BLONDER TONGUE LABORATORIES, INC.
State of Incorporation: Delaware
One Jake Brown Road
Old Bridge, NJ 08857
(732) 679-4000
www.blondertongue.com
Investor@blondertongue.com
_______________________________________________
SIC Code: 3663
Annual Report
For the period ending December 31, 2023
(the “Reporting Period”)
The number of shares of common stock, par value $.001, outstanding is 14,399,191 as of December 31, 2023
The number of shares of common stock, par value $.001, outstanding was 13,349,241 as of December 31, 2022
Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of
1933 and Rule 12b-2 of the Exchange Act of 1934):
Yes: No:
Indicate by check mark whether the company’s shell status has changed since the previous reporting period:
Yes: No:
Indicate by check mark whether a Change in Control of the company has occurred over this reporting period:
Yes: No:
4 “Change in Control” shall mean any events resulting in:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities;
(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;
(iii) A change in the composition of the Board occurring within a two (2)-year period, as a result of which fewer than a majority of the directors are directors
immediately prior to such change; or
(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the
Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
1
BLONDER TONGUE LABORATORIES, INC.
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
Item 1. OTC Pink Current Disclosure Guidelines
Item 2. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022
Consolidated Statement of Operations for the Year Ended December 31, 2023 and 2022
Consolidated Statement of Stockholders’ Equity as of December 31, 2023
Consolidated Statement of Cash Flows for the Year Ended December 31, 2023 and 2022
Notes to Unaudited Consolidated Financial Statements
Item 3. Management’s Discussion and Analysis of Financial Condition and results of Operations
Item 4. Legal Proceedings
Item 5. Certifications
Page No.
3
12
12
13
14
15
16
24
33
33
2
Item 1. OTC PINK CURRENT DISCLOSURE GUIDELINES
1)
Name and address(es) of the issuer and its predecessors (if any)
In answering this item, provide the current name of the issuer and names used by predecessor entities, along
with the dates of the name changes.
Blonder Tongue Laboratories, Inc.
The state of incorporation or registration of the issuer and of each of its predecessors (if any) during the past
five years; Please also include the issuer’s current standing in its state of incorporation (e.g. active, default,
inactive):
Delaware, 1988; Active and In Good Standing
Describe any trading suspension or halt orders issued by the SEC or FINRA concerning the issuer or its
predecessors since inception:
None
List any stock split, dividend, recapitalization, merger, acquisition, spin-off, or reorganization either currently
anticipated or that occurred within the past 12 months:
None
Address of the issuer’s principal executive office:
One Jake Brown Road
Old Bridge, NJ 08857
Telephone: (732) 679-4000
Website: www.blondertongue.com
Email: Investor@blondertongue.com
Address of the issuer’s principal place of business:
Check box if principal executive office and principal place of business are the same address: ☑
Has the issuer or any of its predecessors been in bankruptcy, receivership, or any similar proceeding in the past
five years?
No: ☒
Yes: ☐
3
2)
Security Information
Transfer Agent
Equiniti Trust Company, LLC (“EQ”)
48 Wall Street, Floor 23
New York, NY 10005
1-917-589-4994
helpAST@equiniti.com
Publicly Quoted or Traded Securities:
Trading symbol:
Exact title and class of securities outstanding:
CUSIP:
Par or stated value:
Total shares authorized:
Total shares outstanding:
Total number of shareholders of record:
BDRL
Common Stock
093698108
$0.001
50,000,000
14,399,191
65
as of date: 12/31/2023
as of date: 12/31/2023
as of date: 12/31/2023
Security Description:
1. The Common Stock of the Company is eligible to receive dividends per share as
declared by the Company’s Board of Directors. The holders of Company
Common Stock are entitled to one vote per share of Common Stock held on all
matters that may be voted upon by stockholders are required by law and the
Company’s Articles of Incorporation and Bylaws. The Common Stock has no
preemptive rights.
2. The Company has no Preferred Stock issued or outstanding.
3. There are no other material rights of holders of Common Stock.
4. There have been no material modifications to the rights of holders of the Company’s
securities that have occurred over the reporting period covered by this report.
3)
Issuance History
A. Changes to the Number of Outstanding Shares for the two most recently completed fiscal years and
any subsequent period.
Indicate by check mark whether there were any changes to the number of outstanding shares within the past two
completed fiscal years:
No: ☐
Yes: ☒ (If yes, you must complete the table below)
4
Shares Outstanding as of the Second Most
Recent Fiscal Year End:
Opening Balance:
Date: 12/31/2021 Common: 13,010,859
Preferred: 0
Number of
Shares Issued
(or cancelled)
Class of
Securities
Date of
Transaction
Transaction
type (e.g.,
new
issuance,
cancellation,
shares
returned to
treasury)
*Right-click the rows below and select “Insert” to add rows as needed.
Value of
shares
issued
($/per
share) at
Issuance
Were the
shares
issued at a
discount to
market
price at the
time of
issuance?
(Yes/No)
Individual/ Entity
Shares were
issued to.
***You must
disclose the
control
person(s) for
any entities
listed.
Reason for
share issuance
(e.g. for cash or
debt conversion)
-OR-
Nature of
Services
Provided
Restricted or
Unrestricted as
of this filing.
Exemption
or
Registration
Type.
01/15/2022
Issuance
104,399
Common
0.593
No
02/10/2022
Issuance
17,361
Common
0.45
No
03/11/2022
Issuance
7,920
Common
0.59
No
Stephen
Necessary
Debt
Conversion
Unrestricted
Edward
Grauch
Edward
Grauch
Cash
Unrestricted
Cash
Unrestricted
03/11/2022
Issuance
27,829
Common
0.59
No
Ronald Alterio Cash
Unrestricted
03/11/2022
Issuance
22,498
Common
0.59
No
Allen Horvath Cash
Unrestricted
03/11/2022
Issuance
22,629
Common
0.59
No
Eric Skolnik
Cash
Unrestricted
03/15/2022
Issuance
14,202
Common
0.56
No
Michael
Censoplano
Cash
Unrestricted
03/15/2022
Issuance
13,729
Common
0.56
No
Kathy Yager
Cash
Unrestricted
03/15/2022
Issuance
7,654
Common
0.56
No
James Clark
Cash
Unrestricted
03/15/2022
Issuance
2,317
Common
0.56
No
Yingen Tang
Cash
Unrestricted
03/28/2022
Issuance
7,080
Common
0.66
No
Edward
Grauch
Cash
Unrestricted
03/28/2022
Issuance
5,638
Common
0.66
No
Ronald Alterio Cash
Unrestricted
03/28/2022
Issuance
4,720
Common
0.66
No
Allen Horvath Cash
Unrestricted
03/28/2022
Issuance
2,914
Common
0.66
No
Eric Skolnik
Cash
Unrestricted
04/08/2022
Issuance
8,198
Common
0.57
No
Edward
Grauch
Cash
Unrestricted
04/08/2022
Issuance
6,528
Common
0.57
No
Ronald Alterio Cash
Unrestricted
04/08/2022
Issuance
3,374
Common
0.57
No
Allen Horvath Cash
Unrestricted
5
04/08/2022
Issuance
8,198
Common
0.57
No
Eric Skolnik
Cash
Unrestricted
04/22/2022
Issuance
17,854
Common
0.69
No
Edward
Grauch
Cash
Unrestricted
04/22/2022
Issuance
5,393
Common
0.69
No
Ronald Alterio Cash
Unrestricted
04/22/2022
Issuance
4,515
Common
0.69
No
Allen Horvath Cash
Unrestricted
04/22/2022
Issuance
2,787
Common
0.69
No
Eric Skolnik
Cash
Unrestricted
08/01/2022
Issuance
10,340
Common
0.13
No
10/21/2022
Issuance
13,037
Common
0.15
No
01/27/2023
Issuance
19,297
Common
0.27
No
Edward
Grauch
Edward
Grauch
Edward
Grauch
Cash
Unrestricted
Cash
Unrestricted
Cash
Unrestricted
04/19/2023
Issuance
202,119
Common
0.19
No
Philip Coady
Cash
Unrestricted
06/02/2023
Issuance
808,534
Common
0.17
No
Edward
Grauch
Cash
Unrestricted
06/02/2023
Issuance
20,000
Common
0.17
No
Philip Coady
Grant
Unrestricted
Shares Outstanding on Date of This Report:
Ending Balance:
Date 12/31/2023 Common: 14,399,191
Preferred: 0
B. Promissory and Convertible Notes
Indicate by check mark whether there are any outstanding promissory, convertible notes, convertible
debentures, or any other debt instruments that may be converted into a class of the issuer’s equity securities:
No: ☐
Yes: ☒ (If yes, you must complete the table below)
Date of Note
Issuance
Outstanding
Balance ($)
Principal
Amount
at
Issuance
($)
Interest
Accrued
($)
Maturity
Date
Conversion Terms (e.g.
pricing mechanism for
determining conversion of
instrument to shares)
Name of Noteholder.
*** You must disclose
the control person(s) for
any entities listed.
Reason for
Issuance (e.g.
Loan, Services,
etc.)
04/08/2020
468,410
300,000
168,410 Open
04/08/2020
312,274
200,000
112,274 Open
04/08/2020
78,068
50,000
28,068
Open
12% Interest, convertible at
$0.593 per share
12% Interest, convertible at
$0.593 per share
12% Interest, convertible at
$0.593 per share
Robert Palle
Loan
Steven Shea
Loan
Anthony Bruno
Loan
6
04/17/2020
298,200
200,000
98,200
Open
05/01/2020
38,754
25,000
13,754
Open
01/29/2021
566,905
400,000
166,905 Open
12% Interest, convertible at
$0.593 per share
12% Interest, convertible at
$0.55 per share
12% Interest, convertible at
$1.00 per share
Edward Grauch
Loan
Ronald Alterio
Loan
Cavalry Fund (1)
Loan
Use the space below to provide any additional details, including footnotes to the table above:
(1) The party with investment control of Cavalry Fund is Thomas Walsh
4)
Issuer’s Business, Products and Services
The Company was incorporated in November 1988, under the laws of Delaware as GPS Acquisition Corp. for
the purpose of acquiring the business of Blonder-Tongue Laboratories, Inc., a New Jersey corporation, which was
founded in 1950 by Ben H. Tongue and Isaac S. Blonder to design, manufacture and supply a line of electronics
and systems equipment principally for the private cable industry. Following the acquisition, the Company
changed its name to Blonder Tongue Laboratories, Inc. The Company completed the initial public offering of its
shares of common stock in December 1995.
Today, the Company is a technology-development and manufacturing company that delivers a wide range of
products and services to the telecommunications, cable entertainment and media industry. For 70 years, Blonder
Tongue/Drake products have been deployed in a long list of locations, including lodging/hospitality, multi-
dwelling units/apartments, broadcast studios/networks, universities/schools, healthcare/hospitals, fitness centers,
government facilities/offices, prisons, airports, sports stadiums/arenas, entertainment venues/casinos, retail
stores, and small-medium businesses. These applications are variously described as small and medium sized
businesses in commercial, institutional or enterprise environments, and will be referred to herein collectively as
“SMB”. The customers we serve include business entities installing private video and data networks in these
environments, whether they are the largest cable television operators, telco or satellite providers, integrators,
architects, engineers or the next generation of Internet Protocol Television (“IPTV”) streaming video providers.
The technology requirements of these markets change rapidly, and the Company’s research and development
team is continually delivering high performance-lower cost solutions to meet customers’ needs.
