ADDvantage Technologies Group Inc (AEY) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the ADDvantage Technologies second-quarter fiscal 2011 earnings conference call. One note that today's call is being recorded. And now I would like to turn the conference over Garth Russell of KCSA Strategic Communications.

Before beginning today's call I would like to remind you that this call will contain certain forward-looking statements that are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include among other things statements regarding future events such as the ability of ADDvantage Technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multiple system operators, as well as future financial performance of ADDvantage Technologies. These statements involve a number of risks and uncertainties.

Participants are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, such as those contained in ADDvantage Technologies' most recent report on Form 10-K on file with the Securities and Exchange Commission. Financial information presented on this conference call should be considered in conjunction with these consolidated financial statements. And notes there too included in ADDvantage Technologies' most recent report on Form 10-K filed December 14, 2010.

The guidance regarding anticipated future results on this call is based on limited information currently available on ADDvantage Technologies, which is subject to change, although any such guidance and the factors influencing it will likely change, ADDvantage Technologies will not necessarily update the information as ADDvantage Technologies will only provide guidance at certain points during the year. Such information speaks only as of the date of this presentation. With nothing further, I would now like to turn the call to Ken Chymiak, President and Chief Executive Officer. Ken, the floor is yours.

Thank you, Garth. Welcome to ADDvantage Technologies' fiscal 2011 second-quarter conference call. With me today is David Chymiak, Chairman of the Board, and Scott Francis, our Chief Financial Officer. As always, I would like to begin today's call making some general comments regarding our performance during the quarter. I will then turn the call over to Scott, who will provide the financial results for the second quarter ended March 31, 2011. And finally, Dave will address the market conditions our Company is currently facing, expect to face, in the foreseeable future.

As indicated today in our press release, for the second quarter of 2011, we reported net income of $0.06 per basic and diluted share, with total sales $8.9 million. That total sales for the period were down 26% for the same quarter 2010, due to a combination of facts that negligibly impacted our business during the second quarter of fiscal 2011. The primary fact behind this decline is that we continue to experience prolonged economic downturn within the cable and television industry as MSOs continue to limit capital expenditures on planned expansion projects and bandwidth upgrades in order to conserve cash. The decline in this spending is translated to a significant decrease in the sale of our new and refurbished equipment for the quarter, particularly with regard to the sale of digital converter boxes, which was down dramatically from the same period last year.

We do not currently know the timing of when our MSO customers would begin to increase their capital expenditures to return to pre-recession levels. But until this happens, we do not anticipate revenue growth in our equipment sales business. A second factor in decline of our sales in the quarter was severe weather conditions in the current quarter. This weather delayed any work being done by MSOs under network, as well as it interrupted the ability to ship products. The third factor being Tulsat's new reseller product signed with Cisco during the first quarter of 2011. Under this agreement, Tulsat cannot sell current production Cisco products to other resellers or brokers or can Tulsat sell these Cisco products outside of the United States, as in the past, which has negatively impacted Tulsat sales of Cisco products.

Tulsat will continue to assess over the next several quarters the full impact that this agreement will have on the business. On a more positive note, we've been able to scale our businesses within the fluctuations in demand, allowing us to maintain gross margins approximately 30% for both the second quarters ended March 31, 2011, and 2010. As a result, we have continued to generate positive cash flow, strengthen our balance sheet even further to cash equivalents of $10.2 million as of March 31, 2011. Overall, we remain confident that our strategy to reduce our inventory, maintain a more nimble business, has positioned us to remain profitable. We regularly evaluate various ideas to leverage our cash reserves in order to support the growth of our business, while at the same time increasing value for our shareholders. With that, I would now like to turn it over to Scott Francis, our CFO, for a look at the financials. Scott.

Thank you, Ken. As Ken mentioned earlier, the net sales for the fiscal second quarter of 2011 were $8.9 million, which was a decrease of 26% when compared to $12.1 million for the same period of fiscal 2010. This decrease is primarily attributable to the continued economic downturn in the cable industry, our severe weather conditions we experienced during the period, and the negative impact of the Cisco agreement that was signed in the first quarter of 2011. Revenue from new equipment sales decreased to $6.4 million for the three months ended March 31, 2011, compared to $7.8 million for the same period of last year. And our net refurbished equipment sales decreased 54% to $1.3 million, compared to $2.9 million for the second quarter of fiscal 2010. The decrease in our refurbished equipment sales is primarily due to a decrease in sales of our digital converter boxes of $1 million and the factors that were just discussed.

