SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005, OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____. Commission file number 1-14120 BLONDER TONGUE LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware 52-1611421 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Jake Brown Road, Old Bridge, New Jersey 08857 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 679-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X Number of shares of common stock, par value $.001, outstanding as of November 12, 2005: 8,015,406. The Exhibit Index appears on page 24. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited) September December 31, 30, 2005 2004 Assets (Note 5) Current assets: Cash............................................................ $104 $70 Accounts receivable, net of allowance for doubtful accounts of $602 and $607 respectively...................... 4,668 3,693 Inventories (Note 4)............................................ 9,867 10,309 Income tax receivable........................................... - 320 Prepaid and other current assets................................ 597 654 Deferred income taxes .......................................... 635 960 ------------- ------------ Total current assets........................................ 15,871 16,006 Inventories, non-current (net) (Note 4)............................ 4,294 8,968 Property, plant and equipment, net of accumulated depreciation and amortization ................................. 6,199 6,214 Patents, net ...................................................... 1,958 2,240 Rights-of-Entry, net (Note 6)...................................... 785 977 Other assets, net.................................................. 1,117 925 Investment in Blonder Tongue Telephone LLC (Note 6)................ 1,183 1,430 Deferred income taxes ............................................. 1,169 1,396 ------------- ------------ $32,576 $38,156 ============= ============ Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt (Note 5)...................... $5,001 $2,683 Accounts payable................................................ 1,999 1,497 Accrued compensation............................................ 611 639 Accrued benefit liability....................................... 314 314 Other accrued expenses (Note 8)................................. 232 270 ------------- ------------ Total current liabilities................................... 8,157 5,403 ------------- ------------ Long-term debt (Note 5)............................................ 2,543 5,830 Commitments and contingencies...................................... - - Stockholders' equity: Preferred stock, $.001 par value; authorized 5,000 shares; no shares outstanding....................................... - - Common stock, $.001 par value; authorized 25,000 shares, 8,445 shares Issued......................................... 8 8 Paid-in capital................................................. 24,202 24,202 Retained earnings............................................... 4,018 9,065 Accumulated other comprehensive loss............................ (897) (897) Treasury stock, at cost, 449 shares............................. (5,455) (5,455) ------------- ------------ Total stockholders' equity.................................. 21,876 26,923 ------------- ------------ $32,576 $38,156 ============= ============ See accompanying notes to consolidated financial statements. -2- BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) Three Months Ended September Nine Months Ended 30, September 30, ----------------------- ------------------------- 2005 2004 2005 2004 ---------- ---------- ----------- ----------- Net sales.................................. $9,666 $11,215 $28,343 $30,661 Cost of goods sold......................... 9,719 7,635 23,010 21,060 ---------- ---------- ----------- ----------- Gross profit (loss) (Note 7)............ (53) 3,580 5,333 9,601 ---------- ---------- ----------- ----------- Operating expenses: Selling................................. 1,207 1,047 3,397 3,185 General and administrative.............. 1,639 1,488 4,973 4,444 Research and development................ 372 385 1,178 1,187 ---------- ---------- ----------- ----------- 3,218 2,920 9,548 8,816 ---------- ---------- ----------- ----------- Earnings (loss) from operations............ (3,271) 660 (4,215) 785 ---------- ---------- ----------- ----------- Other Expense: Interest expense........................ (190) (215) (586) (713) Equity in loss of Blonder Tongue Telephone, LLC...................... (55) (126) (246) (126) Interest and other income (Note 7)...... - 87 - 299 ---------- ---------- ----------- ----------- (245) (254) (832) (540) ---------- ---------- ----------- ----------- Net (loss) earnings ....................... $(3,516) $ 406 $(5,047) $ 245 ========== ========== =========== =========== Basic earnings (loss) per share............ $(0.44) $ 0.05 $(0.63) $ 0.03 ========== ========== =========== =========== Basic weighted average shares outstanding.. 8,015 8,002 8,015 7,995 ---------- ---------- ----------- ----------- Diluted earnings (loss) per share.......... $(0.44) $ 0.05 $(0.63) $ 0.03 ========== ========== =========== =========== Diluted weighted average shares outstanding 8,015 8,026 8,015 8,033 ========== ========== =========== =========== See accompanying notes to consolidated financial statements. -3- BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOW (In thousands) (unaudited) Nine Months Ended September 30, ------------------------ 2005 2004 ---------- ---------- Cash Flows From Operating Activities: Net income (loss)............................................ $(5,047) $ 245 Adjustments to reconcile net income (loss) to cash provided by operating activities: Equity in loss from Blonder Tongue Telephone, LLC 246 127 Depreciation............................................... 746 789 Amortization .............................................. 477 517 Gain on sale of rights of entry............................ - (54) Allowance for doubtful accounts............................ - 2 Provision for inventory reserves............................ 4,372 300 Changes in operating assets and liabilities: Accounts receivable........................................ (975) 186 Inventories................................................ 744 1,684 Prepaid and other current assets........................... 57 (65) Other assets............................................... (192) (80) Income taxes............................................... 872 360 Accounts payable, accrued compensation and other accrued expenses.......................................... 437 (1,463) ---------- ---------- Net cash provided by operating activities................ 1,737 2,548 ---------- ---------- Cash Flows From Investing Activities: Capital expenditures....................................... (731) (388) Acquisition of rights-of-entry............................. (3) (12) Proceeds from sale of rights of entry - 151 Collection of note receivable.............................. - 834 ----------- ---------- Net cash provided by (used in) investing activities.... (734) 585 ----------- ---------- Cash Flows From Financing Activities: Borrowings of debt.......................................... 10,740 10,400 Repayments of debt.......................................... (11,709) (13,602) Proceeds from exercise of stock options..................... - 20 ---------- ---------- Net cash used in financing activities.................... (969) (3,182) ---------- ---------- Net increase (decrease) in cash......................... 34 (49) ---------- ---------- Cash, beginning of period..................................... 70 195 ---------- ---------- Cash, end of period........................................... $104 $ 146 ========== ========== Supplemental Cash Flow Information: Cash paid for interest..................................... $ 586 $ 689 Cash paid for income taxes................................. $ - $ - See accompanying notes to consolidated financial statements. -4- BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands) (unaudited) Note 1 - Company and Basis of Presentation Blonder Tongue Laboratories, Inc. (the "Company") is a designer, manufacturer and supplier of electronics and systems equipment for the cable television industry, primarily throughout the United States. The consolidated financial statements include the accounts of Blonder Tongue Laboratories, Inc. and subsidiaries (including BDR Broadband, LLC). Significant intercompany accounts and transactions have been eliminated in consolidation. The Company's investment in Blonder Tongue Telephone, LLC ("BTT") and NetLinc Communications, LLC ("NetLinc") are accounted for on the equity method since the Company does not have control over these entities. Information relating to the Company's rights and obligations with regard to BTT and NetLinc are summarized in Note 1(a) to the Company's Form 10-K/A for the year ended December 31, 2004. The results for the third quarter and nine months of 2005 are not necessarily indicative of the results to be expected for the full fiscal year and have not been audited. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting primarily of normal recurring accruals, necessary for a fair statement of the results of operations for the period presented and the consolidated balance sheet at September 30, 2005. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereto that were included in the Company's latest annual report on Form 10-K/A for the year ended December 31, 2004. Note 2 - New Accounting Pronouncements In December, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R, "Share-Based Payment." This statement is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. Companies will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). The cost will be recognized over the period during which an employee is required to provide service in exchange for the award, which requisite service period will usually be the vesting period. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. SFAS No. 123R will be effective for fiscal years beginning after June 15, 2005 and allows for several alternative transition methods. Accordingly, the Company will adopt SFAS No. 123R in its first quarter of fiscal 2006. The Company is currently evaluating the provisions of SFAS No. 123R and has not yet determined the impact that this Statement will have on its consolidated results of operations or financial position. In November, 2004, the FASB issued SFAS No. 151, "Inventory Costs", an amendment of Accounting Research Bulletin No. 43 Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not believe adoption of SFAS No. 151 will have a material effect on its consolidated financial position, results of operations or cash flows. In December, 2004, the FASB issued FASB Staff Position No. 109-1 ("FSP FAS No. 109-1"), "Application of FASB Statement No. 109, 'Accounting for Income Taxes,' to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004." The American Jobs Creation Act of 2004 introduces a special tax deduction of up to 9% when fully phased in, of the lesser of "qualified production activities income" or taxable income. FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a special tax deduction in accordance with SFAS No. 109. Although FSP FAS No. 109-1 was effective upon issuance, the Company is still evaluating the impact FSP FAS No. 109-1 will have on its consolidated financial statements. -5- In December, 2003, the FASB issued a revision to SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement does not change the measurement or recognition aspects for pensions and other post-retirement benefit plans; however, it does revise employers' disclosures to include more information about the plan assets, obligations to pay benefits and funding obligations. SFAS No. 132, as revised, is generally effective for financial statements with a fiscal year ending after December 15, 2003. The Company has adopted the required provisions of SFAS No. 132, as revised. The adoption of the required provisions of SFAS No. 132, as revised, did not have a material effect on the Company's consolidated financial statements. In May, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6 "Elements of Financial Statements," as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial instruments and disclosure requirements. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and for all other matters, is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material effect on the Company's consolidated financial position or results of operations. In January, 2003, the FASB issued Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities" and in December 2003, a revised interpretation was issued (FIN No. 46, as revised). In general, a variable interest entity ("VIE") is a corporation, partnership, trust, or any other legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46, as revised requires a VIE to be consolidated by a company if that company is designated as the primary beneficiary. The interpretation applies to VIEs created after January 31, 2003, and for all financial statements issued after December 15, 2003 for VIEs in which an enterprise held a variable interest that it acquired before February 1, 2003. The adoption of FIN No. 46, as revised, did not have a material effect on the Company's consolidated financial position or results of operations. In March, 2005, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation ("FIN") No. 47, "Accounting for Conditional Asset Retirement Obligations - An Interpretation of FASB Statement No. 143" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations, and (c) more information about investment in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company plans to adopt FIN 47 at the end of its 2005 fiscal year and does not believe that the adoption will have a material impact on its consolidated results of operations or financial position. Note 3 - Stock Options The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock option plans. Statement of Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based Compensation, requires the Company to provide pro forma information regarding net income (loss) and net income (loss) per common share as if compensation cost for stock options granted under the plans, if applicable, had been determined in accordance with the fair value based method prescribed in FAS 123. The Company does not plan to adopt the fair value based method prescribed by FAS 123. The Company estimates the fair value of each stock option grant by using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants made during the nine months ended September 30, 2005: expected lives of 9.5 years, no dividend yield, volatility at 73%, risk free interest rate of 3.2%. No options were granted during the nine months ended September 30, 2004. -6- Under accounting provisions of FAS 123, the Company's net loss to common shareholders and net loss per common share would have been adjusted to the pro forma amounts indicated below (in thousands, except per share data): Three Months Ended Sept 30, Nine Months Ended Sept 30, ---------------------- ---------------------------- 2005 2004 2005 2004 --------- --------- --------- ---------- Net earnings (loss) as reported .............. $(3,516) $406 $(5,047) $245 Adjustment for fair value of stock options.... 160 51 478 152 --------- --------- --------- ---------- Pro forma................................ $(3,676) $355 $(5,525) $93 ========= ========= ========= ========== Net (earnings) loss per share basic and diluted: As reported.............................. $(0.44) $0.05 $(0.63) $0.03 ========= ========= ========= ========== Pro forma................................ $(0.46) $0.04 $(0.69) $0.01 ========= ========= ========= ========== In May 2005, the stockholders of the Company approved the 2005 Employee Equity Incentive Plan (the "Employee Plan"). The Employee Plan authorizes the Compensation Committee of the Board of Directors (the "Committee") to grant a maximum of 500,000 shares of equity based and other performance based awards to executive officers and other key employees of the Company. The Committee determines the optionees and the terms of the awards granted under the Employee Plan, including the type of awards, exercise price, number of shares subject to the award and the exercisability thereof. In May 2005, the stockholders of the Company approved the 2005 Director Equity Incentive Plan (the "Director Plan"). The Director Plan authorizes the Board of Directors (the "Board") to grant a maximum of 200,000 shares of equity based and other performance based awards to non employee directors of the Company. The Board determines the optionees and the terms of the awards granted under the Director Plan, including the type of awards, exercise price, number of shares subject to the award and the exercisability thereof. Note 4 - Inventories Inventories net of reserves are summarized as follows: Sept 30, Dec. 31, 2005 2004 ------------ ------------- Raw Materials...................................... $10,238 $11,308 Work in process.................................... 2,689 1,698 Finished Goods..................................... 9,950 10,615 ------------ ------------- 22,877 23,621 Less current inventory............................. (9,867) (10,309) ------------ ------------- 13,010 13,312 Less Reserve primarily for excess inventory........ (8,716) (4,344) ------------ ------------- $4,294 $8,968 ============ ============= Inventories are stated at the lower of cost, determined by the first-in, first-out ("FIFO") method, or market. 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 classified as non-current. -7- Over 60% of the non-current inventories are comprised of raw materials. The Company has established a program to use interchangeable parts in its various product offerings and to modify certain of its finished goods to better match customer demands. In addition, the Company has instituted additional marketing programs to dispose of the slower moving inventories. The Company continually analyzes its slow-moving, excess and obsolete inventories. Based on historical and projected sales volumes and anticipated selling prices, the Company establishes reserves. Products that are determined to be obsolete are written down to net realizable value. If the Company does not meet its sales expectations, these reserves are increased. During the third quarter of 2005, the Company reserved 100% of all items for which there was no usage over the previous twelve months and 100% of the value of closeout products. Accordingly, the Company increased its reserves by $3,494,000 and $4,372,000 for the three and nine months ended September 30, 2005, respectively. The Company believes reserves are adequate and inventories are reflected at net realizable value. Note 5 - Debt On March 20, 2002 the Company entered into a credit agreement with Commerce Bank, N.A. for a $19,500 credit facility, comprised of (i) a $7,000 revolving line of credit under which funds may be borrowed at LIBOR, plus a margin ranging from 1.75% to 2.50%, in each case depending on the calculation of certain financial covenants, with a floor of 5% through March 19, 2003, (ii) a $9,000 term loan which bore interest at a rate of 6.75% through September 30, 2002, and thereafter at a fixed rate ranging from 6.50% to 7.25% to reset quarterly depending on the calculation of certain financial covenants and (iii) a $3,500 mortgage loan bearing interest at 7.5%. Borrowings under the revolving line of credit are limited to certain percentages of eligible accounts receivable and inventory, as defined in the credit agreement. The credit facility is collateralized by a security interest in all of the Company's assets. The agreement also contains restrictions that require the