P&F Industries Inc (PFIN) 2010 Q1 法說會逐字稿

Greetings welcome to P&F first quarter 2010 earnings call. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is my pleasure to introduce your host, Richard Goodman, General Counsel for P&F. Thank you, Mr. Goodman, you may begin.

Thank you, operator. Good morning and welcome to P&F Industries' first quarter 2010 conference call. With us today from management are Richard Horowitz, Chairman, President and CEO; and Joseph Molino, Chief Operating Officer and Chief Financial Officer. Before we get started, I'd like to remind that any forward-looking statements contained herein, including those related to the Company's future performance and those contained in the comments of management, are based upon the Company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties.

Including but not limited to the strength of the retail industrial housing and other markets in which we operate, the impact of competition, product demand supply chain pricing and our debt and debt service requirements, potential exposure relating to any sale, liquidation or disposal of the WM Coffman business. And those other risks and uncertainties described in the reports and statements filed by the Company with the Securities and Exchange Commission, including, among others, as described in our annual report on Form 10-K for the fiscal year ended December 31, 2009.

These risks could cause the Company's actual results for the 2010 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Forward-looking statements speak as of the date on they are made and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. With that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard.

Good morning, Rich. And good morning, everybody and thank you all for joining us on our first quarter 2010 conference call. I'd like to begin this call with a brief update on certain facts and events evolving our Company of late. On April 23 of this year, we and our banks, Citibank and HSBC, entered into waiver and amendment, extending the revolving credit facility through January 1, 2011. And resetting certain borrowing thresholds and limits, none of which materially effect us, the Company. We set new financial covenants, which we currently believe we will achieve.

It required a capital infusion of $750,000, which I and an unrelated third party jointly loaned the Company on a subordinated basis. We are continuing our efforts to obtain new financing, as well as new mortgages on our three properties, to replace the current mortgages that we have. Further, we are in discussion, as I just said, to discuss perhaps our machinery and equipment loan as well. The goal of these activities is paramount on all of our minds at P&F and we are working diligently on doing that.

As to the matter of WM Coffman, unfortunately, WM Coffman was unable to achieve the revenue levels we anticipated prior to the transaction. And as a result, we never produced a positive cash flow out of that entity. This caused, among other things, a default on a loan agreement specific to Coffman. Coffman's lender PNC agreed to forebear from taking certain actions through August 31 of this year. Our March 29, 2010, the Company's Board of Directors established a plan to sell, liquidate or otherwise dispose of its ownership of WMC.

I'd like to add that neither P&F nor any of its subsidiaries, other than WM Coffman, of course, is a party to or a guarantor of any obligations of Coffman. Primarily, as a result of the aforementioned, on December 21, 2009, the Company unfortunately wrote down the carrying value of the net assets of WM Coffman, by $5.549 million, to reflect their fair value. As a result, the Company is reporting WMC as a discontinued operation, effective January 1 of this year. As WMC continues to fund its operations through a separate asset-based credit facility with PNC Bank.

I would like to give you a quick summary of our financial results for the first quarter of 2010. P&F reported revenue from continued operations of $11.1 million, for the three month period ended March 31, 2010, compared to revenue from continuing operations of $12.2 million for the same period in 2009. We reported an after tax loss from continuing operations of $707,000, compared to a loss of $339,000 during the first quarter of 2009. Basic and diluted loss per share from continuing operations this quarter was $0.20, compared to $0.09 in the first quarter of 2009. Basic and diluted loss per share from discontinued operations this quarter, was $0.48, compared to $0.08 a year ago.

And now, I'll review the quarterly performance of each of our units. The Continental Tool Group reported first quarter 2010 revenue of $7.8 million, compared to $9.1 million for the same period in 2009. Specifically, revenue at Florida Pneumatic the first quarter of 2010 was $4.5 million, compared to $4.7 million, last year. Revenue at Hy-Tech decreased to $3.3 million during the three month period ended March 31, 2010, from $4.4 million for the same period in 2009. And as of course, I would remind you all, the first quarter of 2009 for Hy-Tech was an extremely large revenue quarter. A significant portion of this decrease for this quarter is due to a reductions in sales to one of our major customers. The balance of the decrease was, of course, our customer base. And Hy-Tech has been performing better since the fourth quarter of 2009 and is continuing in through the first four months of this year than it was in midyear last year.

Nationwide is now the sole entity within our hardware segment. Despite an 8.2% increase in revenue, other hardware revenue, which is comprised of revenue from the sale of fencing and gate hardware, kitchen and bath accessories, OEM products and patio hardware, continues to be effected by, among other things, the general economic sluggishness, a diminishing recreational vehicle and modular home market and competitive pressures. Other hardware revenue consists of fencing and gate hardware, kitchen and bath, OEM and patio hardware. Which during the three month period ended March 31 of this year, had revenue of $1.849 million, $820,000, $448,000, and $210,000 respectively; compared to $1.625 million, $851,000, $429,000, and $171,000 respectively during the same period of last year. The gross margins for our tool segment for the three month period ended March 31, 2010, was 34.6%, compared to 35% for the three month period ended March 31, 2009.

Florida Pneumatic's increased its gross margin by 4.6 percentage points due the lower pricing from overseas vendors and a lower indirect warehousing costs. And Hy-Tech decreased its gross margin percentage by 5%, due primarily to lower overhead absorption, which in turn was due to lower volume throughout the facility. During this period, gross profit for this segment decreased to $4 million, compared to $4.1 million for the same period in 2009. As for the gross margin in our hardware segment, Nationwide's gross margin increased to 38.8% from 29.3%. And its gross profit increased to $1.3 million, from $900,000. Both increases due primarily to product mix, reduction in the cost of products being relieved from inventory and greater absorption of warehouse overhead.

For the three month period ended 31 of this year, our selling and G&A expenses were $4.3 million, compared to $4.2 million for the three month period March 31, 2009. However, I'd like to highlight to you, that in those numbers was an increase of $343,000 of legal, consulting and accounting fees, incurred during this past quarter, compared to the first quarter of 2009. Primarily attributable to our efforts to resolve various matters with our banks. And to a lesser degree, the net cost associated with the wind down of WM Coffman.

Partially offsetting the above, was the result of the continued Company-wide pay rate reduction decrease in our compensation, payroll taxes and benefits, aggregating $285,000. Finally, interest expense of $389,000 for the three month period ending March 31, 2010, reflects an increase of $84,000 when compared to the same period in the prior year. Interest increased on the revolver due to our default rates applied and was partially offset by lower interest on the term loan. At this point, I'd like to hand the call over to Joe. Joe?

