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Edited Transcript of BDR earnings conference call or presentation 31-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Blonder Tongue Laboratories Inc Earnings Call

Old Bridge Apr 1, 2017 (Thomson StreetEvents) -- Edited Transcript of Blonder Tongue Laboratories Inc earnings conference call or presentation Friday, March 31, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric S. Skolnik

Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary

* Robert J. Palle

Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director

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Conference Call Participants

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* Richard Greulich

* Richard Todaro

* Kenneth Hemphill

Southwestern Baptist Theological Seminary - President

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Blonder Tongue Laboratories Fourth Quarter and Year-End 2016 Results Conference Call. (Operator Instructions) At this time, it is my pleasure to turn the floor over to your host, Bob Palle, Chief Executive Officer. Sir, the floor is yours.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [2]

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Thank you. Welcome to Blonder Tongue's 2016 Fourth Quarter and Full Year Financial Reporting Teleconference.

Before we begin this morning with any details of performance, I'd like to preface my remarks and those made by other Blonder Tongue representatives who may be speaking today by

reminding you that we will be discussing certain subjects, which will contain forward-looking statements, including management's view of our prospects and evolving trends in the marketplace.

As you know, the future is impossible to predict, so I caution you that actual results may differ from those that may be projected in our comments this morning. I would ask you that you refer to our prior SEC filings, our Form 10-K for the years 2015 and '16 and our Form 10-Qs from prior quarters for additional information concerning factors that could cause actual results to differ from the information discussed this morning.

With me today are Eric Skolnik, Blonder Tongue's Chief Financial Officer; and Steve Shea, the Chairman of the Board. All of us will be available to answer any questions you may have following our presentations.

First, the essence of the press release comments bear repeating. We were able to substantially narrow the losses for both the fourth quarter and the full year compared to 2015, but the overall results are disappointing and clearly indicate we still have a lot more to do in the areas of increasing sales and improving gross margin.

In the third quarter 2016, we reported that we would remain focused on achieving positive EBITDA and refinancing our revolver and term loan with a new lender. We achieved both of these goals, and the details regarding each of these can be found on our 2016 Form 10-K. Also, as we previously indicated, we continue to project that sales will remain relatively flat for the first half of 2017.

Continuing beyond the comments of the press release, in the area of research and development, BT spent the third and fourth quarters developing additional versions of the public, education and government video encoder products. Specifically at the request of several large service providers, the engineering team improved both the data rate efficiency and the picture quality and also developed specific features that are needed to expand the utility of the product. Although incremental sales of these products for 2016 were modest, BT prevailed in several head-to-head product evaluations against its direct competitors. In so doing, we established relationships and credibility with several large service providers that should lead to increasing sales in this key product area.

For the coming year, our focus will be developing additional products to help the large operators serve the hospitality, education and health care communities more efficiently and cost effectively. This market segment is very large, and it's a good fit for both BT's technical and product expertise and sales channels.

Now I'd like to turn the call over to Eric Skolnik, the company's Chief Financial Officer. And following Eric, we will have an open question-and-answer session. Eric?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [3]

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Thank you, Bob. Net sales increased $235,000 or 4.5% to $5,449,000 for the fourth quarter of 2016 from $5,214,000 for the comparable period in 2015. Net loss for the 3 months ended December 31, 2016, was a loss of $338,000 or a loss of $0.04 per share compared to a loss of $2,136,000 or a loss of $0.32 per share for the comparable period in 2015.

For the year ended December 31, 2016, net sales increased $1,563,000 or 7.5% to $22,506,000 from $20,943,000 in 2015. The net loss for the 12 months ended December 31, 2016, was a loss of $1,195,000 or a loss of $0.16 per share compared to a loss of $6,771,000 or a loss of $1.05 per share for the comparable period in 2015.

The increase in net sales for the year is primarily attributed to an increase in sales of digital video headend products and data products offset in part by a decrease in sales of analog video headend products and contract manufactured products.

Sales of digital video headend products were $11,777,000 and $9,364,000, sales of data products were $2,701,000 and $1,051,000, sales of analog video headend products were $2,317,000 and $3,555,000 and sales of contract manufactured products were $895,000 and $1,553,000 in 2016 and 2015, respectively.

Now I'd like to turn the call over to our question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Richard Todaro.

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Richard Todaro, [2]

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Great job on the refinancing. That's a big relief. I'm trying to look through this K as we're talking and I'm trying to understand what's happening with the subordinate loan that the insiders lent to the company? I just assumed once you refinance, that would just get paid off.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [3]

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No. The importance of the refinancing was to refinance our Santander debt, and the subordinated debt still remains outstanding.

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Richard Todaro, [4]

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So -- but the cost of capital on that new revolver, you can't use that, it's a lot cheaper, right, to pay off that debt?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [5]

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But then, obviously, then it would impact our liquidity. So upright, we would be using not liquidity then for that purpose, and that's not the intent.

