Mace Security International, Inc. Q3 2008 Earnings Call Transcript

Nov.25.08 | About: Mace Security (MACE)

Mace Security International, Inc. (OTCPK:MACE) Q3 2008 Earnings Call November 25, 2008 11:30 AM ET

Executives

Eduardo Nieves - VP of Investor Relations

Greg Krzemien - CFO

Dennis Raefield - CEO

Bob Kramer - Vice President and General Counsel

Analysts

Andrew Shapiro - Lawndale Capital Management

Operator

At this time, I would like to welcome everyone the 2008 third quarter financial results conference call. (Operator Instructions).

And now I'd like to turn the call over to Mr. Nieves. Sir, go ahead.

Eduardo Nieves

Thank you, Ken. Welcome to Mace's investor conference call. My name is Eduardo Nieves, and I am Mace's Vice President of Marketing and Investor Relations. Also on today's call is, Dennis Raefield, Mace's CEO and President; Gregory Krzemien, Mace's Chief Financial Officer, and Robert Kramer, Mace's General Counsel and Executive Vice President. On today's call, Greg will discuss financial results and Dennis will discuss the status of the business.

Before I turn the call over to Greg, there are some housekeeping matters I must address.

Certain statements and information made during this conference call will constitute forward-looking statements, within the meaning of the Federal Private Securities Litigation Reform Act of 1995. When used during the conference call, the words or phrases, will likely result, are expected to, will continue, is anticipated, estimate, projected, intend to or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, known and unknown; and uncertainties, including, but not limited to economic conditions, limited capital resources; and the ability of management to effectively manage the business and integrate acquired businesses.

Such factors could materially, adversely affect Mace's financial performance and could cause Mace's actual results for future periods to differ materially from any opinions or statements expressed during the conference call. Additional discussions of factors that could cause actual results to differ materially from managements projections, forecast, estimates and expectations, are contained under the heading Risk Factors in Mace's SEC filings, including it's registration statements and it's periodic reports on Form 10-K and Form 10-Q. All statements made during the conference call should also be considered in conjunction with the financial statements and notes contained in Mace's Annual Reports on Form 10-K and quarterly reports on Form 10-Q.

Before I turn the call over to Greg, I would like to remind everyone that my phone number is 954-449-1313. After the call if there are any follow-up questions please give me a call. My e-mail address is ed@mace.com, and our website is www.mace.com.

With that, I would now like to turn the call over to Greg Krzemien.

Greg Krzemien

Thanks Eduardo. Good morning and thanks again for everybody joining us this morning for our September quarter end and nine-month ending September results discussion.

As most of you are aware, some from joining our calls in the past, we currently operate in three business segments: Our first segment is our Security Segment, and in that segment we operate three divisions: our original and well known Mace personal defense and pepper spray operation located up in Vermont. We have our Mace-branded professional level of electronic surveillance equipment, which operates out of Fort Lauderdale, Florida. And our consumer level electronic equipment operation in Dallas area, where we also have our high-end machine vision and video conferencing equipment's operation also.

Our second segment is our Digital Media Marketing Segment, which we operate through Linkstar Interactive. And our third segment is our Car Wash Segment, which, as most of you know we are exiting and we continue to unwind that operations.

We have made that decision to exit the car wash several years ago, and to give everybody a total to-date, including the sale of full service car wash in October in our Dallas market, we've sold 35 car wash sites and five truck wash sites, and this has been since December 2005, including a total of seven sites in 2008.

With the sale of these sites, we're pleased to report that we generated about 34.3 million of net cash after payment of about 16.3 million of related mortgage debt. And with that, we currently own 14 car washes; we operate 12 of those car washes. And as disclosed in our 10-Q, we closed two underperforming sites in our San Antonio, Texas market recently.

With the sale of the car washes, this has really allowed us to built some cash balances and reduce our debt balances. Our debt just for reference was 23.9 million at December of '06 that was down to 13.6 million at December '07, and at September 30th, about 7.9 million. And that is in the approximate 6.8 million range after the October car wash sales.

So again, we significantly brought down our debt. Our interest expense in 2007 ran about 1.5 million and based on current interest rate levels and current debt levels our projected interest expense is about $400,000 for the next year. So, we significantly reduced some future cash needs for interest.

We again, have 14 remaining car washes. While we're having discussions currently with parties on several of these sites, we currently, as of today, have no sites under executed agreement. We previously disclosed in last quarter, in the June quarter that we had several sites in Lubbock, Texas and a site in Arlington, Texas under agreements. These agreements were terminated by the buyers, through the exercise of some contingency clauses and the company received about $11,000 in cancellation payments from the buyers.

In the financial statements in the press release and in the 10-Q I'd remind everybody that a majority of the car wash operations are pulled out of continuing operation and moved to discontinued operations accounting. Basically all of our Arizona car washes which was sold, Florida which were sold in the earlier part of the year; our Northeast region car washes which were sold last year, and also the car washes on our San Antonio and Lubbock, Texas markets when we assist -- when we move assets in to held for sale or substantially close our self the car washes in a geographic market, we then move that, that entire market into asset sold or rather discontinued operations.

In our recent 10-Q revenues in the nine months ending September of this year and last year related to the discontinued operations were about 2.9 million this year and 12.3 million last year. The reduction's obviously because of the sales, and our net income was about 5.5 million this year from discontinued ops, and this include gains on the sale of sites of about 6.9 million related to Florida car washes, and it also included approximately $311,000 impairment charge related to the San Antonio washes.

The net income last year was 1.9 million from discontinued operations for nine months, and this included about $2.1 million gain on the sale of washes.

I am going to take a few minutes to again run through some statistics for the three and nine months. First of all for the third quarter ending September, we've reported loss of 2.1 million from $0.13 per share, versus a loss of 3.2 million or a loss of $0.20 per share last year in the third quarter.

Our results for this year’s third quarter show EBITDA of negative $1.6 million, that's a negative 957 after about $400,000 of notable items. Some of the notable items included in the loss for the current quarter are about $255,000 of non-cash stock option expense, and the impairment charge I just mentioned of about 300,000 on the two San Antonio car washes.

Overall for the nine months ending September, reported a loss of $2 million or $0.12 a share, on revenues of $40.5 million from continuing operations. This excludes the $2.9 million of discontinued operations revenue as previously mentioned, and this compares to a net loss of $5.2 million or $0.33 per share last year, on revenues of 28.9 million, and again that was net of $12.3 million of discontinued operations revenue.

The results for nine months of this year show EBITDA of a positive $2.16 million. That, when you back out notable items, would have been a loss of $2.8 million for nine months in cash flow, and the excludable items to do that math were about a net of 4.95 million of positive items. The big one in there is the $6.9 million; our gain on the Florida washes, offsetting that somewhat is about $219,000 of legal fees and wrapping up immigration investigation in the Northeast car washes.

We have $548,000 of non-cash stock option expense for nine months, and we accrued $418,000 of cost and spent a majority of that to clean up the Vermont EPA matter. We had a $600,000 settlement payment for the immigration matter in the Northeast car wash region. So again, all that nets to about 4.95 million of non-recurring or I should say notable items.

The $2.1 million loss also includes about a $1.4 million impairment charge for the write off of the net book value of the customer relations that we wrote off for PromoPath in the Digital Media Marketing segment in the June quarter. And as I previously mentioned, we have the impairment charge of $300,000 for the San Antonio sites, and in June we recorded -- in the June quarter we wrote down two Texas sites by about $1.2 million.

From a revenue perspective, our revenues for three months or the third quarter ended September were about $12 million, compared to 11.8 million of last year in the third quarter. This increase was primarily due to the addition of about $553,000 in incremental revenues from our Digital Media Marketing segment, which we purchased towards the end of July of '07. The increase in revenues was offset slightly by a slight decline in revenues in our Security segment of about $388,000.

For our Car Wash segment showed a slight increase in revenues, which was mostly related to sale of fuel-related car washes with the increasing fuel prices.

Revenues for the first nine months ending September were about $40.5 million, compared to $28.9 million last year. The increase again was primarily due to the addition of about $11.5 million in revenues from the Digital Media Marketing segment, again which we purchased last July.

This increase was offset by a decline in revenues of about 6,000 from the security segment, and we showed a slight increase in revenues, again in our – or a slight decrease, I'm sorry and increase rather, in our car wash segment, again, mostly related to fuel sales and a little bit from detailing in car wash revenues.

Couple of comments on our Linkstar, PromoPath, Digital Media Segment. In the first six months of '08, our revenues increased to about $10.9 million and we showed gross profit of about 4 million, as compared to the first period we owned it last year, which is just shy of 6 months. The revenues back then were about only $7.6 million with gross profit of about $1.5.

This saw a pretty significant improvement in the first half of our year, and revenues and gross profit was really due to the success of our group at Linkstar, developing and selling several new products, including our Purity cosmetic products and our Eternal Minerals spa products. In the three-months ending September '08, we added additional revenues of 3.4 million and a cash flow of about 131,000.

I do want to point out that it's continued to been positive, we did show some reduction in growth levels in the third quarter, which we understand is somewhat normal to the Internet consumer-type business, where that activity somewhat slows down in the summer. We are seeing those levels picking up, and we're excited about where the new acquisition levels are going in.

And in particular, we've introduced a new product towards the end of the September quarter called Extreme Bright White, which is a teeth whitening product. And again, we think things will -- we anticipate things starting to increase again.

One thing -- I want to note that management has been aggressive in significantly reducing the SG&A cost within this segment in response to this slowdown in summer sales and we are continuing to watch that closely.

On the gross profit standpoint, our gross profit as a percentage of revenue was about 30.3% for the third quarter of this year versus 22.9% last year. And approximately 29.9 for the first nine months versus 23.1% for the first nine months of last year, really happy with that improvement, largely related to the Digital Media Segment, which showed margins of about 38.7% for the first nine months of this year. So we are again happy with the growth there.