Hi, thanks, Richard. Just a couple of -- a few more points. At March 31, 2010, our total borrowings in connection with continuing operations were approximately $21.7 million, a decrease from $25.5 million at December 31, 2009. The reduction is due primarily to pay downs on our revolver of $2.4 million and reductions of the term loan of $1.25 million. Capital expenditures for the three month period ended March 31, 2010, were approximately $46,000, compared to approximately $561,000 for the same period a year ago. Significant non-cash items effecting our cash flows of continuing operations, for the three month period ended March 31, 2010, were depreciation of $413,000 and amortization of $87,000. With that, I'd like to turn the call back over to Richard. Richard?

Thank you, Joe. That's the end of our report today. And now, of course, we'll be happy to answer any questions anybody may have.

(Operator Instructions) Thank you. Our first question is from Andrew Shapiro with Lawndale Capital Management. Please proceed with your question.

Hi, good morning. Several questions, since this call also covers Q4 and Q1 and you only went through the Q1 information. Your loan agreements, you talked a little bit about how they've been amended. And right now, we're on some short duration extensions. Can you describe what your thoughts are or your plans to deal with the short duration nature of these loans? And what you envision to be somewhat the structure of stabilized financing that you're trying to achieve here?

Andrew, this is, Joe. Well, we are certainly out there aggressively trying to, first of all, replace the term note that we've got and the two smaller mortgages, with either a single new comprehensive mortgage to cover our three facilities or three separate mortgages. That is probably our primary effort. However, at the same time, we are also speaking to lenders about the revolving credit facility. There are lenders that are interested only in mortgages. There lenders only interested in the revolvers. There are several that are interested in both. Our belief is that if someone would come in and take everything, then of course, we'd go in that direction. If the mortgages came first, then, we would focus on the lenders interested just in the revolver. We are not -- right now, there doesn't seem to be anybody ready to jump in on the revolver only, unless something is done with the mortgages.

But in general, what's the value range you think, the mortgages, which would certainly be stabilized long-term financing? How much do you think would be supported by the mortgages themselves? And then, what remains as we'll call cash flow or working capital, like facilities, that might be available on top of that?

The three buildings are worth around $11 million, based on recent appraisals. We think we can get in the range of a 70% loan to value ratio. So, after some expenses, we'll call that $7.5 million of long-term debt, if you will. The sum of the three pieces of debt in question is probably just under that amount. So, we have a little bit left to apply to the revolver. The revolver, as of now, is just around $13 million. And of course, that moves with activity monthly. But that's basically what you're talking about, $20 million in total debt.

Okay, so, this is all absent Coffman?

That is correct. That is not including anything related to Coffman.

Absent Coffman. And the $13 million of working capital revolver is basically looking -- is assuming the fixed assets to now are going over to a mortgage kind of facility. That $13 million of asset revolver, presently, has, at P&F not Coffman now, what kind of receivable inventory and other asset coverage? Just to get a handle -- just to give us a little insight as to the likelihood and the handle on the new financing.

Well we have advance rate on 80% of eligible accounts receivable and approximately 50% of eligible inventory. Is that what you were --?

Yes.

After. Okay. And it's fairly standard.

And your $13 million, right now, is a full draw on those advance rates?

Yes, I will point out we are not borrowing anything against the machinery and equipment. And that may come into the picture with a new lender.

Sure. And the machinery and equipment balances right now, as of the end of the quarter, were what?

The book value is -- let me just grab it. I can tell you what -- the appraised value is somewhere in the $4 million range and we will, of course, get a fraction of that to borrow against maybe 50% that number. The book value of the equipment is around $13 million. Well, hold on let me back off. That includes the buildings. Let's call it -- I don't have accumulated depreciation broken out for the equipment. I'm going to say, and this is really just off the top of my head, the book value is about $10 million on the equipment.

Net book value or gross?

Net. And Andy, that's an estimate. I do not have that breakout in front of me.

They'd only loan a fraction against the $4 million though.

That's correct. If you want to use a rough number, you can use around $2 million as potential --.

Borrowing power.

There you go.

All right. I'm going to ask some questions on the discontinued ops and then, I'll back out and let -- I know others might want to ask questions here. Your placement of a bunch of businesses into discontinued ops, has obviously convoluted your financial statement presentation for all of us who have followed you for many years. So, both prior year and last quarter numbers appear to be now reclassified because you did the assignment to discontinued ops as of January 1, rather than December 31.

That's correct.

Okay. Can you provide us investors, in one shot, in an 8-K, or other filing, footnotes of your 10-Q, the 2009 quarterly numbers, as reclassified, in advance of having to wait for each of this year's calendar quarters coming up? In other words, so we can reconfigure our numbers ahead of time. Rather than having to -- every quarter, you're going to certainly provide the last number.

Andrew, first of all, I'm not even sure that's mechanically possible, given the fact that kitchen and bath was part of the stair business for almost half of 2009. I'm not sure the numbers would be as accurate as you would probably like. I'm not sure that we can do that. We'll look into it.

When each quarter rolls around, you're going to be doing it though. Right?

You just simply want it ahead of time. You want to see what 2009 looked like --?

To put it -- yes, we'd like to put it in, so that we might get a feel for this is a difficult quarter or not difficult quarter or when this business is actually stabilized or likely to be stabilized, preferably, one can make that assessment ahead of time rather than after the fact.

Well, we'll look in to it.

Because as every quarter rolls around, you're going to have to give us the prior year at that time.

Yes.

So, you might have it internally. Now, what is happening or happened to the Franklin business? Is there any business or assets to sell at this time? And what is on the books and inside of your discontinued ops, is there anything there?

Nothing. Franklin was shut down at December 31. We disposed of all the obsolete inventory. There really isn't anything -- there's nothing left of Franklin.

Okay. Now, your 10-K highlights that all of Woodmark and Pacific Stair, the stair parts businesses were taken out of the kitchen, another Woodmark business and put into WM Coffman. And then, you've written off, it was over $5.5 million of the investment, and you took that right off in Q4. Was the entire business of Coffman's, then, written down and lost?

I'm not sure what you mean. The entire WM Coffman business?

Yes.

Yes, we've written down the investment to $0. So, the answer is, yes.

Okay. When I look at the balance sheet you present, here in Q1, I'm trying to understand. Then, the remaining net asset value of Coffman, on P&F's financials, should be a $0. And when I'm looking at, it looks like there's a $2.1 million net liability on your balance sheet. Am I missing something?

Now, that's a net loss for Q1. So, we wrote it down at December 31, to $0.

Okay.

And then, we had a loss for 2010 for Q1.

Okay.

So, there's no other place to put it.