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Richard Todaro, [6]

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Well, hold on, let me just make sure I clarify, how much is drawn on your revolver today?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [7]

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Today, I'm not at liberty to discuss how much is outstanding.

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Richard Todaro, [8]

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Well, at the end of the quarter, roughly?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [9]

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Again, at the end of the year, the information is in our 10-K. We had at the end of the year, I believe -- let me just see what it says. Bear with me one second. At the end of the year, we had -- I'm sorry. Okay. We had approximately, where is it, $734,000 of additional availability for borrowing.

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Richard Todaro, [10]

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You had $700,000 less than capacity on that line of credit that you...

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [11]

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Correct, correct.

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Richard Todaro, [12]

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Okay, okay. I thought you guys had more capacity. I thought it was like an $8.5 million line of credit. And I didn't realize that you're borrowing that much of it.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [13]

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No, the $8.5 million is a combination of 2 pieces. It's a $5 million revolver and a $3.5 million term loan. So -- and the revolver, of course, is formula based on accounts receivable and inventory. So it obviously ebbs and flows as the months go on.

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Richard Todaro, [14]

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Okay. And the term loan is against your facility?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [15]

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Well, the entire deal is all cross-collateralized. It's 1 going facility, if you will.

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Richard Todaro, [16]

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Okay, okay. And under the terms, if you start making -- start bringing capital, you have to pay down the revolver first? Is that how that works?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [17]

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I would have to research that, but we're...

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Unidentified Company Representative, [18]

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Yes, it's subordinated. The obligation to the convertible sub debtholders is subordinate to the bank, and we would have to get their permission to pay any of that down.

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Richard Todaro, [19]

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Yes, I understand. Because your revolver, is that like prime plus whatever, but this note is at 12%, right?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [20]

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Correct.

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Richard Todaro, [21]

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Yes. Because I'm trying to figure out how to take out the 12% note if that's possible.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [22]

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Richard, Richard, the note is PIK-ed.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [23]

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Right.

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Richard Todaro, [24]

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Yes. It doesn't matter if it's PIK. It's still growing at 12%?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [25]

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Agreed.

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Richard Todaro, [26]

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Right. So it would seem like that, that's a fairly steep rate if you guys can't do anything to work that down. You know what I'm saying?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [27]

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Sure.

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Richard Todaro, [28]

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Any -- you mentioned some positive things you've been working on, that's great. Is there anything that you're concerned about in the business, right now, customer-wise?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [29]

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You meant like something in jeopardy, is that your -- is that what you're getting at?

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Richard Todaro, [30]

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Yes, yes, exactly. Something, ending a contract or anything like that?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [31]

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No.

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Richard Todaro, [32]

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No? Okay.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [33]

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No. I'm not aware of anything. No.

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Richard Todaro, [34]

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And you talked about the front half of the year being flat. Do you have any thoughts initially on the back half of the year? Is there any of this stuff that you think starts to help towards the back half of the year?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [35]

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That's a very good question. It really gets hazy. As you know, the political climate and environment has really caused the markets and just the activity to be very choppy. So those are the reasons for -- a lot of my reasons for hesitating to go forecast any further than the first half. We don't know what -- we don't know and I don't even -- and maybe the White House doesn't even know what's going on inside the White House, but it gets hazy when you get out past the first half of this year because of the political climate. Unless you know something, if you've got a crystal ball, please let me know, okay?

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Richard Todaro, [36]

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Under the -- if, let's say, the back half ended up being similar to the front half, I know that you're rooting for it not to be. I'm just curious, would you end up happening to make any adjustments to the operating [ structure ] at that point? Or do you feel pretty good about running at this current rate through the year?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [37]

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I think that if we can hold this current rate, we'll be okay, yes.

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Operator [38]

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Our next question comes from [ George Gaspar ].

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Unidentified Participant, [39]

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This is [ George Gaspar ], sorry about that. Could you just review a little bit more your general view on the market conditions? I know you talked about the White House and the mixup potentially causing some problems as you view the forward. But in terms of just the total markets that you're serving, are there any particular changes coming about that are pluses and minuses that you might see? And where do you want to take your development to gain access to a larger revenue-generating capacity? Anything special that you're working on that could really give you a bump and to get you up much higher on the revenue stream?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [40]

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Well, I believe in my prepared remarks, I stated that our focus for the coming year will be developing on additional products to help the large operators serve hospitality, education and health care communities more efficiently and cost effectively because that's -- that market segment compared to our revenue is quite large and it's a good fit for our technical and product expertise. So I don't -- I hesitate to say anything more positive than that, but that's -- is that not sufficient?

