trade on 1 day and then there have been some subsequent spikes as well. Do you have any idea what's going on there?

It's very hard for us to speculate. It certainly was not anything specific that we believe we did, and it was not specific to any anything that's unannounced or anything like that. There's no specific deals going on in the background. There's no specific real thing the company is doing that we believe would have driven that. The only thing we could imagine someone may have taken a look at our filings related to how much of the company's stock is being purchased by the management of the company and maybe interpreted on that, possibly, but that's only speculation on our part. There's -- we don't have a solid idea of why the stock acted the way it did and that extreme number of trading activity in shares.

Did that cause any concern with the exchanges?

Well, the only concern it had was the exchange wanted to make sure that everything was going on was legitimate and kosher. We -- I believe they stopped trading on the 1 specific day that it was extreme, allowed us some time to issue a quick press release, basically saying what I just said, which is there's nothing we know of that would be causing this. And then they resumed trading following that. That's the only specific interaction we've had with the exchange over those instances.

All right. Okay. Well, it's a bit disturbing for this investor because what to make of it, given the difficulties at the operational level. But just for me, it would tend to keep investor interest at bay, I think, with these wild fluctuations and inability to figure out buy points and sale points and whatnot from an investors' point of view or a trader's point of view. But I realized you really can't do anything about it and appreciate you addressing the issue, but -- a portion of it, that just my take.

[Operator Instructions] We'll take our next question from [ George Gaspar ], private investor.

Yes. Could you all explain a little bit about the application that you're moving forward on in terms of the patents approvals that you've received and have released to the -- in your releases to shareholders over the last, say, several months. And from the standpoint of how are you applying those applications? And how do they stand up from a competitive point of view? And what is it doing for you for creating a broader revenue generating capacity for what you're doing. Can you -- I know that's a pretty -- I'm giving you a pretty heavy slate to comment on, but hopefully, you can give us some reading on this.

Sure. Sure. Yes, yes, I won't be able to address that question down to probably the depth and level you might be looking for, but I can certainly speak to it at a high level. Two nice patents were awarded to us by the patent office. Recently, we -- to kind of fill in the gaps on [ George's ] question, one of those was awarded based on technology that we've got built into our NXG video digital signal processing platform. The other one is in a very specific set of elements of the design and technology in our DOCSIS modem products. Overall, these are -- we see that those were nice patents. I wouldn't say -- I would not characterize them as groundbreaking, but what they do for the company is from a very basic standpoint, they are very good patents for any kind of future defense that we have for specific pieces of market that we are selling those 2 products in, both the DOCSIS modem products and the NXG digital signal processing platform. They absolutely will restrict our competitors from taking advantage of the same technology that we've instituted in our product. So it may -- I'm speculating here, it may lead our competitors to have to make their products in a little bit more expensive way or a little bit less efficient way or a little bit less flexible way in order to bring similar products to market without violating our patents. And like any other good, solid, well based patent, they bring a little bit of credibility both to the company and the product line. So we intend to use them in both defensive and slightly offensive means. The NXG patent, in particular, I'd say, gives us reason to really promote and push some of the advantages that we have in the NXG platform over our competitors, especially in front of some of the big Tier 1 operators where we've made good progress in sales, but not to the level that we'd like to see. And certainly not during the last 8 months of the current market condition situation. We've been heavily impacted in that product line and all the similar product lines with Tier 1 operators because of the downturn. So we'd like to -- not just like to -- we will be -- we are and will be using those -- the marketing of those patents with our customer base to help promote the differentiation and the advanced technology elements of those products to go after expanding. And again, just to round off the question, we think they are very strong patents related to any kind of defensive posture we might have to take in the future.

Okay. And then -- and going on from that, I appreciate your explanation on that. As you look at this fourth quarter here now, you're 1 month plus through the quarter, could you give us an idea, is there a possibility that your revenue stream for this quarter could be better than last year and better than the third quarter?