Company to maintain certain financial ratios as well as restrictions on the payment of cash dividends. The initial maturity date of the line of credit with Commerce Bank was March 20, 2004. The term loan required equal monthly principal payments of $187 and matures on April 1, 2006. The mortgage loan requires equal monthly principal payments of $19 and matures on April 1, 2017. The mortgage loan is callable after five years at the lender's option. In November, 2003, the Company's credit agreement with Commerce Bank was amended to modify the interest rate and amortization schedule for certain of the loans thereunder, as well as to modify one of the financial covenants. Beginning November 1, 2003, the revolving line of credit bore interest at the prime rate plus 1.5%, with a floor of 5.5%, and the term loan began to accrue interest at a fixed rate of 7.5%. Beginning December 1, 2003, the term loan requires equal monthly principal payments of $193 plus interest with a final payment on April 1, 2006 of all remaining unpaid principal and interest. At March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003, the Company was unable to meet one of its financial covenants required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of each such date. In March, 2004, the Company's credit agreement with Commerce Bank was amended to (i) extend the maturity date of the line of credit until April 1, 2005, (ii) reduce the maximum amount that may be borrowed under the line of credit to $6,000, (iii) suspend the applicability of the cash flow coverage ratio covenant until March 31, 2005, (iv) impose a new financial covenant requiring the Company to achieve certain levels of consolidated pre-tax income on a quarterly basis commencing with the fiscal quarter ended March 31, 2004, and (v) require that the Company make a prepayment against its outstanding term loan to the Bank equal to 100% of the amount of any prepayment received by the Company on its outstanding note receivable from a customer, up to a maximum amount of $500. At December 31, 2004, the Company was unable to meet one of its financial covenants required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of such date. In March, 2005, the Company's credit agreement with Commerce Bank was amended to (i) extend the maturity date of the line of credit until April 1, 2006, (ii) provide for a interest rate on the revolving line of credit of the prime rate plus 2.0%, with a floor of 5.5% (8.75% at September 30, 2005), (iii) waive the applicability of consolidated pre-tax income for the quarter ended December 31, 2004, (iv) suspend the applicability of the cash flow coverage ratio covenant until March 31, 2006, and (v) impose a financial covenant requiring the Company to achieve certain levels of consolidated pre-tax income on a quarterly basis commencing with the fiscal quarter ended March 31, 2005. -8- At March 31, 2005, June 30, 2005 and September 30, 2005, the Company was unable to meet its quarterly consolidated pre-tax income covenant required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of such dates. The Company has continued to treat amounts due under the credit agreement beyond one year as non-current as it believed at the time of each such analysis that it was probable that the Company would meet the future quarterly consolidated pre-tax income covenant for the remainder of the agreement comprising of the remaining 2005 fiscal quarters. The Company's belief that it was probable that it would be in compliance with such covenant was based upon its projected consolidated pre-tax income for such quarters, which projection includes an analysis of, among other things, order input, outstanding sales quotations and backlog. Note 6 - Cable Systems and Telephone Products (Subscribers and passings in whole numbers) During June, 2002, the Company formed a venture with Priority Systems, LLC and Paradigm Capital Investments, LLC for the purpose of acquiring the rights-of-entry for certain multiple dwelling unit ("MDU") cable television systems (the "Systems") owned by affiliates of Verizon Communications, Inc. The venture entity, BDR Broadband, LLC ("BDR Broadband"), 90% of the outstanding equity capital of which is owned by the Company, acquired the Systems, which are comprised of approximately 3,065 existing MDU cable television subscribers and approximately 7,601 passings. BDR Broadband paid approximately $1,880 for the Systems, subject to adjustment, which constitutes a purchase price of $.575 per subscriber. The final closing date for the transaction was on October 1, 2002. The Systems were cash flow positive beginning in the first year. To date, the Systems have been upgraded with approximately $1,348 of interdiction and other products of the Company and, during 2004, two of the Systems located outside the region where the remaining Systems are located, were sold. It is planned that the Systems will be upgraded with approximately $400 of additional interdiction and other products of the Company over the course of operation. During July, 2003, the Company purchased the 10% interest in BDR Broadband that had been originally owned by Paradigm Capital Investments, LLC, for an aggregate purchase price of $35, resulting in an increase in the Company's stake in BDR Broadband from 80% to 90%. The purchase price was allocated $1,524 to rights-of-entry and $391 to fixed assets. The rights-of-entry are being amortized over a five-year period. In consideration for its majority interest in BDR Broadband, the Company advanced to BDR Broadband $250, which was paid to the sellers as a down payment against the final purchase price for the Systems. The Company also agreed to guaranty payment of the aggregate purchase price for the Systems by BDR Broadband. The approximately $1,630 balance of the purchase price was paid by the Company on behalf of BDR Broadband on November 30, 2002 pursuant to the terms and in satisfaction of certain promissory notes executed by BDR Broadband in favor of the sellers. In March, 2003, the Company entered into a series of agreements, pursuant to which the Company acquired a 20% minority interest in NetLinc Communications, LLC ("NetLinc") and a 35% minority interest in Blonder Tongue Telephone, LLC ("BTT") (to which the Company has licensed its name). The aggregate purchase price consisted of (i) up to $3,500 payable over a minimum of two years, plus (ii) 500 shares of the Company's common stock. NetLinc owns patents, proprietary technology and know-how for certain telephony products that allow Competitive Local Exchange Carriers ("CLECs") to competitively provide voice service to MDUs. Certain distributorship agreements were also concurrently entered into among NetLinc, BTT and the Company pursuant to which the Company ultimately acquired the right to distribute NetLinc's telephony products to private and franchise cable operators as well as to all buyers for use in MDU applications. BTT partners with CLECs to offer primary voice service to MDUs, receiving a portion of the line charges due from the CLECs' telephone customers, and the Company offers for sale a line of telephony equipment to complement the voice service. -9- As a result of NetLinc's inability to retain a contract manufacturer to manufacture and supply the products in a timely and consistent manner in accordance with the requisite specifications, in September, 2003 the parties agreed to restructure the terms of their business arrangement entered into in March, 2003. The restructured business arrangement was accomplished by amending certain of the agreements previously entered into and entering into certain new agreements. Some of the principal terms of the restructured arrangement include increasing the Company's economic ownership in NetLinc from 20% to 50% and in BTT from 35% to 50%, all at no additional cost to the Company. The cash portion of the purchase price in the venture was decreased from $3,500 to $1,167 and the then outstanding balance of $342 was paid in installments of $50 per week until it was paid in full in October, 2003. BTT has an obligation to redeem the $1,167 cash component of the purchase price to the Company via preferential distributions of cash flow under BTT's limited liability company operating agreement. In addition, of the 500 shares of common stock issued to BTT as the non-cash component of the purchase price (fair valued at $1,030), one-half (250 shares) have been pledged to the Company as collateral. Under the restructured arrangement, the Company can purchase similar telephony products directly from third party suppliers other than NetLinc and, in connection therewith, the Company would pay certain future royalties to NetLinc and BTT from the sale of these products by the Company. While the distributorship agreements among NetLinc, BTT and the Company have not been terminated, the Company does not anticipate purchasing products from NetLinc in the near term. NetLinc, however, continues to own intellectual property, which may be further developed and used in the future to manufacture and sell telephony products under the distributorship agreements. The Company accounts for its investments in NetLinc and BTT using the equity method. Note 7 - Notes Receivable During September, 2002, the Company sold inventory at a cost of approximately $1,447 to a private cable operator for approximately $1,929 in exchange for which the Company received notes receivable in the principal amount of approximately $1,929. The notes were payable by the customer in 48 monthly principal and interest (at 11.5%) installments of approximately $51 commencing January 1, 2003. The customer's payment obligations under the notes were collateralized by purchase money liens on the inventory sold and blanket second liens on all other assets of the customer. The Company recorded the notes receivable at the inventory cost and did not recognize any revenue or gross profit on the transaction until a substantial amount