Good morning, ladies and gentlemen, and welcome to Blonder Tongue Laboratories First Quarter 2021 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Ted Grauch, President and CEO. Sir, the floor is yours.

Thank you. Hi, good morning, everyone, and thank you for joining us and participating in our 2021 first quarter earnings call. I'm Ted Grauch, Chief Executive Officer and President 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 2020 and our filed 10-Q forms for the first, second, third and fourth quarters of 2020. For additional details, information concerning factors that could cause actual results to differ from the information discussed this morning. With me today are Steven 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 cover our detailed financial results. All of us will be available to answer questions that you may have during a Q&A session immediately following our prepared remarks. The company saw product demand begin to recover during the very end of Q1 after facing the last 12 months in a very difficult pandemic-affected marketplace. Overall, the company's sales were 19.7% lower in Q1 2020 versus Q1 2021, and yet, we were still successful in generating positive cash flow from operations for the quarter and increasing our gross margin and associated operating margins compared with 2020. This was only possible due to our team's extensive work during all of 2020 and making the changes necessary to operate the company more efficiently. We also began a process in Q1 of the technology and sales focus on the growing IP, IP television and broadband-oriented market segments with all of our cable and telecommunications customers and through our distribution channels. Our long-term operating expense reduction programs were finally completed in Q1. Those efforts, combined with the sales focus I just mentioned, yielded an improved product mix in our sales that more than offset the lower revenue level year-on-year. Higher operating efficiency, combined with product mix yielded gross margin of 42.6% for the quarter, up from 13.7% for the same period last year. A specifically encouraging element during Q1 was our increase in our NXG platform product sales and opportunities. Additionally, our ClearView video Transcoder product line that was introduced during 2020 continue to gain sales with additional customers, and we've had additional ClearView models gain service operator qualification during the quarter. Also during the first quarter, the company benefited from supply chain commitment and investment decisions that we made during Q4 of 2020 and that have enabled us to run our manufacturing without interruption year-to-date. This is in contrast with the recent impacts that many electronics companies have had for semiconductor and other parts shortages that we all read about in the news. Blonder Tongue products remain readily available to our customers at our normal lead times, and we have achieved some customer wins in late Q1 with our favorable product availability in the market being a contributing factor. As the company heads towards the middle of the year, our near-term activities are to continue the plans that I have mentioned over the last year on these earnings calls and in our filings and press releases. Specifically, to continue to expand our direct relationships with telco, cable and fiber optics-based service operators and to focus our products and sales efforts with a goal towards achieving the improved product mixes and to run the company in a way that is as financially efficient as possible. As I also mentioned in last quarter's earnings calls, we believe that a major indicator of our progress in the company's structure and health is indicated by the reduction in cash used in operating activities. In Q1, while managing the company with a year-on-year reduction in sales of 19.7%, we had net cash from operating activities of $234,000 compared to net cash used in operating activities of $842,000 for the first quarter of 2020, a significant change. At this point, I would like to pass the floor to Eric Skolnik, our Chief Financial Officer, to cover the detailed financial results for the first quarter of 2021. Eric?

Thank you, Ted. Blonder Tongue Laboratories Inc. net sales decreased $799,000 or 19.7% to $3.251 million for the first quarter of 2021 from $4.050 million for the comparable period in 2020. Net loss for the 3 months ended March 31, 2021, was a loss of $414,000 or a loss of $0.04 per share compared to a loss of $2.08 million or a loss of $0.21 per share for the comparable period in 2020. Net cash provided by operating activities was $234,000 for the first quarter of 2021 compared to net cash used in operating activities of $842,000 for the comparable period of 2020. The decrease in sales is primarily attributed to a decrease in sales of DOCSIS data products, digital video headend products and hybrid fiber-coax, or HFC distribution products, offset by an increase in sales of video transcoder products and NXG internet protocol, IP, video, Digital Signal Processing products. Sales of DOCSIS' data products were $28,000 and $871,000, digital video headend products were $543,000 and $1.57 million; HFC distribution products were $427,000 and $688,000. Transcoder products were $736,000 and $115,000 and NXG products were $421,000 and $196,000 in the first 3 months of 2021 and 2020, respectively. As previously disclosed in our 8-K filed on April 7, 2021, on April 26, 2021, the company received a payroll tax credit of $577,000 through the employee retention tax credit, or ERTC, for the first quarter of 2021. The amount was recorded as other income and included in prepaid and other current assets as of March 31, 2021. The company's primary sources of liquidity have been its existing cash balances, cash generated from operations and amounts available under the MidCap facility. At March 31, 2021, the company had $537,000 available under the MidCap facility. 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 quick-to-view constraints. These factors raise substantial doubt about the company's ability to continue as a going concern. The above factors still exist. Accordingly, there still exists substantial doubt about the company's ability to continue as a going concern. The financial payments do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that might be necessary should the company be unable to continue as a going concern. Now I'd like to open up the call to the question-and-answer session.