Revenue from repair services was also negatively impacted with a decrease in revenue of 16% to $1.2 million for the three months ended March 31, 2011, compared to $1.4 million for the same period of last year. The decline in revenue from the repair service business was primarily attributable to the closure of our Tulsat-West facility during the first quarter of 2011. Cost of sales for the three months ended March 31, 2011, decreased 26% to $6.2 million, from $8.4 million in the same quarter of a year ago, primarily attributable to the overall decrease in equipment sales for the period. The cost of sales was also impacted by a decrease in our provision for our excess of obsolete inventory of $0.1 million to $0.1 million for the three months ended March 31, 2011, from $0.2 million for the same period of last year.

Gross profit for the three months ended March 31, 2011, decreased to $2.7 million, compared to $3.6 million for the same period of fiscal 2010, due primarily to the overall decline in our net sales. This is partially offset by the impact of the $0.1 million decrease in the provision for the excess in obsolete inventory for the quarter. Our gross profit margins remained at 30% for both the three months ended March 31, 2011, and 2010. Operating, selling and general administrative expenses decreased $0.1 million or 8% to $1.5 million for the three months ended March 31, 2011, compared to $1.7 million for the same period of fiscal 2010. The decrease was due primarily to reduced costs resulting from the closure of our Tulsat-West facility in the first quarter of fiscal 2011.

Income from operations in the second quarter 2011 was $1.1 million, compared to $1.9 million for the same period of last year. And our net income contributed to common stockholders for the second quarter of 2011 was $0.6 million or $0.06 per basic and diluted share, compared to $1.1 million or $0.11 per basic and diluted share for the same period of last year. And EBITDA for the second quarter of fiscal 2011 was $1.2 million, compared to $2 million for the same period of last year. And cash and cash equivalents at March 31, 2011, was $10.2 million, compared to $8.7 million at September 30, 2010. Now for our results for the six months ended March 31, 2011.

For the six months ended March 31, 2011, net sales were $18.1 million, a decline of 19% from $22.3 million for the same period last year. New equipment sales for the first six months of fiscal 2011 were $12.9 million, compared with $14.4 million in the previous year, which is a decrease of 10% while our sales of refurbished equipment decreased 47% to $2.7 million in fiscal 2011 from $5.1 million in fiscal 2010. The decrease in our refurbished equipment sales was primarily due to a decrease in the sales in our digital converter boxes of $1.5 million. Revenues from our repair services businesses during the first six months of 2011 were $2.5 million, a decrease of 11% from $2.8 million a year earlier. The repair service revenue declined for the six months ended March 31, 2011, was primarily attributable to the closure of our Tulsat-West facility in the fiscal first quarter of 2011.

Our cost of sales for the first six months of fiscal 2011 decreased by 18% to $12.6 million, compared to $15.3 million a year ago. This is primarily attributable to the overall decrease in equipment sales. And cost of sales was also impacted by a decrease in the provision for the excess in obsolete inventory reserves of $0.2 million to $0.2 million for the six months ended March 31, 2011, from $0.4 million for the same period last year. Gross profit decreased by 20% to $5.6 million for the six months ended March 31, 2011, compared to $7 million for the six months ended March 31, 2010, with the gross margin percentage though remaining at 31% for both the six months ended March 31, 2011 and 2010. Our operating, selling and general administrative expenses decreased 11% to $3 million for the first six months of fiscal 2011, compared with $3.4 million for the first six months of fiscal 2010.

This decrease is primarily due to reduced costs of $0.2 million resulting primarily from the closure of the Tulsat-West facility in the first quarter of 2011. And our income from operations for the six months ended March 31, 2011, was $2.5 million, compared to $3.5 million for the same period of fiscal 2010, a decrease of 29%. And net income attributable to common shareholders for the six months ended March 31, 2011, decreased to $1.3 million or $0.13 per diluted share from $1.9 million or $0.19 per diluted share in the same period a year ago. And then our EBITDA for the six months ended March 31, 2011, was $2.7 million, compared to $3.7 million for the same period of last year. This concludes the financial overview of the quarter in the six months end the March 31, 2011, and I'll now turn the call over to Dave.

