SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 9, 2006
Blonder Tongue Laboratories, Inc.
(Exact Name of registrant as specified in its charter)
Delaware 1-14120 52-1611421
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
One Jake Brown Road, Old Bridge, New Jersey 08857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 679-4000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
On November 11, 2005, the Company announced that it, and its wholly-owned
subsidiary, Blonder Tongue Far East, LLC, had entered into a Joint Venture
Agreement ("JV Agreement") with Master Gain International Industrial, Limited, a
Hong Kong corporation ("Master Gain"), dated as of November 11, 2005, for the
manufacturing of products in the People's Republic of China (the "Joint
Venture"), pursuant to which the parties subsequently caused the formation of
Blonder Tongue International Holdings, Ltd., a British Virgin Islands company
("BTIH"). On June 9, 2006 (The "Termination Date"), the Company sent notice to
Master Gain of its election to terminate the JV Agreement and exercise its right
to purchase Master Gain's fifty percent (50%) ownership interest in BTIH which
the Company anticipates will be for nominal consideration.
The Company determined to terminate the JV Agreement due to the Joint
Venture's failure to meet certain quarterly financial milestones set forth in
the JV Agreement. The inability to meet such financial milestones was caused, in
part, by the failure of Master Gain to contribute the $5,850,000 of capital to
the Joint Venture as required by, and within the timeframes specified in, the JV
Agreement, which failure has continued to date; and the Joint Venture's failure
to obtain certain governmental approvals and licenses necessary for the
operation of the Joint Venture.
The JV Agreement contemplated the formation of several new entities,
including a new Chinese manufacturing company to be owned (directly or
indirectly) by BTIH. In addition, the Joint Venture was, among other things, to
be granted a license from the Company to use certain of the Company's technology
and know-how ("License") in connection with the manufacture of certain products,
and was to be appointed as the exclusive distributor of such products in the
Asian, Southeast Asian, African, European, Middle Eastern and Australian
markets. It was further anticipated that the Joint Venture would seek out and
acquire other technology and rights from third parties, including all of Master
Gain's right, title and interest in and to the cable modem termination system
("CMTS") hardware and software technology and know-how (collectively, the "New
Technology"), and manufacture products developed from the New Technology, for
which the Company was to be appointed as the exclusive distributor in the North
American, South American and Caribbean markets. As of the Termination Date, BTIH
is the only entity that has been formed by the Joint Venture, the Company has
not granted the License to the Joint Venture and no New Technology has been
acquired by the Joint Venture.
Master Gain is an affiliate of Shenzhen Junao Technology Company Ltd.
("Shenzhen"), which purchased T.M.T. - Third Millennium Technologies Ltd.
("TMT"), the manufacturer and supplier of the Company's MegaPort(TM)line of
high-speed data communications products, from Octalica, Inc. ("Octalica") in
February 2006. At the same time, the Company amended its distribution agreement
with TMT to expand its distribution territory, favorably amend certain pricing
and volume provisions and extended by 10 years the term of the distribution
agreement for its MegaPort(TM)product line. As part of the transaction, the
Company was required to guaranty the payment by Shenzhen to Octalica of the
purchase price for TMT, equal to $383,150, plus an earn-out. In exchange for the
guaranty, the Company obtained assignable options to acquire substantially all
of the assets and assume certain liabilities of TMT, or alternatively, to
acquire from Shenzhen all of the outstanding capital stock of TMT, on
substantially the same terms as the acquisition of TMT by Shenzhen from
Octalica. These options expire on February 26, 2007, and are extendable by the
Company for an additional 90 days thereafter. The Company has not, as yet,
determined whether or when such options may be exercised. In addition, the
Company is involved in other ongoing transactions with Master Gain and Shenzhen
related to the CMTS technology and certain fiber optic products.
Although the termination of the JV Agreement has delayed the Company's efforts
to begin production of its products in China, the Company continues to believe
that establishing a manufacturing facility in China is in the best interests of
the Company. The Company believes that the manufacture of its core products in
China will reduce the Company's manufacturing cost, thereby improving the
Company's gross margins and allowing a more aggressive marketing program in the
private cable market, will provide access to, and potential acquisition of,
advanced technologies, including technology in the hybrid fiber coax (HFC)
transmission, the IPTV core passive component and high speed data fields, and
will facilitate the Company's ability to sell to private and franchised cable
operators in the Pacific Rim, particularly in China. The Company intends to
continue actively pursuing opportunities in China, either independently or
through a joint venture relationship with alternative joint venture partners or
a restructured joint venture relationship with Master Gain or Shenzhen.
Item 7.01. Regulation FD Disclosure
On June 15, 2006, the Company issued a press release announcing the termination
of the JV Agreement (as discussed in Item 1.02 hereof), which press release is
attached hereto as Exhibit 99.1. This press release is incorporated into this
Item 7.01 by reference.
Item 9.01. Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) The following exhibits are filed herewith:
Exhibit 99.1 Press Release dated June 15, 2006.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. These statements are neither
promises nor guarantees, are based upon assumptions and estimates that might not
be realized and are subject to risks and uncertainties that could cause actual
results to differ materially from those in the forward looking statements. There
are a number of factors that may cause actual results to differ from these
forward-looking statements, including the success of marketing and sales
strategies and new product development, the price of raw materials, and general
economic and business conditions. Further, there can be no assurance that the
Company will be able to successfully establish operations in China, or that any
operations established will be efficient or provide the benefits anticipated.
Other risks and uncertainties that may materially affect the Company are
provided in the Company's annual reports to shareholders and the Company's
periodic reports filed with the Securities and Exchange Commission from time to
time, including reports on Forms 10-K and 10-Q. Please refer to these documents
for a more thorough description of these and other risk factors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BLONDER TONGUE LABORATORIES, INC.
By: /s/ Eric Skolnik
Eric Skolnik
Senior Vice President and CFO
Date: June 15, 2006