The Company’s strategy is focused on providing a wide range of products to meet the needs of the SMB
environments described above, including lodging/hospitality, multi-dwelling units/apartments, broadcast
studios/networks, universities/schools, healthcare/hospitals, fitness centers, government facilities/offices, prisons,
airports, sports stadiums/arenas, entertainment venues/casinos, retail stores, and small-medium businesses, and
to provide offerings that are optimized for an operator’s existing infrastructure, as well as the operator’s future
strategy. A key component of this growth strategy is to provide products that deliver the latest technologies (such
as IPTV and digital 4K, UHD, HD and SD video content) and have a high performance-to-cost ratio.
In 2019, the Company initiated a consumer premise equipment (“CPE”) sales initiative. The products sold in
2019 comprise primarily Android-based IPTV set top boxes to the Tier 2 and Tier 3 cable and telecommunications
service providers. Although this strategic initiative was designed to secure an in-home position with the
Company’s product offerings, and direct relationships with a wide range of service providers and increase sales
of the Company’s Telecom and SMB products by the BT Premier Distributors to those same service providers, it
was decided in 2021, to de-emphasize this strategy due to the low gross margin of this initiative and global
semiconductor supply chain limitations.
Like many businesses throughout the United States and the world, the Company has been affected by the COVID-
19 pandemic. Because there are daily, weekly and monthly developments regarding the outbreak, we are
continually assessing the current and anticipated future effects on our business, including how these developments
are impacting or may impact our customers, employees and business partners. In our core SMB business, we have
experienced a noticeable decline in sales. From March 2020 through Q3 of 2021 many of our customers
7
significantly reduced their business operations. In our CPE business we have experienced a more substantial
reduction in sales, again as a result of our customers’ significant decrease in their business activities coupled with
expected supply chain constraints. During and since Q3 2021, the Company has seen our customers, in general,
begin to recover their business operations at the same time as the Company began to see global disruptions in
semiconductor supply chain, which is a major raw material component of the products the Company designs,
manufactures and sells. With uncertainties surrounding the extent to which the COVID-19 outbreak will affect
the economy generally, and our customers and business partners in particular, it is impossible for us to predict
when conditions will improve to the point that we can reasonably forecast when our sales and product shipments
might return to historical levels. Since 2019, we have taken steps to reduce and are currently taking additional
steps to significantly reduce our expenses, including adjustments in our staffing (in the form of furloughs) and
reductions in manufacturing activities, which we believe will improve our ability to continue our operations at
current levels and meet our obligations to our customers.
5)
Issuer’s Facilities
The Company’s manufacturing is allocated primarily between its facility in Old Bridge, New Jersey (“Old Bridge
Facility”) and key contract manufacturing located in the People’s Republic of China (“PRC”) as well as South
Korea, Taiwan and Ohio. The Company currently manufactures most of its digital products, including the NXG
product line and latest encoder, transcoder and EdgeQAM collections at the Old Bridge Facility. Since 2007 the
Company has transitioned and continues to manufacture certain high-volume, labor-intensive products, including
many of the Company’s analog and other products, in the PRC, pursuant to manufacturing agreements that govern
the production of products that may from time to time be the subject of purchase orders submitted by (and in the
discretion of) the Company. Although the Company does not currently anticipate the transfer of any additional
products to the PRC or other countries for manufacture, the Company may do so if business and market conditions
make it advantageous to do so. Manufacturing products both at the Company’s Old Bridge Facility as well as in
the PRC, South Korea, Taiwan and Ohio enables the Company to realize cost reductions while maintaining a
competitive position and time-to-market advantage.
6)
All Officers, Directors, and Control Persons of the Company
Names of All Officers,
Directors, and Control
Persons
Affiliation with
Company (e.g. Officer
Title /Director/Owner
of 5% or more)
Residential Address
(City / State Only)
Number of
shares
owned
Share
type/class
Ownership
Percentage
of Class
Outstanding
Names of
control
person(s) if a
corporate entity
Robert J. Palle
CEO
Freehold, NJ
4,224,903
Common
26.11%
Chaeles E. Dietz
Board Member
Oradall, NJ
473,771
Common
3.25%
Michael Hawkey
Board Member
Parker, CO
91,148
Common
0.71%
Gary P Scharmett
Board Member
Newtown, PA
468,581
Common
3.21%
Steven L Shea
Board Member
Owings Mills, MD
1,361,481
Common
9.01%
James F Williams
Board Member
Williamsville, NY
414,173
Common
2.84%
Michael P. Censoplano
CFO
Toms River, NJ
18,566
Common
0.43%
Edward R. Grauch
5% control person
Mexico Beach, FL
1,206,581
Common
8.38%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
8
7)
Legal/Disciplinary History
A.
Identify and provide a brief explanation as to whether any of the persons or entities listed above
in Section 6 have, in the past 10 years:
1. Been the subject of an indictment or conviction in a criminal proceeding or plea agreement or
named as a defendant in a pending criminal proceeding (excluding minor traffic violations);
None
2. Been the subject of the entry of an order, judgment, or decree, not subsequently reversed,
suspended or vacated, by a court of competent jurisdiction that permanently or temporarily
enjoined, barred, suspended or otherwise limited such person’s involvement in any type of
business, securities, commodities, financial- or investment-related, insurance or banking
activities.
None
3. Been the subject of a finding, disciplinary order or judgment by a court of competent
jurisdiction (in a civil action), the Securities and Exchange Commission, the Commodity
Futures Trading Commission, a state securities regulator of a violation of federal or state
securities or commodities law, or a foreign regulatory body or court, which finding or
judgment has not been reversed, suspended, or vacated;
None
4. Named as a defendant or a respondent in a regulatory complaint or proceeding that could
result in a “yes” answer to part 3 above; or
None
5. Been the subject of an order by a self-regulatory organization that permanently or temporarily
barred, suspended, or otherwise limited such person’s involvement in any type of business or
securities activities.
None
6. Been the subject of a U.S Postal Service false representation order, or a temporary
restraining order, or preliminary injunction with respect to conduct alleged to have violated the
false representation statute that applies to U.S mail.
None
B. Describe briefly any material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the issuer or any of its subsidiaries is a party to or of which
any of their property is the subject. Include the name of the court or agency in which the
proceedings are pending, the date instituted, the principal parties thereto, a description of the
factual basis alleged to underlie the proceeding and the relief sought. Include similar information
as to any such proceedings known to be contemplated by governmental authorities.
None
9
8)
Third Party Service Providers
Securities Counsel
Name:
Address 1:
Address 2:
Phone:
Email:
Lucosky Brookman LLP
101 Wood Ave
Woodbridge, NJ 08830
(732) 395-4400
lmetelitsa@lucbro.com
Accountant or Auditor
Name:
Firm:
Address 1:
Address 2:
Phone:
Email:
Investor Relations
Giancarlo Garipoli
Marcum LLP
730 Third Ave
New York, NY 10017
(212) 485-5792
Giancarlo.Garipoli@marcumllp.com
Email:
investor@blondertongue.com
9)
Disclosure & Financial Information
A. The following financial statements were prepared in accordance with:
☐ IFRS
☒ U.S. GAAP
B. The following financial statements were prepared by (name of individual):
Michael P. Censoplano
Chief Financial Offiicer
Name:
Title:
Relationship to Issuer: Employee
Describe the qualifications of the person or persons who prepared the financial statements:5
Accountant, 30 years experience
5 The financial statements requested pursuant to this item must be prepared in accordance with US GAAP or IFRS and by persons with sufficient financial
skills.
10
Forward-Looking Statements
In addition to historical information this Annual Report contains forward-looking statements regarding future events
relating to such matters as anticipated financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995,
the Securities Act of 1933 and the Securities Exchange Act of 1934 provide safe harbors for forward-looking statements.
In order to comply with the terms of these safe harbors, the Company notes that a variety of factors could cause the
Company’s actual results and experience to differ materially and adversely from the anticipated results or other
expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the
operation, performance, development and results of the Company’s business include, but are not limited to, those matters
discussed herein. The words “believe,” “expect,” “anticipate,” “project,” “target,” “intend,” “plan,” “seek,” “estimate,”
“endeavor,” “should,” “could,” “may” and similar expressions are intended to identify forward-looking statements. In
addition, any statements that refer to projections for our future financial performance, our anticipated growth trends in our
business and other characterizations of future events or circumstance are forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as
of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other
documents the Company files from time to time with the Securities and Exchange Commission, including without
limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities
and Exchange Commission on April 17, 2023, and as amended on April 28, 2023 (See Item 1 – Business; Item 1A – Risk
Factors; Item 3 – Legal Proceedings and Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations).
11
Item 2. Consolidated Financial Statements
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(unaudited)
December 31, Dec 31,
2023
2022
$ 8
$ 79
1,538
2,866
383
4,795
156
3
741
493
4,682
475
$11,345
2,929
249
634
1,986
224
144
12
236
6,414
1,763
3,461
231
11,869
-
3,389
3,966
533
7,967
238
3
741
493
4,778
785
$15,005
4,387
70
569
2,431
368
161
24
145
8,155
1,549
4,093
134
13,931
-
-
-
14
32,624
(32,346)
(816)
(524)
$11,345
13
32,275
(30,230 )
(984 )
1,074
$15,005
Assets
Current assets:
Cash ...................................................................................................................
Accounts receivable, net of allowance for doubtful accounts
of $216 as of both December 31, 2023 and December 31, 2022, respectively .
Inventories .........................................................................................................
Prepaid and other current assets .......................................................................
Total current assets ....................................................................................
Property, plant and equipment, net ..........................................................................
License agreements, net ..........................................................................................
Intangible assets, net ................................................................................................
Goodwill ....................................................................................................................
Right of use assets, net……………………………………………………………………………………….…
Other assets, net .......................................................................................................
Liabilities and Stockholders’ Equity
Current liabilities:
Line of credit ......................................................................................................
Current portion of long-term debt .....................................................................
Current portion of lease liability……………………………………………………………..………
Accounts payable ...............................................................................................
Accrued compensation ......................................................................................
Accrued benefit pension liability……………………………………………………………….……
Income taxes payable ........................................................................................
Other accrued expenses ....................................................................................
Total current liabilities ...............................................................................
Subordinated convertible debt with related parties, net……………………….……….………
Lease liability, net of current portion…………………………………………………………….……….
Long-term debt, net of current portion ....................................................................
Total liabilities………………………………………………………………………………………….
Commitments and contingencies ..............................................................................
Stockholders’ equity:
Preferred stock, $.001 par value; authorized 5,000 shares, no shares outstanding...
Common stock, $.001 par value; authorized 50,000 and 25,000 shares, 14,399 and
13,349 shares issued and outstanding as of September 30, 2023 and December 31,
2022, respectively ..........................................................................................
Paid-in capital ....................................................................................................
Accumulated deficit ...........................................................................................
Accumulated other comprehensive loss ............................................................
Total stockholders’ equity ..........................................................................
See accompanying notes to the consolidated financial statements.
12
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Net sales ..........................................................
Cost of goods sold............................................
Gross profit ...................................................
Operating expenses:
Selling .............................................................
General and administrative ...........................
Research and development ...........................
Loss from operations .......................................
Other Income……………………………………………….
Interest Expense ..............................................
(Loss) income before income taxes .................
Provision for income taxes ..............................
Net (loss) income ............................................
Basic and diluted net loss per share ................
Basic and diluted weighted average shares
outstanding………………………………………………….