Thank you, Scott. As Ken mentioned earlier, despite the lower revenues reported for the second quarter, we remain focused on our strategy of reducing inventory to be more in line with current market demands and maintaining a cash position that allows us to react effectively to shifts in the industry. Although we continue to remain cautious, we will be monitoring the actions of our larger MSO customers very closely, making sure we are flexible and ready to capitalize on our relations with these MSOs should demand for equipment begin to build.

One of the major recent changes in the market was Cisco's new distribution model, which is reflected in our new agreement with them. As previously announced on December 27, 2010, our Tulsat subsidiary has entered into a new system integrator seller agreement with Cisco, which will enable us to sell both IT and service provider video technology group-related products in the United States. Under the terms of this agreement, we will now purchase the majority of our new Cisco product inventory through a primary stocking distributor, as opposed to purchasing directly from Cisco as we did under the prior agreement. This is expected to result in slightly higher product costs, but it will lower our storage, shipping, and handling costs as we reduce our inventory of new Cisco products.

As Ken mentioned earlier, one of the major changes in this agreement is that the SPVTG products we've purchased through Cisco are the primary stocking distributor will be only able to be sold to domestic end users of these products. Therefore, we cannot sell current Cisco products to other resellers or brokers, nor can we sell these Cisco products to outside of the United States as we have in the past. These changes to our sales model have negatively impacted our sales of Cisco products. Tulsat will continue to assess over these next several quarters the full impact of this agreement will have on its business. As we continue to make strategic reductions in our inventory, we believe we have and will continue to have the necessary inventory on hand or available to us via our supply channels to meet our customers' demands once they begin to increase their capital expenditures.

With that, as I said, we expect to continue to be an important Cisco partner. We also continue to be the leading broadband access network stocking distributor for Motorola, as well as other master distributor for Fujitsu Frontech encoders, decoders and media solution products in the United States. And are working with both of these OEMs to expand these relationships. We are continually evaluating other possible OEM relations to expand our product offerings to our customers to help grow our business. In closing, as Ken mentioned, we continue to evaluate various alternatives to growing our business and build shareholder value. This concludes our prepared remarks. Operator, we would like to open the call up for any questions.

(Operator Instructions)

[Andrew Winman], a private investor.

How's it going?

Pretty good.

Great, I am new to the story. I've just become a shareholder recently. I'm just kind of walking through the numbers. It's looking to me like, and I don't know if you can comment on this or not, but it's looking to me like you have got about $11.2 million in principal payments due in about the next 15 months to 18 months. You've got $10.2 million in cash on your balance sheet. You're generating $6 million in operating income a year. So, cash isn't a concern. Why not come out with the shareholder, with the buyback program?

Thanks for the question. We have done that in the past. We still have a program in place, some of the covenants we have with the bank is limited to our EBITDA. And one of the other reasons is, as you stated, we do have this term note coming due, and we do have a swap agreement in place there. So, we monitor that closely. We are considering increasing that, but at this time we're looking at other opportunities out in the marketplace. But the Board discusses at each time we meet, so we'll keep that in mind.

Are you all thinking about making an acquisition or?

We don't know right where we're going to go today. We're looking at many opportunities out there. If it's increasing our product line, or if it's other opportunities in the marketplace. We're open to all those. And just so you know, we monitor our cash position, because if you go back and look historically, we have not kept that amount of cash on hand. One of the things it has done for us in the last couple of quarters, in particular over the past year and a half, is put us in a much better position with our bank and we've always felt that no more the cash is king. It gives us some flexibility we never had before.

Well, I know traditionally you all reinvested everything just back into building inventory back into the business, but when I look at it before the recession it pretty much, I mean it varied a little bit, but $10 million in EBIT per year. Right now you're on page 4. I know you don't put out projections, but it's looking a little bit over $6 million in EBIT this year. And if you compare that to the stock price and with you all's balance sheet, this is one just investor's opinion, but I think the best investment you could make right now is buying back shares at the price that's in the market today.

This is Dave. I would like to comment on that. The rules and regulations of what the Company can buy back are so very limited. It has to do with float. We could be buying back 200, 300, 400, 500 shares on days. We've done that. We've accumulated what we can, but it's very, very difficult to do, just to let you know.

Okay. That's fine. I was just making a comment.

We appreciate it. We really do.