of the cost had been recovered, and collectibility was assured. The balances of the notes were collected during the last three quarters of 2004 and approximately $482 of gross margin and $356 of interest income was recognized. Note 8 - Related Party Transactions On January 1, 1995, the Company entered into a consulting and non-competition agreement with a director, who is also the largest stockholder. Under the agreement, the director provides consulting services on various operational and financial issues and as of September 30, 2005, was paid at an annual rate of $152 but in no event is such annual rate permitted to exceed $200. The director also agreed to keep all Company information confidential and will not compete directly or indirectly with the Company for the term of the agreement and for a period of two years thereafter. The initial term of this agreement expired on December 31, 2004 and automatically renews thereafter for successive one-year terms (subject to termination at the end of the initial term or any renewal term on at least 90 days' notice). This agreement automatically renewed for a one-year extension until December 31, 2005. As of September 30, 2005, the Chief Executive Officer was indebted to the Company in the amount of $182, for which no interest has been charged. This indebtedness arose from a series of cash advances, the latest of which was advanced in February 2002 and is included in other assets at September 30, 2005 and December 31, 2004. The President of the Company lent the Company 100% of the purchase price of certain used-equipment inventory purchased by the Company in October through November of 2003. The inventory was purchased at a substantial discount to market price. While the aggregate cost to purchase all of the inventory was approximately $950, the maximum amount of indebtedness outstanding to the President at any one time during 2004 was $675. The Company repaid this loan in full in July, 2004. The President made the loan to the Company on a non-recourse basis, secured solely by a security interest in the inventory purchased by the Company and the proceeds resulting from the sale of the inventory. In consideration for the extension of credit on a non-recourse basis, the President received from the Company interest on the outstanding balance at the margin interest rate he incurred for borrowing the funds from his lenders plus 25% of the gross profit derived from the Company's resale of such inventory. During 2004, interest on the loan paid to the President was $12. In addition, the President was paid $33, representing an advance payment against his share of gross profit derived from the resale of such equipment, the final amount of which will be determined as of December 31, 2005. In April, 2004, the President of the Company acquired $75 of used equipment inventory, which was subsequently sold by him to the Company on a consignment basis. Payment by the Company for the goods becomes due upon the sale thereof by the Company and collection of the accounts receivable generated by such sales. In connection with the transaction, the Company agreed to pay the President cost plus 25% of the gross profit derived from the sale of such inventory. At September 30, 2005, the aggregate remaining outstanding balance due to the President from the sale of the consigned goods was approximately $4 and was included in other accrued expenses. -10- In March, 2003, the Company entered into a series of agreements, pursuant to which the Company acquired a 20% minority interest in NetLinc Communications, LLC ("NetLinc") and a 35% minority interest in Blonder Tongue Telephone, LLC ("BTT"). During September, 2003, the parties restructured the terms of their business arrangement, which included increasing Blonder Tongue's economic ownership in NetLinc from 20% to 50% and in BTT from 35% to 50%, all at no additional cost to Blonder Tongue. The cash portion of the purchase price in the venture was decreased from $3,500 to $1,167, and was paid in full by the Company to BTT in October, 2003. As the non-cash component of the purchase price, the Company issued 500 shares of its common stock to BTT, resulting in BTT becoming the owner of greater than 5% of the outstanding common stock of the Company. The Company will receive preferential distributions equal to the $1,167 cash component of the purchase price from the cash flows of BTT. One-half of such common stock (250 shares) has been pledged to the Company as collateral to secure BTT's obligation. Under the restructured arrangement, the Company pays certain future royalties to NetLinc and BTT upon the sale of telephony products. Through this telephony venture, BTT offers primary voice service to MDUs and the Company offers for sale a line of telephony equipment to complement the voice service. Note 9 - Subsequent Event On October 28, 2005, the Company entered into a commitment letter with National City Business Credit, Inc. ("NCBC"), pursuant to which NCBC committed to provide to the Company (i) a $10,000,000 asset based revolving credit facility and (ii) a $3,500,000 term loan facility, both of which have a three year term. The Company intends to use the proceeds of the credit facility to refinance the Company's existing credit facility with Commerce Bank, to provide working capital and for other general corporate purposes. The commitment letter is subject to certain customary conditions to closing, including satisfactory completion of documentation. The definitive credit agreement is expected to contain affirmative and negative covenants customary in credit facilities of this type and is expected to be executed on or before December 15, 2005, subject to normal and customary closing conditions. On November 10, 2005, the Company and its recently formed, wholly-owned subsidiary, Blonder Tongue Far East, LLC, a Delaware limited liability company ("BTFE"), entered into a Joint Venture Agreement (the "Joint Venture Agreement") with Master Gain International Industrial, Limited, a Hong Kong corporation ("Master Gain"), to manufacture products in the People's Republic of China (the "Joint Venture"). The Joint Venture Agreement contemplates the formation of several new entities including a new Chinese manufacturing company to be called Shenzhen China Blonder Tongue ("SCBT"), fifty percent (50%) of which will be owned (directly or indirectly) by each of the Company and Master Gain. The formation of SCBT and the extent of its operations will be subject to approval and regulation by the People's Republic of China. The Company will grant SCBT a license to use certain of the Company's technology and know-how to manufacture and sell certain of the Company's products, and an exclusive distributorship to sell certain of the Company's products in the Asian, Southeast Asian, African, European, Middle Eastern and Australian markets. This arrangement will commence with less complex products being licensed and manufactured during the early stages and progress to the license, manufacturing and sale of more complex products over time. The Joint Venture Agreement contemplates that the Joint Venture will acquire from third parties, other technology and rights to manufacture, market and sell products developed from these other technologies, including certain cable modem termination system hardware and software technology (the "CMTS Technology"). The Joint Venture will grant the Company an exclusive distributorship to sell such products in the North American, South American and Caribbean markets. -11- Master Gain will contribute $5,850,000 to the Joint Venture (the "Master Gain Contribution"). The Company will, upon receipt by the Joint Venture of the Master Gain Contribution and acquisition by the Joint Venture of the CMTS Technology, contribute 1,000,000 shares of its unregistered common stock, par value $.001 per share, to the Joint Venture and will grant Master Gain stock options to purchase up to 500,000 shares of the Company's unregistered common stock. The shares of unregistered common stock contributed by the Company to the Joint Venture will be subject to a voting trust agreement, whereby an officer of the Company will be designated as the voting trustee. Both the shares issued to the Joint Venture as well as the options granted to Master Gain will be subject to certain restrictions and rights of cancellation. The exercise price, vesting schedule and expiration of the options will be in accordance with the following: (i) options to purchase 50,000 shares at an exercise price of $5.00 per share will vest upon receipt by the Joint Venture of the Master Gain Contribution and acquisition by the Joint Venture of the CMTS Technology and expires on September 30, 2008; (ii) options to purchase 150,000 shares at an exercise price of $7.00 per share will vest on April 15, 2007 and expire on April 14, 2010; and (iii) options to purchase 300,000 shares at an exercise price of $10.00 per share will vest on April 15, 2008 and expire on April 14, 2011. The shares of unregistered common stock will be issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The unregistered common stock will be issued to one or more affiliated entities of which the Company will own, directly or indirectly a 50% interest, and all such entities will have access to the Company's most recent Form 10-K/A, all quarterly and other periodic reports filed subsequent to such Form 10-K/A and the Company's most recent proxy materials. Consummation of the transactions contemplated by the Joint Venture Agreement are subject to certain conditions as set forth in the Joint Venture Agreement, including obtaining any consent, approval, permit, license or other authorization required from any and all governmental authorities with proper jurisdiction, including, without limitation, the People's Republic of China. The foregoing description of the Joint Venture Agreement does not purport to be complete and is qualified in its entirety by reference to the