So, if it's a writeoff and a write down, does that mean that $2.1 million comes out of our balance sheet and our shareholders equity when we sell or liquidate or closeout Coffman to someone else or the lenders take it away? Shouldn't that $2.1 million then come back? I know it's not coming back in cash but does it come back into shareholder's equity at that time? Because you have a net liability. Now, you just walked from the business, like walking away from a house that's under water.

Right, certainly, there's no cash. I do not know the answer to that off the top of my head. I'm guessing it's got to be run through the P&L with disc ops. We'll check with our outside auditors on the ultimate resolution to that. My guess is, you're probably right, it ends up in stockholders' equity as an adjustment. Again, there's no change in the tangible value of that investment.

Right as a net -- because you're saying that we have no other -- there's no recourse. So, it's a house that's under water.

Yes.

We give them the keys but, right now, you've booked a $2.1 million net liability, in the sense of reduction of our shareholder equity and book value at the parent Company.

Well, that's the only place it can be.

When you say, the parent Company, it's still a consolidated entity.

Right. So, we're consolidating in losses that really aren't our losses.

Just to be clear, that loss did not get run through continuing operations.

No but it still was run through shareholder equity.

Yes.

There's no other place to put it.

Your book value right now, if we are able to walk away from this business, I want to say scot-free because we lost a ton of money. But if we're able to walk away from the business without having that $2.1 million and next quarter's loss and next quarter's loss. Then arguably that's coming back into our book value.

Yes, I would say, Andrew, logically, everything you said is correct. We're going to double check that but based on my background in accounting, there is no other place for it to go

Okay. Now, at this point, what is the likely avenue for WM Coffman? Which I understand you have a outside Chief Restructuring Officer who runs it for the banks or whoever. Is that right?

Well, he technically was hired by WM Coffman and reports to the managers of WM Coffman, which is not the bank.

Okay. At this point, what is the likely avenue for Coffman? Is it a sell of a business, is it a liquidate, or what does one define as "otherwise dispose of"? What's the likely avenue now?

I don't know that I can speculate on the likely avenue. We're exploring all of our avenues.

Well, is Coffman already undergoing liquidation of portions of its business?

We can't comment.

There was a -- can you provide a little more insight as to what's going on with respect to the recent 8-K, where the landlord on Coffman has asserted that the lease has been defaulted on?

The landlord has certain rights under the lease. At some point, they terminated the lease. So, the lease is effectively is no longer in force but we can't really say anything beyond that.

Okay. What's the likely timing of the avenue that Coffman is going to pursue? Is it matter of months? Is it August when the PNC loan is due? Is it some other time horizon?

We can't comment.

Okay.

We hope to have some more information for you at some point but right now, we can't say anything.

All right. I've asked plenty of questions. I want to back out of the queue and let others ask question. Please come back to me, I have questions about your remaining businesses.

Our next question is coming from the line of Sam Rebotsky with SER Asset Management. Please proceed with your question.

Yes, good morning, gentlemen. The income tax receivable, when will you expect to see that?

Our estimate is sometime over the summer and there's a range of possible points but we certainly expect it this year.

Which year is it you -- which year does this get carried back to?

It got carried back to 2007, where we had a substantial tax bill that we paid.

Okay. I would like to be a peacemaker in the problems that have been going on. So, there's some assets at the end of the day for all the shareholders or hopefully, that we have the capabilities of waiting until the economy or the businesses that you're in turns around. And I know the salaries, Richard, is rather substantial relative to the earnings or losses. And also, as the sales go down and the losses go up, could you sort of address how -- Timothy wanted to participate. Evidently, P&F does need some additional help to sort of try to help maximize what we have and it would appear that he has the ability to perform some constructive approach. Could you sort of address that possibly and how about reducing salaries sufficiently until the economy turns around?

Could you ask -- I'm not sure you had a question, what is your question?

My question is directly, Richard's salary in excess of $1 million. What is the salary today and what about reducing debt more significantly, in line with the earnings structure, until things turn around? And also, the possibility of having Timothy Stabosz be on the Board to sort of help the Company possibly achieve work out to increase shareholder value?

Sam, this is Richard Richard Horowitz speaking. And Sam, I have a contract with the Company that I negotiated, across the table, back in 2007. And at that time, I don't know what exactly what the Compensation Committee looked at, at that time, but I know they looked at the data that was relevant at that time. And that contract provided for the framework until it expires next year. And at that time, there will be another negotiation for a renewed contract.

Meanwhile, within the framework of that contract, is the contract that governs my base salary and compensation. And the Compensation Committee decided what, if anything, I get in addition, which of course, I do not get. No additional, no bonuses, no stock options, nor anything like that. Also, you should remember that I, as well as the entire Company, reduced our pay 5%, back in April of last year. And I as a -- I am the one who put money in to both WM Coffman and into P&F in the last several months. So, I think I've done my share to get comfortable and do what I can do.

How much money did you put into Coffman and how much are you --?

And I also deferred my compensation for the balance of the year and perhaps next year but that's still open.

How much money did you put in to Coffman that you stand to lose, that's at risk, besides what P&F will lose based on this investment?

Me and another employee of our Company put in $250,000 into Coffman.

And are you first in line to collect?

We're subordinated to the bank.

subordinated to the bank, okay. My only rationale, Richard, is, under normal circumstances, if business was doing fine. Even though you negotiated the contract, you're the major shareholder, et cetera. If there there was a way to reduce wages, which means you, and according get some benefit going forward, if and when the Company succeeds. And assuming it's fair, et cetera, it would conserve cash, et cetera, and --.

That's what we're doing, Sam. That's what I just said to you. That's exactly what we're doing.

And I know I've read the letters. I've never spoken to Timothy so I don't know him personally. The only rationale with the staggered Board voting and the possibility of there's some other input at these meetings that might improve things. I'm just suggesting if there's a way of doing something with other opinions and other ways of looking through things, might be able to be beneficial.

Sam, there are -- Mr. Stabosz has been interviewed by myself, our two Nominating Committee members, and we are in the process of interviewing a few others and we are in the process of doing that. And we're determining -- and it's a ongoing process to determine if there is going to be an additional Director to this Company. We're in the midst of doing that right now.

Okay, that's good. Okay, that's all I have.

Okay. Thank you.

Our next question is from the line of Jim [Patterson] with Black & Decker. Please proceed with your question. Mr. Patterson your line is live for a question. And it appears we have lost Mr. Patterson's line. Our next question is from Timothy Stabosz, a private investor. Please proceed with your question, sir.

I want to thank you for taking my questions. I appreciate this. Good morning.

Good morning.