The point I think we're looking at is that we have looked at that and we have bought back 223,964 shares at $406,000 over the last few years. And just to echo what Dave was saying. In order to do that, it takes forever to get that amount of shares. And one of them we had to make, an institution came to us and we made a non-market purchase, which is (inaudible) under the SEC regulations.

Good. I got it. Well, just keep doing what you're doing. I have no doubt you'll do what is in our best interest. I was just letting you guys know what I thought.

Thank you. Appreciate it.

George Gaspar.

Yes, good morning. That was a good question that you just answered there. A little bit more on this Cisco situation. Can you give us some color as to the business that you're able to do now? Specifically versus the previous contract and what's missing from it?

Yes, George, one of the principal things for us was we had developed a market internationally because Cisco wasn't aggressively pursuing it over several years. And the reason why we were able to work in that market was because our ability to purchase bulk items from Cisco at a better price than we can purchase today. So, it gives us the ability to sell into that marketplace. And the other is that at the current arrangement was we have tried to be very transparent since it took place. We really don't know if the downturn in our Cisco business has been because the entire economy is weak. Or it's because there's an added competition and are -- the factories being more aggressive, because their sales are off.

And as we all know that Cisco is having some internal discussions amongst their business units, so there's a combination of a lot of things going on with that model. That's why we're saying we really don't know if we can put quantitative information out there. We would. Like I said, we think it's going to take another two quarters before we really know what the full impact will be. What do you think, Dave?

This is true. We still have pretty good inventory on products still in stock. We're trying to reduce it as we can. Business still goes on, but the general market is very, very soft at the moment between the cable operators. And it's got real soft in the last two months.

Okay. Do I understand that you're negatively impacted on the Cisco side because of domestic business and not the international? Or am I confused about that?

It's a combination of both. Internationally, we cannot sell as we used to and through our alliance partners and directly, and also the domestic business. Not only for us on the Cisco side, but also on the Motorola side. It's on both sides of it. We have some visibility that say look neither side of these two OEMs are doing very well at this time. Because it seems when I read the 10-Ks and 10-Qs of some of the larger MSOs, they have spent a lot of that money on enterprise on the Telco side. That's because the commercial customers will pay more money for those services. And you can read as well as I do, the loss of video customers, but they are picking it up on Internet side, and some of it.

It's a combination of everything. I think everybody, the cable companies are showing some more positive cash flows because they're not spending as much as they had to in the past. But we believe over the next time frame that you'll have to see where they'll have to need some more bandwidth. And then the other part of our business model, that we were very successful was when there was a shortage that the OEM and the OEMs were only chasing the larger transactions and there was a lot of construction going on in new subdivisions. We probably didn't at the time realize what the impact was but over the last two years, we've been able to realize it is more significant than we thought.

And then just on this inventory situation that you made reference to also. Your inventory was down slightly. It's around $27 million. How do you value the quality of the inventory now say, versus six months ago, or what you see happening in the marketplace going forward because of the slowdown in ordering? Do you still feel that you have the inventory that's going to be necessary as the customers come back into the market.

That's a good question. I'll address it first and we'll let Dave talk specifically about the Tulsat inventory. We built up inventory in the last quarter, more so in the last quarter of the calendar year 2010 because Cisco as we're all aware of, they change the way that they produced products. They went to a third party to do their manufacturing. We built up our inventory on the Motorola side in case there was a shortage out there to develop it. And what has happened in that market, it's just -- there has not been that many upgrades.

We're doing a lot of maintenance sales, which continue when there's a maintenance side. And we had a little bit from some of the tornadoes; it's still a little early on that to know what that impact is going to be. But our Motorola inventory is quite good. It's new and our Fujitsu inventory, we've -- over the last year that we've been in that business, it's been a very good add on for us, and we're looking to add other broadcast products as we go forward. Dave, you want to discuss the Tulsat inventory and the Cisco inventory that we currently have in our inventory that we had purchased prior to the new agreement.

George, I think our inventory is as good as it has ever been. The only thing is some of the fastest moving items that we sell we order from a distributor and have them drop shipped. So, that doesn't reduce our inventory any as far as current inventory. It's not going to go as fast as it did last year going down, but we still have a very broad inventory still in stock and very comfortable with it. We've got allowances for obsolescence and everything on it. And what we've got on the books as far as net costs, very comfortable with.