Years Ended
December 31,
2023
$13,213
9,234
3,979
1,352
2,627
1,258
5,237
(1,258)
20
(867)
(2,105)
(12)
$(2,117)
$(0.11)
2022
$18,115
12,652
5,463
1,995
3,821
1,778
7,594
(2,131)
-
(789)
(2,920)
-
$(2,920)
$(0.22)
13,993
13,281
See accompanying notes to unaudited condensed consolidated financial statements.
13
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(unaudited)
Common Stock
Shares
Amount
$13
13,349
Paid-in
Capital
$32,275
-
-
-
19
-
-
-
-
-
68
(1)
Balance at January 1, 2023
Net loss
Stock-based Compensation
Conversion of convertible subordinated debt
Stock awards for employee compensation
Balance at March 31, 2023
13,368
$13
$32,342
Net Loss
Stock-based Compensation
Conversion of convertible subordinated debt
Stock awards for employee compensation
Balance at June 30, 2023
Net loss
Stock-based Compensation
Balance at September 30, 2023
Net loss
Stock-based Compensation
Balance at December 31, 2023
-
-
-
1,031
14,399
-
-
-
-
-
1
$14
-
-
-
-
47
162
$32,551
-
42
Accumulated
Deficit
$(30,230)
(517)
-
-
$(30,747)
(715)
-
-
-
Accumulated
Other
Comprehensive
Loss
$(984)
-
-
-
-
-
-
$(984)
-
$(31,462)
$(984)
Total
$ 1,074
(517)
68
-
(1)
$624
(715)
47
-
163
$119
(338)
-
-
-
(338)
42
14,399
$14
$32,593
$(31,800)
$(984)
$(177)
-
-
-
-
-
31
(546)
-
168
-
(379)
31
14,399
$14
$32,624
$(32,346)
$(816)
$(525)
See accompanying notes to unaudited condensed consolidated financial statements.
14
BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
December 31,
2023
2022
$(2,117)
$(2,920)
Cash Flows From Operating Activities:
Net loss ..............................................................................................................
Adjustments to reconcile net loss to cash provided by operating activities:
Stock based compensation expense ................................................................
Depreciation ....................................................................................................
Amortization ...................................................................................................
(Recovery) provision for doubtful accounts……………………………………………
Provision for inventory reserves……………………………………………………………
Amortization of deferred loan costs……………………………………………………..…….
Amortization of subordinated debt discount……………………………………….……..
Noncash interest expense ……………………………………………………………………….....
Noncash pension expense…………………………………………………………………………..
Amortization of right of use assets……………………………………………………..……...
Fair value adjustment of stock awards…………………………………………………….….
Changes in operating assets and liabilities:
Accounts receivable .......................................................................................
Inventories .....................................................................................................
Prepaid and other current assets ...................................................................
Other assets ...................................................................................................
Income taxes payable…………………………………………………………………………………
Change in lease liability ..................................................................................
Accounts payable, accrued compensation and other accrued expenses ......
Net cash provided by operating activities ....................................................
Cash Flows From Investing Activities:
Purchases of property and equipment ............................................................
Acquisition of licenses......................................................................................
Net cash used in investing activities ..............................................................
Cash Flows From Financing Activities:
Net barrowing (repayments) of line of credit ..................................................
Repayments of promissory notes…………………………………………………………………
Repayments of long-term debt ........................................................................
Net cash used in financing activities ..............................................................
Net increase (decrease) in cash .........................................................................
Cash, beginning of period ..................................................................................
Cash, end of period ............................................................................................
Supplemental Cash Flow Information:
Cash paid for interest .......................................................................................
Non cash investing and financing activities:
Conversion of subordinated convertible debt to common stock……………….…
Stock paid to employees in lieu of cash……………………………………………………….
Right of use assets obtained by lease obligations…………………….....................
225
78
7
-
(90)
-
15
199
168
742
-
1,851
1,192
148
308
(12)
(336)
(389)
1,989
(641)
(6)
(647)
(1,458)
-
45
(1,413)
(71)
79
$8
$625
-
$25
571
100
25
(24)
345
60
63
176
92
766
(21)
(1,600)
543
253
(142)
(10)
(718)
1,059
(1,382)
(48)
(7)
(55)
1,987
(678)
(67)
1,242
(195)
274
$79
$453
$635
$62
$131
$3,560
See accompanying notes to unaudited condensed consolidated financial statements.
15
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Company and Basis of Consolidation
Blonder Tongue Laboratories, Inc. (together with its consolidated subsidiaries, the “Company”) is a technology-
development and manufacturing company that delivers television signal encoding, transcoding, digital transport, and
broadband product solutions to the markets the Company serves, including the telecommunications, fiber optic and cable
service provider markets, MDU market, the lodging/hospitality market and the institutional market, including campuses,
hospitals, prisons and schools, primarily throughout the United States and Canada. The consolidated financial statements
include the accounts of Blonder Tongue Laboratories, Inc. and its wholly-owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements as of December 31, 2023, and audited
December 31, 2022, have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) for financial information. The accompanying unaudited condensed consolidated interim financial
statements include all adjustments, consisting primarily of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the condensed consolidated financial position, operating results, changes in
stockholders’ equity and cash flows for the periods presented. The condensed consolidated balance sheet at December 31,
2022 has been derived from audited consolidated financial statements. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP for complete financial statements have been
condensed or omitted pursuant to OTCQXOTCQB rules and regulations. The accompanying unaudited condensed
consolidated interim financial statements should be read in conjunction with the consolidated audited financial statements
for the year ended December 31, 2022, and notes thereto.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The
Company’s significant estimates include stock-based compensation and reserves related to accounts receivable, inventories
and deferred tax assets. Actual results could differ from those estimates.
Loss Per Share
Loss per share is calculated in accordance with Accounting Standards Codification (“ASC”) ASC Topic 260
“Earnings Per Share,” which provides for the calculation of “basic” and “diluted” loss per share. Basic loss per share
includes no dilution and is computed by dividing net loss by the weighted average number of common shares outstanding
for the period. Diluted loss per share reflects, in periods in which they have a dilutive effect, the effect of potential
issuances of common shares. The diluted share base excludes the following potential common shares due to their
antidilutive effect:
Stock options
Convertible debt
Warrants
December 31,
2023
2,970
2,588
-
7,141
2022
4,718
2,297
890
6,897
16
Amortization of Debt Discount
The Company accounts for the amortization of the debt discount utilizing the effective interest method.
Adoption of Recent Accounting Pronouncements
None.
Going Concern and COVID-19
Our business has been materially and adversely affected by the outbreak of the Coronavirus or COVID-19. COVID-
19, which has been declared by the World Health Organization to be a “pandemic,” has spread to many countries, including the
United States, and is impacting domestic and worldwide economic activity. Since being declared a “pandemic”, COVID-19
interfered with our ability to meet with certain customers during 2020 and continued into the first half of 2021. In addition, the
COVID-19 outbreak has affected the supply chain for many types of products and materials, particularly those being
manufactured in China and other countries where the outbreak has resulted in significant disruptions to ongoing business
activities. Beginning in the second quarter of 2021 and continuing into the first quarter of 2022, we experienced a material
disruption in our supply chain as it relates to the procurement of certain sole source and other multiple source components utilized
in a material portion of several product lines. There are frequent developments regarding the COVID-19 outbreak that may
impact our customers, employees and business partners. As a result, it is not possible at this time to estimate the duration or the
scope of the impact COVID-19 could have on the Company's business.
As disclosed in the Company’s most recent Annual Report on Form 10-K, the Company experienced a decline in
sales, a reduction in working capital, a loss from operations and net cash used in operating activities, in conjunction with
liquidity constraints. The above factors raised substantial doubt about the Company’s ability to continue as a going
concern. As of December 31, 2023, certain of these factors still exist. Accordingly, there still exists substantial doubt
about the Company’s ability to continue as a going concern. The financial statements 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.
The Company’s primary sources of liquidity have been its existing cash balances, cash generated from operations,
amounts available under the MidCap Facility (see Note 5 below) and amounts available under the Subordinated Loan
Facility (see Note 6 below). As of December 31, 2023, the Company had approximately $2,953 outstanding under the
MidCap Facility (as defined in Note 5 below) and $201 of additional availability for borrowing under the MidCap Facility.
If anticipated operating results are not achieved and/or the Company is unable to obtain additional financing, it
may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain
operations and meet its obligations, which measures could have a material adverse effect on the Company’s ability to
achieve its intended business objectives and may be insufficient to enable the Company to continue as a going concern.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the financial statements
are issued. Based upon the evaluation, the Company did not identify any additional recognized or non-recognized
subsequent events that would require adjustment to or disclosure in the condensed consolidated financial statements except
as disclosed in Note 5.
17
Note 3– Revenue Recognition
The Company recognizes revenue when it satisfies a performance obligation by transferring the product or service
to the customer, typically at a point in time.
Disaggregation of Revenue
The Company is a technology-development and manufacturing company that delivers a wide range of products
and services to the cable entertainment and media industry. Encoder/transcoder products are used by a system operator for
encoding and transcoding of digital video. Encoders accept various input sources (analog and/or digital) and output
digitally encoded 4K, UHD, HD or SD video in various output formats. Transcoders convert video files from one codec
compression format to another to allow the video to be viewed across different platforms and devices. NXG is a two-way
forward-looking platform that is used to deliver next-generation entertainment services in both enterprise and residential
locations. Coax distribution products are used to transport signals from the headend to their ultimate destination in a home,
apartment unit, hotel room, office or other terminal location along a coax distribution network. CPE products are used by
cable operators to provide video delivery to customers using IP technology. Digital modulation products are used by a
system operator for acquisition, processing, compression, and management of digital video. Analog modulation products
are used by a system operator for signal acquisition, processing and manipulation to create an analog channel lineup for
further transmission. DOCSIS data products give service providers, integrators, and premises owners a means to deliver
data, video, and voice-over-coaxial in locations such as hospitality, MDU's, and college campuses, using IP technology
Service agreements and design includes hands-on training, system design engineering, on-site field support, remote support
and troubleshooting and complete system verification testing. Fiber optic products are used to transport signals from the
headend to their ultimate destination in a home, apartment unit, hotel room, office or other terminal location along a fiber
optic distribution network.
The following table presents the Company’s disaggregated revenues by revenue source.
Encoder and Transcoder products
NXG IP video signal processing products
Coax distribution products
CPE products
Digital modulation products
Analog modulation products
DOCSIS data products
Service agreements and design
Fiber optic products
Other
All the Company’s sales are to customers located in North America.
December 31,
2023
2022
$7,200
1,831
1,049
67
693
445
924
315
321
368
$13,213
$9,140
2,709
1,490
29
1,084
450
2,356
357
381
119
$18,115
18
Note 4 – Inventories
Inventories are summarized as follows:
Raw Materials
Work in process
Finished Goods
December 31,
2023
December 31,
2022
$1,473
1,008
384
$ 2,865
$2,052
1,743
171
3,966
Inventories are stated at the lower of cost, determined by the first-in, first-out (“FIFO”) method, or net realizable value.
The Company periodically analyzes anticipated product sales based on historical results, current backlog and marketing
plans. Based on these analyses, the Company anticipates that certain products will not be sold during the next twelve
months. Inventories that are not anticipated to be sold in the next twelve months have been written down to net realizable
value. The Company recorded a provision to reduce the carrying amounts of inventories to their net realizable value in the
amount of $3,480 and $3,571 in 2023 and 2022, respectively.