Getting back to Coffman, it's kind of a strange question, I suppose. But the economy is turning up it seems. We've had some decent growth in non-farm payrolls. If housing should turn up here, what are the chances, is it slim or is it out of the question, at this point, that that could remain as operating entity for P&F or is that over 100%?

Tim, unfortunately, we can't comment on that at this time. By advice of counsel, I apologize.

Okay. I didn't think it was a unreasonable question but fine. Okay. Do we view -- looking at Q1, in your budgeting -- well, first of all, let me ask this. Without Coffman, assuming Coffman is gone, do we still view Q1 as seasonally the weakest now for the new P&F, if you will, excluding Coffman, or does it kind of compete with Q4?

Let me answer that. Generally, the answer to your question is, yes. Q1 is our weakest quarter. Certainly, by far the weakest quarter at Nationwide, followed by Q4 at Nationwide. Just to break down the businesses, seasonality not much of a factor at Hy-Tech. It's fairly steady, a little slow down around Christmas time, which is not abnormal.

I don't necessarily need the details, unless the other people on the call want it. I just wanted the broad. Go ahead if you want.

Yes, it's the weakest quarter, typically. Q4 can be weak but sometimes Q4 is bolstered by the particularly strong retail business with Florida Pneumatic. So, it's not always as weak.

Okay. Now, when I look at your -- is that a budget, essentially, that's in the 8-K that's attached to the debt restructuring agreement or whatever you call it? Is that a budget, the monthly figures, the table that that monthly figures of your revenues and your operating income?

It's what we gave the bank as our projection, at the time, to set targets.

Okay. That's a projection, you're not "required" to meet any of those monthly figures per se but you've got to come out of the end where you're --?

We're not -- we don't have to meet figures monthly. We have an EBITDA test that's a cumulative EBITDA test throughout the year.

My question is this. I added up the first three months of the year and see that you were calling for, in those budgets, an operating loss, preinterest expense of $486,000. And you achieved, I believe on this financial statement, for the quarter, a $318,000 loss. So, you beat the numbers on your budget for the first three months pretty handily. Correct?

Yes, that's a fair statement.

So, that looks pretty good to me that we got continuing ops in our weakest quarter seasonally, preinterest expense, a $318,000 loss. My question is -- well, let me ask the question this way. Do you believe you're potentially equally conservative on your projections for the rest of the year in that budget?

Yes, the assumptions going into the budget, I'm not going to go in to the details. But we essentially, took the run rate adjusted for seasonality from the back half of 2009 and more or less use that for 2010. But there are a lot of other assumptions that I won't go in to. I'm not sure that answers your question but --.

Maybe I can answer the question. This is, Richard. The answer is, yes. We had a good first quarter and we're cautiously optimistic about the balance of the year.

The budget, from April on forward, calls for operating income from the continuing operations until, I believe, November or December. Well, you've answered the question. It sounds like confidence level for meeting those numbers, based upon conservatively beating them for Q1, the confidence level is pretty good, you're saying.

Nobody has a crystal ball, Tim. I wouldn't want to lead into anything. We had a good first quarter. Things seem to be going at a good pace.

And we just to remind you. That's just what we gave the bank, we're not necessarily putting that out there as guidance for anybody.

Understood. Okay, that's all for me for now. I'll get back in queue. Thank you.

Our next question is a follow up from the line of Andrew Shapiro with Lawndale. Please proceed with your question.

Okay. On Countrywide Hardware, what's planned for the Plano, Texas and Georgia facilities whose leases run out over the next year?

Again, I apologize, but we cannot comment on that at this time. Anything to do with the WM Coffman Company, we just can't comment. I apologize for that.

No, I, Understand. I didn't realize, Plano, Texas and Georgia, those two leases are inside of Coffman?

Yes, they are.

Now, then, that's fine I don't -- alright. Can you characterize the competitive landscape in any areas you see opportunity from? Presumably, your competition serving these markets are weak as well. Are you gaining share, are you losing share, what's going on competitively?

Well, I would say, overall, we certainly are not losing share anywhere. We have held our own through the downturn and we certainly expect to hold our own as things rebound. I would agree with you that our competitors are suffering the same sorts of fate as we are.

Now, your -- either you read this stuff too quickly and I didn't have benefit of the 10-Q for this quarter out yet, to do this. But can you give us the gross margins for each of these segments or subsegments, as you break them out, for obviously, this year versus last year?

Just a second.

While he's digging that up, can I -- I'll ask a little further here now inside of Hy-Tech. So Hy-Tech's, last time we talked, again, this is six months ago, 0.50 year ago, it was 25% to 30% oil and gas related. Energy prices have started to move back up. How are you guys seeing CapEx in that field and what's your prognosis here on Hy-Tech in the coming quarters? Because it certainly has not achieved, we'll call it, the counter cyclicality or the stabilizing of force to your tools business that you thought it might be versus consumer.

Andrew I don't know if I agree with that. I don't know if I quite understand what you're asking. But I think Hy-Tech, with the exception of a period of time in 2009, has been performing very well with the Company. And we're not just in the oil and gas business. We're in a broad range of industries, in everything. And we had a extremely unusually large first quarter of last year. I can't tell you really why. It may have been a backup of customer business, et cetera. But it was extremely unusual and our management team told us, at that time, the orders are just flooding in and obviously, we're going to build them. And so, we did.

And we had extremely good first four months, actually, of 2009. Then the bottom kind of fell out, at Hy-Tech and started regrouping in the last quarter. As I mentioned in my presentation earlier. Started regrouping in the fourth quarter of 2009 and had a very comfortably good first quarter -- first four months, I should say of 2010. But when you compare to 2009's first quarter, of course, it won't look good. But they're working at a very predictably good margin for the first four months. And actually, from the last couple of months, of last year, they're doing very well. Again, not when you compare it to last year's Q1 but when you compare to it Q2 and Q3, they're doing very well. Does that answer your question?

It helps but now that leads me to a follow up on this particular issue because again, with convoluted financials that's going on here. So, Hy-Tech's revenues and gross profit for this quarter, that's Q1, versus Q4, just the prior quarter, can you break that out for us, so we can get a handle on the fact that Hy-Tech is rebounding or not doing as weak as it appears?

Are you talking about sequential quarter to quarter comparison?

For Hy-Tech, yes.

I don't have that in front of me. I would say, my intuition is that it's as good, if not better than, Q4.

Okay.

But I don't have Q4 in front of me. So, that's just my feel. I do have those margin numbers.

Thank you, we'll take them.

The hardware segment had gross margin for Q1 of 38.8%, as compared to 29.3% of 2009. And that is really now just Nationwide. There's nothing else in there. The tool group had margin of 34.6%, as compared to 35% for last year in the Q1.