Joint Venture Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated by reference herein. -12- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements In addition to historical information, this Quarterly Report contains forward-looking statements 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 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially 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 in the section entitled Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The words "believe", "expect", "anticipate", "project" and similar expressions identify 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/A for the year ended December 31, 2004 (See Item 1 - Business; Item 3 - Legal Proceedings; Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations; and Risk Factors). General 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. The Company is principally a designer, manufacturer and supplier of a comprehensive line of electronics and systems equipment, primarily for the cable television industry (both franchise and private cable). Over the past few years, the Company has also introduced equipment and innovative solutions for the high-speed transmission of data and the provision of telephony services in multiple dwelling unit applications. The Company's products are used to acquire, distribute and protect the broad range of communications signals carried on fiber optic, twisted pair, coaxial cable and wireless distribution systems. These products are sold to customers providing an array of communications services, including television, high-speed data (Internet) and telephony, to single family dwellings, multiple dwelling units, the lodging industry and institutions such as hospitals, prisons, schools and marinas. The Company's principal customers are cable system integrators (both franchise and private cable operators, as well as contractors) that design, package, install and in most instances operate, upgrade and maintain the systems they build. A key component of the Company's strategy is to leverage the Company's reputation by broadening its product line to offer one-stop shop convenience to private cable and franchise cable system integrators and to deliver products having a high performance-to-cost ratio. The Company continues to expand its core product lines (headend and distribution), to maintain its ability to provide all of the electronic equipment needed to build small cable systems and much of the equipment needed in larger systems for the most efficient operation and highest profitability in high density applications. In March, 1998, the Company acquired all of the assets and technology rights, including the SMI Interdiction product line, of the interdiction business of Scientific-Atlanta, Inc. The Company is utilizing the SMI Interdiction product line acquired from Scientific-Atlanta, which has been engineered primarily to serve the franchise cable market, as a supplement to the Company's VideoMask(TM)Interdiction products, which are primarily focused on the private cable market. -13- Over the past several years, the Company has expanded beyond its core business by acquiring a private cable television system (BDR Broadband, LLC ) and by acquiring an interest in a company offering a private telephone program ideally suited to multiple dwelling unit applications (Blonder Tongue Telephone, LLC). These acquisitions are described in more detail below. During June, 2002, the Company formed a venture with Priority Systems, LLC and Paradigm Capital Investments, LLC for the purpose of acquiring the rights-of-entry for certain multiple dwelling unit cable television systems (the "Systems") owned by affiliates of Verizon Communications, Inc. The venture entity, BDR Broadband, 90% of the outstanding equity capital of which is owned by the Company, acquired the Systems, which are comprised of approximately 3,065 existing MDU cable television subscribers and approximately 7,601 passings. BDR Broadband paid approximately $1,880,000 for the Systems, subject to adjustment, which constitutes a purchase price of $575 per subscriber. The final closing date for the transaction was on October 1, 2002. The Systems were cash flow positive beginning in the first year. To date, the Systems have been upgraded with approximately $2,004,000 of interdiction and other products of the Company and, during 2004, two of the Systems located outside the region where the remaining Systems are located, were sold. It is planned that the Systems will be upgraded with approximately $400,000 of additional interdiction and other products of the Company over the course of operation. During July, 2003, the Company purchased the 10% interest in BDR Broadband that had been originally owned by Paradigm Capital Investments, LLC, for an aggregate purchase price of $35,000, resulting in an increase in the Company's stake in BDR Broadband from 80% to 90%. In consideration for its majority interest in BDR Broadband, the Company advanced to BDR Broadband $250,000, which was paid to the sellers as a down payment against the final purchase price for the Systems. The Company also agreed to guaranty payment of the aggregate purchase price for the Systems by BDR Broadband. The approximately $1,630,000 balance of the purchase price was paid by the Company on behalf of BDR Broadband on November 30, 2002, pursuant to the terms and in satisfaction of certain promissory notes (the "Seller Notes") executed by BDR Broadband in favor of the sellers. The Company believes that the model it devised for acquiring and operating the Systems has been successful and can be replicated for other transactions. The Company also believes that opportunities currently exist to acquire additional rights-of-entry for multiple dwelling unit cable television, high-speed data and/or telephony systems. The Company is seeking opportunities, although there is no assurance that the Company will be successful in consummating any transactions. In addition, the Company may need financing to acquire the additional rights-of-entry, and financing may not be available on acceptable terms or at all. In furtherance of the foregoing, in August 2005, the Company formed a new wholly-owned limited liability company called Hybrid Networks, LLC ("HNL") for the purpose of exploiting opportunities to acquire additional rights-of-entry in the mid-Atlantic and southeast regions of the United States, where participation in such opportunities by the Company's joint venture partner in BDR Broadband is not warranted. In March, 2003, the Company entered into a series of agreements, pursuant to which the Company acquired a 20% minority interest in NetLinc Communications, LLC ("NetLinc") and a 35% minority interest in Blonder Tongue Telephone, LLC ("BTT") (to which the Company has licensed its name). The aggregate purchase price consisted of (i) up to $3,500,000 payable over a minimum of two years, plus (ii) 500,000 shares of the Company's common stock. NetLinc owns patents, proprietary technology and know-how for certain telephony products that allow Competitive Local Exchange Carriers ("CLECs") to competitively provide voice service to MDUs. Certain distributorship agreements were also concurrently entered into among NetLinc, BTT and the Company pursuant to which the Company ultimately acquired the right to distribute NetLinc's telephony products to private and franchise cable operators as well as to all buyers for use in MDU applications. BTT partners with CLECs to offer primary voice service to MDUs, receiving a portion of the line charges due from the CLECs' telephone customers, and the Company offers for sale a line of telephony equipment to complement the voice service. As a result of NetLinc's inability to retain a contract manufacturer to manufacture and supply the products in a timely and consistent manner in accordance with the requisite specifications, in September, 2003 the parties agreed to restructure the terms of their business arrangement entered into in March, 2003. The restructured business arrangement was accomplished by amending certain of the agreements previously entered into and entering into certain new agreements. Some of the principal terms of the restructured arrangement include increasing the Company's economic ownership in NetLinc from 20% to 50% and in BTT from 35% to 50%, all at no additional cost to the Company. The cash portion of the purchase price in the venture was decreased from $3,500,000 to $1,166,667 and the then outstanding balance of $342,000 was paid in installments of $50,000 per week until it was paid in full in October, 2003. In addition, of the 500,000 shares of common stock issued to BTT as the non-cash component of the purchase price (fair valued at $1,030,000), one-half (250,000 shares) have been pledged to the Company as collateral to secure BTT's obligation to repay the $1,167,667 cash component of the purchase price to the Company via preferential distributions of cash flow under BTT's limited liability company operating agreement. Under the restructured arrangement, the Company can purchase similar telephony products directly from third party suppliers other than NetLinc and, in connection therewith, the Company would pay certain future royalties to NetLinc and BTT from the sale of these products by the Company. While the distributorship agreements among NetLinc, BTT and the Company have not been terminated, the Company does not anticipate purchasing products from NetLinc in the near term. NetLinc, however, continues to own intellectual property, which may be further developed and used in the future to manufacture and sell telephony products under the distributorship agreements. -14- In addition to receiving incremental revenues associated with its direct sales of the telephony products, the Company also anticipates receiving additional revenues from telephony services provided by or through contracts for such services obtained by BDR Broadband, BTT (through