Dave, aren't we looking at more opportunities on our refurbished line gear and product like that and I think that going forward, it looks like it could be a bright area for us.

Well, we still make very good margins on refurbished gear. We have a lot of good inventory in stock. We haven't been seeing any being offered to us in any large quantities, so I suspect inventory to be down probably a few more million by the end of the year if not more.

And one other thing, George. We're seeing some significant opportunities where they've been pushed off since 2012 again, so which is kind of -- we were all geared up for these opportunities, but it looks like that happened. I need to address the digital converter boxes. That market is always feast or famine for us. And what has happened, the Latin American customers down there where most of those boxes have gone in the past. They have the same challenges getting the money to pay for the boxes. And so, there also has been a significant amount of boxes on the market and there has been a suppression of pricing, in other words it's going down. Saying that between their ability to pay and the prices, so that just impacted us.

One thing about that particular business. In addition on the CPE side, we're doing modems also. And we're selling modems and converter boxes, but our inventory has shrunk considerably. We're in pretty good shape in that business as far as inventory. We always bid on new opportunities, looking for product at the right price. We look for that may be to the rest of the calendar year may pick up and there may be more opportunities out there. But inventory-wise, we're in pretty good shape.

Okay. Before I pass to whoever's coming on. Again, on this inventory the -- you mentioned trying to take your inventory down hopefully in the coming quarters. Do you have a target on what you think you can build your cash up by the end of this year? Is it like $13 million, $12 million to $14 million range? Or by taking the inventory down relative to your sales volume now versus the last couple of quarters, I would think that you should be able to bring your inventory down a couple $2 million, $3 million. Tell me if I'm wrong on that but that should build your cash position. Do you have a target on cash for the end of the year?

Yes. George, one of the things we have to realize and I think Dave touched on it a little bit, is we buy more of the faster moving products that we normally bought directly from Cisco, we buy it through a distribution channel now. Needless to say that product does not come into our inventory, so we're not reducing that amount.

I got you.

But also, when you're making a decent margin on some of this product, it takes a little while to get it. For example, if you sold $1 million worth of product, new and used or a combination of it at 30% margin, that's going to reduce your inventory by $300,000. By $700,000, so it takes a long time to get to that point. We are looking at all of the deals now and direct to your point, it could be. It could be that. It could be more. It just depends and it's all a part of revenue. If we get the revenue, yes, we'll see that go down dramatically.

George, I'll answer that a different way. I would agree, except when a deal comes to end, we sort of take that one off the table. In other words, our current inventory that we have today, that's realistic to drop it, whether we end up acquiring something or acquiring another line, the inventory, we may not have that much cash. That's one thing that effects it.

Okay. I'll pass through and come back in.

[Mike Shillinger].

Yes, with the events that happened in Japan. Has that impacted the flow of equipment? Are there any products that you're seeing that have issues and if so, how's that impacted you?

The only impact that we have directly is with our particular line up. But we, as a massive stock and distributor, we had quite a bit in inventory and that's going down if the sales are there. But in everything I read, the biggest impact affects a lot of people is in the automobile manufacturer, because there's a lot of chips made in that. And I'm sure there's some of the products we buy may have some Japanese components in it. But for us directly, no, that has not been a negative impact.

Okay, thank you very much.

This is Ken. I would like to make one comment on the stimulus. I think everybody -- we had high hopes for the stimulus to bring us in some dollars in revenue. Most of that money that we see is going to Telcos and it's really for the broadband or they're upgrading their plan or serving under served areas at this time. We've looked at a couple of opportunities, but it really hasn't impacted us that much. Have you seen much opportunities in that, Dave?

We've got small percentages of quite a few different deals that's being affected by it, but nothing on the large scale. We're just not in that type of business. We're not in the install-type business. And we provide some things, but most of them have plenty of lead time. They're going to get their best prices negotiating with the factory and keep working with it until the last minute and get a better price.

Some of that product that we are seeing and some of the opportunity, engineering staffs are doing well in that part of the business, if they already had deep ties to some of these projects. I think if you look at NCTA and some others that have made a study on this, they're saying that it's pretty expensive what they're doing per subscriber. It's not really in the best interest of our country. I think because the cost is just prohibitive. Normally, you couldn't do it. It's kind of like ethanol. You have to subsidize something in order to create a market. It's makes it -- it's questionable if that's the right way to go. For us directly, we're looking at some other opportunities now, but it will not be significant because most of it stems from integration and construction of new plant for these companies.