Note 5 – Debt
Line of Credit
On October 25, 2019, the Company entered into a Loan and Security Agreement (All Assets) (the “Loan
Agreement”) with MidCap Business Credit LLC (“MidCap”). The Loan Agreement provides the Company with a credit
facility comprising a $5,000 revolving line of credit (the “MidCap Facility”). The MidCap Facility matures following the
third anniversary of the Loan Agreement. Interest on the amounts outstanding under the Loan Agreement is variable, based
upon the three-month LIBOR rate, which has been amended in The Fifteenth Amendment to Term SOFR plus a margin
of 4.75% (10.24% at December 31, 2023), subject to re-set each month. All outstanding indebtedness under the Loan
Agreement is secured by all of the assets of the Company and its subsidiaries.
The Loan Agreement contains customary covenants, including restrictions on the incurrence of additional
indebtedness, the payment of cash dividends or similar distributions, the repayment of any subordinated indebtedness and
the encumbrance, sale or other disposition of assets. In addition, the Company was initially required to maintain minimum
availability of $500, with the minimum availability to be reduced to $400 upon the deliverance of an inventory appraisal
satisfactory to MidCap, which occurred during the fourth quarter 2019.
On April 7, 2020, the Company entered into a certain Consent and Amendment to Loan Agreement and Loan
Documents with Midcap (the “MidCap First Amendment”), which amended the MidCap Facility to, among other things,
remove the existing $400 availability block, subject to the same being re-imposed at the rate of approximately $7 per
month commencing June 1, 2020. The operative provisions relating to the removal of the availability block under the
MidCap First Amendment became effective on April 8, 2020, following the consummation by the Company of the
transactions contemplated by the Subordinated Loan Facility (See Note 6).
On January 8, 2021, the parties entered into a Second Amendment to Loan Agreement (the "Second
Amendment"), which amendment, revised the Loan Agreement to, among other things, modify the Loan Agreement's
definition of “Minimum EBITDA Covenant Trigger Event.” The Second Amendment amends the definition, retroactive
to and as of December 1, 2020, and also includes certain additional non-substantive changes.
On June 14, 2021, the parties entered into a Third Amendment to Loan Agreement (the "Third Amendment"),
which amendment, revised the Loan Agreement to, among other things, modify the Loan Agreement's definition of
“Minimum EBITDA Covenant Trigger Event.” The Third Amendment amends the definition, retroactive to and as of June
1, 2021, and also includes certain additional non-substantive changes.
On July 30, 2021, the parties entered into a Fourth Amendment to Loan Agreement (the "Fourth Amendment"),
which amendment, revised the Loan Agreement to, among other things, modify the Loan Agreement's definition of
“Minimum EBITDA Covenant Trigger Event.” The Fourth Amendment amends the definition, retroactive to and as of
July 1, 2021, and also includes certain additional non-substantive changes.
19
On August 26, 2021, the parties entered into a Fifth Amendment to Loan Agreement (the "Fifth Amendment"),
which amendment, revised the Loan Agreement to, among other things, (i) provide for an over-advance facility in the
maximum amount of $400, (ii) defer the monthly incremental increase to the existing availability block and (iii) modify
the Loan Agreement's definition of “Minimum EBITDA Covenant Trigger Event.” The Fifth Amendment amends the
definition, retroactive to and as of August 1,
On December 16, 2021, the parties entered into a Sixth Amendment to Loan Agreement (the “Sixth
Amendment”), which amendment, revised the Loan Agreement to, among other things modify the Loan Agreement's
definition of "Borrowing Base" (with such amendment retroactive to and effective as of December 15, 2021), and also
includes certain additional non-substantive changes.
On February 11, 2022, the parties entered into a Seventh Amendment to Loan Agreement (the “Seventh
Amendment”), which amendment, revised the Loan Agreement to, among other things modify the Loan Agreement's
definition of "Borrowing Base" and “Availability Block,” and also includes certain additional non-substantive changes.
On March 3, 2022, the parties entered into an Eighth Amendment to Loan Agreement (the “Eighth
Amendment”), which amendment, revised the Loan Agreement to, among other things modify the Loan Agreement's
definition of "Borrowing Base" and “Availability Block,” and also includes certain additional non-substantive changes.
On April 5, 2022, the Company entered into a Ninth Amendment to Loan Agreement (the “Ninth Amendment”).
Among other things, the amendment modified the Loan Agreement's definition of "Borrowing Base" so as to provide for
an over-advance facility (the “2022 Over-Advance Facility”) in an aggregate amount of up to $1,000. MidCap's
agreement to enter into the Ninth Amendment was conditioned, in part, on the entry into a participation agreement between
MidCap and Robert J. Pallé, a Director, and an affiliate of Mr. Pallé (the “Pallé Parties”). The terms of the Ninth
Amendment and the participation agreement contemplate that any advances made by Midcap pursuant to the 2022 Over-
Advance Facility would be funded by the Pallé Parties under the participation agreement. Advances under the 2022 Over-
Advance Facility are subject to the discretion of MidCap and the Pallé Parties. On April 5, 2022, pursuant to the 2022
Over-Advance Facility and the participation agreement, the Pallé Parties funded an initial advance of $200 that was
provided to the Company. Since April 5, 2022, a total of $1,175 was made by Midcap to the Company, which was funded
by the Pallé Parties. Further advances may be made to the Company upon its request, subject to the discretion of MidCap
and the Pallé Parties, in minimum amounts of not less than $100 per tranche, unless a lesser amount is agreed to by the
parties. The amount advanced in each tranche will bear an interest rate of 1% per month.
On May 5, 2022, the parties entered into a Tenth Amendment to Loan Agreement (the "Tenth Amendment"),
which amendment, revised the Loan Agreement to, among other things, modify the Loan Agreement's definition of
“Minimum EBITDA Covenant Trigger Event.” The Tenth Amendment amends the definition, retroactive to and as of
January 1, 2022, and also includes certain additional non-substantive changes.
On June 14, 2022, the parties entered into a Eleventh Amendment to Loan Agreement (the "Eleventh
Amendment"), which amendment, revised the Loan Agreement to, among other things, (i) modify the Loan Agreement's
definition of “Borrowing Base” to extend the Company’s WIP advance and the amortization of the Company’s over
advance facility until July 1, 2022, and (ii) delete in its entirety from the Loan Agreement the Company’s minimum
EBITDA covenant and also includes certain additional non-substantive changes.
On July 1, 2022, the parties entered into a Twelfth Amendment to Loan Agreement (the "Twelfth Amendment"),
which amendment, revised the Loan Agreement to, among other things, modify the Loan Agreement's definition of
“Borrowing Base” to extend the Company’s WIP advance and the amortization of the Company’s over advance facility
until July 15, 2022., and also includes certain additional non-substantive changes.
On October 25, 2022, the parties entered into a Thirteenth Amendment to Loan Agreement (the "Thirteenth
Amendment"), which amendment, revised the Loan Agreement to extend the mature date of the MidCap Facility to
October 28, 2022.
On October 28, 2022, the parties entered into a Fourteenth Amendment to Loan Agreement (the "Fourteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extended the mature date of the
MidCap Facility to June 30, 2023, modify the Loan Agreement's definition of “Borrowing Base” to extend the Company’s
WIP advance and the amortization of the Company’s over advance facility until December 1, 2022, increased the 2022
Over Advance Facility to $1,500 and also includes certain additional non-substantive changes.
20
On July 5, 2023, the parties entered into a Fifteenth Amendment to Loan Agreement (the "Fifteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to September 30, 2023, modify the Loan Agreement's definition of “Borrowing Base” to extend the
Company’s Over-Advance Facility to $400,000, which such amount shall, commencing on August 7, 2023 and continuing
on the first Business Day of each succeeding calendar week, be reduced by $25,000 per week until such amount reaches
$0. The Fifteenth Amendment amends the definition, retroactive to and as of June 30, 2023, and also, includes certain
additional non-substantive changes.
On August 28, 2023, the parties entered into a Sixteenth Amendment to Loan Agreement (the "Sixteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to November 30, 2023, modify the Loan Agreement's definition of “Borrowing Base” to extend the
Company’s Over-Advance Facility to $400,000, which such amount shall, commencing on August 28, 2023 and continuing
on the first Business Day of each succeeding calendar week, be reduced by $10,000 per week until such amount reaches
$350,000, and also, includes certain additional non-substantive changes.
On November 30, 2023, the parties entered into a Seventeenth Amendment to Loan Agreement (the "Seventeenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to January 31, 2024.
On January 30, 2024, the parties entered into a Eighteenth Amendment to Loan Agreement (the "Eighteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to March 31, 2024.
On April 01, 2024, the parties entered into a Nineteenth Amendment to Loan Agreement (the "Nineteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to May 31, 2024.
Note 6 – Subordinated Convertible Debt with Related Parties
On April 8, 2020, the Company, as borrower, together with Livewire Ventures, LLC (wholly owned by the
Company’s Chief Executive Officer, Edward R. Grauch), MidAtlantic IRA, LLC FBO Steven L. Shea IRA (an IRA
account for the benefit of the Company’s Chairman of the Board, Steven Shea), Carol M. Pallé and Robert J. Pallé
(Company Director and employed as Managing Director-Strategic Accounts) , Anthony J. Bruno (Company Director), and
Stephen K. Necessary (Company Director) , as lenders (collectively, the “Initial Lenders”) and Robert J. Pallé, as Agent
for the Lenders (in such capacity, the “Agent”) entered into a certain Senior Subordinated Convertible Loan and Security
Agreement (the “Subordinated Loan Agreement”), pursuant to which the lenders from time to time party thereto were
permitted to provide up to $1,500 of loans to the Company (the “Subordinated Loan Facility”). Interest accrues on the
outstanding amounts advanced under the Subordinated Loan Facility at the rate of 12% per annum, compounded and
payable monthly, in-kind, by the automatic increase of the principal amount of the loan on each monthly interest payment
date, by the amount of the accrued interest payable at that time (“PIK Interest”); provided, however, that at the option of
the Company, it may pay interest in cash on any interest payment date, in lieu of PIK Interest.
On April 8, 2020, the Initial Lenders agreed to provide the Company with a Tranche A term loan facility of $800
of which $600 was advanced to the Company on April 8, 2020, $100 was advanced to the Company on April 17, 2020 and
$100 was advanced to the Company on January 12, 2021. The Initial Lenders participating in the Tranche A term loan
facility have the option of converting the principal balance of the loan held by each of them, in whole (unless otherwise
agreed by the Company), into shares of the Company’s common stock at a conversion price equal to the volume weighted
average price of the common stock as reported by the NYSE American, during the five trading days preceding April 8,
2020 (the “Tranche A Conversion Price”) which was calculated at $0.593. The conversion right was subject to
stockholder approval as required by the rules of the NYSE American, which was obtained on June 11, 2020.
On April 24, 2020, the Company, the Initial Lenders, Ronald V. Alterio (the Company’s Senior Vice President-
Engineering, Chief Technology Officer) and certain additional unaffiliated investors (the “Additional Lenders,” and,
together with the Initial Lenders, the “Lenders”) entered into the First Amendment to Senior Subordinated Convertible
Loan and Security Agreement and Joinder (the “Amendment”). The Amendment provides for the funding of $200 of
additional loans under the Subordinated Loan Facility as a Tranche B term loan established under the Subordinated Loan
21
Agreement, with such loans being provided by the Additional Lenders. The Amendment also sets the conversion price of
$0.55 (the “Tranche B Conversion Price”) with respect to the right of the Additional Lenders to convert the accreted
principal balance of the loans held by each of them into shares of the Company’s common stock. The terms and conditions
of the conversion rights applicable to the Initial Lenders and the Additional Lenders are otherwise identical in all material
respects, including the terms restricting conversion to an aggregate amount of shares of common stock that would not
result in the Company’s non-compliance with NYSE American rules requiring stockholder approval of issuances or
potential issuances of shares in excess of the percentage limits specified therein or in an amount that may be deemed to
constitute a change of control under such rules. These restrictions were eliminated when the requisite stockholder approval
was obtained on June 11, 2020.