The margin is sold and you just have to now get your revenues back up.

Yes.

You mentioned some progress. Again, it's been six months since the last call. You mentioned some progress last year in penetrating new large industrial clients in Hy-Tech. Is Hy-Tech gaining new customers to mitigate declines from current customers?

Well, Hy-Tech, is certainly not -- we have not, to my knowledge, lost any accounts in the last 12 months. And we've certainly picked up a few.

We had one large customer who had a very good Q1 of last year and they have not, really, been doing any business with us. But we are still their supplier when they do business.

Yes, it's a customer that's selling into a government related situation and those sales aren't necessarily standard month to month.

And that's the large client that was down.

Yes.

And so, their drop is, we'll call it, market or project driven, not customer financial distress.

Correct.

That's exactly right. And they told us that we can expect orders going forward but we don't know exactly when. But they're a customer of ours and a good customer.

And what are you seeing at Sears, was obviously your largest consumer customer, on the Florida Pneumatic side?

What are we seeing in what, I'm sorry?

What are you seeing in Sears in terms of their inventory and promotions? Because you have -- you know when they have a seasonal promotion coming up months ahead of time because it's a big wave where it's lower margin but a bunch of volume. Versus drops when it's higher margin because there's not a promotion going on.

The Sears business is fairly steady year-over-year. The promotional business, we don't have as much foresight this year, as we might have had in years past. So, I don't know that I can speculate exactly on that. But the base business, which is more of the revenue is fairly consistent.

Okay. Well, I have a more questions but let me ask one on Coffman and I'm back out again because we do have some participants on the call this time. I like that. As a subordinated lender into Coffman, Richard that other employee who is a subordinated lender, are you potentially going to be the new equity holders of a Coffman business that is, in a sense, foreclosed on and restructured? Is that a possibility?

Again, Andrew, I can only tell you what our counsel just told us, that we can't comment.

Because obviously, there's inherent conflict of interest. So, can you identify the members of the P&F Board of Directors who are part of -- I'm assuming and I'm hopeful that you have appointed a Special Conflicts Committee on this matter. And who are the members of the Conflicts Committee?

Andrew, I can only tell you -- don't make the assumption that I have anything to do with the WM Coffman business going forward.

I'm not assuming that you do. But I would think Mr. Goodman is listening very closely there. There are inherent conflicts of interest of you and an employee being a subordinate lender into something that P&F is the equity holder of. And so, I'm assuming you have a special committee of the Board of Directors that evaluates these conflicts. And I was wondering who are those members of the Board who are on the Conflicts Committee?

Andrew, I'll let Rich Goodman answer for you.

To the extent there's a conflict, like you're talking about, we would have a special committee of independent directors look at it. In the past, what we've used was a committee comprised of Mark Utay, Jeff Franklin and Ken Scheriff, three members of our Board. If there's anything, like you're talking about now, we certainly would have another committee like that established but we can't comment on whether that's going on.

Right. Okay. Because you -- I would assume, at least you, in particular, understands my concern of we took our stair businesses out. We put them into Coffman. The thing did not hit projections. The housing slump has remained. It will eventually rebound. And two of our employees are subordinated lenders, senior, to P&F that are in there and ongoing or a new restructured thing there's that business has gone. And there was these synergies that were expected and they didn't yet occur. It just raises a lot of questions. So, I wanted to know who was the Conflicts Committee and I'm pleased that Mr. Utay is on that Committee. Okay, I'll back out in the queue. I have more questions. Please come back.

Our next question is a follow up from the line of Tim Stabosz, private investor. Please go ahead with your question.

Joe, can you clarify please, I'm a little confused. Getting back to the machinery and equipment and the loan ability, your borrowability. How is it that something that has $10 million net book value and $4 million of appraised value, wouldn't be written down to that value or something?

Well, that's not the requirement under GAAP.

It's not required to be written down.

Okay.

And by the way, I could be off on my very rough estimate of book.

Book value, I do not have that data in front of me.

There's a depreciable life for that equipment. That equipment is providing value to the Company, that reflects its ability to generate cash flows or income and that's the period it's written down or -- because it has a utilizable life -- a useful life, right? That's really what it comes down to?

Yes, typically when you buy a piece of equipment or you make an acquisition, you take the useful -- the valuation at that point in time and you spread it out over the remaining useful life of the equipment.

Okay. Clarify, I don't want to keep on the issue of Coffman but there's really absolutely no additional losses that we'll be booking on Coffman at the parent Company, at P&F, right? Or if we do, we get them back in the end as far as the shareholder equity hit?

Yes, you're correct. Any other activity related to Coffman should go through a discontinued operations conduit.

And we've got a Chinese wall between the Company and Coffman, as far as that goes, at this point. Let me ask a few questions about that your 13D filer, myself, specific to my request to be appointed to the Board. And out there, of course, the Company's interviewed other people. Can you discuss the sourcing on where these candidates that you've interviewed have come from? Specifically, are any of the candidates you've interviewed been sourced directly from your Directors, Mr. Dubofsky, Kalick, Goldberg or Solomon?

They came from -- the Nominating Committee received those other possible candidates, Tim. Is that what you're asking us?

Yes. that's what I'm asking you. Where any of them sourced from any of your pre-existing Directors?

I'm talking off the top of my head. And I really don't -- I'm not on the Nominating Committee, so I really really say. But I do not -- I believe that perhaps maybe one candidate was recommended by somebody on the Board. I don't recall who and I don't recall who the person was because, again, I'm not involved in the process. That's the Nominating Committee. That has not been the genesis of the candidates.

The bulk of the other candidates came from two or three outside shareholders or essentially or --?

It's the Nominating Committee -- I don't know what else to say. The Nominating Committee is getting those -- they're doing that work. Their due diligence in that regard. I'm not equipped to answer that question. I don't really know the answer.

Well, you had said that the interview was me and Mr. Utay and you're the Chairman of the Board. So, I --.

Yes, I met you. I have not met anybody else yet.

Yes, but this is process, obviously, that's been somewhat contentious at this point. And I'm sure you're keeping up on it.

It's not contentious. We're in the process of what we are doing. We're in the process of exploring it and looking to get another Board member. It's not contentious to us at all.

Okay. Well, you are aware that, at least, one of your candidates was sourced from within your Board. Right. You said that.