So anybody who's followed Blonder Tongue Laboratories knows, we're very -- we try to take a more conservative approach on trying to predict anything in the future or give any specific guidance. What I am -- if you read the press release as well as some of the comments we made this morning, I am comfortable saying that so far, the quarter is shaping up better than Q3. So we've seen that slow, steady market improvement in our core product, our HFC and many other product elements have been slowly increasing in August and through September, and October was a continuation of that slow, steady improvement. So I can't really speak for November and December because they haven't happened yet. We're hopeful, but unfortunately, the other thing I will point out is it has been uncanny how quickly -- and I've said this earlier in the conversation, and we put it in the press release as well, it's uncanny how quickly our market has responded both up and down based on the sentiment. So if we -- what has got me a little bit hesitant in answering your question more broadly and more openly is we've seen at least 3 times since February, how quickly our market has responded both negatively and positively to a change in general sentiment related to the COVID situation, and we're seeing a very bad increase in the COVID situation out there. Now we have not seen our market respond in a big negative way to the most recent uptick. But that doesn't mean that next week, we won't wake up and see. There's just -- the whole situation has changed the dynamics and the resiliency of our market in a way -- we couldn't have predicted back in January or February. So I'm cautiously optimistic about the quarter. I don't want to put too much weight into that because, again, the current environment has been so unpredictable that we're using the levers that we have to make sure we hold on to our capital and our liquidity. And we've been holding up very well the last 3 or 4, 5 months through very, very difficult times using the levers that we have, which are a combination of sales possibilities and aggressiveness combined with operational cost managing.

Okay. Okay. Good explanation. Now going forward view, since so many organization companies are telling their employees that they can work -- continue to work from home for -- even Microsoft telling their people most of the next year. Can you capitalize on the intricacies that are needed for people to work remotely and what you offer to the market, do you see yourself having an opportunity to expand that area of activity to capture more of this at home business environment?

I think the way to characterize our view on that is we did a good job of -- this doesn't quite answer your question, but I'll start with this part of it, which is I think we did a good job in the company of moving every single job in the company that was capable of being done efficiently in a work-from-home environment, we transitioned those people very rapidly into work-from-home environments. We've since -- as we've understood the virus better and the transmission, we've developed a better understanding and comfort level with the CDC and other government guidelines, we've pulled some of those positions back into working in the office because we saw they work a little bit more efficiently. There's a little bit more -- I'll just leave it at that, efficiency gains without creating an undue risk for the safety of our staff, and that has worked very, very well since the March that positioning has worked very well. A lot of our sales team, in fact, have always been based out from a combination of home offices and regional offices, in the Midwest and the South and the West. So those positions haven't changed. And really, the general philosophy of the company is and should be moving more towards making sure our sales team is in close proximity to our customer base. Not -- it doesn't make a lot of sense to have a lot of salespeople at our headquarters, where the majority of what happens here is a combination of finance, administration, engineering, and factory production, right? The sales team needs to be out where the customers are. So that hasn't changed. And in fact, that's -- that would be the only element to more directly answer your question that we have been planning and have made small changes to position people in the sales organization closer to customers. Now at the same time, a lot of our customers are still working from home, which is an interesting dynamic. We end up having a lot of sales meetings as either Zoom based or Microsoft Teams or whatever technology people want to use or we end up meeting a lot at like coffee shops, the parking lot or the lobby of the office building or whatnot. I mean, just as 1 prime example, we learned just over the last few days that one of our customers and target customers in the industry, a big Tier 1, they're not sending any of their people back into the office until June of next year, but they've made a specific decision that June looks like the month that they feel comfortable transitioning back into the office. So we're seeing others have already made that transition. So for example, Altice is a customer of ours up in the New York metropolitan area, a very big operator. And they've been transitioning and are ramped up a lot more now than they were a few months ago. So every operator and every customer is kind of taking their own decision. And did I answer the question?

Yes. That was very good explanation. And just -- I'm going to just sum up by saying that this is a tough environment, obviously, and it isn't going to necessarily change overnight going forward either. But the beauty of -- and you've had some questions asked of you in your explanations about the stock activity going up and down on huge volumes and so on. But what's most exciting about the future here for the company is that you have some dynamics going here now in terms of the increasing activity in technology that you're trying to apply and expand your product line. And when you look at the size of your company, and the share count outstanding. And the leverage opportunities here are very substantial. Hopefully, that's what I believe. That's what a lot of shareholders are staying with Blonder Tongue is that they see it as a nucleus or something that can do a lot better. And hopefully, you can all -- you can pull it off with everything that you've been trying to do and go forward on. Take care, god bless you.

Thank you so much.