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Unidentified Participant, [41]

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Well, I think as shareholders, we are anxious to see the company do something dynamic that could put it on a different plane in terms of revenue generation relative to the product areas. And with the technology that you have, I would assume that you could broaden your base of what your -- and try to evolve into some markets that you're not in at all and generate a larger revenue stream. Is that -- am I way off base by even asking you about this?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [42]

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No. You can ask any questions, and there are no dumb questions whatsoever. I mean, you're not off base. There are no off-base questions. But some of this, if you are in my position, you might come to the same conclusion that I have that we have established sales channels and established relationships. And as additional potential prospects or customers for us migrate into a territory where we're very active and these service providers that maybe we have ignored certain -- serving certain segments and they get into those segments where our expertise is high, then we are jumping on those and capturing those opportunities. But to go off and do something completely different and new in a new market is very risky for us because we don't have established sales channels or contacts. And I don't think that you would do that if you were here in my position. So okay? But the opportunities in the markets that we serve are quite large. There may be not a bazillion dollars but hundreds of millions of dollars. And so we just need to get our appropriate market, recover our fair share of that market, like we -- as we were in the middle '90s and late '90s. And that's what we're working on, and we think that's achievable with the team that we have. And we think we've demonstrated that with some recent wins towards the end of 2016. So as I said, the sales for those products at the end of 2016 were modest, okay? But it did allow us to increase our sales in the fourth quarter by 5%, several hundred thousand dollars.

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Unidentified Participant, [43]

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Sure, that was impressive.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [44]

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Well, I don't think it's impressive, but it is a demonstration that we are setting targets, we're achieving those targets and then we're reporting on the results.

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Unidentified Participant, [45]

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Okay. And then from the previous dialogue that you're talking and the questioner, your personnel structure, the way you have it now is pretty much in the scope of where you see your revenue-generating capacity and you don't have to make any further reductions at this point?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [46]

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We are not planning any further reductions at this point, correct.

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Operator [47]

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Our next question comes from Ken Hemphill.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [48]

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How many employees do you have in the research and development department?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [49]

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I think it's 19.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [50]

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And I may have asked you this question before. I know you don't have any proprietary products, and I do know your company from first hand. I've experienced your product when I worked as business manager of a school district, which is the best job I had. The product has a very good reputation for quality. Is that basically what you try to sell?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [51]

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That's a piece of it, absolutely.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [52]

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But what else would you be...

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [53]

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We make -- we're modest priced that works properly and lasts a long time.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [54]

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And of course, your price obviously would have to be competitive, otherwise you wouldn't sell anything.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [55]

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Right. Yes, our products are modestly priced because you need to be modestly priced if you're going to be competitive in that product area.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [56]

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Now when you say your sales look flat for the next 6 months, flat compared to the last quarter or prior year when sales weren't as good?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [57]

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The prior year when sales weren't as good. We made money in the first half last year.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [58]

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I noticed on the...

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [59]

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Why did you say sales weren't as good last year?

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [60]

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The impression that sales were better towards the end of the year than the beginning.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [61]

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Well, no, I think it's pretty flat. I mean, I haven't taken -- made a bar graph and taken a ruler to it, but it's relatively flat is the instructive term that I was told to use, which it is.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [62]

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I mean, the reason for the question, it looks like cash flow-wise you're almost at breakeven.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [63]

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Cash flow is positive. And if you have those couple of pages from the K, we can review that, if you'd like.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [64]

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I'm just saying that at the level right now, well, if it stays that way, you're still at your breakeven, so we can only hope that things can improve if things improve in the marketplace.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [65]

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Net earnings, we are not breakeven.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [66]

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Not even cash flow-wise?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [67]

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Cash flow-wise, we're positive.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [68]

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Right, some, yes. I noticed in the release, it says basic and diluted weighted average shares outstanding, the 3 months ended were 8,110,000; yet for the year ended, it was 7,413,000 with the same date. I don't understand how it can be different.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [69]

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Because the weighted average for a 3-month period is the -- it's only for a 3 month period, right? So it's only at 90 days and then you have a weighted average over a 12-month period, right, it's 365 days.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [70]

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I see. The -- I see that treasury stock dropped tremendously. What happened there?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [71]

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We issued shares out of treasury rather than reissue new shares for the various restricted stock awards that we had in 2016 as well as under our director stock purchase plan.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [72]

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So these shares were sold?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [73]

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They were moved from treasury and then issued under those various plans.

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Kenneth Hemphill, Southwestern Baptist Theological Seminary - President [74]

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So no money committed to the company, just they were given out as bonuses to the...

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [75]

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Well, no, and depending on the situation on the restricted stock, yes, those were awards, basically compensation to the employees in lieu of cash. And as far as the director fees are concerned, those were director fees that the directors took stock instead of cash. So the idea, of course, in all of these sets of programs is cash preservation, so which obviously is better for the company.

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Operator [76]

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Our next question comes from Richard Greulich.