We'll go back to George for a follow-up.

Thank you. A question on outlook and opportunity and this is, you mentioned bad weather being one of the issues in the quarter. What do you see with the very serious flooding underway and there was this mention about the tornado situation and some pretty serious devastation in the Southeast and this flooding going on. Does that pose an ultimate opportunity for replacement in the field?

No, none of that. We'll let David address a little bit from this side. But what we always do as a Company, we don't like to play on people's misery. But what we do as a service, as a value add, we call our customers in those market and say look, we're here to help you. You need something and we need to get it out overnight. Do we need to ship it to you? Do we need to make arrangements? Give you a good example. One of our customers about 200 miles plus from here was needing some sandbags, and they couldn't get them in their local market. They were all sold out and two of our sales team went out and bought 10,000 sandbags and delivered it to them. Those are things that we do because we feel the pain with the customer, but we're here to assist them and help them in any way we can. Dave, did you see any orders coming in from the floods or the tornadoes?

George, this is the way our business works with the weather. If it's a total loss or close to a total loss, we usually don't get involved because it's going to require a complete rebuild. And they go back with the insurance, they go back with the factory, and they have time to wait for delivery and get a better price. We have had where people, a town may just be hit in one section of town. Those are our type customers because they want to be back on the air tomorrow or next week. And we've had several of those orders, but nothing significant; $20,000, $30,000 orders. A lot of repair connectors. Things like this. Things that get damaged by water. But a total flood and everything, may take, especially if it's a large area, we will pick up some of it, but it's not normally our type business.

I see. Okay. And a question on new business arena. I know I brought this up before many times on quarterly calls. Is there anything -- you run such a good business. In fact, even with this downturn that you experienced, you've got wonderful ability to bring something to the bottom line relative to this revenue item, which I think says a lot. And the question is, regarding new business arena, is there something for the Company to look at in terms of cloud computing connectiveness, the equipment that it goes into that? Are there any areas that you could see where you could utilize your talents and distribution system to build out from where you are in a totally new stream of business?

George, I'm going to let Dave address that, but I'll say in the last few weeks he was at a Cisco summit out in Santa Jose that invited as one of the 30 plus people. I'll let him discuss, because that's one of the reasons why he went there is Cisco was throwing out potentially new opportunities. Dave, what did you come up with?

George, we're in a business that we're used to making profit. And I talked to several of the people there that I've known for years and the companies that are out there. We're not in the IP business as such. We're certified. We've got people that have the credentials and everything. But that business model we haven't worked in and we just aren't used to working in this margin of 3% to 5% to 8% type stuff, and it's very difficult.

A lot of those companies that I see and the opportunities, I see a lot of companies going bankrupt out there over the next years in some of that business because it's too many of us. And we're just not in that business and haven't picked at that model. We would have to make probably an acquisition and we've looked that too, but it's very hard to mix in a company that doesn't make any money for three years and you are putting money out. It's very difficult for us to look at in our model.

What we've looked at, a lot of those companies and I think you all as well as we would realize that, the money's got to be made on the integration side because our OEM partners are people in that industry not going to let you make much money. They don't value fulfillment at that degree. Like Dave said, if you made 5%, you're doing quite well. That's gross. And you've got to make it on the installation side of it, or the engineering side. And a lot of these companies at the end of the day, they're lucky to make a profit alone any margins. So, we've always as I -- we have stated many times before. We chased profits and not revenues. That would be a total change of our business philosophy and our models.

Okay. Well, obviously, sellers in the stock aren't looking at your book value, which I calculated this morning as about [334] and nearly $1 in cash. Admittedly you've got debt against that. Obviously, you're in a good position to take advantage of any turnaround in the market. And, I just wish you guys well to hang in there and build this thing out going forward.

We appreciate your kind comments.

And there are no further questions at this time. I'll turn the conference back over to management for additional or closing comments.

We appreciate everybody joining us today. The results are what they are and this is a difficult market, but I think the thing that we look for is we've got a good management team. We've got great employees that are challenged every day to make a profit for the Company. And also going forward, we're in a very good position with our cash and we think the inventory. And we strive to get new opportunities every day. We look forward to talking to you next quarter and hopefully the results will be better. Have a good day.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.