the Company's 50% stake therein) as well as through joint ventures with third parties. While the events related to the restructuring resulted in a delay in the Company's anticipated revenue stream from the sale of telephony products, the Company believes that these revised terms are beneficial and will result in the Company enjoying higher gross margins on telephony equipment unit sales as well as an incrementally higher proportion of telephony service revenues. It has been the Company's experience during the past two years that the time frame from introduction of a telephony service opportunity to consummation of the associated right-of-entry agreement, is longer than the time frame relating to obtaining rights-of-entry for the provision of video and high-speed data services. This protracted time frame has had an adverse impact on the growth of telephony system revenues. Material incremental revenues associated with the sale of telephony products are not presently anticipated to be received until at least fiscal year 2006. Results of Operations Third three months of 2005 Compared with third three months of 2004 Net Sales. Net sales decreased $1,549,000, or 13.8%, to $9,666,000 in the third three months of 2005 from $11,215,000 in the third three months of 2004. The decrease in sales is primarily attributed to lower head end product sales. In addition, net sales for the third three months of 2004 included the recognition of $458,000 of revenues from a note receivable obtained by the Company in connection with a sale of goods to a customer in September 2002. Net sales included approximately $4,489,000 and $5,531,000 of headend equipment for the third three months of 2005 and 2004, respectively. Included in net sales are revenues from BDR Broadband of $446,000 and $355,000 for the third three months of 2005 and 2004, respectively. Cost of Goods Sold. Cost of goods sold increased to $9,719,000 for the third three months of 2005 from $7,635,000 for the third three months of 2004 and increased as a percentage of sales to 100.6% from 68.8%. The increase as a percentage of sales was caused primarily by an increase in the reserve for excess inventory of $3,494,000. The increase in the reserve was based on the Company's determination that sales of certain products would not meet expectations due to the significant changes taking place in communications technology as the shift from analog to digital accelerates and as the use of fiber and applications relying on VoIP expand in future deployments for cable television, high-speed data and voice services (see footnote 4 in the notes to the Company's unaudited consolidated financial statements contained in this Form 10-Q). Excluding the increase in the inventory reserve, the cost of goods sold percentage was 64.4% and 68.8% for the third three months of 2005 and 2004, respectively. The decrease was attributed to a higher portion of sales in the third three months of 2005 being comprised of higher margin products. Selling Expenses. Selling expenses increased to $1,207,000 for the third three months of 2005 from $1,047,000 in the third three months of 2004 and increased as a percentage of sales to 12.5% for the third three months of 2005 from 9.3% for the third three months of 2004. The $160,000 increase was primarily the result of an increase in salaries and fringe benefits of $78,000 due to an increase in headcount, an increase of $31,000 for consulting fees paid to sales reps and an increase of $53,000 due to an increase in departmental supplies. -15- General and Administrative Expenses. General and administrative expenses increased to $1,639,000 for the third three months of 2005 from $1,488,000 for the third three months of 2004 and increased as a percentage of sales to 16.9% for the third three months of 2005 from 13.3% for the third three months of 2004. The $151,000 increase was primarily attributed to an increase in professional fees of $118,000. Research and Development Expenses. Research and development expenses decreased to $372,000 in the third three months of 2005 from $385,000 in the third three months of 2004 but increased as a percentage of sales to 3.9% for the third three months of 2005 from 3.4% for the third three months of 2004. This $13,000 decrease is primarily due to a decrease in purchases of departmental supplies of $21,000, a decrease of product licensing fees of $4,000, a decrease of depreciation of $4,000 offset by an increase in salaries and fringe benefits of $21,000. Operating Income (Loss). Operating loss of $3,271,000 for the third three months of 2005 represents a decrease from operating income of $660,000 for the third three months of 2004. Operating income as a percentage of sales decreased to (33.8)% in the third three months of 2005 from 5.9% in the third three months of 2004. Other Expense. Interest expense decreased to $190,000 in the third three months of 2005 from $215,000 in the third three months of 2004. The decrease is the result of lower average borrowing. Interest income decreased to zero in the third three months of 2005 compared to $87,000 in the third three months of 2004 primarily due to the recognition of $85,000 of interest income on a note receivable in the third three months of 2004 (see footnote 7 in the notes to the Company's unaudited consolidated financial statements contained in this Form 10-Q). Income Taxes. The provision for income taxes for the third three months of 2005 and 2004 was zero. As a result of the Company's continuing losses, a 100% valuation allowance has been recorded on the 2005 and 2004 increase in the deferred tax benefit. First nine months of 2005 Compared with first nine months of 2004 Net Sales. Net sales decreased $2,318,000, or 7.6%, to $28,343,000 in the first nine months of 2005 from $30,661,000 in the first nine months of 2004. The decrease in sales is primarily attributed to the recognition of $1,203,000 of sales from the note receivable in the first nine months of 2004 and a decrease in headend equipment sales. Headend sales were $14,006,000 and $15,016,000 for the first nine months of 2005 and 2004, respectively. Included in net sales are revenues from BDR Broadband of $1,315,000 and $1,094,000 for the first nine months of 2005 and 2004, respectively. Cost of Goods Sold. Cost of goods sold increased to $23,010,000 for the first nine months of 2005 from $21,060,000 for the first nine months of 2004, and increased as a percentage of sales to 81.2% from 68.7%. The increase as a percentage of sales was caused primarily by an increase in the reserve for excess inventory of $4,373,000 in the first nine months of 2005 compared to $300,000 for the first nine months of 2004. The increase in the inventory reserve is due to the Company determining that sales of certain products would not meet expectations as described above. Excluding the increase in the inventory reserve, the cost of goods sold percentage was 65.8% and 67.7% for the nine months of 2005 and 2004, respectively. The decrease was attributed to a higher portion of sales in the nine months of 2005 being comprised of higher margin products. Selling Expenses. Selling expenses increased to $3,397,000 in the first nine months of 2005 from $3,185,000 in the first nine months of 2004, and increased as a percentage of sales to 11.9% for the first nine months of 2005 from 10.4% for the first nine months of 2004. This $212,000 increase is primarily attributable to an increase in wages and fringe benefits of $267,000 due to an increase in headcount and an increase in departmental supplies of $65,000 offset by a decrease of $111,000 in royalty expense for the first nine months of 2005. General and Administrative Expenses. General and administrative expenses increased to $4,973,000 for the first nine months of 2005 from $4,444,000 for the first nine months of 2004 and increased as a percentage of sales to 17.6% for the first nine months of 2005 from 14.5% for the first nine months of 2004. The $529,000 increase can be primarily attributed to an increase in professional fees of $508,000. -16- Research and Development Expenses. Research and development expenses decreased to $1,178,000 in the first nine months of 2005 from $1,187,000 in the first nine months of 2004. This $9,000 decrease was primarily due to a decrease in product licensing fees of $29,000 and a decrease in depreciation of $13,000 offset by an increase in salaries and fringe benefits of $42,000. Research and development expenses, as a percentage of sales, increased to 4.2% in the first nine months of 2005 from 3.9% in the first nine months of 2003. Operating (Loss) Income. Operating loss was $4,215,000 for the first nine months of 2005 compared to operating income of $785,000 for the first nine months of 2004. Operating income as a percentage of sales decreased to (14.9%) in the first nine months of 2005 from 2.6% in the first nine months of 2004. Other Expense. Interest expense decreased to $586,000 in the first nine months of 2005 from $713,000 in the first nine months of 2004. The decrease is the result of lower average borrowing. Other income decreased to zero in the first nine months of 2005 compared to $299,000 for the first nine months of 2004 primarily due to the recognition of $222,000 of interest income on the note receivable in the first nine months of 2004 as described above. Income Taxes. The benefit for income taxes for the first nine months of 2005 and 2004 was zero. The benefit for the current year loss has been subject to a valuation allowance since the realization of the deferred tax benefit is not considered more likely than not. Liquidity and Capital Resources As of September 30, 2005 and December 31, 2004, the Company's working capital was $7,714,000 and $10,603,000, respectively. The decrease in working capital is attributable primarily to an increase in the current portion of debt of $4,041,000 due to the reclassification of the revolving line of credit to current at September 30, 