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Richard Greulich, [77]

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Bob, is there any compensation that has been deferred or reduced that once you become more profitable will be automatically increased?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [78]

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No, we're not going to know.

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Richard Greulich, [79]

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Okay, so you're getting a salary now? I know one time you weren't.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [80]

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No, I'm not getting a salary.

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Richard Greulich, [81]

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So I'm assuming if things get better, your salary will be bumped up somewhere?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [82]

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That would be the hope, but we're focused on meeting our bank covenants and preserving cash right now and keeping all our key employees and team members together while we proceed forward with these what may be modest victories here this past year and turn them into more than modest victories this year.

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Richard Greulich, [83]

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What is the outlook for contract manufacturing at this point now? Are you -- for 2017, are you likely to have much or less or more?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [84]

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I think it's going to be similar, but if it's -- all of this is uncertain.

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Richard Greulich, [85]

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So your visibility looks out -- do you look out a couple of quarters and have those orders in hand to do that business? Or...

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [86]

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No. We look out -- we do look out a couple quarters. We do not have that business in hand.

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Operator [87]

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Our next question comes from [ Greg Bowen ].

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Unidentified Participant, [88]

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I think you got my last name wrong. Anyway...

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [89]

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Well, what is your last name?

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Unidentified Participant, [90]

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It's [ Bourbon ]. Glad to see we're moving in the right direction. Let me be clear about the cash flow for the year, I understand it's positive. Was it for the quarter?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [91]

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Yes.

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Unidentified Participant, [92]

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Okay. And the shares outstanding were 8.1 million, correct?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [93]

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Yes.

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Unidentified Participant, [94]

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Now I wonder, there's a couple rate case since the credit agreement with Sterling, the first one about -- regarding Olson. Can you talk a little bit about that at all?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [95]

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Yes. The Olson Technology, Inc. has a basically fiber optic product line, and Olson supplies certain key subassemblies to Blonder Tongue that are part of our fiber optic product line sales. And the idea is that we are going to acquire the assets to its product line. And its present open-market customers are similar to ours. Its largest distributor customer is also our largest distributor customer. So we think it's a good fit and...

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Unidentified Participant, [96]

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That hasn't been consummated yet?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [97]

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It has not closed.

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Unidentified Participant, [98]

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But you anticipate it will without problem?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [99]

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It's forecasted to close, yes, sometime in the future. The idea is for us to expand our fiber optic product offerings with this tuck-in.

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Unidentified Participant, [100]

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And what should -- what would it do to P&L? I assume it's going to be revenue positive, correct?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [101]

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Yes. Our assessment, our analysis is that it will be accretive to our financials.

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Unidentified Participant, [102]

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Okay. We're going to look forward to hearing more about that over the maybe the course of this year?

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [103]

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We will report on our -- yes, sure, our successes is part of what we're doing.

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Unidentified Participant, [104]

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Not making fun, but again, most of the release over the past few years has not had to do with sales and revenue but more with financing agreements and amendments to financing. We look forward to the day when they're more revenue related. Anyway, finally, on the 8-K that had to do with the releasing of a Section 4(e)(ii) or something to that effect. Why was that done, number one?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [105]

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Which 8-K are you referring to?

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Unidentified Participant, [106]

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The one released last week, I think on the 23rd -- 21st or 23rd.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [107]

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What that did was that modifies the subordinated debt agreement.

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Unidentified Participant, [108]

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Yes.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [109]

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And removed an element of price protection.

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Unidentified Participant, [110]

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It has to do with the conversion prices?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [111]

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Correct. It was not the conversion price itself. It was basically a price protection element of the convertible debt, which was eliminated.

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Unidentified Participant, [112]

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Okay. Well, I wondered if anything that's prompted that within the original agreement. Is it something that caused someone to (inaudible) or someone (inaudible) or to leave?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [113]

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What happened was that, that element of the agreement gave rise to having us to bifurcate the debt into a derivative piece as well as the debt piece. And so that the elimination of that provision will then allow us to just have the debt be regular debt without having a derivative piece anymore.

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Unidentified Participant, [114]

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So that explains -- there will be a onetime, I guess, maybe in the first quarter liability or expense that subsequently will disappear?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [115]

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That is correct.

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Unidentified Participant, [116]

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I can understand, and that makes some sense (inaudible). Will any of the shares converted be below the 0.56?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - CFO, Principal Accounting Officer, SVP, Treasurer and Assistant Secretary [117]

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No, sir.

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Operator [118]

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And it looks like that was the final question.

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Robert J. Palle, Blonder Tongue Laboratories, Inc. - CEO, President, COO, Secretary and Director [119]

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Okay. If there's no further questions, thank you very much for participating this morning. I hope you guys have a great day and a great week, and look forward talking to you on the next call.

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Operator [120]

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Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time, and have a great day.