On October 29, 2020, the additional unaffiliated investors as described above, submitted irrevocable notices of
conversion under the Tranche B Term Loan. As a result, $175 of original principal and $11 of PIK interest outstanding
under the Tranche B Term Loan were converted into 338 shares of Company common stock in full satisfaction of their
indebtedness.
On January 28, 2021, the Company entered into the Third Amendment to Senior Subordinated Convertible Loan
and Security Agreement and Joinder (the “LSA Third Amendment”) with the Tranche A Parties, the Tranche B Parties
(that had not previously converted the loans attributable to each of them into shares of common stock), the Agent and
certain other investors (the “Tranche C Parties”). Pursuant to the LSA Third Amendment, the parties agreed to increase
the aggregate loan limit from $1,500 to $1,600 and the Tranche C Parties agreed to provide the Company with a
commitment for a $600 term loan facility, all of which was advanced to the Company on January 29, 2021 (the “Tranche
C Loans”). As is the case with the loans provided by the Tranche A Parties and Tranche B Parties, interest on the Tranche
C Loans accrues at 12% per annum and is payable monthly in-kind, by the automatic increase of the principal amount of
the loans on each monthly interest payment date, by the amount of the accrued interest payable at that time. The Company,
at its option, may pay any interest due on the Tranche C Loans in cash on any interest payment date in lieu of PIK Interest.
The Tranche C Parties also have the option, following the stockholder approval described in the next sentence, of
converting the accreted principal balance of the Tranche C Loans attributable to each of them into shares of the Company’s
common stock at a conversion price of $1.00. The conversion rights are subject to the terms and conditions applicable to
the Tranche C Parties restricting conversion of the Tranche C Loans to an aggregate amount of shares of common stock
that would not result in the Company’s non-compliance with NYSE American rules requiring stockholder approval of
issuances or potential issuances of shares in excess of the percentage limits specified therein. These restrictions were
eliminated when the requisite stockholder approval was obtained on March 4, 2021. As the stock price was $1.31 on March
4, 2021, the Company recorded a discount of $186 relating to the difference in stock price due to the beneficial conversion
feature. The Company issued 42 warrants at an exercise price of $1.00 to a placement agent in connection with the Tranche
C Loans. The warrants have a five-year term from January 28, 2021.
On March 15, 2021, one of the Tranche C Parties submitted an irrevocable notice of conversion under the Tranche
C Loans. As a result, $100 of original principal and $1 of PIK interest outstanding under the Tranche C Loans were
converted into 101 shares of Company common stock in partial satisfaction of their indebtedness.
On April 6, 2021, the same Tranche C Party submitted an irrevocable notice of conversion under the Tranche C
Loans. As a result, $50 of original principal and $1 of PIK interest outstanding under the Tranche C Loans were converted
into 51 shares of Company common stock in partial satisfaction of their indebtedness.
On May 24, 2021, the same Tranche C Party submitted an irrevocable notice of conversion under the Tranche C
Loans. As a result, $50 of original principal and $2 of PIK interest outstanding under the Tranche C Loans were converted
into 52 shares of Company common stock in complete satisfaction of their indebtedness.
On January 21, 2022, one of the Tranche A Parties submitted an irrevocable notice of conversion under the
Tranche A Loans. As a result, $50 of original principal and $12 of PIK interest outstanding under the Tranche A Loans
were converted into 104 shares of Company common stock in complete satisfaction of their indebtedness.
The obligations of the Company under the Subordinated Loan Agreement are guaranteed by Drake and are
secured by substantially all of the Company’s and Drake’s assets. The Subordinated Loan Agreement has a maturity date
three years from the date of closing, at which time the accreted principal balance of the loan (by virtue of the PIK Interest)
plus any other accrued unpaid interest, would be due and payable in full. In connection with the Subordinated Loan
Agreement, the Company, Drake, the Lenders and MidCap entered into a Subordination Agreement (the “Subordination
Agreement”), pursuant to which the rights of the Lenders under the Subordinated Loan Agreement were subordinated to
22
the rights of MidCap under the MidCap Agreement and related security documents. The Subordination Agreement
precludes the Company from making cash payments of interest in lieu of PIK Interest, in the absence of the prior written
consent of MidCap or unless the Company is able to meet certain predefined conditions precedent to the making of any
such payments of interest (or principal), as more fully described in the Subordination Agreement. The Company accrued
$214 and $176 of PIK Interest with respect to the Subordinated Loan Facility for the year ended December 31, 2023 and
2022, respectively. The Company recorded zero and $63 of interest expense related to the amortization of the debt discount
for the year ended December 31, 2023 and 2022, respectively.
Note 7 – Concentration of Credit Risk
The following table summarizes credit risk with respect to customers as percentage of sales for the year ended
December 31, 2023 and 2022:
Customer A……………………………………………………….
Customer B……………………………………………………….
Customer C……………………………………………………….
Customer D……………………………………………………….
December 31,
2023
23%
16%
8%
11%
2022
-
14%
13%
-
The following table summarizes credit risk with respect to customers as percentage of accounts receivable:
Customer A ................................................................................................
Customer B ................................................................................................
Customer C ................................................................................................
Customer E .................................................................................................
December 31,
2023
12%
1%
24%
28%
2022
9%
16%
18%
-
The following table summarizes credit risk with respect to vendors as percentage of purchases for the year ended
December 31, 2023 and 2022:
Vendor A……………………………………………………….
Vendor B……………………………………………………….
Vendor C……………………………………………………….
December 31,
2023
32%
14%
10%
2022
19%
22%
-
The following table summarizes credit risk with respect to vendors as percentage of accounts payable:
Vendor A ....................................................................................................
Vendor B ....................................................................................................
Vendor D ....................................................................................................
Note 8 – Commitments and Contingencies
Leases
December 31,
2023
26%
12%
17%
2022
19%
17%
16%
The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an
asset under a leasing arrangement with an initial term greater than twelve months. The Company leases its real estate and
23
certain office equipment under non-cancellable operating leases, and certain office and factory equipment under non-
cancellable financing leases.
The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an
operating or financing lease and recognizes the ROU asset and lease liabilities based on the present value of future
minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest
rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar
collateralized basis over a similar term in order to determine the present value of its lease payments.
The following table summarizes the Company’s operating and financing lease expense for years ending December
31, 2023 and 2022, respectively:
Operating lease cost
Financing lease cost
Total
Weighted average remaining lease term
Weighted average discount rate-operating leases
December 31,
2023
945
288
1,233
5.1
7.2%
2022
947
66
1,013
6.1
6.5%
Maturities of the Company’s operating leases as of December 31, 2023, excluding short term leases are as follows:
2024
2025
2026
2027
2028
Thereafter
Total
Less: present value discount
Total operating lease liabilities
$
$
957
971
995
1,019
1,043
87
5,071
(119)
4,952
ITEM 3. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s historical results of operations and liquidity and capital
resources should be read in conjunction with the consolidated financial statements of the Company and notes thereto
appearing elsewhere herein. The following discussion and analysis also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of various factors. See “Forward Looking Statements” that precedes Item 1 above.
Results of Operations
For the year ended December 31, 2023 compared with the year ended December 31, 2022.
Net Sales. Net sales decreased $4,902,000 or 27.1%, to $13,213,000 in 2023 from $18,115,000 in 2022. The
decrease is primarily attributable to a decrease in sales of encoder/transcoder products, coax distribution products, digital
modulation products, NXG products and DOCSIS data products, offset by an increase in sales of test equipment. Sales of
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encoder/transcoder products were $7,200,000 and $9,140,000, coax distribution products were $1,049,000 and $1,490,000,
digital modulation products were $693,000 and $1,084,000, NXG products were $1,831,000 and $2,709,000, DOCSIS
data products were $924,000 and $2,356,000, test equipment products were $328,000 and $54,000 in the years of 2023
and 2022, respectively. The Company experienced a decrease in coax distribution products, NXG products, and digital
modulation products due to the ability in 2022 to ship the backlog of orders caused by the pandemic. The Company
experienced a reduction in DOCSIS products and encoder/transcoder products due to a decrease in demand.
Cost of Goods Sold. Cost of goods sold decreased to $9,234,000 in 2023 from $12,652,000 in 2022 and remained
the same as a percentage of sales at 70.0%.
Selling Expenses. Selling expenses decreased to $1,352,000 in 2023 from $1,995,000 in 2022 and decreased as
percentage of sales to 10.2% in 2023 from 11.0% in 2022. The $643,000 decrease was primarily the result of a decrease
in freight expense of $24,000, travel expense of $34,000, maintenance expense of $35,000, rent expense of $57,000,
tradeshow and advertising expense of $70,000 and salaries and fringe benefits due to a decrease in head count of $344,000.
General and Administrative Expenses. General and administrative expenses decreased to $2,627,000 in 2023
from $3,821,000 in 2022 and decreased as a percentage of sales to 19.9% in 2023 from 21.1% in 2022. The $1,194,000
decrease was primarily the result of a decrease in salaries and fringe benefits of $540,000, a reduction in legal fees of
$299,000, a reduction in consulting fees of $107,000, a reduction in auditing fees of $86,000, a reduction in reporting fees
of $49,000, and a reduction in maintenance expense of $31,000.
Research and Development Expenses. Research and development expenses decreased to $1,258,000 in 2023
from $1,778,000 in 2022 and decreased as a percentage of sales to 9.5% in 2023 from 9.8% in 2022. This $520,000
decrease is primarily the result of a decrease in salaries and fringe benefits of $517,000 due to decreased head count, a
reduction in rent expense of $22,000, a reduction in product testing fees of $12,000, offset by an increase in consulting
fees of $77,000.
Operating Loss. Operating loss of $(1,258,000) in 2023 represents an improvement from the operating loss of
$(2,131,000) in 2022. Operating loss as a percentage of sales was (9.5)% in 2023 compared to (11.8)% in 2022.
Interest Expense. Interest expense increased to $867,000 in 2023 from $789,000 in 2022. The increase is
primarily the result of higher average borrowing and higher interest rates, including an increase of $12,000 of PIK interest.
Inflation and Seasonality
Inflation and seasonality have not previously had a material impact on the results of operations of the Company.
However, beginning in early 2022, the Company began to experience inflationary pressures related to the procurement of
certain products used in its manufacturing process which continued in 2023, and expects these pressures to continue into
2024. To date we have been successful in passing on cost increases to our customers and will continue to attempt to pass
on increases to customers. However, there can be no assurances that the Company will continue to be able to do so.
Liquidity and Capital Resources
Unless we significantly improve revenue and significantly decrease operational expenses, we do not believe our
existing liquidity and cash flows from operations are adequate to fund our normal expected future business operations for
the next 12 months. If our existing capital resources or cash flows become insufficient to meet current business plans,
projections, and existing capital requirements, we may be required to raise additional funds, which may not be available
on favorable terms, if at all. As of December 31, 2023, and December 31, 2022, cash held in bank accounts and loan
availability were $281,000 and $687,000, respectively. Our capital commitments over the next twelve months include (a)
$3,329,000 to satisfy December 31, 2023, accounts payable, accrued expense and lease liabilities and (b) renegotiating an
extension of the Subordinated Debt Agreements.