2005. The Company's net cash provided by operating activities for the nine-month period ended September 30, 2005 was $1,737,000, compared to $2,548,000 for the nine-month period ended September 30, 2004. The decrease is attributable primarily to an increase in accounts receivable of $975,000. Cash used in investing activities was $734,000, which was primarily attributable to capital expenditures for new equipment and upgrades to the BDR Broadband Systems of $731,000. Cash used in financing activities was $969,000 for the first nine months of 2005 primarily comprised of $10,740,000 of borrowings offset by $11,709,000 of repayments of debt. On March 20, 2002 the Company entered into a credit agreement with Commerce Bank, N.A. for a $19,500,000 credit facility, comprised of (i) a $7,000,000 revolving line of credit under which funds may be borrowed at LIBOR, plus a margin ranging from 1.75% to 2.50%, in each case depending on the calculation of certain financial covenants, with a floor of 5% through March 19, 2003, (ii) a $9,000,000 term loan which bore interest at a rate of 6.75% through September 30, 2002, and thereafter at a fixed rate ranging from 6.50% to 7.25% to reset quarterly depending on the calculation of certain financial covenants, and (iii) a $3,500,000 mortgage loan bearing interest at 7.5%. Borrowings under the revolving line of credit are limited to certain percentages of eligible accounts receivable and inventory, as defined in the credit agreement. The credit facility is collateralized by a security interest in all of the Company's assets. The agreement also contains restrictions that require the Company to maintain certain financial ratios as well as restrictions on the payment of cash dividends. The initial maturity date of the line of credit with Commerce Bank was March 20, 2004. The term loan required equal monthly principal payments of $187,000 and matures on April 1, 2006. The mortgage loan requires equal monthly principal payments of $19,000 and matures on April 1, 2017. The mortgage loan is callable after five years at the lender's option. In November, 2003, the Company's credit agreement with Commerce Bank was amended to modify the interest rate and amortization schedule for certain of the loans thereunder, as well as to modify one of the financial covenants. Beginning November 1, 2003, the revolving line of credit bore interest at the prime rate plus 1.5%, with a floor of 5.5%, and the term loan began to accrue interest at a fixed rate of 7.5%. Beginning December 1, 2003, the term loan requires equal monthly principal payments of $193,000 plus interest with a final payment on April 1, 2006 of all remaining unpaid principal and interest. -17- At March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003, the Company was unable to meet one of its financial covenants required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of each such date. In March, 2004, the Company's credit agreement with Commerce Bank was amended to (i) extend the maturity date of the line of credit until April 1, 2005, (ii) reduce the maximum amount that may be borrowed under the line of credit to $6,000,000, (iii) suspend the applicability of the cash flow coverage ratio covenant until March 31, 2005, (iv) impose a new financial covenant requiring the Company to achieve certain levels of consolidated pre-tax income on a quarterly basis commencing with the fiscal quarter ended March 31, 2004, and (v) require that the Company make a prepayment against its outstanding term loan to the Bank equal to 100% of the amount of any prepayment received by the Company on its outstanding note receivable from a customer, up to a maximum amount of $500,000. At December 31, 2004, the Company was unable to meet one of its financial covenants required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of such date. In March, 2005, the Company's credit agreement with Commerce Bank was amended to (i) extend the maturity date of the line of credit until April 1, 2006, (ii) provide for a interest rate on the revolving line of credit of the prime rate plus 2.0%, with a floor of 5.5% (8.75% at September 30, 2005), (iii) waive the applicability of consolidated pre-tax income for the quarter ended December 31, 2004, (iv) suspend the applicability of the cash flow coverage ratio covenant until March 31, 2006, and (v) impose a financial covenant requiring the Company to achieve certain levels of consolidated pre-tax income on a quarterly basis commencing with the fiscal quarter ended March 31, 2005. At March 31, 2005, June 30, 2005 and September 30, 2005, the Company was unable to meet one of its financial covenants required under its credit agreement with Commerce Bank, which non-compliance was waived by the Bank effective as of such date. See footnote 5 in the notes to the Company's unaudited consolidated financial statements contained in this Form 10-Q for more information regarding the non-compliance at March 31, 2005, June 30, 2005 and September 30, 2005 and the accounting treatment of portions of the debt under the credit agreement as non-current. At September 30, 2005, there was $4,041,000, $510,000 and $2,683,000 outstanding under the revolving line of credit, term loan and mortgage loan, respectively. The Company has from time to time experienced short-term cash requirement issues. In 2002, the Company paid approximately $1,880,000 in connection with acquiring its majority interest in BDR Broadband and paying off the Seller Notes for BDR Broadband. In addition, the Company will incur additional obligations related to royalties, if any, in connection with its $1,167,000 cash investments during 2003, in NetLinc and BTT. While the Company's existing lender agreed to allow the Company to fund both the BDR Broadband obligations and the NetLinc/BTT obligations using its line of credit, such lender did not agree to increase the maximum amount available under such line of credit. These expenditures, coupled with the March 2004 amendment to the Company's credit agreement with Commerce Bank described above, have reduced the Company's working capital. The Company is exploring various alternatives to enhance its working capital, including inventory-related pricing and product reengineering efforts, as well as seeking alternative financing. During October, 2005, the Company entered into a commitment letter with National City Business Credit, Inc. ("NCBC") pursuant to which NCBC committed to provide to the Company a $10,000,000 asset based revolving credit facility and a $3,500,000 term loan facility (see footnote 9 in the notes to the Company's unaudited consolidated financial statements contained in this Form 10-Q for further information regarding the commitment letter with NCBC). During 2004, BDR Broadband had positive operating cash flow, which has continued in 2005. As such, BDR Broadband is not presently anticipated to adversely impact the Company's working capital. New Accounting Pronouncements -18- In December, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R, "Share-Based Payment." This statement is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. Companies will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). The cost will be recognized over the period during which an employee is required to provide service in exchange for the award, which requisite service period will usually be the vesting period. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. SFAS No. 123R will be effective for fiscal years beginning after June 15, 2005 and allows for several alternative transition methods. Accordingly, the Company will adopt SFAS No. 123R in its first quarter of fiscal 2006. The Company is currently evaluating the provisions of SFAS No. 123R and has not yet determined the impact that this Statement will have on its consolidated results of operations or financial position. In November, 2004, the FASB issued SFAS No. 151, "Inventory Costs", an amendment of Accounting Research Bulletin No. 43 Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not believe adoption of SFAS No. 151 will have a material effect on its consolidated financial position, results of operations or cash flows. In December, 2004, the FASB issued FASB Staff Position No. 109-1 ("FSP FAS No. 109-1"), "Application of FASB Statement No. 109, 'Accounting for Income Taxes,' to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004." The American Jobs Creation Act of 2004 introduces a special tax deduction of up to 9% when fully phased in, of the lesser of "qualified production activities income" or taxable income. FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a special tax deduction in accordance with SFAS No. 109. Although FSP FAS No. 109-1 was effective upon issuance, the Company is still evaluating the impact FSP FAS No. 109-1 will have on its consolidated financial statements. In December, 2003, the FASB issued a revision to SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement does not change the measurement or recognition aspects for pensions and other post-retirement benefit plans; however, it does revise employers' disclosures to include more information about the plan assets, obligations to pay benefits and funding obligations. SFAS No. 132, as revised, is generally effective for financial statements with a fiscal year ending after December 15, 2003. The Company has adopted the required provisions of SFAS No. 132, as revised. The adoption of the required provisions of SFAS No. 132, as revised, did not have a material effect on the Company's consolidated financial statements. In May, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6 "Elements of Financial Statements," as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial instruments and disclosure requirements. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and for all other matters, is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material effect on the Company's consolidated financial position or results of operations. In January, 2003, the FASB issued Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities" and in December 2003, a revised interpretation was issued (FIN No. 46, as revised). In general, a variable interest entity ("VIE") is a corporation, partnership, trust, or any other legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46, as revised requires a VIE to be consolidated by a company if that company is designated as the primary beneficiary. The interpretation applies to VIEs created after January 31, 2003, and for all financial statements issued after December 15, 2003 for VIEs in which an enterprise held a variable interest that it acquired before February 1, 2003. The adoption of FIN No. 46, as revised, did not have a material effect on the Company's consolidated financial position or results of operations. -19- In March, 2005, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation ("FIN") No. 47, "Accounting for Conditional Asset Retirement Obligations - An Interpretation of FASB Statement No. 143" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations, and (c) more information about investment in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company plans to adopt FIN 47 at the end of its 2005 fiscal year and does not believe that the adoption will have a material impact on its consolidated results of operations or financial position. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in the Company's financial instruments and positions represents the potential loss arising from adverse changes in interest rates. At September 30, 2005 and 2004 the principal amount of the Company's aggregate outstanding variable rate indebtedness was $4,041,000 and $3,331,000, respectively. A hypothetical 100 basis point increase in interest rates would have had an annualized unfavorable impact of approximately $40,000 and $33,000, respectively, on the Company's earnings and cash flows based upon these quarter-end debt levels. At September 30, 2005, the Company did not have any derivative financial instruments. ITEM 4. CONTROLS AND PROCEDURES The Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective in timely alerting them to material information required to be included in the Company's periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote; however, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective at a reasonable assurance level. There have been no changes in the Company's internal control over financial reporting, to the extent that elements of internal control over financial reporting are subsumed within disclosure controls and procedures, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party to certain proceedings incidental to the ordinary course of its business, none of which, in the current opinion of management, is likely to have a material adverse effect on the Company's business, financial condition, or results of operations. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS -20- None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION On November 10, 2005, the Company and its recently formed, wholly-owned subsidiary, Blonder Tongue Far East, LLC, a Delaware limited liability company ("BTFE"), entered into a Joint Venture Agreement (the "Joint Venture Agreement") with Master Gain International Industrial, Limited, a Hong Kong corporation ("Master Gain"), to manufacture products in the People's Republic of China (the "Joint Venture"). The Joint Venture Agreement contemplates the formation of several new entities including a new Chinese manufacturing company to be called Shenzhen China Blonder Tongue ("SCBT"), fifty percent (50%) of which will be owned (directly or indirectly) by each of the Company and Master Gain. The formation of SCBT and the extent of its operations will be subject to approval and regulation by the People's Republic of China. The Company will grant SCBT a license to use certain of the Company's technology and know-how to manufacture and sell certain of the Company's products, and an exclusive distributorship to sell certain of the Company's products in the Asian, Southeast Asian, African, European, Middle Eastern and Australian markets. This arrangement will commence with less complex products being licensed and manufactured during the early stages and progress to the license, manufacturing and sale of more complex products over time. The Joint Venture Agreement contemplates that the Joint Venture will acquire from third parties, other technology and rights to manufacture, market and sell products developed from these other technologies, including certain cable modem termination system hardware and software technology (the "CMTS Technology"). The Joint Venture will grant the Company an exclusive distributorship to sell such products in the North American, South American and Caribbean markets. Master Gain will contribute $5,850,000 to the Joint Venture (the "Master Gain Contribution"). The Company will, upon receipt by the Joint Venture of the Master Gain Contribution and acquisition by the Joint Venture of the CMTS Technology, contribute 1,000,000 shares of its unregistered common stock, par value $.001 per share, to the Joint Venture and will grant Master Gain stock options to purchase up to 500,000 shares of the Company's unregistered common stock. The shares of unregistered common stock contributed by the Company to the Joint Venture will be subject to a voting trust agreement, whereby an officer of the Company will be designated as the voting trustee. Both the shares issued to the Joint Venture as well as the options granted to Master Gain will be subject to certain restrictions and rights of cancellation. The exercise price, vesting schedule and expiration of the options will be in accordance with the following: (i) options to purchase 50,000 shares at an exercise price of $5.00 per share will vest upon receipt by the Joint Venture of the Master Gain Contribution and acquisition by the Joint Venture of the CMTS Technology and expires on September 30, 2008; (ii) options to purchase 150,000 shares at an exercise price of $7.00 per share will vest on April 15, 2007 and expire on April 14, 2010; and (iii) options to purchase 300,000 shares at an exercise price of $10.00 per share will vest on April 15, 2008 and expire on April 14, 2011. The shares of unregistered common stock will be issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The unregistered common stock will be issued to one or more affiliated entities of which the Company will own, directly or indirectly a 50% interest, and all such entities will have access to the Company's most recent Form 10-K/A, all quarterly and other periodic reports filed subsequent to such Form 10-K/A and the Company's most recent proxy materials. Consummation of the transactions contemplated by the Joint Venture Agreement are subject to certain conditions as set forth in the Joint Venture Agreement, including obtaining any consent, approval, permit, license or other authorization required from any and all governmental authorities with proper jurisdiction, including, without limitation, the People's Republic of China. The foregoing description of the Joint Venture Agreement does not purport to be complete and is qualified in its entirety by reference to the Joint Venture Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated by reference herein. ITEM 6. EXHIBITS Exhibits The exhibits are listed in the Exhibit Index appearing at page 24 herein. -21- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BLONDER TONGUE LABORATORIES, INC. Date: November 14, 2005 By: /s/ James A. Luksch James A. Luksch Chief Executive Officer By: /s/ Eric Skolnik Eric Skolnik Senior Vice President and Chief Financial Officer (Principal Financial Officer) -22- EXHIBIT INDEX Exhibit # Description Location 3.1 Restated Certificate of Incorporation Incorporated by reference from of Blonder Tongue Laboratories, Inc. Exhibit 3.1 to S-1 Registration Statement No. 33-98070 originally filed October 12, 1995, as amended. 3.2 Restated Bylaws of Blonder Tongue Incorporated by reference from Laboratories, Inc. Exhibit 3.2 to S-1 Registration Statement No. 33-98070 originally filed October 12, 1995, as amended. 10.1 Joint Venture Agreement, dated Filed herewith. November 10, 2005, among, Blonder Tongue Laboratories, Inc, Blonder Tongue Far East, LLC, and Master Gain International Industrial, Limited. 31.1 Certification of James A. Luksch Filed herewith. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Eric Skolnik Filed herewith. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to Filed herewith. Section 906 of Sarbanes-Oxley Act of 2002. -23- Exhibit 31.1 CERTIFICATION I, James A. Luksch, Chief Executive Officer of Blonder Tongue Laboratories, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blonder Tongue Laboratories, Inc.; 2. Based on my knowledge, this report 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2005 /s/ James A. Luksch James A. Luksch Chief Executive Officer (Principal Executive Officer) Exhibit 31.2 CERTIFICATION I, Eric Skolnik, Senior Vice President and Chief Financial Officer of Blonder Tongue Laboratories, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blonder Tongue Laboratories, Inc.; 2. Based on my knowledge, this report 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2005 /s/ Eric Skolnik Eric Skolnik Senior Vice President and Chief Financial Officer (Principal Financial Officer) Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 To the knowledge of each of the undersigned, this Report on Form 10-Q for the quarter ended September 30, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Blonder Tongue Laboratories, Inc. for the applicable reporting period. Date: November 14, 2005 By: /s/ James A. Luksch James A. Luksch, Chief Executive Officer By: /s/ Eric Skolnik Eric Skolnik, Chief Financial Officer
Blonder Tongue Laboratories (BDRL) 10-Q2005 Q3 Quarterly report
Filed: 14 Nov 05, 12:00am