Thank you, [ George ]. And just to respond to that last comment, why is the things you just mentioned were exactly some of the reasons that really attracted me to come join the company coming up on 2 years ago, and I still believe in those fundamentals in that -- those potential opportunities.

[Operator Instructions] We'll return to [ Gregory Urban ] for another question.

Sorry, guys. We're going long.

That's okay. We're here for you, [ Greg ]. No problem.

Thanks. Well, I'd like to be there for you as well. Regarding the PPE loan, what -- where do we stand with that?

It's still -- the application for forgiveness is the portal that we have with our lender, it's still not open yet. So we have not applied for forgiveness as of yet, but it doesn't matter because any potential payments wouldn't be due for any of the unforgivable piece until way into the future sometime at the end of '21. So we're still okay.

That $1.769 million is on long term, right?

That is correct. Yes.

That's right.

All right. Thanks for that. And finally, and I think I've asked this last time, have we lost any accounts?

Lost any accounts?

Yes. Anyone closed up shop or just going elsewhere with their business?

Nothing that I would consider material. We had 1 relatively small CPE customer. And by the way, we have over 65 operators using some of our CPE products now. We had one of them of note split their volume between us and another supplier that concerned us, and we're trying to work to become their sole supplier again. But that was a small hit that made us look at the competitiveness of some aspects of that product. Other than that, I'd say no. The bigger impact has been people who were decent size and ramping up in their purchasing of our NXG product and some other encoder products and some other headend and video distribution gear had simply stopped purchasing anything during the pandemic situation and a lot of those -- and I alluded to that earlier, but I'll say it more specifically. Just everybody who feels like they can run their business by -- and still delay purchases till they kind of see what's going to happen in the market, we're going to see they get through the process, see when there's going to be a vaccine or whatnot. Anybody who can run their business by lowering their CapEx, they're doing it. And that's -- I mean, quite frankly, the 21% that we're showing in quarter -- year-on-year quarter reduction in sales, I think, is strangely not a bad number given how bad the situation is out there. I think we've only reduced 21% because we had growth in some of the newer product lines. It would have been worse otherwise. The flip side of that situation is, and I can only say this with some level of confidence because of my long-term background in this industry, this industry does tend to have fairly big and wide up cycles and down cycles and swings in capital investment cycles. When things go down, they do tend to yield pent-up demand, at least in my experience, that's been the case. And so one of the things we're preparing for, and I believe I alluded to it in the press release, was, we know there's going to be recovery. We know that there's going to be vaccines for the virus. There was a great press release earlier this week on Monday from one of the contenders for one of the early vaccine introductions that talked about 90% effectiveness. That's -- things like that, when those actually start hitting in the market, it's going to yield -- we believe it's going to yield some market improvement. We don't know how big or how quickly. But we are confident there will be a market recovery, and we also will believe that the largest of our customers who've been withholding capital expenditures will have pent-up demand. So again, those are our beliefs. It doesn't mean that they're true. Those are our beliefs. And we're running the business in such a way that we want to be positioned from a market perspective with a product availability perspective when new technology introduction to capture any potential big upward swing in the market that we believe and hope will come after the COVID concerns start to go away, and we've got either a vaccine or just a general improvement on the overall infection situation across the country and in Canada.

All right. Well, thanks for taking the call and good luck. And I wish you all well into the future. I agree with [ George ], the leverage is there. It's just a matter of surviving this very difficult period.

Yes. [ Greg ], 1 more point on your first question that you had just asked to Eric. Not that we can sit here and predict specifically, what will happen in the forgiveness situation for our PPP loan, but I can tell you that we went to great lengths in the company, both in the finance office and the management team and with our legal team to make sure that the way we dealt with that PPP loan was to the letter of everything related to what the government had let us know where the forgiveness criteria. So to the extent that we can have optimism in the sort of posture of that loans to be forgivable, we are optimistic to the extent that as long as the rules don't change or somebody doesn't move the cheese, to use a different metaphor, we should be sitting pretty good on the forgiveness status of that once they allow for forgiveness applications to come in and get processed.

[Operator Instructions] There appear to be no further questions at this time.

Okay. So I guess this ends the Q3 2020 earnings call for Blonder Tongue Laboratories. Thank you all for participating and for the questions, and have a good day and rest of the week. Thank you.