[Operator Instructions] Our first question today is coming from Drew Chiarelli, a private investor.

I have a question for you, under the -- the $537,000 you have currently available, how much of total been used out of that so far?

No. That represents the unused portion of the $537,000 at March 31.

Okay. How much cash is currently on the balance sheet?

As -- you mean like at March 31, we report $56,000 of cash on the balance sheet.

And then with the NYSE, sending the noncompliance, what is the game plan there to get the shareholder equity up?

Ted, do you want to handle that?

Sure. We have already filed a revised recovery plan with the NYSE American. It brings into account a reasonable plan that we believe is achievable if the company decides to execute on all those portions of the plan between now and the end of the year. The measurement is to be made by the NYSE American approximately December 10, and then they'll make a decision whether we're in compliance or not. And they have a choice to then move towards the potential delisting at that point. But we have a plan. The plan includes elements that we've already previously talked about, such as our -- the forgiveness of our PPP loan from last year, that is about $1.76 million of the deficiency and some other elements.

Got it. Lastly, the debt that the company has, what is -- can you go in the high level details of the current debt the company has?

Sure. At March 31, we had approximately $1.280 million worth of subordinated convertible debt predominantly with related parties. At March 31, we had a balance under our line of credit of about $1.238 million. We have $1.769 million of the PPP loan that Ted mentioned that we expect to have forgiveness this year. And then there's about, I think, about $50,000 worth of other small [ ensuing ] stuff.

And what is the $1.280 million in convertible debt, what does that convert at?

It's at different conversion prices. There is a -- some of it is at $0.55 per share. Some of it is at $59.3 per share and some of it's at $1 per share. It's in -- it was in our 10-K, all the details.

Got you. Awesome. Last question. I've e-mailed you guys over the last week or 2, every e-mail has been kicked back at blondertongue.com. Is there a separate e-mail?

No, that should be it. So I guess we'll have to investigate what the issue is.

Information got sent back to T. Grauch and E. Skolnik all that's sent back from @blondertongue.com.

What's the e-mail that you're sending from that could be just a spam blocker problem?

Drew@venturesidecapital.com.

Sure. Drew@venturesidecapital.com. We will -- we'll take those.

Our next question today is coming from Gregory Irvin, a private investor.

I highlighted the things you mentioned, and I've just over them briefly one at a time. The cash flow from operations is a real turnaround. Primary question is, do you see that it being sustainable over the course of the year?

So I really appreciate using that word turnaround. I like it a lot. Thank you. The question of whether it's sustainable really has so many factors related to will those sales sustain, will our product mix be able to be sustainable. We're optimistic, but there's a lot of factors out there in the market. And right now, we feel pretty good. But we'll take it one quarter at a time and see how things are developing. The things -- the elements that are sustainable with incredibly high level of confidence are the operating expense changes we've made to the company. The updated sets of technology that we completed last year that are looking like they've got better traction in the market as the economy starts to recover from the effects of pandemic. And the wider range of customers that we're dealing with, both in the distribution and service operating markets, all those things look pretty positive. So all right.

And #2 is the gross margins, incredible reversal there again, same question, do you see them staying in the 35% to 40-plus percent range?

Yes. We try not to do too much forecasting in this company just to stay on the conservative side. The product mix that we're putting forward in the coming quarters should be the same or very similar to what we were able to do in Q1, whether those margins would be sustainable, I would leave it a little bit open-ended and see how it goes. You can imagine we're going to do everything in our power to make them be at that level or better.

Since the NeXgen and the -- I take it that ClearView were the best sellers this quarter that most -- that we could attribute that largely that margin increase to those lines, correct?

Those were 2 really big contributing factors, among other things, yes.

One that I didn't notice, I'm sure it will be in the Q is the DOCSIS. It looks like it fell off a cliff. What happened there?