We do not believe that our current cash flows from operations would be adequate to fund our normal expected
future operations for the long term unless we improve revenue and significantly decrease operational expenses. If our
existing capital resources or cash flows become insufficient to meet anticipated business plans and existing capital
requirements, we may be required to raise additional funds, which may not be available on favorable terms, if at all.
25
The Company’s working (deficit) capital was $(1,618,000) and $(189,000) on December 31, 2023, and December
31, 2022, respectively. The decrease in working capital was primarily due to a decrease in accounts receivable.
The Company’s net cash provided by operating activities for the year ended December 31, 2023, was $1,989,000
primarily due to a decrease in accounts receivable of $1,851,000, compared to net cash used in operating activities for the
year ended December 31, 2022 was $1,382,000, primarily due to an increase in receivables of $1,600,000, a decrease in
lease liability of $718,000, a decrease in prepaid and other current assets of $253,000, offset by an increase in accounts
payable accrued expenses and accrued compensation of $1,059,000 and non-cash adjustments used in operating activities
of $2,153,000.
Cash used in investing activities for the year ended December 31, 2023, was $647,000 due to increase in capital
expenditures of $641,000, and the acquisition of licenses of $6,000. Cash used in investing activities for the year ended
December 31, 2022, was $55,000, which was attributable primarily to capital expenditures of $48,000 and the acquisition
of licenses of $7,000.
Cash used in financing activities was $1,413,000 for the year ended December 31, 2023, was comprised of net
repayments of the line of credit of $1,458,000 offset by the financing of manufacturing machinery of $45,000. Cash
provided by financing activities was $1,242,000 for the year ended December 31, 2022, comprised primarily of net
borrowings of line of credit of $1,987,000, offset by repayments of debt of $67,000 and repayment of promissory notes of
$678,000.
For a full description of the Company’s senior secured indebtedness under the MidCap Facility and its effect upon
the Company’s consolidated financial position and results of operations, see Note 5 – Debt of the Notes to Condensed
Consolidated Financial Statements.
The Company’s primary sources of liquidity have been its existing cash balances, cash generated from operations,
amounts available under the MidCap Facility and amounts available under the Subordinated Loan Facility. On a going-
forward basis, the Company expects its primary sources of liquidity will be its existing cash balances, cash generated from
operations and amounts available under the MidCap Facility. The Company also may seek to raise additional capital
through the issuance of shares of common stock or other securities convertible into, or exercisable for, shares of common
stock, although the Company cannot provide any assurances that this type of additional financing will be available on
reasonable terms, or at all. As of December 31, 2023, the Company had approximately $2,953,000 outstanding under the
MidCap Facility and $201,000 of additional availability for borrowing under the MidCap Facility.
As previously disclosed, on February 1, 2019, the Company completed the sale of the Old Bridge Facility to Jake
Brown Road, LLC (the “Buyer”). In addition, in connection with the completion of the sale, the Company and the Buyer
(as landlord) entered into a lease (the “Lease”), pursuant to which the Company will continue to occupy, and continue to
conduct its manufacturing, engineering, sales and administrative functions in the Old Bridge Facility.
The Lease has an initial term of five years and allows the Company to extend the term for an additional five years
following the initial term. The Company was obligated to pay base rent of approximately $837,000 for the first year of the
Lease, with the amount of the base rent adjusted for each subsequent year to equal 102.5% of the preceding year’s base
rent. Without regard to any reduction in the Company’s lease expense derived from its sublease to a third party of the
Sublease Space (defined below), for the first year of the Lease, the base rent of approximately $837,000.00 would offset,
in part, the anticipated annualized saving of interest and depreciation expense of approximately $469,000 and the cash
debt service of approximately $562,000. The Lease further provides for an initial security deposit in an amount equal to
eight months of base rent, which could be reduced to not lower than three months of base rent, upon certain benchmarks
being met during the Lease term. It was determined in the first quarter 2020 that the applicable benchmark relevant to the
six-month period ended August 1, 2019 was met and as a result the landlord released a portion of the security deposit equal
to one month’s base rent to the Company, leaving an aggregate security deposit held by the landlord, in an amount equal
to seven months of base rent. Subsequently, the Company determined in the third quarter 2020 that the applicable
benchmark relevant to the six-month period ended August 1, 2020 was met and as a result, the Company notified the
landlord in writing that it would offset rent otherwise due on August 1, 2020 against the reimbursement of a portion of the
security deposit equal to one month’s base rent, leaving an aggregate security deposit held by the landlord, in an amount
equal to six months of base rent. The landlord expressed its disagreement with the Company’s interpretation of the lease
and requested the provision of financial information to support the Company’s contention or in the alternative payment of
the offset amount. Subsequently, no further actions or communications regarding the offset were made by the landlord and
26
the Company thereafter, beginning with September 2020, resumed timely payments of its rental obligations under the
Lease. In early 2021, the Company undertook an analysis of the common area maintenance charges being assessed under
the Lease in an effort to reconcile those payments with the specific terms of the Lease. The Lease provides that this
reconciliation is to be accomplished by the landlord annually, however this has not occurred. The Company’s analysis
indicates that it may have been overcharged for common area maintenance expenses since the inception of the Lease and
submitted supporting data to the landlord, requesting that the landlord review the submission against its records. The
Company has also requested that the landlord release from escrow and return to the Company, the unexpended balance of
the Repair Escrow. The landlord and the Company anticipated resolving the reconciliation of the common area
maintenance charges and Repair Escrow release request during the month of February 2021 and with the prior oral approval
of the landlord, the Company refrained from paying February 2021 rent, expecting that the reconciliation would be
completed prior to the end of that month. Inasmuch as the disputed amounts, in the opinion of the Company, exceed three
months’ rent and common area maintenance expenses, the Company refrained from the payment of base rent and common
area maintenance charges for the months of February 2021 and March 2021, it being the expectation of the parties that
these amounts will be credited against the amount finally determined to be reimbursed to the Company. Without prejudice
to the Company’s positions regarding these matters, and without creating any inference that the Company agrees with any
of the landlord’s claims or waiving any rights available to the Company under the Lease or otherwise, on May 5, 2021, the
Company made payment to the landlord of $140,000, representing all amounts that the landlord then claimed were due.
Further information is discussed herein in the section entitled Item 4.
The landlord may, once during the lease term or any renewal thereof, require the Company to relocate to another
facility made available by the landlord that meets the Company’s specifications for a replacement facility within a defined
geographical area, by providing notice which confirms that all of the Company’s specifications for a replacement facility
will be met, that all costs relating to such relocation will be paid by the landlord, and that security for the repayment of
those relocation costs has been established. The Company will also be provided a six-month overlap period (the “Overlap
Period”) during which the Company may operate in the Old Bridge Facility with rent therein being abated, but with rent
being paid at the replacement facility, to mitigate interruptions of the Company’s on-going business while the move occurs.
If the Company declines to be relocated to the facility proposed by the landlord, the Lease will terminate 18 months from
the date of the landlord’s notice, but the Company will continue to be entitled to receive the same benefits in terms of
reimbursement of its relocation costs and an Overlap Period during which no rent will be due at the Old Bridge Facility,
while the Company moves its operations to an alternative facility that it has identified.
On December 31, 2019, the Company entered into a two-year sublease to a third party for 32,500 square feet of
the Old Bridge Facility (the “Sublease Space”) which commenced on March 1, 2020, the rental proceeds from which inure
to the benefit of the Company. The sublease also provides for a one-year renewal option, which was exercised in January
2022. In February of 2023, the sublease was extended for an additional three years ending on February 28, 2026. The
extension of the sublease provides rental income approximately $342,000 in the first year, approximately $353,000 in the
second year and approximately $367,000 in the third year of the sublease.
During 2023, the Company continued to experience a decline in sales, a loss from operations and net cash used
in operating activities, in conjunction with liquidity constraints. These factors raised substantial doubt about the Company’s
ability to continue as a going concern. Accordingly, there still exists substantial doubt about the Company’s ability to
continue as a going concern. The financial statements 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.
While management of the Company believes that the Company will be successful in its planned operating
activities, there can be no assurance that the Company will be successful in generating sufficient revenues and reduced
expenses to sustain the operations of the Company. If anticipated operating results are not achieved and/or the Company
is unable to obtain additional financing, it may be required to take additional measures to reduce costs in order to conserve
its cash in amounts sufficient to sustain operations and meet its obligations, which measures could have a material adverse
effect on the Company’s ability to achieve its intended business objectives and may be insufficient to enable the Company
to continue as a going concern for at least twelve months from the date these financial statements are made available to be
issued.
Beginning in the middle of 2019, the Company experienced a significant decline in its net sales of core or legacy
products, which while not recovering to historical norms, stabilized during the early part of the first quarter of 2020.
Beginning in February 2020, however, as the prospects of an ever-worsening outbreak of COVID-19 took hold, the
Company began to experience adverse impacts to revenues across all of its product lines. Sales of the Company’s products
27
did not return to historical norms during 2021 or 2022. The Company still does not anticipate that sales will recover to
historical norms during 2023, due primarily to supply chain shortages impacting the Company’s ability to source raw
materials used in the manufacturing process. In light of these developments and as detailed below, the Company has taken
significant steps during the past year, implemented in several phases, in order to manage operations through what has been
a period of diminished sales levels.
As part of its efforts to improve liquidity and provide operating capital, on April 7, 2020, the Company entered
into a certain Consent and Amendment (the “MidCap First Amendment”) to Loan Agreement and Loan Documents with
Midcap (the “MidCap Loan Agreement”), which amended the MidCap Facility to, among other things, remove the
existing $400,000 availability block, subject to the same being re-imposed at the rate of approximately $7,000 per month
commencing June 1, 2020. The operative provisions relating to the removal of the availability block under the MidCap
First Amendment became effective on April 8, 2020, following the consummation by the Company of the transactions
contemplated by the Subordinated Loan Facility (defined below).
On April 5, 2022, the Company entered into a Ninth Amendment to the MidCap Loan Agreement (the “MidCap
Ninth Amendment”). Among other things, the amendment modified the MidCap Loan Agreement’s definition of
“Borrowing Base” so as to provide for an over-advance facility (the “2022 Over-Advance Facility”) in an aggregate
amount of up to $1,000,000. MidCap’s agreement to enter into the MidCap Ninth Amendment was conditioned, in part,
on the entry into a participation agreement between MidCap and Robert J. Palle, a Director, and an affiliate of Mr. Palle
(the “Palle Parties”). The terms of the MidCap Ninth Amendment and the participation agreement contemplate that any
advances made by Midcap pursuant to the 2022 Over-Advance Facility would be funded by the Palle Parties under the
participation agreement. Advances under the 2022 Over-Advance Facility are subject to the discretion of MidCap and the
Palle Parties. On April 5, 2022, pursuant to the 2022 Over-Advance Facility and the participation agreement, the Palle
Parties funded an initial advance of $200,000 that was provided to the Company. From April 5, 2022 to December 23,
2022, a total of $975,000 was made by Midcap to the Company, which was funded by the Palle Parties. Further advances
may be made to the Company upon its request, subject to the discretion of MidCap and the Palle Parties, in minimum
amounts of not less than $100,000 per tranche, unless a lesser amount is agreed to by the parties. The amount advanced in
each tranche will bear an interest rate of 1% per month.
On May 5, 2022, the Company entered into a Tenth Amendment to MidCap Loan Agreement (the “MidCap
Tenth Amendment”), to, among other things, modify the MidCap Loan Agreement’s definition of “Minimum EBITDA
Covenant Trigger Event.” The MidCap Tenth Amendment amends the definition, retroactive to and as of January 1, 2022.