Tim, all I can say is, we've discussed it in our public filings, many of which you've seen I'm sure, probably all of them. The Nominating Committee is engaged in the process of evaluating these candidates and then the process is ongoing. I'm not a member of that Committee. And so, I'm generally familiar with it but I can tell you, this is an active process. And I know that. And if the Committed identifies a suitable candidate, other than yourself, to bring before the Board and the Board accepts the recommendation, we will add that Director to the Board. I'm not going to jump the gun on the process because I'm casually familiar with that. I'm not really in the loop. You can see from our filings, it's what we've been doing. So, I don't know what else I can add to that.

The Company seemed to suggest in its proxy statement that essentially, if it finds someone who is qualified, that the Nominating Committee intends to make that recommendation to the Board. If the Board agrees that that person is qualified, is it the intent to add one person to the Board after, or before for that matter, at the annual meeting?

If we find, at the annual meeting?

Well, before or after. Probably after, at this point, obviously.

If we find a suitable Director, with the right qualification, who is willing to make a time commitment as a serious undertaking, which it is to be on the Board, the answer would be, yes.

It's the desire of the Board to add a new outside independent Director.

I just said, if the right person comes along, with the right qualifications, the answer is, yes.

Let me go on to something else. Specific to my filings, since it's been seven months, at what point in time will the Board decide to act on any of my requests or demands, for that matter, so to speak, related to specific bylaw changes? Are they being considered? And let me say this, also. It will give you a little time to think about that. Because when I initially sent my letter asking for your consideration to be on the Board, and I think September of last year. Within a few weeks, the Board filed an 8-K where they changed bylaws and tightened up things to make it hit harder, raising a wall in a certain sense, that's the appeared to me. And yet, seven months go by with regard to specific bylaw requests that I make that would improve governance, in my opinion, at our Company. And nothing has happened for seven months. So, that troubles me. So, I'd like to know if there's any intent on some of these bylaws, like getting rid of the bylaw that says the Chairman -- you, Richard, that the CEO has to be the Chairman? Are we looking at any of these changes that really should be made, frankly? From any reasonable standpoint, some of these things should happen.

Tim, again, I don't know specifically what you're referring to but everything that you told us, everything that you've brought to our attention has been considered by the Board and many times. And just because you're suggesting it doesn't mean that's something that we're going to do. But we absolutely talk about it at the Board meetings. Is that the question you're asking me?

No, the question I'm asking you is why has the Board waited seven months to get rid of the bylaw that says that the CEO has to be the Chairman of the Company? Or that the Chairman has to be the CEO, when they --?

If you're talking specifically about that point, I will tell you, that I know many companies have separated the roles of CEO and Chairman and many have not. Particularly of our size, have not done that. And we haven't and we explained why we haven't in our proxy statement. And as the proxy statement says, the Board believes that having the CEO as the Chairman helps identify the Company in its priorities and it helps facilitate information flow between management and the Board. And that's our statement from the Board, not from me. That's a statement from the Board.

But there's a difference between having your CEO and Chairman be the same person and essentially, requiring it in your bylaws, Richard. And that's what I'm talking about, that bylaw that says, essentially, you have to be the Chairman.

Tim, I'm not going to answer an individual conversation. I told you, we've released it in the proxy. I told you what we said. That's the best I can do.

Okay. Well, let me get back to the general question and try one more time. There's a number of requests, I made, for bylaw changes. In consideration of this, the Board was very prompt, within a few weeks of making bylaw changes and reacting to the request of one outside shareholder, who owns 6.3% of the Company, me, to be considered for the Board. It was very quick to tighten up its bylaws with regard to that, within three weeks. But it's been seven months and I've made some good suggestions on bylaw that would increase and improve governance here. Nothing has happened in seven months. Is the Board -- what's the time frame on maybe making some of those changes?

Tim, this is an earnings call. And we're not getting in to a town hall meeting here. This is an earnings call. We're happy to discuss anything to do with the earnings of the Company, the first quarter, or even to the end of last year, because we did have our fourth quarter. And that's what we're prepared to talk about on this call.

Okay. Are those changes still being considered? That's all I'm asking you. Are those changes that I suggested, yes or no, if I may ask respectfully please?

I don't know what else to say to you, Tim.

Yes or no.

Tim, I'll tell you, this is not about you. This is not about -- it's about P&F and the first quarter's earnings. That's where we're going to keep the conversation. If you have any other questions regarding the last quarter of last year or the first quarter of this year, we are more than happy to entertain those. And we want to answer them to the best of our ability.

Well, I've asked a number of questions about the earnings. I don't think this other stuff is irrelevant but I'll regroup and get back in queue. Thank you.

Thank you. Our next question is a follow up from Andrew Shapiro of Lawndale. Please proceed with your question, sir.

Hi. I assume there is I think we cleared up there is no more goodwill left associated with Coffman. So can you quantify how much of your $5.1 million of goodwill and your $2.6 million of intangibles is associated with each of your remaining businesses? Is it all just Hy-Tech or where is it last and allocated between?

It is between Hy-Tech and Nationwide, the bulk of it is Hy-Tech.

When you say the bulk -- I'm trying to understand --?

Andrew, I don't have it in from of me. My guess is 2/3 of it is related to Hy-Tech.

Okay. And the impairment tests on these, is an annual test that you conduct around November, for purposes of the year end?

That is correct.

Okay. And then, actually, since it came up with Stabosz and this gentlemen named Sam, as well. I thought -- I'd like to make it known, we had filed a 13D filing that said we were going to nominate some individuals to put in front of your Nominating Committee to consider for your Board. I was a little surprised, your proxy actually didn't disclose that in greater detail. But we did submit five individuals to your Nominating Committee, who are highly qualified and very independent, individuals for your consideration. And we appreciate that you have been interviewing them. Although, I understand one has taken himself out of consideration. But I would hope that you would get through this -- that you would convey, because I know it's not your part, Richard, that you would convey to the Board that they need get through the process quickly and get the individual or individuals added to the Board.

I will and thank you for your attention on that, Andrew. And we will get back to you on it, absolutely.

Now, I want to understand, you had highlighted that there is certain, we'll call it, nonrecurring costs that are built into our SG&A this quarter. But backing those costs out, in light of the severe declines that have gone on here at the Company, I'm a little bit surprised that the SG&A reduction isn't or hasn't been greater. We've been running into issues with our lenders that you would think that there would be more even deeper cuts, being made on the SG&A side, to reposition the Company for its lower level of revenues. Are you having an expectation that revenues are going to rebound and in the near future? Or what are the reasons that the cuts are not deeper?

I'll let Joe answer for the most part. But I know we speak very regularly to the management at each company. And are cuts are very deep in all of our businesses. We don't really have any room left in our subs to be doing any more cutting. We've talked about that. And now, if we have fair amount of upside, with the same overhead. But I would say, we have had push back from all of our subs at this point. But we've made very deep cuts, amounting to several million dollars.