As far as SG&A cost, make some comments there. Our SG&A expenses for three months ending September of '08 were about $5.1 million compared to $5.5 million last year. This decrease in SG&A cost is really a result of decrease in some of our notable item class for the three months ending September. In particular, we showed our cost relating to the legal fees for the immigration matter were only $15,000 in this current quarter versus $355,000 for the three months last September.

Also our non cash compensation expense was $255,000 this September quarter versus 767,000 last year and we also paid last year about $310,000 of commissions on Linkstar acquisition.

One of things that significantly offsets these decreases is the Linkstar acquisition – the Linkstar acquisition in the third quarter of ’07. We had SG&A cost of $758,000 in the three months ending September of this year, versus a much smaller number last year, because of again, being acquired somewhat during the quarter.

As far as SG&A expenses for the nine months ending September ’08, they were 16.3 million compared to $12.9 in the same period of ’07. The increase again was primarily related to the acquisition of Linkstar, which increased SG&A expense for the nine months by about $4.2 million.

And I want to point out that we currently put in SG&A cost or our cost for shipping the product out, which for Linkstar is a pretty significant number, about $1.1 million for nine months, it also includes all our credit card processing fees as part of our selling expense, which is again about $850,000 for nine months. So again, that SG&A number, which is fairly significant for Linkstar does include a significant cost for shipping and credit card processing.

An additional accrual also was booked this year for about $418,000 for the EPA matter up in Vermont. As I mentioned, for the three months, these increases in SG&A cost were also partially offset by some decreases in SG&A costs, regarding again the legal immigration matter, where those costs were $219,000 this year for nine months and $603,000 last year for nine months.

We also, again in SG&A for nine months have non-cash stock compensation of 545,000 versus about $1.1 million last year. So again, those decreases do somewhat offset the increase from the SG&A of Linkstar.

One of the other things in the SG&A cost that’s important to note is that we did as we indicated in our press release, start some significant cost reduction efforts this year. Lot of those occurred during and towards the end of the September quarter. So while we see some minimal effect of those in the current Q, a large majority of those increases will be impacted we hope in the future here.

Interest expense to date, mentioned that for a couple of moments, was about $399,000 for this current year-to-date period and about 1.18 million last year for the nine months. And again with a significant reduction in debt that I previously mentioned, we'll continue to experience a dropdown in our interest expense.

Our weighted average interest rate currently is at about 5.6%. Most of our remaining debt is tied to prime. So again, we're benefiting from the lower interest rates at this point.

Before I talk about the balance sheet and cash flows for a couple of minutes, I will mention that we have about $28 million plus of NOL carryforwards that take us well into 2027, 2028 area, and again we've done some analysis and there's been no change in control elements of the company which would inhibit use of any of those NOLs in the future at this point.

From the balance sheet perspective, we continue to remain very strong. We have a low leverage ratio of about 13.3 to 1. That's what our 7.9 million of bank debt at September 30th and 51.6 million of booked value. Our working capital remained strong, we have cash of about 12.8 million at September, and we have positive working capital, compelling us into the future here.

Public comments on cash flow. For the nine months ending September, we used about 5.3 million in operating activities, including the notable charges in expenses I previously mentioned. From an investing activity, we generated about 6.4 million in net cash, 7.9 from the sales of washes, and that's net of the payout of the debt, and we expanded about 450,000 in CapEx for remaining continuing operations. We also used about 1.5 million of cash for routine debt payments in the nine months.

Again a lot of information, I want to try and provide to everybody. I'd like to thank everybody for joining us this morning. And at this point, I'm going to turn the call over to Dennis Raefield, our CEO. Dennis?

Dennis Raefield

Well, good morning ladies and gentlemen, and thank you for joining us. This has been a tumultuous time for the world, and we share your pain as investors, we really do. It has also been a time of significant change in improvement for Mace Security.

We have made many, many significant changes in our organizational structure in the last quarter to meet the Board's goal of reducing our SG&A expenses, which we believe was our number one issue and to cut our operating losses. I'd like to take a second to highlight some of those major actions we've taken in Q3.

Number one and most important, we have reduced our SG&A cost on an annualized basis by over 2.3 million between now and the end of the year. That number includes a recent addition to staff, as well to replace some management roles, but it excludes even more savings from the compensation different between the current and ex CEO.

As you know the Board terminated the previous CEO and the reason was his refusal to cut operating expenses by $2 million as ordered by the Board. So I am proud to announce today that we've exceeded that $2 million with our Q3 actions, and we intend to continue trimming and reorganizing in Q4 and also in to Q1 of 2009 until we have an efficient and profitable operation.

My goal, as I previously stated in earlier call, is to bring to Mace to profitability in late 2009, and we continue to hope and plan for that success. Of course with the current state of the U.S. market, we have plenty of unforeseeable events in front of us, nevertheless we remain vigilant to keep our pulse on the security market place and to adjust Mace's overhead and operations to match whatever the world will serve us.

In the long run there is no way to make Mace profitable by cuts alone. Our multi-lines of businesses are too diverse and require too much public company reporting to make a profit just by cutting expenses. To make Mace successful we must grow the top line. To the end I've hired a new Security Division President Mr. John O'Leary, who started last week and is based in our Florida offices.

John joined us most recently from IBM, and he previously work for me at Honeywell where he was my VP of Sales for the Integrated Security Division selling access control and CCTV.

John is a hands-on field sales leader and is test to raise to the topline of Mace security. John will be hiring several outside sales people which we have zeroed at the moment to stimulate sales and their costs are also included in our net 2.3 million annualized saving.

In addition, another key area for Mace, we made a key hire in project -- excuse me, in product management bring on Mr. Joe Schaffer recently from GVI Samsung another public company in the security space, and he was previously with Taiko and [Sensimatic Video]. Joel brings a wealth of product experience and is recently joined me on our visit to our Asian countries where we negotiated better pricing terms and quality control for Mace’s products.

So Mace’s current product line, as some of you know is ageing, and we need new products that customers want, and need to increase sales. Those products will start to arrive in Q1 of 2009, and should help us to stimulate sales.

I have many, many issues to fix in Mace, but we have concentrated on first, as I call it, riding the ship as they say, and filling key management positions before developing a new strategy. At our annual shareholder’s meeting in Philadelphia in two weeks, I will lay out the beginning of our strategic plan to return Mace to its rightful leadership position.

I would like to speak for a moment about our other divisions. As you know, we previously stated we are moving out of the car wash business, and I previously mentioned our plan is to complete the divestiture of all remaining car washes by the end of Q1 2009.

I now believe, in the current economic situation, Mace should not sell a car wash just to raise cash, since we are in a good, strong cash position, and lose its contribution to EBITDA, but neither should we run car washes at a loss. With that new goal in mind, in Q3 we have closed two non-performing car washes in San Antonio. I am pushing our car wash management to close any other washes that do not continue to contribute to our overhead, and we will continue to sell those that do not perform.

With our current market conditions, we may not finish our divestitures by Q1, 2009, but we will make sure that the remaining car washes are all profitable, and we will not give away our company assets just to raise cash.

I’d now like to spend a moment on Linkstar, our acquisition that was done about a year ago. Linkstar continues to be marginally profitable, and with our newest product release, that Tooth Whitening System that Greg mentioned called, ‘Extreme Bright White, our sales are again ramping upwards, and we expect strong November and December revenues.

We previously announced that the second of our two founders will leave the Division in January on good terms, and a search is underway for a new President, which is also in our budget and net of the $2.3 million of savings.

The business will continue to operate with or without a new President, is currently reporting to me and is in a stable mode with excellent management in both sales and operations. Our customer service issues are improved and we continue to develop one to two new products per quarter. We do not plan to sell or close Linkstar, and we anticipate continuing as before, generating profits to our bottom line.

As some of you know that Digital Media Marketing business has a cyclical P&L, with increasing revenue first creating operating losses, followed by profit harvesting a few months later. We are continuing to modify this business model to reduce these large swings, although the cycle is inherent in the media space.

Finally, I would like to discuss our namesake product, Mace pepper spray, or Mace personal defense as Greg mentioned it, that’s the name we call this division. Mace personal defense has always been a small, but well-run division of Mace, generating regular growth in EBITDA. We continue to expect the same, but I'm pushing our experienced management team in Vermont to expand Mace's visibility in product lines in this market space, to really grow this end of the business, especially with the turmoil in the world. We're going to do that with new products and acquisitions.

I would like to add some quick background on our stock purchases in the open market, because I know there's a lot of request from shareholders for Mace to buyback stock. During Q3, we continued to purchase shares when the market timing seem right to do so. We did in the past limit our daily purchases to conserve cash and to not change our own price interest stock is being traded. The Board has continued to authorize me to buy back shares when it makes economic sense for the company, and has removed any daily limits.

We all understand that the goals of the company management and shareholders are not always aligned perfectly. In these trying times, no company can run out of cash. We are in a strong cash position and intend to stay that way, and we have backup cash available if we want to sell car washes.

While our stock purchases seem small, we have restricted the consumption of cash from every source and we continue to balance where there's a good buy on the market and the good use of capital against the depletion of our cash reserve.

Please understand as shareholders that we make each purchase decision very seriously. We will continue to buy shares when it makes the most sense and we see significant value in our actions.

In closing, I would like to comment on the marketplace. As you know, everyone claims that in a recession crime goes up when people lose their jobs. I also believe this is the case, but the reality has been that first we get purchasing contraction and hunkering down by all buyers, which we have already seen across the broad markets, then the later followed by focused spending for survival.

I anticipate that even our flagship divisions will see a contraction before a surge, as a perfect example, our sporting goods customers who buy Mace's pepper spray report that there is a buying spree going on right now for pistols and guns in anticipation of our new President Obama's inauguration and expected change in our gun ownership policy. This reflects focused buying for survival.

We anticipate that all Mace security divisions will eventually grow as people hunker down to protect their homes, their families and their businesses. We just do not expect it will happen until later in the year, and Mace management is adjusting our operations continually to match those expectations. We are conserving cash and we are tightening our belt to weather this storm.

I thank you for your time today. We are now ready to open the call for a limited time for question. Ken?

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from [David Erlac] from [Carrelage Advisors]. Your line is open sir.

Unidentified Analyst

Yes, I was wondering about the status of the Paolino lawsuit and the effects that it would have on the company in terms of costs, whether it's reserves there (inaudible).that the result is not positive for the company. Could you say something about that please?

Bob Kramer

I don't believe there are any reserves for the litigation that accountants and Greg Krezmien, the CFO have studied this carefully and under the appropriate accounting principles, we don't feel at this point reserves are appropriate. David is there a further question.

Unidentified Analyst

I was just wondering I guess there was Mr. Paolino. He has some claims against the company, so those claims you are saying there is no reserves for in the event that?

Bob Kramer

Well principally there is two as you know and as disclosed in our public report, there are two ongoing litigations, there was also an inquiry made by the branch of the SEC concerning the disclosure, surrounding the situation, company did supply documents and the SEC was satisfied with the company's disclosure.

So there remains whistleblower action, and as we stated in the most recent filing, the Secretary of Labor it's initial determination was that they were the company against Mr. Paolino. Mr. Paolino has appeal that decision on and this is right under the law which set it before an administrative law judge.

Mr. Paolino has filed request that the hearing that was set for the later part of January '09 be stayed and not brought to a hearing. The company is opposing that motion and are seeking to bring that to a hearing and the company though there is no guarantees in litigation, the company is very optimistic that it can prevail on the action.

Unidentified Analyst

And one final question on that point, and then I have a (inaudible).

Bob Kramer

Sure. I was going to discuss the arbitration next, but please ask your question.

Unidentified Analyst

Well, one thing I was confused about. There was I guess an allegation that there was $500,000 either misappropriated or misused, I wasn’t quite sure. Could you explain what happened with respect to the 500,000 odd numbers, or what is alleged to have occurred?

Bob Kramer

I’m not sure I understand the question David. The whistleblower complaint is mainly centered about a complaint by Mr. Paolino that under the Sarbanes-Oxley Act that he complained of a wrongdoing on the Corporation’s part and the Corporation then retaliated by firing him. The initial fact finding was that the Corporation that he had not engaged in a protected act and there was no retaliation, and that the Corporation had good independent reasons for terminating him.

I don’t think there’s any 500,000 in the whistleblower complaint. So I’m not sure what you’re addressing. And again, that Mr. Paolino appealed, as is his right, has set for a hearing, Mr. Paolino is seeking to delay that hearing and not bring the case to fruition.

Unidentified Analyst

Okay.

Bob Kramer

And the arbitration action, that centers around the same facts obviously, but different issues. The issue in the arbitration hearing is basically that Mr. Paolino and whether he's due severance payment or not. Mr. Paolino's contract allowed for his services to be terminated. In one instance there's a clause that allows him to be terminated without a severance payment that the Corporation is relying upon. In the second instance, Mr. Paolino's basically litigating in the arbitration that the Corporation was incorrect and relying on that that clause and he can be only terminated with a severance payment and he is seeking for that severance payment. Now that action the Corporation has counterclaimed, I believe the counterclaim is for $1 million.

Unidentified Analyst

Okay. I read that. Let me just ask you this question. This is the way for the Paolino matter. On the Digital Marketing portion of the company, I understand that the sales has gone down in that area. How does the company explain the diminution in sales by input Digital Marketing aspect of the company and will it and kind of turn around in your – or in someone's opinion.

Dennis Raefield

I'll be glad to answer that, David.

Unidentified Analyst

Okay. Sure.

Dennis Raefield

The sales did fall in the third quarter, and according to – we were new to the space, but according to the management that third quarter is a traditionally weak quarter. It's a summertime people don’t use the internet as much in the summer, and all of our sales of our products are based on people surfing the internet and finding our products post sale in a system called CPA or Cost Per Acquisition. So they find us after they're buying other things on the internet.

Our sales have turned up in October or November or both, and which will be reported in our fourth quarter, and we expect December as well. So we already have turned the corner. It does require us to develop new products on a regular basis as products become stale on the Internet and our newest product in this case happens to be doing much better than we thought, so I think you'll see a return to top line revenue numbers for Q4.

Unidentified Analyst

Okay. Well, thank you very much, gentlemen. I appreciate. Thank you.

Bob Kramer

You're welcome.

Operator

Your next question comes from [Thurman Willis], a Private Investor. Your line is open, sir.

Unidentified Analyst

Gentlemen, as you know, I've been a shareholder for quite sometime, I appreciate you having a conference call. And as I have done in the past, reminded the shareholders that their main objective is to enhance shareholder value. I would like to congratulate management on the reducing of expenses, for having a conference call to keep us updated and for continuing to liquidate car washes. I fully realize as you do, this is a difficult market and I know that you've had some transactions on some car washes that failed.

But from my eyes, I see you vigilantly trying to sell those washes and I appreciate that. I have repeatedly talked about two primary things that I will consistently reinforce again and then I ask my question. There are 6,000 or 7,000 companies out there. We all know that there are probably many of them selling under market value. Mace has chosen for years not to be involved on the street and not to show itself and to tell its story. It appears to me with the cash burn disappearing, you're getting rid of the car washes that you're not a security company, you're not a car wash company and that you are going to really be more of the security company than anything else.

It is confusing to investors and the business that we purchased about a year ago which I was totally opposed to. So my first question is, at what point that we plan to consolidate our business into one part of business that we can go out and tell the story and get investors involved in a company that they have shown the way from because they did not understand it to be a car wash business and a security business. So again, how long before we can begin to tell the street of our story, I have asked that we loosen the shack of home that Board will allow him to give out and tell the story. But again let me say to you that I am most complimentary of what you have done to bring this company into line.

Dennis Raefield

Thank you, Thurman, I appreciate your support. I will answer this one. First of all, when you have a gaping hole below the waterline of your ship, I use that ship analogy. I think the most important thing is to seal the wound and to pump out the water. And so I think this is a big job, and there are lot of things in the company that needed repairing and we are not done yet and I am moving toward that direction, I am hoping you are coming to beautiful downtown Philadelphia in December for our Annual Shareholder meeting.

Unidentified Analyst

Will be.

Dennis Raefield

Thurman and I will be presenting the first of the strategy, which is, of course, as just as you think, a consolidation towards the security business, I think that's the expertise that some of the new Board members and I share, you can see some of the hires are in that direction. The car washes, as we know where that is going in the long run, that is a source of funds. I am working on that plan, and I will reveal it and I think you'll find that it will have some interesting pieces to it. I think it's a terrible time in the marketplace, but there's also opportunity in chaos, and there's opportunity when people are scared for their families and their businesses and just holding on to what they have, and not having it take away from them.

And I think we're going to bring some new ideas to that marketplace rather than just selling boxes, and I don't want to reveal that thunder, but we will see the plan. So, I think the plan will be laid out in early December. We still have to fix the ship before I steer a new course, and I think there's still a lot of things that, we're going go trim a lot of cost out of this company. I don't want to use the cash up, running negative operating losses. So that has stayed my focus.

So, you're right, I haven't gone to the street yet and released Eduardo because I think we have to have a clear strategy in addition just to a focus to the company, we have to have a clear strategy, I will be laying that out. So I think you're going to see that Q1 of 2009 is my anticipated date to let loose that snowstorm as you call them and as you know (inaudible) snow. So, I want to let that snowstorm loose, but I think we have to be very clear in this marketplace. People have been really hurt by a lot of things that have happened in the last two, three months, and we need to be clear in our focus, and people have to decide whether they believe that's a good strategy or not.

Unidentified Analyst

Well, I appreciate that. And I would give you one example, when the Madrid bombings occurred, I think we still agree that we all live in difficult times with potential terrorism, and while all of us pray that doesn't happen. We are in a segment that benefits from individuals that have fear.

And so, I think that bodes well for Mace Security, but I remember the analyst that was on television that I was watching, I happened to own some of all four of the companies. And as they mentioned Mace, and it was up $1.5, the individual says, "Oh sell, this stock is a car wash company".

And so I'm glad to hear that we will be focusing on the fact that we centralize what we are and I – appear from what I've read, though I do not know the individuals that are hired, that we can concentrate our sales moving the Security business. So I thank you for that.

My second question, moving rather quickly, is here we have a stock that does not have debt to speak of. Yes, it has 7 million, but my back of the envelope shows, if they were to sell those 14 car washes, even after paying off the debt we could possibly have another $1 a share in cash, that gives us almost $2 a share in cash, assuming those car washes sold, however I know that it is a difficult market, but here we are selling at $0.83.

I personally have bought about 40,000 shares this morning when the stock got down to the $0.83 level, I know it's been to $0.60 and we know that all companies, but we have $3.14 in book value. We are selling at or below cash. We are selling well below book value. And I truly regret having been able to buy that stock, because I think the company should have been able to buy that stock.

Now while we have 16 million shares outstanding and 12 million in cash, I truly agree that we want to preserve cash in this market, not being able – as myself being a banker knowing that it is very difficult to borrow money. However, I do think at under $1 a share for two reasons, which I'll mention: that we need to be aggressive in buying stock.

Yes, I am glad to continue to pick up stock at $0.80, $0.90. Our stock needs to trade above a $1, so that we take no chance of delisting and getting the pink sheets. And we know that’s Wild West of buying and selling stock. And I dare to understand that we were going to buy 5,000 a day. I think we should satisfy that at least 25 minimum to 50% of our cash, which would be 5 to $6 million and I know that you would not be able to buy 6 million shares under a $1, because it would ruin the stock price, I am not sure.

However, I would say to you we were in tax low selling season. We are in November, we are in December, and there will be people dumping this stock, no matter what the cash level is, just to take the loss, I think it bodes very well timed that we could produce the outstanding shares from 15, 16 million to 12, 13 million. And I think, as I have said before, that this is incumbent on Directors and – committed to their fiduciary responsibility, when I can buy something that’s worth $3.14 for $0.80 that is better than going out and buying another business. And even though, Linkstar may be marginally profitable, had we not bought Linkstar, and had those monies back, we would be an entirely different business now.

Don’t need to be in those different segments, because it’s very confusing to investor, so. I’m going to encourage the Board in committing to your fiduciary responsibility. How would you explain a complaint from large shareholders, of which I am one, that you did not buy stock at 60, 70, $0.80 when you had a 3.14, if it is a real book value that is absolutely too conservative and that is one of my major complaints of this company, not now, but it has been too conservative.

The advice given is, it's been too conservative and I am encouraging you to move out and this stock should at least trade to a cash or book cash value and I think we can do that. The Street is very aware, market makers are very aware when the company isn't buying stock, it causes the stock price to go up, buying impels buying. And stocks as you tell other about them, I think anybody with any sense would commit a small amount of their funding to a security company in during terrorist attempts and in the unknown times. And with the company that has cash and is not leveraged and is moving toward one, I think you have a golden opportunity.

I commend you, I commend you, but if 90 days pass, six months passes and this company continues to have the same conservative looking back, not looking ahead, cup half empty, instead of cup half full, I will be extremely critical of the company and encourage shareholders to complete their fiduciary responsibility. I am sorry to get on a preaching mode, but I have involved this three or four years and I am again most encouraged with what's going on but I think we need to go to even the next level.

Dennis Raefield

Thurman thank you, I don't think you are in (inaudible) I think it's a discussion we have every day and I will take your message clearly to the Board. We are meeting at the annual shareholder’s meeting in two weeks again, and as I mentioned in the call, maybe I wasn’t clear. The Board has given me some new reins to do additional purchasing, and we are in the marketplace everyday, and we have been for the last two months, and when you see those spikes, some of those are ours, and I see yours hitting the screen today. We’re actually up to that 1998 between bid and yes, so thank you for your…

Unidentified Analyst

And that’s my bid at 90, and that’s how much I believe in the company, and believe where it’s going, and I again thank you for the lead you’ve taken because I believe in that. But I think some guidance we get is too conservative sometimes, and I encourage us to get good fiduciary responsibility in this day and time according to my SEC attorney that I think is one of the best attorneys, not to talk about what you’re doing, versus talk about your doing, Jack Welch’s book, ‘Communicate, Communicate, Communicate’ I know that every attorney in the world guards us against Sarbanes-Oxley, and the potential liability we have, but I’m telling you, that is going to change, and there’s going to be more liability incurred by not communicating with shareholders, and not listening to shareholders, but I firmly believe this company is on the listening mode now, and I applaud you’re not say that seriously, that’s the reason I’m buying stock, I’m putting my money where my mouth is.

Dennis Raefield

Well, thank you for that, and message absolutely received.

Unidentified Analyst

Thank you; thank you.

Operator

Your next question comes from Andrew Shapiro with Lawndale Capital Management. Your line’s open.

Andrew Shapiro - Lawndale Capital Management

Hi, I have a few questions. Dennis, you will be able to make it to Philadelphia in sunny December at the annual meeting when you’ll be unveiling the new strategy. Two requests if you could: Can you give us the opportunity that whatever you're presenting in Philadelphia will be made available either through a live webcast with Q&A or alternatively the presentation and will be filed as an 8-K on Edgar and put up on the Mace website?

Dennis Raefield

Eduardo, any issues with that?

Eduardo Nieves

I don’t see any issues with either one of them.

Dennis Raefield

Okay. I think in the spirit of (inaudible) communicate, communicate we'll be glad to do that. And whether we do one or both, we'll let you know afterwards, offline.

Andrew Shapiro - Lawndale Capital Management

Okay. And in addition; because you had mentioned your 45-day plan about 90 days ago, and you've been quoted in some trade press regarding thesis of your strategic direction. Is it possible that you could at least address some of the strategic direction and thoughts of building the security products portion of this business of where you're taking the company that you can share with us this vision today?

Dennis Raefield

A little bit. I wish you could come to Philadelphia, because it will be alive at that time. But the part that I previously really state which I can expound on little bit is that to me selling boxes in today's security economy there's a lot of competition. The Chinese are trying to come directly to the higher states, their quality is low and their customer service is low, but they're aggressively coming here with the Chinese price in the marketplace. Part of the thing that I need to do at Mace, we have a fantastic name; but we don’t have a lot of loyalty because people buy our product and then jump to the next low price product. We are a low price leader, so the good news in our current strategy is we're not the JC Penny or in the middle of the market, we are a low cost provider.

But that loyalty is not very well implanted, and so my strategy will involve building loyalty by offering additional services and dealer programs to our dealers, so that they have a reason to stay with us rather than just surf, buy, and jump to the next guy. And that involves as I previously mentioned, a [central station] acquisition which allows us to offer additional services.

The real future which we're going to be talking about is services that today are just a naissance in the industry, remote video monitoring and remote access control monitoring. These things have been tried, they work, and my previous company did them successfully. But the problem is that, making those businesses run on their own is a difficult task, and the way to do that is to buy an existing already profitable running central station, which is called a Wholesale Central Station, and then adding these new services that build loyalty and their dealer programs that build royalty and use the Mace name to our advantage.

The Mace name is one of the most powerful names in the business. For those of you that know Smith & Wesson, they have started a branding program, licensing their name to the security industry. But Smith & Wesson is an aggressive name and we believe that people like housewives that are at home with children do not want us to put a sticker on their house that says protected by Smith & Wesson. It may work in certain parts of the country, but it doesn't work for Middle America who doesn't like aggressiveness.

But Mace on the other hand is a very defensive name, it's a protection name, it's not a name that says we hurt people, it says, "leave me alone, go away". And that's the direction we're going to go. I think that name will add value to our dealers but it has never been exploited. And as we focus, that new strategy will involve using the Mace name much more strongly and leveraging one of our greatest assets and building loyalty so that as we get attacked by price competition, people will stick with us because we offer more than just a box going out the door. So that's as much as Andrew I'd like to reveal at this stage, I think I don't want to take all the thunder away if you don't mind.

Andrew Shapiro - Lawndale Capital Management

So, with respect to that if you could then maybe clarify, just want to make sure I understand this. We have a large NOL at Mace, your thought is that you would going and buying existing cash flow generating business, paying some hopefully modest multiple of that cash flow, that would then get out it into our income statement and this would be with minimal corporate overhead, so you deleveraging our existing corporate overhead.

Dennis Raefield

Absolutely.

Andrew Shapiro - Lawndale Capital Management

And then that would get tossed in and then you slapped the base name on it and organically grow that acquired business.

Dennis Raefield

Actually grow it and offer products and one of the things we are trying to do, most central stations don't sell products and most product companies don't have a central station. So one of the things we will be doing is encouraging people to, that our product will actually work even better in our central station than work in all central station, but they will have extra features and extra things that really tie the dealer to a loyalty to us. So, yes, it will be stand, it will not be additional overhead, it will be free-standing running and profitable unit that I am buying and the multiples are not too high in the wholesale business. In the retail business that once you see in the paper are tremendously high, but the wholesale business is a different market and it has lower multiples and we should be able to acquire it without using very much of our cash and that is my plan.

Andrew Shapiro - Lawndale Capital Management

I am glad you did that, you said that about without using too much of your cash because that does do an excellent segue which is the idea that you can pursue certain growth acquisition to enhance our pre-tax income, use up that NOL, but at the same time you will still have the sufficient cash for our liquidity needs as well as buying back shares, I am very pleased to hear that the 5000 share a day limit is off the table in terms of the buyback. You stated that you have the $2.3 million savings plans and it's in place already and you mentioned in today's script that this savings is net of new hires not only Mr. (inaudible) but also the outside sales staff that you want him to be bringing in. Can you break out this 2.3 million savings and describe I guess the major steps contributing to this and what incremental saving steps you implied you might have available to you in future quarters as well.

Dennis Raefield

Okay. I'm going to let Greg take a second to pull up as a sense what he can give you, what detail he can give you on that. But let me say that, some of those things are such as we are closing our warehouse in Florida and consolidating with Texas to have a single logistics operations for the company and that actually is occurring over the third and fourth quarter, the employees have been notified and it will be complete by 12/31. So some of these savings that's why I said annualized, will not kick in until 2009, the same we closed the Las Olas corporate headquarters. We are still paying rent on that until 12/31. So these annualized savings are not yet all hitting and showing on our P&L, because there are things that we are restricted by our contracts and agreements to do, but we are doing some of that. Greg, do you have a highlight of the 2.3 million and where it's coming from?

Greg Krzemien

Yeah, sure, Dennis. I mean, I can definitely provide some highlight.

Andrew Shapiro - Lawndale Capital Management

I don't to have little minutia but just kind of break in that.

Greg Krzemien

Sure.

Andrew Shapiro - Lawndale Capital Management

So we understand what strategic areas you are moving into and what's your strategic areas you kind of pulled out off?

Greg Krzemien

Sure. And again the majority of the savings are in the personal area and that's somewhere in the neighborhood of about $1.7 million give or take of the total that Dennis refer to and it really is a netting assist, it's obviously a more significant part of reductions, I'm going to say somewhere in the neighborhood of about 30 some reductions, but then we have about a dozen physicians coming back in the other way and some of those physicians are positions replacing some of the individual at Linkstar that have moved on.

As Dennis had indicated before, we do have the new hires that he just mentioned John and Joe. We have in there several outside sales people for the security market. And we have added a couple just to management level people that we had terminated over the last couple of months, that Dennis has continued to look to replace.

I mean these reductions do cover all of our operations. There are reductions in there. Many of which have taken place already and some that are still pending with the consolidation of the Florida and Texas security operation... Linkstar as I mentioned during my comments, we've made some pretty significant cut backs with the reduction in some of the activity there. There are reductions in the corporate staff in these numbers, I personally like I mean down for more individuals in the last couple of months. So there are cuts in all areas and it does provide for people that we thought we know and Dennis knows he needs to bring back in to fulfill his plan, so that’s again the majority of it.

There are couple of hundred thousand dollars of other operating costs. We’re tightening up everything from hotel and travel expenses, to how we send out mail, and we have projected and started some savings in there that add up to a couple of hundred thousand dollars. The (inaudible) lease itself was about a $160,000 annual cost. So that obviously is a cost that we will be saving. That is partially offset by a very small lease that Dennis has in California, but the net savings overall are in about the $130,000 range, between closing the Florida (inaudible) office, and Dennis's small office.

We have in there some savings, and also from closing a couple of the unprofitable car washes, the two San Antonio sites that saved us a couple of hundred thousand of cash flow drain. So again, that’s kind of a highlight Andrew, of how we got to about the 2.3 million. As Dennis said, we’re going to continue to look at other things over the next three to six months that we can hopefully continue to make some additional savings.

Andrew Shapiro - Lawndale Capital Management

Do you insiders – some thoughts as to the scope of the additional savings that might be extracted with additional round of cuts?

Dennis Raefield

Let me answer that, Greg. I’m concerned about revealing that in this call because it affects people’s lives and things, but certainly we have – I have more plans and I think there is still, we’re still tightening to do, but I can’t cut off an arm or leg in this company.

Andrew Shapiro - Lawndale Capital Management

I understand it.

Dennis Raefield

We’re working on it. We also have what, I will just say, the last thing is that Greg’s department has done a big job of implementing a single wired accounting system, believe it or not, this company for as long its been in business, just the last week they got a single accounting system company wide and that has not yet flowed through to see what that's going to – that automation is going to do the company.

Andrew Shapiro - Lawndale Capital Management

Actually I can very much believe that in the way this had been run in the past.

Dennis Raefield

Its getting there and our IT department has been working, – their goal is to be a 100% converted over and live with the single accounting system by 12/31. It is live already and now we're moving to the corporate account.

Andrew Shapiro - Lawndale Capital Management

When you move to a sales force only in Florida from consolidating your warehouse operations into Texas, we have owned real estate in Florida, I believe in the warehouse area I know that, what is that on the books for and in general what do we think albeit arguably in this market diminished value, what might that be able to be monetized for.

Dennis Raefield

Okay. First let me just correct the misstatements that you made, I move in the warehouse to Texas, I have a sales force in Texas and the sales force in Florida, I have not – the sales force in Texas is still in Texas.

Andrew Shapiro - Lawndale Capital Management

Right. No but your Florida sales force doesn’t move into Texas, you got to have office?

Dennis Raefield

No. And I’m putting that building up for sale that we owned there, and there is no reason to have double rent. When we sell it and it maybe a long-time or short-time, then we will move to more efficient offices. And to rent some offices is our current plan in the same Fort Lauderdale area, and sell the building, the building has been listed. And Greg, if you could tell him what the building's market value and book value is.

Greg Krzemien

Well, I mean the book value is about 2.2 million and I'll let Bob speak about his efforts in listing that facility.

Andrew Shapiro - Lawndale Capital Management

Yeah what's it listed for?

Bob Kramer

It's listed for 2.4 million

Andrew Shapiro - Lawndale Capital Management

2.4 and on the books it's 2.2.

Bob Kramer

Yes and realtor is also attempting to lease the warehouse space and/or sell the building.

Andrew Shapiro - Lawndale Capital Management

Okay. I have many more questions, but I’ll back out in the queue to let others who have been patiently waiting to come in, but please come back to us.

Operator

Your next question comes from [Jack Gulati] from Fidelity Investments. Your line’s open sir.

Dennis Raefield

Jack, are you there?

Bob Kramer

Ken, it looks like we lost Jack.

Operator

All right, very good sir. We’ll come back to Andrew Shapiro from Lawndale Capital Management.

Andrew Shapiro - Lawndale Capital Management

The mortgages associated with the discontinued ops, are they in interest expense, or the interest expense is net in the discontinued ops line?

Greg Krzemien

The interest expense related to (inaudible) in discontinued operations would be in discontinued operations number.

Andrew Shapiro - Lawndale Capital Management

Okay. And Dennis, can you describe a little bit more about, you said that your kind of the transition from the old products to the new products, having just kind of returned from Asia and your vendors, and you got a new merchandise manager, kind of what your thoughts are, I guess criticisms of the current line and the refreshing that you’re going to put into the new line?

Dennis Raefield

Yes, that will come out as well in Philadelphia, but I gave you a brief oversight. There are three sources of products in Asia, and most of our product does come from Asia. The Taiwanese are the most innovative of the producers; the Koreans are the most solid mid-market players, and turn out high quality, and the Chinese have the low cost and the lower quality option. And it is a constantly moving target that if you cannot just buy Chinese product, because you get the lowest, cheapest, most aged product. And if you buy only Taiwanese products, your costs end up too high, so you have to actually continue to move through the chain. So part of our strategy will be to innovate with new products using the most innovative suppliers, and then move towards having the value line, a stable central line with Korea and a value line with Chinese, with very selective Chinese vendors.

I think in the past we didn’t take this selection and the management of vendors as seriously as we do today. Joel and his team we are very, very aggressive, very serious about the way that we manage vendors and that's why I went with him to put the CEO flag in their office and say we are here to do business, but its going to be in a new set of rules and new set of terms, and we are growing and we need your support, but we also need your to deliver high quality product.

I think in the past we bought things and some times to match with them and sometimes the wrong products because we didn’t have experienced leadership choosing the product. So our hope is that the new management will do much more due diligence before for buying things.

In addition we have our own ideas of products which we will be designing here and its called ODM, Original Design Manufacturing, and then asking them to build it and of course the issue there is the intellectual property, making sure what we build doesn’t become back to be everybody product, but that's whey we work with the right kinds of vendors where we can deliver things to marketplace that haven’t been seen before and leverage some of our central station capabilities. That’s enough information for you.

Andrew Shapiro - Lawndale Capital Management

I guess, just maybe for the color, can you discuss the product array within the different security segments and how you feels it stacks up competitively and kind of where it is you are looking to make the changes?

Dennis Raefield

The company today excluding the personal defense division, the rest of the security division is 95% video today that were 98% video. So we're not selling any other kinds of products, we're not selling any alarm panels or we're not selling any access control at all. We've dabbled and it's in the catalogue, but it's not part of our line. So first of all we're going to spread out to be more of a source where people can get all three of those product, we're not going to invent some of them but there are good products out there that we're not selling so that we can get more of a spend of these dealers.

So secondly, we will be adding horizontally across the product lines. In the video business, it's more an issue that we did not necessarily solve the problems our customers had, and so they pick and choose through our line, and then they would actually have to buy from five people to get what they wanted. So what I'm moving is to actually make our line complete. We're cutting the number of skews down probably by two-thirds; we have too many confusing choices in our catalogue.

So it's more of a basic one-to-one clean-up on the first round, that's what Joel is doing, is to make our life easier, have bigger quantities of less skews and not so many confusing choices. The other one is to expect the quality absolutely impeccable which it hasn’t been. It's been spotty and we've lost good customers because we didn’t take care of them. So the incremental stuff will come later, and probably in Q2 where you see things that no one else has ever seen, that takes a lot of while to get to market.

The first thing I need to do is have people think of us as a good solid supplier that they can count on, and so it will be an improvement of the line and horizontally some additional products that these installers install everyday.

Andrew Shapiro - Lawndale Capital Management

Shipping and handling costs were up by almost 50% sequentially, from 500,000 or so to 800,000. Which segment experienced such an increase? Was it security, Linkstar? And then I have a follow-up depending on what segment it came from.

Greg Krzemien

It's definitely going Linkstar Andrew.

Andrew Shapiro - Lawndale Capital Management

Okay. So if you are having the shipping and handling costs up so much this quarter, is that a function of our customer acquisition efforts that then results in higher sales volume on the back end which you inferred already in October and November.

Greg Krzemien

I think if you are looking at the current quarter, we only Linkstar for the first two, just two months out of the September '07 quarter.

Andrew Shapiro - Lawndale Capital Management

That's it.

Greg Krzemien

And I mean we were just developing our products when we bought the company, we only had the wrinkle cream and the diet sale.

Andrew Shapiro - Lawndale Capital Management

But Greg, I believe my query was that this shipping and handling increase, there was sequential increase meaning quarter-over-quarter just from the prior quarter.

Greg Krzemien

I think part of it is just definitely the shipments, were so pretty strong revenue in the September quarter as compared to June quarter and as Dennis said (inaudible) what we saw during December was somewhat of a drop down in the new acquisitions of customers which have somewhat of a delayed effect and we are starting to see that picking up.

Andrew Shapiro - Lawndale Capital Management

Well that's what I am trying to understand is that your cycle that you guys described in the past, you have these customers for may be four months on a particular product and you need to refresh your product every quarter with new things. Was this September quarter that you have reported, a quarter where our shipping and handling has gone up because you have done a bunch of customer acquisition which is then to be followed by as Dennis or you have implied October, November have seen a pick up again in new revenue from the teeth whitening, from the new product introduction, and they usually don't book revenue in that first month because this guy, the customers get the product for free

Greg Krzemien

That is true, but we do have the freight cost present in the trial outs.

Andrew Shapiro - Lawndale Capital Management

Exactly. That's what I'm trying to understand.

Dennis Raefield

Right.

Andrew Shapiro - Lawndale Capital Management

The quarter ended September, we had a bunch of shipping and handling and that is a tale for Q4 to have the follow-on three to four months of run rate from those new products.

Dennis Raefield

That's what we anticipate, yes.

Andrew Shapiro - Lawndale Capital Management

Okay. What's behind the large returns and allowances item that was highlighted as well in the MD&A?

Dennis Raefield

Well, again I highlighted that we had some increase in returns of allowances, I mean it wasn't that significant, I mean if I'm looking at our operation for the current quarter, for instance in Florida, I mean our discounts and returns were about 270,000 in September '07 and that was about 310,000. So I mean it is off, it does affect some of our margins, I wouldn't call significant but I did know that that was part of wide margins or a little bit tighter. We had some products being returned again, it wasn't any kind of significant, the flood gates are rolling in and we did bring some additional partisan on, I know particular one of our large customers, you halt, you had some issues with some DVRs but again it wasn't an extensive problem but they were up a little bit.

Andrew Shapiro - Lawndale Capital Management

On the digital marketing side, you mentioned in the script that I think Dennis did the dropping CPA, the sequential drop from June quarter to September quarter, some seasonality less people on the Internet. Is it a drop on the amount of CPA that's occurred or is it the natural quick trail off of your existing subscribers in the timing of new product introductions?

Bob Kramer

I'll take first response to that Dennis, I mean it's somewhat, I mean the more significant part was really just the drop-off and some new customers acquisitions that we started seeing as we got later in the quarter and seeing now subsequent to the end of September quarter. We do see some drop-off of products previously introduced, as they go to the lifecycle. And as Dennis mentioned, our goal is to introduce a new product, the two new products a quarter, we just built out the extreme bright white, I guess some time in September and they have several other products that we've been discussing with them and are planning to roll out in the next couple of quarters. So, it is just part of the natural cycle of a product's life.

Andrew Shapiro - Lawndale Capital Management

Okay. And can you describe kind of what your per customer acquisition cost is like right now versus the past quarters or is that to proprietary?

Bob Kramer

Dennis, will you take that one or…

Dennis Raefield

I don't think it's proprietary; it does depend on the subscriber. The range is 20 to $35 per customer, and that range depends on who is the subscriber and the marketplace. Our sales department's job is actually to manage those incoming costs as best they can and get the lowest cost per acquisition, but it does vary and it depends a lot as we've learned on how exciting the customer thinks that the product is as well. So, we have to continue to deliver something interesting because they can stick something else in that same space besides our products.

So, it's not just cost, it's also the chance of success because they know they only have eyes of that customer for a few seconds and they want to make sure that it becomes an actual CPA and actually acquisition. So, they choose us by the cost, the amount we are willing to pay them and the sexiness of the offering, what they think is the chance that we are going to actually close something. So it does vary in quite a broad range.

Andrew Shapiro - Lawndale Capital Management

And the trend has been stable?

Dennis Raefield

The trend is stable. I have not seen any significant change in that and the other comment I'd make and what Greg said. We are not seeing a change in the length of time that customers are with us other than its more positive. One other things that when I came on Board and met with the management, I said how can we retain these customers, we have a fantastic customer base and we have actually increased that long that tail. It's still not long, but we have increased that tail by offering ways to keep the customer and we've also answered the phone better and done a better job of customer service, so the customers are happier to reorder with us and I think we've improved the retention of customers. It is a tough business to do, but I think the management team we have with Linkstar has done a really good job of extending that tail, and that hopefully in the long run will help drop to the bottom line. As you know, if we don't have to pay an acquisition for a new customer that becomes pure profit to the bottom line.

Andrew Shapiro - Lawndale Capital Management

Right. The Arlington and two Lubbock washes fell out of contract. I think you wrote down two Arlington's, other was San Antonio. Can you clarify that just to understand? Can you tell us what these facilities are that fell out of contract are on the books for and whether the Lubbock's ones were written down or not?

Dennis Raefield

I'll let Bob to give you the detail, but let me just say that there were four in contract, we did close one.

Andrew Shapiro - Lawndale Capital Management

Yeah.

Bob Kramer

And three fell out. So just to be clear there. And Bob, do you want to respond, by what level do you want to respond?

Bob Kramer

Greg will give the write-down, I'll just respond quickly with a short background. The two Lubbock, Andrew, the two Lubbock washes. We sure took a chance. They were contracts with developer. The developer was trying to resell it to a big box. It had enlarged due diligence period, and basically he didn’t take the sell, he cancelled it, with no harm. We took the shop, because we were selling it at a price that we thought was even above selling it as a going car wash. So it was a good price and we took those two shops with economy being turning the developer didn’t close this deal, so he cancelled the contract. I just want to give the background on those two sites.

The Arlington site was a kind of one off mom and pop, operator had a site out of state, wanted to – was enamored with this Arlington site, was going to pretty sign into operate it, again with the economy deteriorating, he felt like his primary business, his primary car wash might get squeezed and he just got afraid of it, and he cancel it under a financing contingency. With that settled, I will turn this over now to Greg to give you the background on the write-down on the book value.

Greg Krzemien

To answer your question Andrew on the write-down; the write-downs had nothing to do with those sites. Again as Bob said, we were negotiating offers and deals that were above the current book value on those sites. And the sites that we get write-down were two other sites in Arlington that again are challenge from the cash flow standpoint. And with some recent appraisals (inaudible), we started to make sure we had this written down to what we felt we could get for them on the market. And the other two sites for the two (inaudible) that we wrote down that we closed at the end of September quarter.

Andrew Shapiro - Lawndale Capital Management

Right, and when we had asked you yesterday, you wanted to reserve answering the questions on this call for Reg FD purposes, regarding what levels you wrote these washes down to? We know the write off amount, but we don’t know what level you wrote them down to, which we would…

Bob Kramer

Yes, Greg is looking that up for you Andrew. You want the actual number they booked at?

Andrew Shapiro - Lawndale Capital Management

Yeah, if you could.

Bob Kramer

Sure; Greg’s going to look at it.

Greg Krzemien

The two sites that we wrote down in San Antonio, we have written down to a total of about $1 million right now for those two sites, and the two sites that I wrote down in the Arlington area, I wrote them down to a total of about $2 million from the values that they were.

Andrew Shapiro - Lawndale Capital Management

Okay. Excellent. I’ll back out into the queue. I have a few more questions, but again people are patiently waiting, and let them ask questions. But come back to us please.

Eduardo Nieves

Ken.

Operator

(Operator Instructions). And [Bob Taplinger] with [Taplinger Partners] has got the next question. Your line is open sir.

Unidentified Analyst

Thank you. Good morning. I have a couple of questions please and also my compliments on your work to date. As far as the unsold car washes are concerned, is there an inability to find buyers or are buyers available, but an inability to get for those buyers to get financing?

Bob Kramer

Yes, hi. Bob, its Bob Kramer. I would say, it’s basically a pricing issue, and also in this current environment financing of the buyer issue.

Unidentified Analyst

My reason in asking the question is, I thought that I hate for Mace to be in anything but the security and surveillance business, and I thought that I think it hurts the image I think it distracts management to be in the car wash business, and if financing in all or any of the car wash sales is the primary reason for the lack of being able to move them I would suggest, Mace might consider providing the financing, I don’t if you can sell subject to the existing mortgages or where the existing mortgages have to paid off in order to sell them. But if Mace would take back financing it would precipitate a sale, relieve Mace of the management responsibilities, and get some front money with the buyer's down payment and then continuing income from the mortgage payments that the buyers would make. So I'd like you to think to consider that as a possibility as you go forward.

Bob Kramer

We actually have been considering that and we do work on some offers on providing the financing basis.

Unidentified Analyst

Great. I think just being very careful of course that its credible buyers, because you're not selling real estate, it wouldn’t depreciate, you're selling a going business that a bad operator could run down into the grounds so that if you do have to foreclose, you won't take a viable entity.

Bob Kramer

And that has been the big consideration so far as the down payment we're able to get, we are not able to get. But we are aggressively looking at it and again as Dennis noted in his introductory comments that what we are trying to do is prioritizing the sales so that we don’t by selling the best washes, we then don’t have to only have the bad washes remaining which become very unprofitable.

Unidentified Analyst

Right, of course, I'm sorry, go on.

Bob Kramer

So, it’s a process we're managing and I just do want to point out to we are down to a 14 washes, 12 of which are active down from about 50. And we did have got in a pace – we are well over book value for the ones as it aggregate for what we've sold.

So we have been pretty successful and I also really think it's probably clear to say that we're really not a car wash company anymore, with few washes and we do to expect to had some contracts under clean and again, purely shorter. But again, it's just right now, it's a tough environment and as Dennis mentioned, as we have been throughout be very smart about the sales.

Unidentified Analyst

Right. At the shorter side I would like to echo Mr. Shapiro's thought that the annual meeting be webcast. I know that I can't attend as much as I'd like, but I'd like to stay on top of developments and there is nothing like seeing them live as they take place. So if that's a possibility, I'd like to also encourage you to do that.

Next question is, when you go down your path, I realize you can change (inaudible), but when you make your presentation on the levels of your strategic (inaudible) and so forth. I guess once you commit to it, you're going to attempt it. And my thought is with the purchase of a central station, that's geographically limiting to where the communities that the central station serves, you can expand it of course, but that's a slow process, whereas Mace can now sell your products throughout the world or throughout the country. Wouldn’t it better to have joint ventures with existing central stations where you can introduce Mace products on some kind of a revenue sharing basis rather than commit to geographically limiting opportunity?

Dennis Raefield

That's a good question Bob. First of all, central stations are not geographically limited at all. If you are selling and installing which is a retail central station, you are right, it is a regional business. Our wholesale central stations are all national by nature and that they don't do any installations of their own. They basically monitor after a local installer. I am looking at two right now and negotiations are looking at two different ones and one is in the Midwest and one is the West, and it doesn't really matter where they are. So if you're thinking of retail central station in a burglary arm company, absolutely rejoice.

Unidentified Analyst

Yeah I see from a consumer standpoint, I didn't know two things are different?

Dennis Raefield

No, the wholesale central station only monitors, does not install, does not have the liability, and does not have any installation crews. Basically it receive less of the income but handles more accounts and handles them further on dealer.

Unidentified Analyst

Because they emit or sell to the end users, they sell to the local surveillance companies?

Dennis Raefield

And it doesn't matter where they are, in fact they are all national. There are about 40 of those international central station in the United States and many of them compete by being a low cost provider. We are actually going to compete by being a alternative service provider with different services. I have looked at negotiating to do contracts and if I don't find one I will contract with someone to do it rather than pay high multiples.

The problem with contract is most of the central stations make so much money just doing the old thing from the past that they are not very interested new services and products. This is a business is a car champion, fat cab, I will call them old men even though I am 60 myself that don't have much knowledge of what's coming down the pike in the future and they are glad just sit around and do the old thing.

So it is difficult to strategically partner with these guys because they don't see where the world is going very rapidly.

Unidentified Analyst

Well, the way you just described the way the wholesale central station operates, I am in love with that idea.

Dennis Raefield

Right.

Unidentified Analyst

And I would certainly hold out to pursue to try to buy one of those especially if they are old man. You know sometimes old people they want to change things, things go into a state and opportunities are created.

Dennis Raefield

That is what I'm actually negotiating with people who want to retire, and they don't want to keep going and they don't want to try new ideas. And so this is an excellent opportunity for us and it is not geographically limited?

Unidentified Analyst

Right. And if you do it for Mace stock they differ further capital gain and they have an interest in the ongoing profitability that you can convince and you can build into their business, and it would conserve our cash. So that might be an interesting opportunity to make an acquisition for stock, even though the stocks are achieved that's one of the reason why it's a shame, it's so cheap, but perhaps that would be an opportunity. I'd like to ask when the internet company was bought which I hate for a lot of reasons. But when it was bought, and I know present management didn't buy it. But one of the things that they accounted was the synergies between Mace and the internet company. Are you finding any of those synergies at all or any worthwhile synergies?

Dennis Raefield

Currently, no. We will create some because we do have a strong internet presence that we an use to create leads and some of the new products that slowly the strategic plan is getting released there, but there is certainly an entire DIY market that has not been tapped a total new, hello?

Unidentified Analyst

Yeah, I'm here.

Dennis Raefield

Okay. Sounds like it went dead. There are total new products in the DIY market that will not go through installers, they could go direct consumers and end users. I think the world is changing a lot and people are starting to manage their own life a lot more. So with that I intend to use Linkstar for but the direct synergy -- Linkstar is built for products that have some recurring needs for them and things like camera or pepper spray you buy once, it's a capital equipment or a one-time buy. So Linkstar is not built for products that don't require reordering every month and an automatic shipment. But there are security products that we'll go in that direction and one of those certainly is sign up for central station service and generating leave for our dealers.

So there is way to tie those two together, but I think that presently it's very difficult to sell -- have Linkstar sell any products that we have today. I made them stand alone on their own merits without trying to connecting to the security, because they need a recurring product. How many pepper sprays can I send you next month, give them to all your children and your wife and you got one, it's not a recurring revenue sale.

Unidentified Analyst

Well, I see. But then if you don't want to answer this, I can understand completely because it might reveal your reveal strategy, you don't want to reveal. But you seem adamant about not wanting to dispose the Internet company, is that because you think you can build it up to have sufficient revenue and profit that you can sell it at a good profit, and it's not -- just not worth anything now because of the scale of business that it generates, or are you committed to keeping the internet company as a division of Mace for into long-term future?

Bob Kramer

I would only want to answer a piece of that, and that is that I am continuing to learn about the business, I think the business is now -- and those we understand it, it's a complex business, it's running, we have good staff, we have taken a lot of the volatility out before our founder Maury left. He set up some good systems and procedures, and the company is running and I'm satisfied with it and I don't -- until I understand it better, I'm going to continue running additional longer and such a strong boom bust cycle. If it got back to boom bust, I would certainly look at whether it's good for Mace. But we got to running as a machine and I have no intention of changing it at this time and I don't think any other comments would be appropriate.

Unidentified Analyst

All right. Well, I thank you for the comment you did make and good luck.

Dennis Raefield

Okay.

Bob Kramer

Thanks Bob.

Operator

Your next question comes to Andrew Shapiro from Lawndale Capital Management. Your line is open.

Andrew Shapiro - Lawndale Capital Management

Hi, as the company's largest shareholder and I just want to mention something that came up in this last call. Given the current stock price and the clear cut need and accretive nature of buying and retiring shares, I would be adamantly opposed to the issuance of stock and your acquisitions and I don't think Dennis, you would be planning on doing that anyway. But I just wanted to make sure that you knew how our views were on that, given the stock price when the issuing shares and in fact, I wanted to ask about whether or not any of the departed or soon to be departed Linkstar's employees expressed interest in selling their large blocks of Mace stock that were given to them in when Mr. Paolino overpaid for this business in the first place.

Bob Kramer

Dennis, would you like to --

Dennis Raefield

I didn't hear your question in there?

Andrew Shapiro - Lawndale Capital Management

Has any of the departed, is Maury or (inaudible) or Collin is going to depart expressed interest in selling their large box of Mace stock which they otherwise don't have any ongoing interest in the business. And if they are not going to be our employees, we don't have a desire to keep them aligned, but it would seem to be a place or a home where you could find and acquire a large block of stock from people who might frankly want to cash out and go their separate way.

Dennis Raefield

Go ahead Robert.

Bob Kramer

I have had conversation with some of the individuals and they expressed a desire to hold their stock and believe that it was -- currently the price was cheaper than they hope it will be down the road.

Andrew Shapiro - Lawndale Capital Management

Okay. Well, I mean I can't disagree with them, but that's obviously a place where you can find a big block of stock subject to the block share exemptions in the buyback rules. The net operating loss tax carry forward, what is it now grown to become, it's quite sizeable.

Bob Kramer

Yeah, it's somewhere in that neighborhood of about 28, 29 million.

Andrew Shapiro - Lawndale Capital Management

Even after this quarter's loss.

Bob Kramer

That's my estimate, including the loss right through the quarter.

Andrew Shapiro - Lawndale Capital Management

Okay. And could you help clarify the company's bought back shares, but in the 10-Q that was issued the share account was unchanged on the outstanding shares versus the prior quarter. Can you clarify what that's about and what's were the discrepancy reconcile that it's --

Bob Kramer

Sure, Andrew. If you look at the income statement or rather the balance sheet, we indicated that we have in treasury 81,000 shares of stock as of September 30th. Those shares were technically still outstanding. My goal is to keep it cumulating those and before the end of the year here, I'll be starting the process here very shortly to actually cancel those shares with the transfer agent to get them out of the outstanding balance

Unidentified Analyst

And how many shares are in Treasury now or at least at the date of the 10-Q?

Greg Krzemien

Yeah, As of the date, as of September 30…

Andrew Shapiro - Lawndale Capital Management

No, no, the date of the 10-Q’s issuance was like November 15.

Greg Krzemien

Oh sure. As of that date, I believe what we disclosed was approximately 140,000 shares, and that was through purchasing through the end of October.

Andrew Shapiro - Lawndale Capital Management

The company has in its marketable securities, a hedge fund that Louis had the company invest in. You have disclosed that you have issued the redemption request; you are getting redeemed a certain value effective by the September quarter end valuation, but the payouts are coming in installments with the bulk of it not coming until next year. You received one payment I think according to your filing. What assurances do you have that you will get the other redemption payment from this fund that needed to delay its payout?

Bob Kramer

Well, we have their agreement. I’m not sure I understand Andrew, I can answer, I’m not sure if you expect more. We have their agreement to pay that balance on January 15th.

Andrew Shapiro - Lawndale Capital Management

But can they delay that payout even further.

Bob Kramer

Well, not without them breaching their agreement. But it’s -- again, you would have to -- if they delay, you would have to sue them to enforce it.

Andrew Shapiro - Lawndale Capital Management

Right, but we’re talking about $2 million, right?

Bob Kramer

Yes, of course. The number is 2,206,748, but it’s just the way any hedge fund - we have a couple issues, one, what is the account balance and two how do you enforce any right on any investment pay, as you know many hedge funds right have provisions in the partnership agreement saying in light of the market turmoil they can delay redemptions….

Andrew Shapiro - Lawndale Capital Management

Have delayed your redemptions, the valuation part is locked up and where not accretive anymore.

Bob Kramer

Correct, that’s correct.

Andrew Shapiro - Lawndale Capital Management

Okay. And when would we recognize a gain, is it on the final payout we already recognized it?

Greg Krzemien

I mean, we book the unrealized gain through the equity and then as that’s realized and the statements we get, we put it through the income statement, so the majority of that has been realized in their investment statements and that has already been recorded through the income statement

Andrew Shapiro - Lawndale Capital Management

Okay. You mentioned on the call here a little supplemental news about the fact that its sounded as if Mr. Paolino has formally – has he dropped his Department of Labor appeal which is where he asked for a hearing and he asked for an appeal, but now he doesn’t want it.

Dennis Raefield

Let me, no, that’s – let me repeat the information Andrew and thank you for asking, because we want it clear for everyone. We're talking now about the whistleblower only, we are now talking about the arbitration, so everyone understands. Both separate proceedings and the – in fact have separate issues. In the whistleblower proceeding the initial findings were issued by the Secretary of Labor in the company's favor and adverse Mr. Paolino and those findings are actually quoted in the Q on page 16.

Andrew Shapiro - Lawndale Capital Management

Yes, below down in the bottom.

Dennis Raefield

Mr. Paolino has the right of appeal which he exercised in the appeal. The matter is then heard by in an administrative law judge procedurally. The administrative law judge set some discovery and set a hearing date for the late January of '09.

Mr. Paolino has filed a motion in this action, in the whistleblower action, stating that seeking to differ the hearing until after the arbitration hearing is held, citing that the burden of duplicative discovery is unnecessary and that wishing to have the stay the action, whistleblower action, and have the arbitration action first.

We haven't filed our paperwork yet, but we're intending to oppose that motion and to additionally file some summary judgment pleadings asking for actually the matter to be determined based on the record and based on the law.

Andrew Shapiro - Lawndale Capital Management

And if you got a favorable ruling in the Department of Labor case on your summary judgment motion and the hearing, is that information admissible in the arbitration hearing?

Dennis Raefield

The issues are really, the facts or the saying, this is -- I can understand why this is confusing, because the underlying facts on both cases are the same. But the issues being judged are very different. The issue in the whistleblower complaint is really -- did Mr. Paolino blow the -- to use of an act -- was there an act of wrong doing of a company that Mr. Paolino blew the whistle on and did the company in turn fire him in retaliation for that. I express that now legally but as a lay person just for clarity. That's the issue there. Of course the initial determination was the company had good and independent reason for terminating Mr. Paolino and there was no whistle blowing that happened.

The arbitration is very different, even though again that's same underlying situation. The arbitration is Mr. Paolino has two -- has an employment agreement, the employment agreement allows the company to terminate Mr. Paolino. The issue under the employment agreement though was the company justified in relying on one of the clauses which allowed the termination without the termination payment or in fact does the company contractually have to pay the termination payment.

So while it seems one is translatable to the other, it may not be. The Corporation certainly will seek to do everything it can win both actions and win the arbitration action, and it would seek to use any whistleblower complaint to termination in its advantage to the arbitration action. But it's not -- I don't, I can't definitively state to you that winning the whistleblower action means you are going to win the arbitration.

It's obviously a positive thing and we would try to positively utilize.

Andrew Shapiro - Lawndale Capital Management

Hence why he wants to delay it, since he lost on the first round on appeal. Question about your bank; we have a credit agreement with Chase that is tied to a bunch of mortgages as part of our small amount of debt outstanding. And at the last disclosure that credit agreement debt was 5.6 million. I don't know but first can you clarify. Is that 5.6 million in the 10-Q now or lower as a result of the recent Arlington Dallas car wash sale or was that Chase mortgage that got paid down.

Greg Krzemien

That was not -- that was not a Chase mortgage sale, so it's still at 5.6.

Andrew Shapiro - Lawndale Capital Management

So were in the 5.6 million ranges. Now that line of credit according to your 10-Q has it bulk loaded covenant on it, written in earlier days when maybe it was more necessary in terms of the quantities, but it has a specific dollar requirement that the company must maintain $5 million of cash and marketable securities. And of course that seems a little bit outrageous even in this tough credit environment.

It seems a little outrageous to be paying a sizeable interest rate on debt of 5.6 million when you are required to keep in the bank pretty much $5 million. And it also has a fixed dollar limit on you CapEx of a $1 million, which we probably much don't want to be in Dennis's way for strategic redeployment reasons. Can you discuss the company's views regarding this agreement and it’s a credit alternatives regarding the mortgages or working with Chase to get those covenants restruct to do something more reasonable for only 5.6 million outstanding on debt.

Greg Krzemien

Sure, Andrew. First of all we have -- and have had just an unbelievable excellent relationship with Chase Bank. We continue to have an excellent relationship with and even based on what's happening now. And obviously as you said, they have very low risk. We have gone to them in the past to reduce certain covenants and they've always obliged us. I do have an upcoming meeting with the bank scheduled for the first of the year, and that's something we will be on our agenda. We've recently some of these mortgages; a big chunk came down earlier in the year when we sold the Florida car washes. But that is something we will be discussing with them, and we'll bring everything into something that is more realistic and reasonably.

Andrew Shapiro - Lawndale Capital Management

Why not preemptively before -- in the past they have waived covenants, but you've been required to disclose you breached the covenant and then they waived it. Why not preemptively getting to them early and frankly why wait till January, get into them earlier and get these covenants restruct to be more balanced for their needs and our needs?

Greg Krzemien

Thanks Andrew for the suggestion, and like I said, we are working on it.

Andrew Shapiro - Lawndale Capital Management

We have Vermont facility Mace pepper spray areas where we lease that facility from its local manager Mr. [Goodrich] When the lease was done it was done according to the disclosures at arms length etcetera, but that lease was done quite a while ago and it's coming up for a revisit, renewal in less than a year. I was just wondering can you tell us when that lease, the market price on the lease was last market checked. I'm assuming was at its initiation, how many, long ago, and is the market for the similar lease one where the lease will get adjusted down to new lower rates or up to market rates. What’s market?

Bob Kramer

Well, it was renewed in '04 and survey of the market was made then.

Andrew Shapiro - Lawndale Capital Management

Right.

Bob Kramer

Before we would extend it or renew it again, we would survey the market again.

Andrew Shapiro - Lawndale Capital Management

And do we know whether the market is above or below our current rent levels now?

Bob Kramer

No, not as I speak to you. Not as I speak to, I don’t know one way or the way.

Andrew Shapiro - Lawndale Capital Management

Because I would assume we would try to negotiate the lowest possible rents in light of the fact that environmental remediation issues occurred some of which were due to areas the company is not responsible for, but I would think a bit lower, what the rent levels ought to be going forward.

Bob Kramer

I really don’t, I mean, we will obviously try to obtain the lowest rent possible. I don’t think the building issues really have or such that they will have an effect on third party rent, but that's something we'll certain consider. And in the building issues had to do with that and other space, the building owner sand blasted paint off brick work and exposed of the paint outside near a stream and that doesn’t have really any impact on anyone renting our space.

Andrew Shapiro - Lawndale Capital Management

Okay. Now the EPA hasn’t sent you a letter yet to wrap the Vermont remediation. Is it common for them or is it uncommon for them to send a kind of a wrap up, you are done letter or how do you get finality to the EPA issue or when do you expect to kind of have to may be able to drop that disclosure?

Bob Kramer

I guess Andrew; there are three sorts of governmental actions that are described. First there is administrative order, which is described at length in the filing, and that's the major EPA action. And we filed the final report under the administrative order and the EPA can comment or not comment on that final report. And basically if they will comment, that's probably, generally not a good think. So, you probably hope you don't hear from them. But again, they are free to do re-inspections and at any time. So, we think we did a proper job, the closure report reflects we've done quite a proper job and that in fact we have done by – now you don't get a letter from the EPA, saying thanks guys, we'll never bother you again.

Andrew Shapiro - Lawndale Capital Management

Well, that's ordinary course if they could come for visits.

Bob Kramer

Yes, so I’m saying, I’m trying to indicate to you that they don't have to comment on the closure report and they can do any kind of follow-up they want. So, you really -- obviously there is no finality other than knowing that you're doing, trying to do the proper job.

Andrew Shapiro - Lawndale Capital Management

So as company council what's the timing on these continued disclosures.

Bob Kramer

They would typically -- it’s a good question, and I guess probably a year from the closure report but again, you asked me now question that I am sort of responding off the (inaudible) and I wouldn’t want to consider it more closely.

Andrew Shapiro - Lawndale Capital Management

Last point which is regarding Dennis's presentation of the strategic review, because I have attended your annual meetings in the past, and there are certain portions of the meeting that are ordinary course. Then there’s a presentation, and since ordinary course is not definitive in terms of its time, and all that I suggest that you may be have and announce your webcast or have a presentation; have it precede the ordinary business of the annual meeting, so that it has a definitive and in fixed announcable time. So those of us who can’t attend the meeting can go and know when it’s going to take place for the presentation, and then you follow up with the rest of your annual meeting stuff. It's just a suggestion which is kind of a reverse of our past practice, because you weren’t necessarily webcasting it. But we -- you know, more and more companies are doing that, and to do a webcast of your presentation may allow for some Q&A to be shared and all that for those who are attending and all -- anyway, in case I attend I’ll certainly, as you know, ask my fair share of questions.

Eduardo Nieves

We’ll talk about that. We’ll let you know.

Andrew Shapiro - Lawndale Capital Management

Thank you.

Operator

And there are no further questions in queue.

Eduardo Nieves

All right Ken, I -- Dennis, did you have a conclusion or do you want me to…

Dennis Raefield

I just -- I want to thank all of you that spoke today. And I think (inaudible) especially his comment that we need to communicate. I think we’re showing that and we’re trying to be as open as possible with you guys. That’s part of the new management. We’re not done yet, we have a lot of things to fix, and I appreciate your support and I think we got a couple of good ideas here, and I appreciate all of you attending, and we will talk to you -- for those of you that attend the annual shareholders meeting, we’ll see you there, and if not, we’ll see you on the next Q.

Eduardo Nieves

Thank you everyone. Just as a reminder, please, follow up questions, you can call me at 954-449-1313 or e-mail me at ed@mace.com. Ken that concludes the call.

Operator

This now concludes our 2008 third quarter financial results conference call.

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