All other substantive terms of the MidCap Loan Agreement continue in full force and effect.
On June 14, 2022, the Company entered into an Eleventh Amendment to MidCap Loan Agreement (the “MidCap
Eleventh Amendment”), to, among other things, (i) modify the MidCap Loan Agreement’s definition of “Borrowing
Base” to extend the Company’s WIP advance and the amortization of the Company’s over-advance facility until July 1,
2022, and (ii) delete in its entirety from the MidCap Loan Agreement the Company’s minimum EBITDA covenant. All
other substantive terms of the Loan Agreement continue in full force and effect.
On July 1, 2022, the Company entered into a Twelfth Amendment to MidCap Loan Agreement (the “Twelfth
Amendment”), to, among other things, modify the Loan Agreement’s definition of “Borrowing Base” to extend the
Company’s WIP advance and the amortization of the Company’s over-advance facility until July 15, 2022. All other
substantive terms of the Loan Agreement continue in full force and effect.
On October 25, 2022, the Company entered into a Thirteenth Amendment to MidCap Loan Agreement (the
“Thirteenth Amendment”), to, among other things, extend the expiration date of the Loan Agreement to October 28,
2022.
On October 28, 2022, the Company entered into a Fourteenth Amendment to MidCap Loan Agreement (the
“Fourteenth Amendment”), to, among other things, extend the expiration date of the Loan Agreement to June 30, 2023,
modify the definition of “Borrowing Base” to extend the Company’s WIP advance and the amortization of the Company’s
over-advance facility until December 1, 2022 and increase the 2022 over advance facility to $1,500,000. As of May 31,
2023 a total of $1,175,000 was made by MidCap to the Company, under the 2022 over advance facility. All other
substantive terms of the Loan Agreement continue in full force and effect.
On July 5, 2023, the parties entered into a Fifteenth Amendment to Loan Agreement (the "Fifteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
28
MidCap Facility to September 30, 2023, modify the Loan Agreement's definition of “Borrowing Base” to extend the
Company’s Over-Advance Facility to $400,000, which such amount shall, commencing on August 7, 2023 and continuing
on the first Business Day of each succeeding calendar week, be reduced by $25,000 per week until such amount reaches
$0. The Fifteenth Amendment amends the definition, retroactive to and as of June 30, 2023, and also, includes certain
additional non-substantive changes.
On August 28, 2023, the parties entered into a Sixteenth Amendment to Loan Agreement (the "Sixteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to November 30, 2023, modify the Loan Agreement's definition of “Borrowing Base” to extend the
Company’s Over-Advance Facility to $400,000, which such amount shall, commencing on August 28, 2023 and continuing
on the first Business Day of each succeeding calendar week, be reduced by $10,000 per week until such amount reaches
$350,000, and also, includes certain additional non-substantive changes.
On November 30, 2023, the parties entered into a Seventeenth Amendment to Loan Agreement (the "Seventeenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to January 31, 2024.
On January 30, 2024, the parties entered into a Eighteenth Amendment to Loan Agreement (the "Eighteenth
Amendment"), which amendment, revised the Loan Agreement to, among other things, extend the maturity date of the
MidCap Facility to March 31, 2024.
On April 8, 2020, the Company, as borrower, together with Livewire Ventures, LLC (wholly owned by the
Company’s former Chief Executive Officer, Edward R. Grauch), MidAtlantic IRA, LLC FBO Steven L. Shea IRA (an
IRA account for the benefit of the Company’s Chairman of the Board, Steven Shea), Carol M. Pallé and Robert J. Pallé,
Anthony J. Bruno, and Stephen K. Necessary, as lenders (collectively, the “Initial Lenders”) and Robert J. Pallé, as Agent
for the Lenders (in such capacity, the “Agent”) entered into a certain Senior Subordinated Convertible Loan and Security
Agreement (the “Subordinated Loan Agreement”), pursuant to which the lenders from time to time party thereto may
provide up to $1,500,000 of loans to the Company (the “Subordinated Loan Facility”). Interest accrues on the outstanding
amounts advanced under the Subordinated Loan Facility at the rate of 12% per annum, compounded and payable monthly,
in-kind, by the automatic increase of the principal amount of the loan on each monthly interest payment date, by the amount
of the accrued interest payable at that time (“PIK Interest”); provided, however, that at the option of the Company, it may
pay interest in cash on any interest payment date, in lieu of PIK Interest.
On April 8, 2020, the Initial Lenders agreed to provide the Company with a Tranche A term loan facility of
$800,000, of which $600,000 was advanced to the Company on April 8, 2020, $100,000 was advanced to the Company
on April 17, 2020 and $100,000 was advanced to the Company on January 12, 2021. The Initial Lenders participating in
the Tranche A term loan facility have the option of converting the principal balance of the loan held by each of them, in
whole (unless otherwise agreed by the Company), into shares of the Company’s common stock, at a conversion price equal
to the volume weighted average price of the common stock as reported by the NYSE American, during the five trading
days preceding April 8, 2020 (the “Tranche A Conversion Price”) which was calculated at $0.593. The conversion right
was subject to stockholder approval as required by the rules of the NYSE American, and was obtained on June 11, 2020
at the Company’s annual meeting of stockholders.
On April 24, 2020, the Company, the Initial Lenders and Ronald V. Alterio (the Company’s Senior Vice
President-Engineering, Chief Technology Officer) and certain additional unaffiliated investors (the “Additional
Lenders,” and, together with the Initial Lenders, the “Lenders”) entered into the First Amendment to Senior Subordinated
Convertible Loan and Security Agreement and Joinder (the “Amendment”). The Amendment provides for the funding of
$200,000 of additional loans as a Tranche B term loan under the Subordinated Loan Facility established under the
Subordinated Loan Agreement, with such loans being provided by the Additional Lenders. The Amendment also sets the
conversion price of $0.55 (the “Tranche B Conversion Price”) with respect to the right of the Additional Lenders to
convert the accreted principal balance of the loans held by each of them into shares of the Company’s common stock. The
terms and conditions of the conversion rights applicable to the Initial Lenders and the Additional Lenders are otherwise
identical in all material respects, including the terms restricting conversion to an aggregate amount of shares of common
stock that would not result in the Company’s non-compliance with NYSE American rules requiring stockholder approval
of issuances or potential issuances of shares in excess of the percentage limits specified therein or in an amount that may
be deemed to constitute a change of control under such rules. These restrictions terminated as the requisite stockholder
approval was obtained on June 11, 2020 at the Company’s annual meeting of stockholders.
29
On April 10, 2020, the Company received loan proceeds of approximately $1,769,000 (“PPP Loan”) under the
Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security
Act (“CARES Act”), provided for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll
expenses of the qualifying business. The PPP Loan and accrued interest are forgivable after twenty-four weeks (the
“Covered Period”) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent
and utilities, and maintains its payroll levels. The amount of loan forgiveness would be reduced if the borrower terminated
employees or reduced salaries during the eight-week period.
The PPP Loan was evidenced by a promissory note, dated as of April 5, 2020 (the “Note”), between the Company,
as Borrower, and JPMorgan Chase Bank, N.A., as Lender (the “Lender”). The interest rate on the Note was 0.98% per
annum, with interest accruing on the unpaid principal balance computed on the basis of the actual number of days elapsed
in a year of 360 days. No payments of principal or interest were due during the ten-month period beginning after the
Covered Period (the “Deferral Period”).
On June 22, 2021, the Company applied to the SBA for full forgiveness of the PPP Loan. On June 30, 2021, the
Company received notification that the forgiveness was granted. The Company recorded the $1,769,000 forgiveness as a
gain on debt forgiveness during the year ended December 31, 2021.
On October 29, 2020, the unaffiliated Additional Investors as described in Note 6, submitted irrevocable notices
of conversion under the Tranche B Term Loan. As a result, approximately $175,000 of original principal and $11,000 of
PIK interest outstanding under the Tranche B Term Loan was converted into 338,272 shares of Company common stock
in full satisfaction of the underlying indebtedness.
On December 14, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with certain accredited investors (the “Purchasers”) for the sale and issuance by the Company to the Purchasers of (i) an
aggregate of 1,429,000 shares (the “Shares”) of the Company’s common stock and (ii) warrants (the “Purchaser
Warrants”) to purchase an aggregate of up to 714,000 shares of common stock (the “Purchaser Warrant Shares”), for
aggregate gross proceeds to the Company of $1,000, before deducting placement agent fees and offering expenses payable
by the Company. The Company also agreed to issue to the placement agents and certain persons affiliated with the
placement agents, as additional compensation, (a) fully-vested warrants (the “Placement Agent Warrants”) to purchase
an aggregate of up to 100,000 shares (the “Placement Agent Warrant Shares”) of common stock and (b) contingent
warrants (the “Placement Agent Contingent Warrants”) to purchase an aggregate of up to an additional 50,000 shares
(the “Placement Agent Contingent Warrant Shares”) of common stock. The transaction closed on December 15, 2020.
The Purchase Agreement also includes terms that give the Purchasers certain price protections, providing for
adjustments of the number of shares of common stock held by them in the event of certain future dilutive securities
issuances by the Company for a period not to exceed 18 months following the closing of the private placement, or such
earlier date on which all of the Purchaser Warrants have been exercised. In addition, the Purchase Agreement provides the
Purchasers with a right to participate in certain future Company financings, up to 30% of the amount of such financings,
for a period of 24 months following the closing of the private placement. The Purchase Agreement also required the
Company to register the resale of the Shares and the Purchaser Warrant Shares pursuant to the terms of a Registration
Rights Agreement between the Company and the Purchasers, dated as of December 14, 2020, as further described below.
The Company filed a registration statement with the SEC on January 14, 2021 to register the resale of the Shares and the
Purchaser Warrant Shares, which registration statement was declared effective by the SEC on January 21, 2021.
The Purchaser Warrants have an exercise price of $1.25 per share, are exercisable beginning on December 15,
2020, and have a term of three years. The exercise price and the number of shares of common stock issuable upon exercise
of each Purchaser Warrant is subject to appropriate adjustments in the event of certain stock dividends and distributions,
stock splits, stock combinations, reclassifications or similar events affecting the common stock. The fair value of the
Purchaser Warrants is $643,000.
In certain circumstances, upon the occurrence of a fundamental transaction, a holder of Purchaser Warrants is
entitled to receive, upon any subsequent exercise of the Purchaser Warrant, for each Purchaser Warrant Share that would
have been issuable upon such exercise of the Purchaser Warrant immediately prior to the fundamental transaction, at the
option of the holder, the number of shares of common stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional consideration receivable as a result of the fundamental transaction by
a holder of the number of shares of common stock of the Company for which the Purchaser Warrant is exercisable
immediately prior to the fundamental transaction. If holders of the Company’s common stock are given any choice as to
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the securities, cash or property to be received in a fundamental transaction, then the Holder shall be given the choice as to
the additional consideration it receives upon any exercise of the Purchaser Warrant following the fundamental transaction.
The Placement Agent Warrants have an exercise price of $0.70 per share, a term of five years from December 14,
2020, and became exercisable upon the Company obtaining the stockholder approval described above. The exercise price
and the number of shares of common stock issuable upon exercise of each Placement Agent Warrant is subject to
appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting the common stock. The Placement Agent Warrants also provide the holders
with certain “piggyback” registration rights, permitting the holders to request that the Company include the Placement
Agent Warrant Shares for sale in certain registration statements filed by the Company. The fair value of the Placement
Agent Warrants is $121,000. During June and July 2021, the Company received approximately $61,000 as 87,500 of
Placement Agent Warrants were exercised.