On that one, the really big thing is, on that one, it really is a comparison on quarter -- one quarter last year, which was pre-pandemic. We started to see the effects of the pandemic on our sales and product mix right at the end of the quarter last year and literally like the last week of the quarter last year, right? So you can kind of look at the first quarter of 2020 as being the last or a normal quarter for the last year. And there, we had very good and very strong sales of DOCSIS products that go into a lot of hospitality setting, a lot of small and medium businesses, a lot of B2B kind of locations. You can imagine that there's been a huge impact on those portions of the products in our product portfolio over the last year. And so -- and Q1 this year is no exception to that. So we have not seen any kind of major recovery in the hospitality sector as it relates to our products yet. We've seen -- as you've seen, a sales increase in some other sectors that are very encouraging, but the hospitality portion of our sales, in particular, the DOCSIS products that's modems, it's transmission equipment called CMTS and some other things. Those are not recovered from the pandemic. And that's why that's such a stark difference.

Okay. What about the -- what is it, the CPE equipment set top, how is that doing?

So the CPE -- I think the best way to characterize that without going too much into forward-looking statements is -- we're still playing a role in that, and we're going to watch the market over the coming quarters to see which areas that we've been working in are going to lead to either growth in the top line or growth in the margin level, and we're kind of adapting as we see that. They've been good so far this year. But we kind of see that market is changing over the coming months. There's still a lot of opportunities there, but we may be changing some of the things we're doing in terms of product mix and services, services and software versus hardware, et cetera.

I -- correct me if I'm wrong, that was sort of a -- this is my characterization, an interim income source over the last year or so that maybe its future is not so bright as far as the product mix goes.

From the very beginning, we wanted to jump into that product. It's adding that product mix, knowing full well that there was going to be a short-term period of time that we have a lower margin mix associated with it because the product line was the tool that we were able to use to establish compelling and genuine supply relationships with a large number of service operators that would not -- have traditionally not purchased from us or have traditionally purchased our products through distribution channels and not had direct relationships with us. So one interesting data point is over the last 1.5 years to 2 years, we've established roughly 65, 70 new relationships directly with small- and medium-sized service operators around the country that we didn't have before. We had that CPE product line. So that's -- if you measure that as one element of the success of the strategy, that has done very, very well.

Intangible result of being a door opener for you.

Yes, exactly, exactly, exactly. And you can imagine, we're already in the process of trying to turn those new relationships into sales of a broader range of our product lines, including the NXGs, the ClearViews and encoders and many other products.

Another positive was that you mentioned there's no supply issues in contrast, following other companies, but that is somewhat of the factors. So that's good to hear as well.

Thanks very much on that. Yes. We -- several of the management in the company, including myself, have backgrounds working extensively in Asia with Asian suppliers and other positions I've held in different companies over the last 20 years, including the semiconductor industry, where I used to work at Intel and ST Microelectronics. And our contacts, they really were -- in that industry really were key to us understanding that there was a potential disruption supply pretty early, and we sort of doubled down on commitments and stocking up on raw materials ahead -- ahead of when it actually started to be a problem. So we're a little lucky there. I think we made the right decisions. Of course, hindsight's always 2020. So that was a [ big ] decision.

Question regarding the employee retention facility that $577,000 income, I take it if the company hadn't received that, that the overall net loss would have been closer to $1 million. Am I correct in assuming that?

Well, yes. You want to talk about?

No, no. Well, I'm glad that's available. And looking at the -- I initially mentioned, I missed that on the 8-K because I was more concerned about the delisting risk. But I see that it goes back to comparisons in similar quarters to 2019. Is that -- you need a 20% loss and growth in comparing those quarters, is that all or nothing help me here. Is that...

Yes. The measurement is, you take -- you look at each quarter, and you compare it back to the comparable quarter in 2019. And if you have sustained a loss in revenue of 20% or more, you qualify for the ERTC program.

Might the strategy be to stay slightly under that in order to take advantage of that program. I mean you want your sales and whatnot to go up, but you don't want to lose it. I don't know. It looks like...

Well, I mean, what we're fundamentally focused on, Greg, as a company, is we want to grow the top line and bottom line. And if the market shows us that it's growing, and it's good, high margin, important revenue, I would be very happy to -- to not qualify for the program in exchange for us growing our business. We do not want to be a company that looks at that income stream as important to our ongoing success. It cannot be -- it is not now, and it's not going to be. While the situation is where it is right now, which is the market is showing some signs of recovery. It looks pretty good, but we're not over that threshold. Then -- and as long as we're fully in compliance with the qualifications, we're going to absolutely take advantage of it.