Well, if it's several million dollars of cuts in SG&A, right, why don't we then see that when you reverse engineer the items you highlighted were nonrecurring?

Well, if you backed out $300,000 some odd, $350,000 or more of legal for one quarter, that would have been --.

Instead of $4.2 million versus current quarter $4.3 million, you would have seen $4.2 million, versus $4 million.

Or $3.9 million or something like that. That's one quarter, yes.

Well, yes, that's 5% a year. It just seems that 5% SG&A cuts, you must have substantial excess underutilized capacity. When do you downsize the core business for the level of business that you're running?

Andrew, one thing to point out is you've really got an accumulation of four entities. You have the three subsidiaries and P&F. And each sort of has a fixed amount of overhead it's absolutely got to have. And I can tell you that our presidents are begging to add people, not subtract people. And they are at bone. They have cut to the bone.

So, they want to add people to do what, to sell? Because that's what we need.

They have people to sell.

So, what do they want to add people to do?

To better run their organizations. We're running very skinny.

We're saying that we're doing that. But Joe's point is that we are at a very bare minimum. That's what I think Joe's point is.

Right. And the, we've $1.5 million in public Company costs, that there's nothing we can do about. In fact, this year, we probably spent more being a public Company, as opposed to less. Well, that's where we are. I really don't anticipate that we can cut much beyond where we are on the fixed costs.

Right. Now, we don't have an obligation to be a public Company.

Well, I can't speak to that.

Maybe the Board needs to consider that a Company with a $7 million market cap of $40 million, $45 million revenue run rate and your particular gross margins, that the SG&A costs here, maybe need to be synergized with a larger party. I wish Mr. Black & Decker, who was in the question queue, might be -- maybe this is a Company that ought to be a subsidiary of some other company. And the Board of Directors has an obligation to consider that. And I know Richard, you're young, but you've got 1/3 of the stock. We've had this call and talked before and I've been here -- I've been a shareholder for quite some time and the public markets don't really appreciate you and this Company as much as maybe they should. And this Company and your investment in this Company, along with my investment in this Company, may be much better off as part of an auction process with synergistic players. And then, a lot of these presidents won't have a personnel shortage.

Well, Andrew, and I'll let Richard answer. This is an earnings call and I didn't mean to open up the floor to a discussion on whether we should be public or private. But I don't know that there's much we can say in that regard on this call.

Obviously, we look into that all the time, Andrew. Obviously.

For me, as a shareholder, it's not as obvious because the Board -- I'm participating in your Board meetings and it's been multiple years. And it just -- and I'll bring it back to earnings. When I hear from you that we're at the bare bone. And this is all the -- that we are really running at a $16 million a year SG&A run rate, and that's bare bones. And $1 million of it a year is your salary, $350,000 of it a year is Joe's salary. And there's $1 million or more a year being a public Company. This all does relate to earnings and becoming profitable and right sizing the business. And that's why I'm trying to get your insight, as Chairman and CEO of the Board, about how long does one stay with this kind of fixed overhead because it's unsustainable? Right? Because we're not running profitably here right now.

Well, we have a positive cash flow and a positive EBITDA. We do. We are running profitable. And we will be.

Okay. Because you own a 1/3 of the Company, I own almost 10% of the Company. We can't just sit and click along and not build any profits.

Andrew, I don't know what else to say. Other than, I don't think the Company or the Board or anybody here sits around clicking along. I don't think that's what we do. We're doing everything we can and what we have to do and we're well aware of the costs of being public and if there's a solution, we're pursuing it. And I can't comment any more than that. I don't know what else you want me to say, to be perfectly frank.

Well, I'm just trying to get your vision, Richard. Since the Board likes to listen to you very closely.

Andrew, all strategic options will be and are addressed to the Board, at all times, not just now but in the past. And they will continue to be. And we will continue to do just that. And there are Board members on the call. They hear you. And your point is well taken and --.

Then, I'll ask my next one. Since some Board members are listening in on the call. Other than Mr. Utay, I'm trying to understand, why don't the Directors, who have been here for quite some time, purchase and own a meaningful quantity of shares, such as you and I?

Andrew, we've talked about this many times in the past. And I'm not in a position to tell people where to spend their money, where to put their money. I'm not in a position to do that. Mr. Dubofsky owns stock, by the way, in the Company and Mr. Utay.

Yes, Dubofsky does own about $40,000 worth of stock, having served on the Board for about 20 years.

I don't think that's a criteria for serving on the Board. I think that what we get from our Board members, believe it or not, is an enormous amount of time and an enormous amount of dedication to this Company. And if they themselves choose not to buy the stock, well I can't --.

That sends a message, though.

I don't think so. Whatever their personal business is --.

Look, several of them filed their Form 990's. They all have personal charitable foundations. Okay? They're not paupers. They're choosing not to buy shares in the Company. And I'm -- do they see too much money flowing out in SG&A and other things? The stock price is not cheap enough?

Andrew, again, we've gone through this many times. And I can's tell people what to do and I don't and I won't. I've heard you in the past.

You mentioned they're on the call and this is our opportunity to do it. And maybe we'll find a way to maybe get to it your annual meeting and ask them again, in person, regarding that. But again this all related -- this all segued out of the SG&A issue, of what's sustainable for a Company of this size and when does one downsize further to right size the business?

Right.

Do you feel the Company and the business is right sized right now for the level of cash flow and revenue stream and gross profit the Company is generating?

We are always looking at our -- I would never say we're right sized. That's something that we always examine. It's a fluid situation and we will continue to do that, not only at the corporate level, as well as the individual subs level.

The Company has a potential asset, a potential cash payment that is not in the income statement and not in the balance sheet yet, via the court decision that P&F has one, at the lower court level, regarding the escrowed moneys from the sale of the business, the sale of real estate. What is the status of that appeal and the estimated timing of the next milestones and what are those milestones?

I'll let Rich get that one.

Yes, the appeals process is beginning. And we have no way of estimating how long it's going to take to go through.

Can you be a little more specific when you say the appeals process is beginning. When do you guys file your next briefs? When is the hearing?

There's a technical list of procedures that could happen. We're waiting on the court to formally file the decision. The other party had already preserved their rights to appeal but technically, they haven't appealed yet, pending the court. So, the there's a procedural bunch of steps that have to happen.

So, the lower court has still not published its opinion.

I'm not sure exactly. I'm not handling that directly but that's my understanding. But again, the process is going on in the court.

You don't know if the opinion has been published or when it would be coming out? You're the in-house counsel.