The Placement Agent Contingent Warrants have an exercise price of $1.25 per share, a term of five years from
December 14, 2020, and become exercisable if, and to the extent, holders of the Purchaser Warrants exercise such
Purchaser Warrants. In no event, however, will the Placement Agent Contingent Warrants become exercisable unless and
until Stockholder Approval has been obtained. The exercise price and the number of shares of common stock issuable
upon exercise of each Placement Agent Contingent Warrant is subject to appropriate adjustments in the event of certain
stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common
stock. The Placement Agent Contingent Warrants also provide the holders with certain “piggyback” registration rights,
permitting the holders to request that the Company include the Placement Agent Contingent Warrant Shares for sale in
certain registration statements filed by the Company. The fair value of the Placement Agent Contingent Warrants is
$56,000.
On January 28, 2021, the Company entered into the Third Amendment to Senior Subordinated Convertible Loan
and Security Agreement and Joinder (the “LSA Third Amendment”) with the Tranche A Parties, the Tranche B Parties
(that had not previously converted the loans attributable to each of them into shares of common stock), the Agent and
certain other investors (the “Tranche C Parties”). Pursuant to the LSA Third Amendment, the parties agreed to increase
the aggregate loan limit under the Subordinated Loan Agreement from $1,500,000 to $1,600,000 and the Tranche C Parties
agreed to provide the Company with a commitment for a $600,000 term loan facility, all of which was advanced to the
Company on January 29, 2021 (the “Tranche C Loans”). As is the case with the loans provided by the Tranche A Parties
and Tranche B Parties, interest on the Tranche C Loans accrues at 12% per annum and is payable monthly in-kind, by the
automatic increase of the principal amount of the loans on each monthly interest payment date, by the amount of the
accrued interest payable at that time. The Company, at its option, may pay any interest due on the Tranche C Loans in cash
on any interest payment date in lieu of PIK Interest. The Tranche C Parties also have the option, following Stockholder
Approval (defined below) of converting the accreted principal balance of the Tranche C Loans attributable to each of them
into shares of the Company’s common stock at a conversion price of $1.00.
Both the Purchase Agreement and the Subordinated Loan Agreement (as amended by the LSA Third Amendment)
obligated the Company to call a special meeting of its stockholders to seek stockholder approval of the issuance of shares
of its common stock issuable in connection with the transactions contemplated by the Securities Purchase Agreement and
the LSA Third Amendment, in excess of 19.99% of the Company’s outstanding shares of common stock, in accordance
with the requirements of Section 713(a) of the NYSE American Company Guide. Stockholder approval of the foregoing
was obtained on March 4, 2021. As the stock price was $1.31 on March 4, 2021, the Company recorded a discount of
$186,000 relating to the difference in stock price due to the beneficial conversion feature.
The obligations of the Company under the Subordinated Loan Agreement are guaranteed by Drake and are
secured by substantially all of the Company’s and Drake’s assets. The Subordinated Loan Agreement has a maturity date
three years from the date of closing, at which time the accreted principal balance of the loan (by virtue of the PIK Interest)
plus any other accrued unpaid interest, would be due and payable in full. In connection with the Subordinated Loan
Agreement, the Company, Drake, the Lenders and MidCap entered into a Subordination Agreement (the “Subordination
Agreement”), pursuant to which the rights of the Lenders under the Subordinated Loan Agreement were subordinated to
the rights of MidCap under the MidCap Agreement and related security documents. The Subordination Agreement
precludes the Company from making cash payments of interest in lieu of PIK Interest, in the absence of the prior written
consent of MidCap or unless the Company is able to meet certain predefined conditions precedent to the making of any
such payments of interest (or principal), as more fully described in the Subordination Agreement.
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On March 15, 2021, one of the Tranche C Parties submitted an irrevocable notice of conversion under the Tranche
C Loans. As a result, $100,000 of original principal and $1,000 of PIK interest outstanding under the Tranche C Loans
were converted into 100,987 shares of Company common stock in partial satisfaction of the indebtedness to that Tranche
C Party.
On April 6, 2021, the same Tranche C Party submitted an irrevocable notice of conversion under the Tranche C
Loans. As a result, $50,000 of original principal and $1,000 of PIK interest outstanding under the Tranche C Loans were
converted into 51,260 shares of Company common stock in partial satisfaction of the indebtedness to that Tranche C Party.
On May 24, 2021, the same Tranche C Party submitted an irrevocable notice of conversion under the Tranche C
Loans. As a result, $50,000 of original principal and $2,000 of PIK interest outstanding under the Tranche C Loans were
converted into 52,277 shares of Company common stock in complete satisfaction of their indebtedness.
On January 21, 2022, one of the Tranche A Parties submitted an irrevocable notice of conversion under the
Tranche A Loans. As a result, $50,000 of original principal and $12,000 of PIK interest outstanding under the Tranche A
Loans were converted into 104,399 shares of Company common stock in complete satisfaction of their indebtedness.
On August 16, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital
Partners, LLC (the “Agent”). In accordance with the terms of the Sales Agreement, the Company may offer and sell from
time to time through the Agent shares of the Company’s common stock, par value $0.001 per share, having an aggregate
offering price of up to $400,000. From August 16, 2021 through September 30, 2021, the Company sold an aggregate of
38,388 shares under the Sales Agreement at prices ranging from $1.1053 to $1.1390 per share, for aggregate proceeds, net
of sales commissions, of approximately $41,000.
On August 23, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with
an institutional investor providing for the sale by the Company to the investor of 200,000 shares of the Company’s common
stock at a purchase price of $1.08 per share, resulting in aggregate proceeds to the Company of $216,000. The shares were
offered and sold pursuant to the Company’s effective shelf registration statement on Form S-3. The Company’s sale of the
Shares pursuant to the Purchase Agreement will have the effect of reducing the amount of shares that may be sold pursuant
to the Sales Agreement from $400,000 to $184,000. Taking into account sales of common stock pursuant to the Stock
Purchase Agreement and sales of common stock pursuant to the Sales Agreement to date, the amount available to be sold
under the Sales Agreement is currently $143,000.
For the year ended December 31, 2021, the Company accrued payroll tax credits of $1,804,000 through the
Employee Retention Tax Credit program (“ERTC”). The amount was recorded as other income and included in prepaid
and other current assets as of the applicable quarter end date. The Company received $577,000 of the first quarter of 2021
ERTC in April, $115,000 towards Q2 in July, $181,000 towards Q3 in August, $219,000 towards Q3 in October and
$195,000 towards Q3 in November. The ERTC was initially established as part of the CARES Act of 2020 and
subsequently amended by the Consolidated Appropriation Act (“CAA”) of 2021 and the American Rescue Plan Act
(“ARPA”) of 2021. The CAA and ARPA amendments to the ERTC program provide eligible employers with a tax credit
in an amount equal to 70% of qualified wages (including certain health care expenses) that eligible employers pay their
employees after January 1, 2021 through September 30, 2021. The maximum amount of qualified wages taken into account
with respect to each employee for each calendar quarter is $10,000, so that the maximum credit that an eligible employer
may claim for qualified wages paid to any employee is $7,000 per quarter. For purposes of the amended ERTC, an eligible
employer is defined as having experienced a significant (20% or more) decline in gross receipts during each 2021 calendar
quarter when compared with the same quarter in 2019. The credit is taken against the Company’s share of Social Security
Tax when the Company’s payroll provider files the applicable quarterly tax filings on Form 941. At December 31, 2021,
the Company is still owed $517,000 in ERTC funds of which the Company received $217,000 in the second and third
quarters of 2022. At December 31, 2023 the Company is still owed $299,000 in ERTC funds.
In other efforts to alleviate the liquidity pressures and reposition the Company to generate positive cash flow at a
lower level of net sales, since March 2023, the Company has implemented a cost-reduction program which reduced cash
expenses in 2023, providing an annual savings of approximately $2,500,000. Although the Company believes it has made
and will continue to make progress under this program and the funding provided under the Subordinated Loan Agreement
and available as a result of the release of the availability block under the MidCap Facility, the Company operates in a
rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future
cash receipts and expenditures. Accordingly, there can be no assurance that our planned improvements will be successful.
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In addition, the COVID-19 outbreak has affected the supply chain for many types of products and materials,
particularly those being manufactured in China and other countries where the outbreak has resulted in significant
disruptions to ongoing business activities. Beginning in the second quarter of 2021 and continuing into the first quarter of
2023, we experienced a material disruption in our supply chain as it relates to the procurement of certain sole source and
other multiple source components utilized in a material portion of several product lines. We believe this disruption may
continue beyond 2023. If these or any similar types of supply disruptions continue, it is possible that we will be unable to
complete sales of any affected products to our customers on requested schedules.
The Company has reacted to these unprecedented circumstances, as many enterprises have had to do over the
course of the pandemic, with a range of actions designed to compensate for anticipated temporary revenue shortfalls,
manage the Company’s working capital and minimize the overall financial impact of this disruption, including
implementation of exceptional short-term operating expense reductions, such as temporary manufacturing shut-downs and
employee furloughs.
The Company expects to use cash generated from operations to meet its long-term debt obligations. The Company
also expects to make financed and unfinanced long-term capital expenditures from time to time in the ordinary course of
business, which capital expenditures were $641,000 and $48,000 for the year ended December 31, 2023, and year ended
December 31, 2022, respectively. The Company expects to use cash generated from operations, amounts available under
the MidCap Facility, amounts available under the Subordinated Loan Facility, and purchase-money financing to meet any
anticipated long-term capital expenditures.
ITEM 4. Legal Proceedings
In 2018, Blonder Tongue sold its facility to Jake Brown Road and then leased the facility back. On the eve of
closing, and as a condition of sale, Jake Brown required $130,000 to be placed in escrow to satisfy a condition imposed
upon Jake Brown by its lender in connection with the “possible need” for certain repairs to the roof and parking lot of the
leased premises. The sales agreement, as amended, required Jake Brown and Blonder Tongue to meet within thirty days
to address any needed repairs. That meeting never occurred. Thereafter, Jake Brown has not conducted any repairs, and
the $130,000 has not been returned. Instead, the subject roof repairs were covered by warranty, and Blonder Tongue
completed repairs to the parking lot at its own expense. Throughout the relationship, Blonder Tongue has repeatedly raised
the issue and requested return of the funds, which Jake Brown has withheld for more than four years, as well as other
amounts that were assessed by Jake Brown Road. In response, Blonder Tongue has withheld rent payments as an offset
to amounts it claims to be owed by Jake Brown. Jake Brown has filed an action for eviction and rent it claims it is owed
in New Jersey state court. Blonder Tongue has responded by asserting the offset that serves as the basis for its withholding
of rent, and it also has filed an action against Jake Brown Road in New Jersey state court for breach of contract related to
the escrow funds and other assessed amounts. On December 20, 2023, both parties came to a mutual settlement agreement.
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10) Issuer Certification
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Robert J. Pallé, certify that:
1.
I have reviewed this Disclosure Statement for Blonder Tongue Laboratories, Inc.
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this disclosure
statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated
by reference in this disclosure statement, fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure
statement.
Date: April 15, 2024
BY: /s/ Robert J. Pallé
Robert J. Pallé
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Michael P. Censoplano, certify that:
1.
I have reviewed this Disclosure Statement for Blonder Tongue Laboratories, Inc.
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this disclosure
statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated
by reference in this disclosure statement, fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure
statement.
Date: April 15, 2024
BY: /s/ Michael P. Censoplano
Michael P. Censoplano
Chief Financial Officer
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