That's what I would expect. And let's say -- and going back to the delisting, looking at that, the criteria for the various -- what is the line stages of that. The 6 million requirement of shareholder equity and then 4 million and then 2 million. And right now, we're -- it looks like it was about 1.5 million of shareholder equity. And looking to satisfy all those, it looks like it's going to be a big step-up, particularly to get to 6 million by the end of the year. I assume you're confident or fairly confident that you can get there and get the exchanges off your back? Or get it off shareholders back as it's a major concern for me this delisting. And as I understand it, you could get a call at any time and the listing would be a problem.

Well, in terms of we could get a call at any time, we're -- that measurement of the company will not happen until roughly December 10 -- December 11. So we're not in a situation where we could just get a call at any time. And as we answered to Drew's question just a few minutes ago, we have submitted a plan that will get us fully in compliant for that measurement has to happen in the middle of the center. So now the question is executing on that plan and making the decisions that we need to make to get the company back over there. So there is a path. It's been laid out in front of the NYSE and submitted as a formal plan. And we're working towards that plan.

Yes, excuse me, that must have been my misreading or misinterpretation of -- the total number of shares outstanding?

At the -- as of May 6, the number of shares outstanding were 11,960,505 million.

Okay. Okay. And if you could give a little color or elaboration on your service operator base, how you're doing with the big 2 or 3? And where you're looking for growth over the near to medium term with the various product lines?

Sure. The ClearView products are the largest base of sales are into markets that are serviced by DIRECTV. We do have a direct relationship with DIRECTV on a communications basis, but the products are actually purchased through distribution channels to their dealer network. That's going very well. That lined up right with what we've already publicly announced on the growth of the ClearView product lines. Some of those products are into -- in the cable operators as well. The large majority is in the DIRECTV SMB and bulk video markets. And that's going very well and growing pretty well so far this year. We're doing very well in growing our both the relationships and potential business in the tier 1. Nothing that I can publicly talk about because, as you can imagine, most of the tier 1 relationships we have, have nondisclosure agreements in place, and we can't even mention the names of the company, let alone the specifics of any particular deal. But we are growing our business in the tier 1 segment. And those are all direct relationships where we sell directly to those operators. We don't sell-through any intermediary or distribution channels in those relationships. And they're growing really nicely. And we've established new beachheads from a potential sales perspective recently during Q1. And things are going well there. The growth this year is mostly going to come from growing the NXG, the ClearView and a restoration of some of the lost hospitality and SMB, small-medium business segments that were lost during the worst of the pandemic situation. So if we could simply recover those, and also count on the new sales that we've gotten with the newer products during the last 12 months, we'll be in pretty good shape.

In regard to streaming, do you have -- competitive with the hardware in that niche? It's not niche, well, if it's a niche, it's a growing niche.

It certainly was a niche and now it's not, right? That's right. We're -- the best way to characterize that is we've done investments. As I wrote in the press release, a lot of the product mix growth has been in products that we developed. They are parts of our NXG product line, they're parts of other encoder and transcoder product lines that are now incorporating some of the newer OTT style technologies such as if anybody is a technologist on the call, things like MPEG Dash, HLS, CDN technologies, content delivery network technologies, IP packetized video. Those technologies are now starting to show up as features and enhancements and even in some cases, separate product SKUs in our portfolio, and that's part of what's been driving the sales. We're looking to continue to finish -- not finish, but continue the additional development that we're doing, the R&D and the engineering to expand that portfolio in that area because that's a growing segment in video as well as continue to try to grow products in our data and broadband portfolio, which is, frankly, an even faster-growing market segment that we're very keen to get more fundamentally into this year.

And finally, and this was touched on in the last call. The non -- in the services that you may be working on to deliver independent of hardware. Are you able to talk about that at all?

Yes. Sure. A lot of that's still kind of in planning and product development, but the one area that we have done a good job of in the first quarter, we had started racking up more sales in service level agreements that are related to our current part. We revamped that program early in the year, launched new product literature and started selling and supporting some different policies related to our SLA agreements. So that's another -- frankly, probably a very small factor why our margin stood up stronger in Q1, a very small factor, but it's an area that we think is -- has a lot of potential to it. So we're putting a lot of focus on that. And then some other affiliated services, right? I won't talk about quite yet.

Our next question today is coming from George Gaspar, a private investor.

Most of the questions that I had were just recently answered here on the call, which was very good. My one question here is about your employment situation with your current staff. And I know you've done a lot to try to economize it and bring your cost into a more precise level relative to your revenue stream. How do you view the requirement for the going forward to try to recapture more of your markets? Can you do it with the existing employment situation? Or do you have visions of needing to accomplish it by 5%, 10%, 15% or more. Can you talk about that?

Sure. So the way -- I think the best way to think about the operational changes we made over the last year and a few months is it was slow and iterative, meaning we would make some changes in a certain area we would test would see what effect that was having on particular department's ability to do the job. And then we would recalibrate and figure out what can be done more, maybe there in a different part. So it was compared to a fairly strong, fast set of actions. We did it in this way because what we wanted to do was to end up with a structure and a capability that we would be happy to live with for a long period of time. And as we work towards getting the revenue to grow and the margin levels to grow, I didn't want a structure that I had to add back a bunch of cost to -- in order to perform and deliver on a larger revenue level. So I think we've accomplished that. And so where we're looking to potentially add staff. And if we do -- if and when we do start adding staff back, it will be offset by other reductions in either other parts of the company in -- or in other operating costs. It would be in expanding sales and marketing activity in order to capture more -- that revenue and the most interesting revenue out there. That would be the area we would actually -- we don't believe we need to expand cost or extend cost in manufacturing and operations in engineering for the most part in support.

Okay, good. Just one last, any observations on -- in terms of expansion going more international?

We've looked into it. We do have some distributors of ours that are active in Latin America that are bringing a nonmaterial amount of sales to us right now. And we're seeing some signs that, that may be growing as those other economies start potentially recovering from the pandemic effects. So that will just sort of pick up naturally potentially. But when we looked into it before, the costs associated with expanding in the markets that were already served by fairly well entrenched competitors where -- it's not that we felt like we couldn't do it, we felt like it was expensive. And the outcomes were a little bit questionable, how long it would take for us to make meaningful inroads and to taking that share away from other competitors. And we felt like those resources were better spent to shore up where we are right now. And we're going to have better return on investment by focusing on U.S. and Canada.

Our next question is coming from Dave Cole, a private investor.

I have a couple of questions. They look back around to the listing and outstanding shares. But I was wondering, by the end of the year, what -- is there an estimate on what the fully diluted number of shares would be? So there's about 11 million outstanding right now. But after conversion, what would that be?

Well, it depends on the -- we have approximately -- it would be another 2.060 million of shares under our convertible debt structure. And the outstanding warrants that we had from our private placement, that's about another 929,000 shares. And then, of course, there's also the potential dilution for our employee and director stock options and depending without -- I'm not sure of the exact mix, some of them may be in the money, some of them may not be in the money. That's another 3.982 million. So the potential common shares that are outstanding in addition to the existing shares is 6,971,000 additional shares right now.

So we're looking at possibly having 17 million...

If every single one of them converted, correct, yes. But that's not necessarily likely.

Okay. And as a part of the listing requirement is a dollar bid for 30 days, right?

No. The only listing requirement that we have right now is that we need to be back in compliance with our stockholders' equity at the minimum of $6 million by December 10.

Okay. Also along those lines, how closely are we tracking and executing the listing -- the continued listing plan that was submitted last I saw from -- I think it was an 8-K, said we were not in line or in compliance yet with the plan?

Well, correct. What happens is we are required each quarter to basically update our plan and describe any changes to the plan compared to the actual results of the quarter. So the NYSE American has certain thresholds that -- so if you -- for example, if you're below X and then you're below Y, you're going to get another notice. And that's generally what's happened here is that even though our updated plans may still show compliance by December 10 at that specific period in time, when we report, the NYSE is required to send us a notice of deficiency, and that's what happened.

All right. And my last -- I think this is my last question based on the subject. If there is a delisting, what's going to happen after that? Does the company go private? Are going to list on OTC Bulletin Board or somewhere else with less requirements, and then wait until we regroup and then come back to the NYSE American? Was there -- has there been any consideration of that?

I don't think we're really prepared to talk about at this time. We have our plan in place with the NYSE American, and that's what we're driving toward at this time.

But there certainly are other markets where the stock can trade without going prime mentioning private is not reporting, that's not going to happen. There are alternatives like you mentioned like the Bulletin Board, which is not called the Bulletin Board anymore. It's called something else. I don't recall exactly.

Yes. Yes. It's still called Bulletin Board.

Is it? Okay.

[Operator Instructions] We have no further questions in queue. Do you have any closing comments that you'd like to finish with?

Sure. I just want to thank everybody who joined the call. We appreciate everybody's participation and interest in our company and ongoing investment, and we look forward to talking to everybody next quarter. Thank you all very much.

Thank You, ladies and gentlemen. This does conclude today's event. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.