It's beyond the time frame that the court is supposed to have done what they're supposed to do. But I can't force them to do anything or say more than that.

They haven't done it yet.

Okay. No, but when you initially responded to the question, it sounded as if you weren't aware of this, that the outside counsel was. And that didn't sound like that would be in the job description. So, I'm just wondering.

We answered your question.

I don't know ultimately how long it's going to take, the process.

Obviously, we're pressing as much as we can.

No, I would think you could use and need the cash. I'm sure you want it.

We want the money clearly and we're entitled to it. And we won the lower court decision and we're going to pursue this vigorously and we'll try to get to a resolution, obviously.

I will back out in the queue. Please consider coming back to us.

Your next question is a follow up from line of Sam Rebotsky with SER Asset Management.

Yes, hi, gentlemen. It's my understanding, net income is different from EBITDA. Can you tell me when you expect to be in the net income position? What is your basic break even basis, on a yearly basis, on a quarterly basis? Do you expect to get there this year? Because EBITDA doesn't do me any good. You've paid for your depreciation, even though it doesn't require cash.

Yes, this is, Joe Molino. We don't give any guidance. But Richard did say earlier that we have a positive EBITDA business, that generates positive cash flow. So, we can be paying off our debt regularly. But we don't give guidance any beyond that.

But what is required to break even? Is there -- in other words, is it $40 million, $50 million, $60 million?

Your question, what would be required to hit a break even profit level?

Yes.

On an annualized basis?

Yes, I'm just looking for some kind of idea, what kind of range, where have you cut your expenses to?

Approximately, again, assuming no other changes, $2 million to $3 million, on an annual basis, in additional revenue.

Per quarter?

Per year.

$2 million to $3 million --.

$2 million to $3 million of additional revenue, assuming everything else stayed exactly the same.

Per quarter.

For the year.

For last year, $2 million to $3 million.

No, I didn't say for last year. Given where the business is right now, if I can wave a magic wand and add $3 million in revenue, I feel pretty good that we'd be at a break even pace.

In other words, multiplying this quarter by four and add $2 million to $3 million?

You can't really multiply Q1 and get -- you can't really multiply any of our quarters by four to get a full year run rate. As I said earlier on the call, it's a fairly seasonal business. I know you're only speaking about a rolling 12 month period.

Okay. So, all you need to add is based on what your budget is now for the year, $2 million to $3 million to whatever your budget is and you will be break even.

Yes. That's an estimate but yes.

So is that better than it was, your projections, say six months ago?

I would say yes because we have reduced core expenses from six months ago.

And what percentage of your capacity are you operating at now?

This is a very rough estimate. Certainly, less than 50%.

50%. Okay. Thank you very much.

Thank you.

Gentlemen, our last question is coming from the line of Timothy Stabosz.

Just two other things. The legal expenses, I'm a little bit unclear on that. Is the $64,000, is that part of the $343,000?

No, it is not.

Okay. So, I have to add those two together to get a total one-time -- well I won't say one-time but incremental increase of $343,000, yes. What's in that $64,000? I'm hoping that most of that doesn't relate to my 13D and dealing with me. It would be my money.

I don't know, honestly.

Richard Goodman, could you comment or Richard Horowitz, please?

You're asking me how much of it is related to you?

Well, I just hope that when the only thing I was looking for was to get a sense of openness, talk to the Board and get on the Board and have the process occur that we didn't spend a lot of money on, wasting money on something like that, when that's my concern. I just want some reassurance that most of that didn't relate to dealing with me, that's all.

I wouldn't be able to say that but I can say most of it is not related to you, Tim.

Okay. The other thing is I really preferred the last conference call more than this one. Because when you had a sense of openness and more of a free ranging call, being that you don't have a ton of shareholders to participate. It increases the sense of -- the openness is appreciated because there's a lot of questions and issues that some of us have, I know I have them, with trust of the Board. And trust of your structure of your Board and who is on which positions. So, I'm a little bit frustrated and disappointed or a lot disappointed in this call because we kind of -- as we got into some meat of the matter, we kind of shut it down this time. And last time, you were more open and gracious, more open about these things. So, I am leaving unsatisfied but I'm hoping that at the annual meeting, in a few weeks, that there will be more openness for addressing all issues of concern. I hope you can reassure me of that because I'm going to be traveling to New York, from Chicago, to attend the meeting.

We look forward to seeing you, Tim.

Can you assure me on that?

I look forward to seeing you then. Tim, you want us to say things that we're not prepared to say. And that's what --.

What I want you to say is, "We'll talk about anything with you at the annual meeting."

We will. We'll be happy to talk about anything at any time.

No, not any time. That's not any time Richard.

Tim, subject to the law and the SEC and what we're committed to do, we will speak about any subject that we are permitted to do. We're a public Company and that's what we will do.

Thank you.

Excuse me gentlemen, we do have one final question coming in from Andrew Shapiro.

Thank you. The gentlemen before Mr. Stabosz had asked a question for which Joe had given an answer on. That we're operating at less than 50% capacity. And that actually speaks the point for which I asked before. And so, now I'd like to get your thoughts of what you could do in order to address, you can't operate at less than 50% capacity or even let's say slightly more that 50% capacity or even 75% of capacity, over the long haul. That doesn't make sense. What steps might you be able to do to right size the business?

Andrew, we answered the question already. Revenue will right size this business.

When was the last time you were running running at full capacity?

I don't know that we've ever been at full capacity.

Okay.

Maybe at Hy-Tech, at the height of that business some time in 2008. That's just for Hy-Tech.

And when you were running at about $1 per share earnings rate, for the days of doing that. But when you were running at about $1 a share earnings rate, what kind of capacity levels were you running? I think that was before Hy-Tech.

That was a different business. That was primarily driven by residential hardware at that point. I can't compare Andrew, I can't. It's a different Company, really.

So in terms of what kind of cash flow this Company could generate or earnings this Company could generate, were it to run at 75% to near capacity?

Significantly more than we've got now.

We'll, we're not generating anything now. That's the problem.

I answered the question about how much revenue it would take to get us to break even. I stand by that statement. You can extrapolate, yourself, from there.

So, about $2 million to $3 million of revenue gets you about $0.20 a share. Because we're losing $0.20 a share this quarter.

Well, I was speaking on an annualized basis.

Okay. $2 million to $3 million for the year?

$3 million a year in additional revenue would approximately get us to a break even operation.

On an annual basis.

Yes.

Okay. Thank you.

Thank you. Gentlemen, there are no further questions at this time. I'd like to turn the floor back over to Mr. Richard Horowitz.

Okay. Thank you all for taking the time today for the call. And we'll speak to you at our next quarterly report.

Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation