UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20212022

 

Commission file number 1-2257

TRANS-LUX CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

13-1394750

(State or other jurisdiction of

(I.R.S. Employer

 incorporation or organization)

Identification No.)

135 East 57254 West 31thst Street, 1412th Floor, New York, New York

1002210001

(Address of principal executive offices)

(Zip code)

(800) 243-5544

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     X      No         

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to file such files).  Yes     X      No         

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ___

Accelerated filer ___

Non-accelerated filer      X   

Emerging growth company ___

Smaller reporting company      X   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                                    

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes               No     X                                 

 

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Date  

Class

Shares Outstanding

11/11/218/10/22

Common Stock - $0.001 Par Value

13,446,276

 

 

TRANS-LUX CORPORATIONAND SUBSIDIARIES

 

 

Table of Contents

 

 

 

 

Page No.

Part I - Financial Information (unaudited)

 

 

 

 

        Item 1.

Condensed Consolidated Balance Sheets – SeptemberJune 30, 20212022 and December 31, 20202021 (see Note 1)

1

 

 

 

 

Condensed Consolidated Statements of Operations – Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss –  Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

2

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

3

 

 

 

 

Condensed Consolidated Statements of Cash Flows – NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

4

 

 

 

 

Notes to Condensed Consolidated Financial Statements

5

 

 

 

         Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1817

 

 

 

        Item 3.

Quantitative and Qualitative Disclosures about Market Risk

2423

 

 

 

         Item 4.

Controls and Procedures

2524

 

 

 

Part II - Other Information

 

 

 

 

          Item 1.

Legal Proceedings

2524

 

 

 

          Item 1A.

Risk Factors

2524

 

 

 

         Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2524

 

 

 

          Item 3.

Defaults upon Senior Securities

2625

 

 

 

          Item 4.

Mine Safety Disclosures

2625

 

 

 

         Item 5.

Other Information

2625

 

 

 

          Item 6.

Exhibits

2725

 

 

 

Signatures

 

2826

 

 

 

Exhibits

 

 

 

Table of Contents

Part I - Financial Information (unaudited)

Part I - Financial Information (unaudited)

Part I - Financial Information (unaudited)

Item 1.

Item 1.

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30

2021

 

December 31

2020

June 30

2022

 

December 31

2021

In thousands, except share data

 

 

        

ASSETS

 

 

 

 

 

 

 

 

Current assets:

        

Cash and cash equivalents

$

286

 

$

43

$

108

 

$

524

Receivables, net

 

1,706

 

1,382

 

3,456

 

2,149

Inventories

 

1,221

 

1,542

 

2,380

 

871

Prepaids and other assets

 

624

 

327

 

1,466

 

1,551

Total current assets

 

3,837

 

3,294

 

7,410

 

5,095

Long-term assets:

        

Rental equipment, net

 

472

 

656

 

318

 

411

Property, plant and equipment, net

 

2,013

 

2,200

 

1,836

 

1,950

Right of use assets

 

639

 

858

 

967

 

1,162

Other assets

 

46

 

47

 

34

 

33

Total long-term assets

 

3,170

 

3,761

 

3,155

 

3,556

TOTAL ASSETS

$

7,007

 

$

7,055

$

10,565

 

$

8,651

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

        

Accounts payable

$

5,432

 

$

1,640

$

5,160

 

$

5,248

Accrued liabilities

 

4,105

 

4,555

 

4,471

 

4,287

Current portion of long-term debt

 

2,518

 

2,546

 

2,962

 

3,030

Current lease liabilities

 

306

 

302

 

430

 

397

Customer deposits

 

66

 

524

 

3,138

 

1,951

Total current liabilities

 

12,427

 

9,567

 

16,161

 

14,913

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

-

 

269

 

500

 

500

Long-term lease liabilities

 

363

 

591

 

584

 

805

Deferred pension liability and other

 

4,051

 

3,677

 

3,251

 

3,381

Total long-term liabilities

 

4,414

 

4,537

 

4,335

 

4,686

Total liabilities

 

16,841

 

14,104

 

20,496

 

19,599

Stockholders' deficit:

 

 

 

 

 

 

 

 

Preferred Stock Series A - $20 stated value - 416,500 shares authorized;
shares issued and outstanding: 0 in 2021 and 2020

 

-

 

-

Preferred Stock Series B - $200 stated value - 51,000 shares authorized;
shares issued and outstanding: 0 in 2021 and 2020

 

-

 

-

Common Stock - $0.001 par value - 30,000,000 shares authorized;
shares issued: 13,474,116 in 2021 and 2020;
shares outstanding: 13,446,276 in 2021 and 2020

 

13

 

13

Preferred Stock

 

 -

 

 -

Preferred Stock Series A - $20 stated value - 416,500 shares authorized;
shares issued and outstanding: 0 in 2022 and 2021

 

 -

 

 -

Preferred Stock Series B - $200 stated value - 51,000 shares authorized;
shares issued and outstanding: 0 in 2022 and 2021

 

 -

 

 -

Common Stock - $0.001 par value - 30,000,000 shares authorized;
shares issued: 13,474,116 in 2022 and 2021;
shares outstanding: 13,446,276 in 2022 and 2021

 

                    13

 

13

Additional paid-in-capital

 

41,330

 

41,330

 

41,368

 

41,330

Accumulated deficit

 

(40,802)

 

(38,007)

 

(41,952)

 

(42,975)

Accumulated other comprehensive loss

 

(7,312)

 

(7,322)

 

(6,297)

 

(6,253)

Treasury stock - at cost - 27,840 common shares in 2021 and 2020

 

(3,063)

 

(3,063)

Treasury stock - at cost - 27,840 common shares in 2022 and 2021

 

(3,063)

 

(3,063)

Total stockholders' deficit

 

(9,834)

 

(7,049)

 

(9,931)

 

(10,948)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

7,007

 

$

7,055

$

10,565

 

$

8,651

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

    

1

Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

3 Months Ended

September 30

 

9 Months Ended

September 30

 

In thousands, except per share data

In thousands, except per share data

3 Months Ended

June 30

6 Months Ended

June 30

2021

 

2020

 

2021

 

2020

2022

 

2021

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

$

2,393

 

$

2,405

 

$

6,882

 

$

5,257

$

7,016

$

2,396

$

10,253

$

4,489

Digital product lease and maintenance

 

472

 

491

 

 

1,456

 

1,601

 

 

286

 

 

491

 

 

714

 

 

984

Total revenues

 

2,865

 

2,896

 

 

8,338

 

6,858

 

7,302

 

 

2,887

 

10,967

 

 

5,473

 

 

 

 

 

 

 

 

Cost of revenues:

        

 

 

 

 

 

 

 

 

 

 

 

 

Cost of digital product sales

 

3,010

 

2,822

 

8,286

 

6,528

5,800

3,022

8,758

5,276

Cost of digital product lease and maintenance

 

145

 

146

 

 

462

 

471

 

 

142

 

 

164

 

 

307

 

 

317

Total cost of revenues

 

3,155

 

2,968

 

 

8,748

 

6,999

 

5,942

 

 

3,186

 

9,065

 

 

5,593

        

Gross loss

 

(290)

 

(72)

 

(410)

 

(141)

Gross income (loss)

 

 

1,360

 

 

(299)

 

 

1,902

 

 

(120)

General and administrative expenses

 

(727)

 

(704)

 

(2,270)

 

(2,971)

 

(822)

 

 

(744)

 

(1,584)

 

 

(1,543)

Restructuring costs benefit

 

-

 

-

 

 

-

 

 

29

Operating loss

 

(1,017)

 

(776)

 

(2,680)

 

(3,083)

Operating income (loss)

 

 

538

 

 

(1,043)

 

 

318

 

 

(1,663)

Interest expense, net

 

(103)

 

(100)

 

(363)

 

(363)

(130)

(157)

(272)

(260)

Gain (loss) on foreign currency remeasurement

 

62

 

(49)

 

(10)

 

64

 

 

76

 

 

(36)

 

 

60

 

 

(72)

Gain on extinguishment of debt

 

-

 

137

 

77

 

137

               -

              -

               -

77

Gain on forgiveness of PPP loan

 

 

               -

 

 

              -

 

 

824

 

 

              -

Pension benefit

 

66

 

37

 

 

200

 

110

 

52

 

 

67

 

105

 

 

134

Loss before income taxes

 

(992)

 

(751)

 

(2,776)

 

(3,135)

Income (loss) before income taxes

 

 

536

 

 

(1,169)

 

 

1,035

 

 

(1,784)

Income tax expense

 

(7)

 

(7)

 

 

(19)

 

(19)

 

            (6)

 

 

           (6)

 

(12)

 

 

(12)

Net loss

$

(999)

 

$

(758)

 

$

(2,795)

 

$

(3,154)

        

Loss per share - basic and diluted

$

(0.07)

 

$

(0.06)

 

$

(0.21)

 

$

(0.23)

Net income (loss)

 

$

530

 

$

(1,175)

 

$

      1,023

 

$

(1,796)

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.


The accompanying notes are an integral part of these condensed consolidated financial statements.

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

3 Months Ended

9 Months Ended

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

September 30

September 30

In thousands

2021

 

2020

2021

 

2020

In thousands

3 Months Ended

June 30

 

6 Months Ended

June 30

Net loss

$

(999)

 

$ 

(758)

 

$

(2,795)

 

$ 

(3,154)

Other comprehensive income (loss):

In thousands

In thousands

2022

 

2021

 

2022

 

2021

$

530

 

$

(1,175)

$

1,023

 

$

(1,796)

Other comprehensive (loss) income:

Unrealized foreign currency translation (loss) gain

 

(58)

 

46

 

 

10

 

(61)

 

(71)

 

34

 

(44)

 

68

Total other comprehensive (loss) income, net of tax

 

(58)

 

46

 

10

 

(61)

 

(71)

 

34

 

(44)

 

68

Comprehensive loss

$

(1,057)

 

$ 

(712)

 

$

(2,785)

 

$ 

(3,215)

Comprehensive income (loss)

 

$

459

 

$

(1,141)

 

$

979

 

$

(1,728)

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.


The accompanying notes are an integral part of these condensed consolidated financial statements.


2

Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(unaudited)

            

Accumulated

Other

Comprehensive

Loss

   

Total

Stock-

holders'

Deficit

                

Accumulated

Other

Comprehensive

Loss

    

Total

Stock-

holders'

Deficit

Preferred Stock

    

Add'l

Paid-in

Capital

     

Preferred Stock

    

Add'l

Paid-in

Capital

   

 

 

 

 

 

Series A

Series B

Common Stock

  

Accumulated

Deficit

 

Accumulated

Other

Comprehensive

Loss

Treasury

Stock

 

Series A

Series B

Common Stock

  

Accumulated

Deficit

 

Accumulated

Other

Comprehensive

Loss

Treasury

Stock

 

In thousands, except share data

Shares

 

Amt

Shares

 

Amt

Shares

 

Amt

 

Accumulated

Other

Comprehensive

Loss

Shares

 

Amt

Shares

 

Amt

Shares

 

Amt

 

 

 

Accumulated

Other

Comprehensive

Loss

For the 9 months ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 6 months ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2022

 -

 

$

 -

 -

 

$

 -

 13,474,116

 

$

13

 

$

41,330

 

$

(42,975)

 

$

(6,253)

 

$

(3,063)

$

(10,948)

Net income

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

1,023

 

 

-

 

 

-

 

 

1,023

Issuance of options

 -

 

 

 -

 -

 

 -

-

 

-

 

38

 

 

-

 

 

-

 

 

-

 

 

38

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation loss

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

-

 

 

(44)

 

 

-

 

 

(44)

Balance June 30, 2022

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,368

 

$

(41,952)

 

$

(6,297)

 

$

(3,063)

 

$

(9,931)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 1, 2022

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,330

 

$

(42,482)

 

$

(6,226)

 

$

(3,063)

 

$

(10,428)

Net income

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

530

 

 

-

 

 

-

 

 

530

Issuance of options

 -

 

 

 -

 -

 

 -

-

 

-

 

38

 

 

-

 

 

-

 

 

-

 

 

38

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation loss

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

-

 

 

(71)

 

 

-

 

 

(71)

Balance June 30, 2022

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,368

 

$

(41,952)

 

$

(6,297)

 

$

(3,063)

 

$

(9,931)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 6 months ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2021

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,330

 

$

(38,007)

 

$

(7,322)

 

$

(3,063)

 

$

(7,049)

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,330

 

$

(38,007)

 

$

(7,322)

 

$

(3,063)

 

$

(7,049)

Net loss

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

(1,796)

 

 

-

 

 

-

 

 

(1,796)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation gain

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

-

 

 

68

 

 

-

 

 

68

Balance June 30, 2021

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,330

 

$

(39,803)

 

$

(7,254)

 

$

(3,063)

 

$

(8,777)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance April 1, 2021

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,330

 

$

(38,628)

 

$

(7,288)

 

$

  (3,063)

 

$

(7,636)

Net loss

-

 

-

 

-

 

-

 

-

 

(2,795)

 

 

-

 

-

 

(2,795)

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

(1,175)

 

 

-

 

 

-

 

 

(1,175)

Other comprehensive income, net of tax:

                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation gain

-

 

-

 

-

 

-

 

-

 

-

 

 

10

 

 

-

 

10

 -

 

 

 -

 -

 

 -

-

 

-

 

-

 

 

-

 

 

34

 

 

-

 

 

34

Balance September 30, 2021

-

 

$

-

-

 

$

-

 13,474,116

 

$

13

 

$

41,330

 

$

(40,802)

 

$

(7,312)

 

$

(3,063)

 

$

(9,834)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended September 30, 2021

                 

Balance July 1, 2021

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,330

 

$

(39,803)

 

$

(7,254)

 

$

(3,063)

 

$

(8,777)

Net loss

-

 

-

 

-

 

-

 

-

 

(999)

 

-

 

-

 

(999)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation loss

-

 

-

 

-

 

-

 

-

 

-

 

(58)

 

-

 

(58)

Balance September 30, 2021

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,330

 

$

(40,802)

 

$

(7,312)

 

$

(3,063)

 

$

(9,834)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 9 months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2020

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,088

 

$

(33,164)

 

$

(6,618)

 

$

(3,063)

 

$

(1,744)

Net loss

-

 

-

 

-

 

-

 

-

 

(3,154)

 

 

-

 

-

 

(3,154)

Issuance of warrants

-

 

-

 

-

 

-

 

94

 

-

 

-

 

-

 

94

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency translation loss

-

 

-

 

-

 

-

 

-

 

-

 

(61)

 

-

 

(61)

Balance September 30, 2020

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,182

 

$

(36,318)

 

$

(6,679)

 

$

(3,063)

 

$

(4,865)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance July 1, 2020

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,182

 

$

(35,560)

 

$

(6,725)

 

$

(3,063)

 

$

(4,153)

Net loss

-

 

-

 

-

 

-

 

-

 

(758)

 

 

-

 

-

 

(758)

Other comprehensive income, net of tax:

                 

Unrealized foreign currency translation gain

-

 

-

 

-

 

-

 

-

 

-

 

46

 

 

-

 

46

Balance September 30, 2020

-

 

$

-

-

 

$

-

13,474,116

 

$

13

 

$

41,182

 

$

(36,318)

 

$

(6,679)

 

$

(3,063)

 

$

(4,865)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2021

 -

 

$

 -

 -

 

$

 -

13,474,116

 

$

13

 

$

41,330

 

$

(39,803)

 

$

(7,254)

 

$

(3,063)

 

$

(8,777)

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

9 Months Ended

September 30

In thousands

6 Months Ended

June 30

2021

 

2020

2022

 

2021

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

$

(2,795)

 

$

 (3,154)

Adjustment to reconcile net loss to net cash provided by (used in)
operating activities:

 

 

 

 

Net income (loss)

$

1,023

$

(1,796)

Adjustment to reconcile net income to net cash provided by
operating activities:

 

 

 

 

Depreciation and amortization

 

371

 

 409

 

219

 

 

254

Amortization of right of use assets

 

219

 

 213

195

145

Gain on forgiveness of PPP loan

 

(824)

 

-

Amortization of deferred financing fees and debt discount

 

95

 

65

53

63

Loss on disposal of assets

 

-

 

5

Gain on extinguishment of debt

 

(77)

 

 (137)

 

-

 

 

(77)

Loss (gain) on foreign currency remeasurement

 

10

 

 (64)

Issuance of warrants

 

-

 

94

(Gain) loss on foreign currency remeasurement

(60)

72

Amortization of stock options

 

38

 

 

-

Bad debt expense

 

58

 

87

14

45

Changes in operating assets and liabilities:

    

 

 

 

 

Accounts receivable, net

 

(383)

 

685

Accounts receivable

(1,321)

(487)

Inventories

 

321

 

 274

 

(1,509)

 

402

Prepaids and other assets

 

(296)

 

 (82)

84

92

Accounts payable

 

3,792

 

 (164)

 

(88)

 

1,749

Accrued liabilities

 

24

 

233

176

131

Operating lease liabilities

 

(224)

 

(213)

 

(188)

 

(147)

Customer deposits

 

(458)

 

 197

1,187

(464)

Deferred pension liability and other

 

(52)

 

 (417)

 

(105)

 

(88)

Net cash provided by (used in) operating activities

 

605

 

 (1,969)

Net cash used in operating activities

 

(1,106)

 

(106)

Cash flows from investing activities

    

 

 

 

 

Equipment manufactured for rental

 

-

 

 (17)

Purchases of property, plant and equipment

 

-

 

 (173)

 

(12)

 

-

Net cash used in investing activities

 

-

 

(190)

 

(12)

 

-

Cash flows from financing activities

 

 

 

 

Proceeds from long-term debt

 

-

 

 1,497

 

703

 

125

Payments of long-term debt

 

(362)

 

 (650)

 

-

 

 

(20)

Payments for deferred financing fees

 

-

 

 (40)

Net cash (used in) provided by financing activities

 

(362)

 

807

Net cash provided by financing activities

 

703

 

105

Effect of exchange rate changes

 

-

 

 (2)

 

(1)

 

1

Net increase (decrease) in cash, cash equivalents and restricted cash

 

243

 

 (1,354)

Cash, cash equivalents and restricted cash at beginning of year

 

43

 

1,385

Cash, cash equivalents and restricted cash at end of period

$

286

 

$

 31

Net decrease in cash and cash equivalents

 

(416)

 

0

Cash and cash equivalents at beginning of year

 

524

 

43

Cash and cash equivalents at end of period

$

108

 

$

43

Supplemental disclosure of cash flow information:

 

 

 

 

 

Interest paid

$

197

 

$

202

$

-

 

$

162

Income taxes paid

 

9

 

 

 15

 

10

 

 

9

Supplemental non-cash financing activities:

    

Warrants issued to Unilumin

$

-

 

$

94

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.


The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJune 30, 20212022

(unaudited)

 

(unaudited)

Note 1 –Basis of Presentation

 

As used in this report, “Trans-Lux,” the “Company,” “we,” “us,” and “our” refer to Trans-Lux Corporation and its subsidiaries.

 

Financial information included herein is unaudited, however, such information reflects all adjustments (of a normal and recurring nature), which are, in the opinion of management, necessary for the fair presentation of the Condensed Consolidated Financial Statements for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the full year.  The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and therefore do not include all information and footnote disclosures required under accounting principles generally accepted in the United States of America (“GAAP”).  The Condensed Consolidated Financial Statements included herein should be read in conjunction with the Consolidated Financial Statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.  The Condensed Consolidated Balance Sheet at December 31, 20202021 is derived from the December 31, 20202021 audited financial statements.

The following new accounting pronouncements were adopted in 2021:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20).  ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.  Public business entities should apply the amendments in ASU 2018-14 for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years (i.e., January 1, 2021).  Early application is permitted.  The adoption of this standard did not have a material effect on the Company’s consolidated financial position and results of operations.

The following new accounting pronouncements, and related impacts on adoption, are being evaluated by the Company:

None.

 

Note 2 – Liquidity and Going Concern

 

A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business.  This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent.  In accordance with this requirement, the Company has prepared its accompanying Condensed Consolidated Financial Statements assuming the Company will continue as a going concern.

 

5

Table of Contents

 

Due to the onset of the COVID-19 pandemic in 2020, the Company experienced a reduction in sales orders from customers. As a result,customers in 2020 and 2021, which has just recently started to rebound.  The Company recorded net income of $1.0 million in the Company incurredsix months ended June 30, 2022 but recorded a net loss of $2.8$5.0 million in the nine monthsyear ended September 30, 2021 andDecember 31, 2021.  The Company had a working capital deficiencydeficiencies of $8.6$8.8 million and $9.8 million as of SeptemberJune 30, 2021. In addition, the Company has past due principal2022 and interest payments on our outstanding 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) and 9½% Subordinated debentures due 2012 (the “Debentures”).December 31, 2021, respectively.

 

The Company is dependent on future operating performance in order to generate sufficient cash flows in order to continue to run its businesses.  Future operating performance is dependent on general economic conditions, as well as financial, competitive and other factors beyond our control, including the impact of the current economic environment, the spread of major epidemics (including coronavirus), increases in interest rates and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains, extended shut down of businesses and the impact of inflation.  In order to more effectively manage its cash resources, the Company had, from time to time, increased the timetable of its payment of some of its payables, which delayed certain product deliveries from our vendors, which in turn delayed certain deliveries to our customers.

 

If we are unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan, (iii) make the required principal and interest payments on the Notesour outstanding 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) and the Debentures9½% Subordinated debentures due 2012 (the “Debentures”) and/or (iv) repay our obligations under our Loan Agreement (hereinafter defined) with Unilumin, (assigned from MidCap Business Credit LLC (“MidCap”) in July 2021), there would be a significant adverse impact on our financial position and operating results. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities. Due to the above, there is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to operate our businesscontinue as a going concern over the next 12 months from the date of issuance of this Form 10-Q.

 

Note 3 – Revenue Recognition

 

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.  To determine revenue recognition for arrangements that an entity determines are within the scope of this standard, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.  The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.  At contract inception, once the contract is determined to be within the scope of this standard, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.  The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.  Sales tax, value added tax and other taxes collected on behalf of third parties are excluded from revenue.

6

Table of Contents

Contracts with customers may contain multiple performance obligations.  For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation.  The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.  If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component.  Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less.  None of the Company’s contracts contained a significant financing component as of September 30, 2021.

We recognize revenue in accordance with two different accounting standards: 1) Accounting Standards Codification (“ASC”) Topic 606 and 2) ASC Topic 842.  Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties.  A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606.  Our contracts with customers generally do not include multiple performance obligations.  We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer.  The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.  None of the Company’s contracts contained a significant financing component as of June 30, 2022.  Revenue from the Company’s digital product and maintenance service is recognized ratably over the lease term in accordance with ASC Topic 842.

 

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Table of Contents


Disaggregated Revenues

 

The following table represents a disaggregation of revenue from contracts with customers for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, along with the reportable segment for each category:

 

 

Three months ended

Nine months ended

Three months ended

 

Six months ended

In thousands

 

 September 30, 2021

 September 30, 2020

 September 30, 2021

 September 30, 2020

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Digital product sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Catalog and small customized products

 

$

2,393

$

2,405

$

6,882

$

5,257

$

7,016

 

$

2,396

 

$

10,253

 

$

4,489

Large customized products

 

 

 -

 

 -

 

 -

 

 -

 

-

 

-

 

-

 

-

Subtotal

  

2,393

 

2,405

 

6,882

 

5,257

 

7,016

 

2,396

 

10,253

 

4,489

Digital product lease and maintenance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

  

196

 

240

 

615

 

755

 

140

 

210

 

311

 

419

Maintenance agreements

 

 

276

 

251

 

841

 

846

 

146

 

281

 

403

 

565

Subtotal

  

472

 

491

 

1,456

 

1,601

 

286

 

491

 

714

 

984

Total

 

$

2,865

$

2,896

$

8,338

$

6,858

$

7,302

 

$

2,887

 

$

10,967

 

$

5,473

 

Performance Obligations

 

The Company has two primary revenue streams which are Digital product sales and Digital product lease and maintenance.

 

Digital Product Sales

 

The Company recognizes net revenue on digital product sales to its distribution partners and to end users related to digital display solutions and fixed digit scoreboards.  For the Company’s catalog products, revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract.  For the Company’s customized products, revenue is either recognized at a point in time or over time depending on the sizelength of the contract.  For those customized product contracts that are smaller in size, revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract.  For those customized product contracts that are larger in size, revenue is recognized over time based on incurred costs as compared to projected costs using the input method, as this best reflects the Company’s progress in transferring control of the customized product to the customer.  The Company may also contract with a customer to perform installation services of digital display products.  Similar to the larger customized products, the Company recognizes the revenue associated with installation services using the input method, whereby the basis is the total contract costs incurred to date compared to the total expected costs to be incurred.

 

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Table of Contents

 

Revenue on sales to distribution partners are recorded net of prompt-pay discounts, if offered, and other deductions.  To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method to which the Company expects to be entitled.  In the case of prompt-pay discounts, there are only two possible outcomes: either the customer pays on-time or does not.  Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.  Determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available.  The Company believes that the estimates it has established are reasonable based upon current facts and circumstances.  Applying different judgments to the same facts and circumstances could result in the estimated amounts to vary.  The Company offers an assurance-type warranty that the digital display products will conform to the published specifications.  Returns may only be made subject to this warranty and not for convenience.

 

Digital Product Lease and Maintenance

 

Digital product lease revenues represent revenues from leasing equipment that we own.  We do not generally provide an option for the lessee to purchase the rented equipment at the end of the lease and do not generate material revenue from sales of equipment under such options.  Our lease revenues do not include material amounts of variable payments.  Digital product maintenance revenues represent revenues from maintenance agreements for equipment that we do not own.  Lease and maintenance contracts generally run for periods of one month to 10 years.  A contract entered into by the Company with a customer may contain both lease and maintenance services (either or both services may be agreed upon based on the individual customer contract).  Maintenance services may consist of providing labor, parts and software maintenance as may be required to maintain the customer’s equipment in proper operating condition at the customer’s service location.  The Company concluded the lease and maintenance services represent a series of distinct services and the most representative method for measuring progress towards satisfying the performance obligation of these services is the input method.  Additionally, maintenance services require the Company to “stand ready” to provide support to the customer when and if needed.  As there is no discernable pattern of efforts other than evenly over the lease and maintenance terms, the Company will recognize revenue straight-line over the lease and maintenance terms of service.

 

The Company has an enforceable right to payment for performance completed to date, as evidenced by the requirement that the customer pay upfront for each month of services. Lease and maintenance service amounts billed ahead of revenue recognition are recorded in deferred revenue and are included in accrued liabilities in the Condensed Consolidated Financial Statements.

 

Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements.  At SeptemberJune 30, 2021,2022, the future minimum lease payments due to the Company under operating leases that expire at varying dates through 20282029 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating $1,786,000$1,682,000 are as follows:  $165,000$266,000 – remainder of 2021, $516,000 – 2022, $365,000$457,000 – 2023, $292,000$349,000 – 2024, $200,000$266,000 – 2025, $186,000 – 2026 and $248,000$158,000 thereafter.

 

98

Table of Contents


Contract Balances with Customers

 

Contract assets primarily relate to rights to consideration for goods or services transferred to the customer when the right is conditional on something other than the passage of time.  The contract assets are transferred to the receivables when the rights become unconditional.  As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had no contract assets.  The contract liabilities primarily relate to the advance consideration received from customers for contracts prior to the transfer of control to the customer and therefore revenue is recognized on completion of delivery.  Contract liabilities are classified as deferred revenue by the Company and are included in customer deposits and accrued liabilities in the Condensed Consolidated Balance Sheets.

 

The following table presents the balances in the Company’s receivables and contract liabilities with customers:

 

In thousands

 

September 30,
2021

December 31,
2020

 

June 30, 2022

 

December 31, 2021

Gross receivables

 

$

2,134

$

2,042

 

$

3,875

 

$

2,572

Allowance for bad debts

 

428

 

660

 

419

 

 

423

Net receivables

 

1,706

 

1,382

 

 

3,456

 

 

2,149

Contract liabilities

 

328

 

618

 

 

3,254

 

 

2,011

 

During the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods:

 

 

Three months ended

Nine months ended

 

        Three months ended

 

Six months ended

In thousands

 

September 30,
2021

  September 30,
2020

September 30,
2021

  September 30,
2020

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

Revenue recognized in the period from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts included in the contract liability at
the beginning of the period

 

$

 -

$

149

$

484

$

82

 

$

1,397

 

$

121

 

$

1,868

 

$

484

Performance obligations satisfied in previous periods
(for example, due to changes in transaction price)

 

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Transaction Price Allocated to Future Performance Obligations – alternative more qualitative presentation

 

Remaining performance obligations represent the transaction price of contracts for which work has not been performed (or has been partially performed).  The guidance provides certain practical expedients that limit this requirement and, therefore, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed.  As of SeptemberJune 30, 2021,2022, the aggregate amount of the transaction price allocated to remaining performance obligations for digital product sales was $3.0$6.8 million and digital product lease and maintenance was $1.8$1.7 million.

 

The Company expects to recognize revenue on approximately 75%87%, 14%8% and 11%5% of the remaining performance obligations over the next 12 months, 13 to 36 months and 37 or more months, respectively.

10

Table of Contents

 

Costs to Obtain or Fulfill a Customer Contract

 

The Company capitalizes incremental costs of obtaining customer contracts.  Capitalized commissions are amortized based on the transfer of the products or services to which the assets relate.  Applying the practical expedient in ASC paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.  These costs are included in General and administrative expenses.

9

Table of Contents

 

The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.  When shipping and handling costs are incurred after a customer obtains control of the products, the Company also has elected to account for these as costs to fulfill the promise and not as a separate performance obligation.  Shipping and handling costs associated with the distribution of finished products to customers are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer.

 

Note 4 – Inventories

 

Inventories consist of the following:

 

 

September 30

2021

December 31

2020

June 30

2022

December 31

2021

In thousands

 

 

Raw materials

 

$

964

$

1,124

 

$

1,654

 

$

467

Work-in-progress

 

244

 

324

269

-

Finished goods

 

 

13

 

94

 

 

457

 

 

404

 

$

1,221

$

1,542

 

$

2,380

 

$

871

 

Note 5 – Rental Equipment, net

 

Rental equipment consists of the following:

 

 

September 30

December 31

June 30

2022

December 31

2021

In thousands

 

2021

2020

 

Rental equipment

 

$

3,714

$

3,714

 

$

3,664

 

$

3,664

Less accumulated depreciation

 

 

3,242

 

3,058

 

3,346

 

3,253

Net rental equipment

 

$

472

$

656

 

$

318

 

$

411

 

Depreciation expense for rental equipment for the ninesix months ended SeptemberJune 30, 2022 and 2021 was $93,000 and 2020 was $184,000 and $215,000,$123,000, respectively.  Depreciation expense for rental equipment for the three months ended SeptemberJune 30, 2022 and 2021 was $46,000 and 2020 was $61,000 and $72,000,$62,000, respectively.

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Note 6 – Property, Plant and Equipment, net

 

Property, plant and equipment consists of the following:

 

 

September 30

December 31

In thousands

 

2021

2020

 

June 30
2022

 

December 31
2021

Machinery, fixtures and equipment

 

$

2,923

$

2,923

 

$

2,920

 

$

2,908

Leaseholds and improvements

 

 

23

 

23

 

23

 

23

 

2,946

 

2,946

 

 

2,943

 

 

2,931

Less accumulated depreciation

 

 

933

 

746

 

1,107

 

 

981

Net property, plant and equipment

 

$

2,013

$

2,200

 

$

1,836

 

$

1,950

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Table of Contents

 

Machinery, fixtures and equipment having a net book value of $1.8 million and $2.0 million and $2.2 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, were pledged as collateral under various financing agreements.

 

Depreciation expense for property, plant and equipment for the ninesix months ended SeptemberJune 30, 2022 and 2021 was $126,000 and 2020 was $187,000 and $194,000,$131,000, respectively.  Depreciation expense for property, plant and equipment for the three months ended SeptemberJune 30, 2022 and 2021 was $63,000 and 2020 was $56,000 and $59,000,$66,000, respectively.

 

Note 7 –Long-Term Debt

 

Long-term debt consists of the following:

 

 

September 30

December 31

In thousands

June 30
2022

 

December 31
2021

 

2021

2020

8¼% Limited convertible senior subordinated notes due 2012

 

$

302

$

352

 

$

302

 

$

302

9½% Subordinated debentures due 2012

 

220

 

220

 

 

220

 

 

220

Revolving credit line – related party

 

439

 

 -

 

 

1,440

 

 

1.189

Revolving credit line

 

 -

 

612

Term loans – related party

 

1,000

 

1,000

 

 

1,000

 

 

1,000

Term loan

 

 

641

 

811

Term loans

 

 

500

 

 

871

Total debt

 

2,602

 

2,995

 

 

3,462

 

 

3,582

Less deferred financing costs and debt discount

 

 

84

 

180

 

 

-

 

 

52

Net debt

 

2,518

 

2,815

 

 

3,462

 

 

3,530

Less portion due within one year

 

 

2,518

 

2,546

 

 

2,962

 

 

3,030

Net long-term debt

 

$

 -

$

269

 

$

 500

 

$

500

 

On September 16, 2019, the Company entered into a loan agreement (the “Loan Agreement”) with MidCap.  On June 3, 2020, March 23, 2021 and May 31, 2021, the Company and MidCap entered into modification agreements to the Loan Agreement.  On July 30, 2021, MidCap assigned the loan to Unilumin.  The Loan Agreement has a term of three years,terminates on September 16, 2022, unless earlier terminated by the parties in accordance with the termination provisions of the Loan Agreement.  The Loan Agreement allows the Company to borrow up to an aggregate of $4.0 million at an interest rate of the 3-month LIBOR interest rate plus 4.75% (7.93%(12.00% at SeptemberJune 30, 2021)2022) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes.  As of SeptemberJune 30, 2021,2022, the balance outstanding under the Loan Agreement was $439,000.$1.4 million, including $250,000 of borrowings in the six months ended June 30, 2022.  The Loan Agreement also requires the payment of certain fees, including a facility fee, an unused credit line fee and a collateral monitoring charge.  The Loan Agreement contains financial and other covenant requirements, including financial covenants that require the Company to attain certain EBITDA amounts for certain periods, including the nine monthsperiod ended SeptemberJune 30, 2021.2022.  The Company was not in compliance with this covenant.  As such, Unilumin has the right to demand payment of the outstanding balance, but no such demand has been made as of the time of this filing.  The Loan Agreement is secured by substantially all of the Company’s assets.

 

12The Company entered into a loan note (the “Loan Note”) with the SBA (“Lender”) as lender under their Economic Injury Disaster Loan (“EIDL”) program, dated as of December 10, 2021.  Under the Loan Note, the Company borrowed $500,000 from Lender under the EIDL Program.  As of June 30, 2022, $500,000 was outstanding.  The loan matures on December 10, 2051 and carries an interest rate of 3.75%.  As of June 30, 2022, the Company had accrued $10,000 of interest related to the Loan Note, which is included in Accrued liabilities in the Consolidated Balance Sheets.

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On April 23, 2020, the Company entered into a loan note (the “Loan Note”) with Enterprise Bank and Trust (“Lender”) as lender under the CARES Act of the Small Business Administration of the United States of America (“SBA”), dated as of April 20, 2020.  Under the Loan Note, the Company borrowed $810,800 from Lender under the Paycheck Protection Program (“PPP”) included in the SBA’s CARES Act, $641,000 of which is outstanding as of September 30, 2021.Act.  The Loan Note proceeds arewere forgivable as long as the Company uses the loan proceeds for eligible purposes including payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leave; rent; utilities; and maintains its payroll levels.  Certain employeesIn January 2022, the loan was forgiven in full and the payments that had previously been paid were not retained byrefunded.  Refund proceeds in the Company, so the potential amount of loan forgiveness will be reduced.  The unforgiven portion$ 452,631 are included in proceeds from long-term debt in the accompanying condensed consolidated statements of the PPP loan is payable over two years at an interest rate of 1.00%, with a deferral of paymentsCash Flows for the first six months.  While the Company believes that its use of the loan proceeds will meet the conditions of forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.months ended June 30, 2022.

 

The Company has a $500,000 loan from Carlisle Investments Inc. (“Carlisle”), a related party managed by a shareholder and former director at a fixed interest rate of 12.00%, which matured on April 27, 2019 with a bullet payment of all principal due at such time. Interest is payable monthly. Carlisle had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of SeptemberJune 30, 2021,2022, the entire amount was outstanding and is included in current portion of long-term debt in the Consolidated Balance Sheets. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $225,000$270,000 and $180,000,$240,000, respectively, of interest related to this loan, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets.

 

The Company has an additional $500,000 loan from Carlisle at a fixed interest rate of 12.00%, which matured on December 10, 2017 with a bullet payment of all principal due at such time (the “Second Carlisle Agreement”). Interest is payable monthly. Carlisle had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of SeptemberJune 30, 2021,2022, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $225,000$270,000 and $180,000,$240,000, respectively, of interest related to this loan, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets. Under the Second Carlisle Agreement, the Company granted a security interest to Carlisle in accounts receivable, materials and intangibles relating to a certain purchase order for equipment issued in April 2017.

 

As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had outstanding $302,000 and $352,000, respectively, of Notes.  The Notes matured as of March 1, 2012 and are currently in default.  As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $301,000$320,000 and $329,000,$307,000, respectively, of interest related to the Notes, which is included in Accrued liabilities in the Consolidated Balance Sheets.  The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. On January 15, 2021, holders of $50,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $400 in cash, for an aggregate payment by the Company of $20,000.  As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of $77,000 in the ninesix months ended SeptemberJune 30, 2021.

 

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As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had outstanding $220,000 of Debentures.  The Debentures matured as of December 1, 2012 and are currently in default.  As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $247,000$263,000 and $232,000,$253,000, respectively, of interest related to the Debentures, which is included in Accrued liabilities in the Consolidated Balance Sheets.  The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.

 

Note 8 –Pension Plan

 

As of December 31, 2003, the benefit service under the pension plan had been frozen and, accordingly, there is no service cost.  As of April 30, 2009, the compensation increments had been frozen and, accordingly, no additional benefits are being accrued under the pension plan.

 

The following table presents the components of net periodic pension cost for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

Three months ended
September 30

Nine months ended
September 30

Three months ended June 30

Six months ended June 30

In thousands

 

 

2021

 

2020

 

2021

 

2020

 

2022

 

2021

 

2022

 

2021

Interest cost

 

$

64

$

96

$

190

$

289

 

$

76

 

$

64

 

$

152

 

$

127

Expected return on plan assets

(210)

(203)

(630)

(610)

(200)

(210)

(400)

(420)

Amortization of net actuarial loss

 

 

80

 

70

 

240

 

211

 

 

72

 

80

 

143

 

160

Net periodic pension (benefit) expense

 

$

(66)

$

(37)

$

(200)

$

(110)

 

$

(52)

 

$

(66)

 

$

(105)

 

$

(133)

 

As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had recorded a current pension liability of $128,000$138,000 and $1.0 million,$129,000, respectively, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets, and a long-term pension liability of $4.0$3.3 million and $3.7$3.4 million, respectively, which is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets.  The minimum required contribution in 20212022 is expected to be $388,000,$138,000, which the Company expects to contribute in 2022, but none of which the Company has contributed $306,000 as of SeptemberJune 30, 2021.2022.

 

Note 9 –Leases

 

The Company leases administrative and manufacturing facilities through operating lease agreements. The Company has no finance leases as of SeptemberJune 30, 2021.2022.  Our leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common area or other maintenance costs). The facility leases include one or more options to renew.  The exercise of lease renewal options is typically at our sole discretion, therefore, the renewals to extend the lease terms are not included in our right of use (“ROU”) assets or lease liabilities as they are not reasonably certain of exercise.  We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term.

 

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Operating leases result in the recognition of ROU assets and lease liabilities on the Condensed Consolidated Balance Sheets.  ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments.  Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.  As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate at the commencement date to determine the present value of lease payments.  Most real estate leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more.  Lease expense is recognized on a straight-line basis over the lease term.  Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets.  The primary leases we enter into with initial terms of 12 months or less are for equipment.

 

Supplemental information regarding leases:

 

 

September 30

2021

 

June 30

2022

In thousands, unless otherwise noted

 

 

Balance Sheet:

 

 

 

 

ROU assets

 

$

639

 

$

967

Current lease liabilities – operating

 

306

 

430

Non-current lease liabilities - operating

 

363

 

584

Total lease liabilities

 

669

 

1,014

Weighted average remaining lease term (years)

 

1.9

 

2.2

Weighted average discount rate

 

8.9%

 

7.8%

Future minimum lease payments:

  

 

 

Remainder of 2021

 

$

94

2022

 

348

Remainder of 2022

 

$

245

2023

 

295

 

437

2024

 

146

2025

 

149

2026

 

152

Thereafter

 

 

 -

 

 

 13

Total

 

737

 

1,142

Less: Imputed interest

  

68

 

 

128

Total lease liabilities

 

 

669

 

1,014

Less: Current lease liabilities

 

 

306

 

 

430

Long-term lease liabilities

 

$

363

 

$

584

 

Supplemental cash flow information regarding leases:

 

 

For the
three months ended

September 30, 2021

For the
nine months ended

September 30, 2021

 

For the three months ended

June 30, 2022

 

For the six months ended

June 30, 2022

In thousands

 

  

   

Operating cash flow information:

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

93

$

277

 

$

110

 

$

232

Non-cash activity:

 

 

 

 

 

 

 

 

ROU assets obtained in exchange for lease liabilities

 

 -

 

 -

 

 -

 

 -

 

15Total operating lease expense was $239,000 for the six months ended June 30, 2022.  Total operating lease expense was $109,000 for the three months ended June 30, 2022.  There was no short-term lease expense for the six months or three months ended June 30, 2022.  Total operating lease expense and short-term lease expense was $190,000 and $3,000, respectively, for the six months ended June 30, 2021.  Total operating lease expense and short-term lease expense was $96,000 and $1,000, respectively, for the three months ended June 30, 2021.

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Table of Contents


Total operating lease expense and short-term lease expense was $284,000 and $5,000, respectively, for the nine months ended September 30, 2021.  Total operating lease expense and short-term lease expense was $94,000 and $2,000, respectively, for the three months ended September 30, 2021.  Total operating lease expense and short-term lease expense was $289,000 and $56,000, respectively, for the nine months ended September 30, 2020.  Total operating lease expense and short-term lease expense was $94,000 and $20,000, respectively, for the three months ended September 30, 2020.

 

Note 10 – Stockholders’ Deficit and LossIncome (Loss) Per Share

 

The following table presents the calculation of lossincome (loss) per share for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

Three months ended
September 30

Nine months ended
September 30

 

Three months ended June 30

 

Six months ended June 30

In thousands, except per share data

 

2021

2020

2021

2020

 

2022

 

2021

 

2022

 

2021

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss, as reported

$

(999)

$

(758)

$

(2,795)

$

(3,154)

Net income (loss), as reported

 

$

530

 

$

(1,175)

 

$

1,023

 

$

(1,796)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

13,446

 

13,696

 

13,595

 

13,696

Basic and diluted loss per share

 

$

(0.07)

$

(0.06)

$

(0.21)

$

(0.23)

Weighted average shares outstanding - basic

 

 

13,446

 

 

13,643

 

 

13,446

 

 

13,670

Weighted average shares outstanding - diluted

 

 

13,489

 

 

13,643

 

 

13,489

 

 

13,670

Earnings (loss) per share – basic and diluted

 

$

0.04

 

$

(0.09)

 

$

0.08

 

$

(0.13)

 

Basic lossearnings (loss) per common share is computed by dividing net lossincome (loss) attributable to common shares by the weighted average number of common shares outstanding for the period.  Diluted lossearnings (loss) per common share is computed by dividing net lossincome (loss) attributable to common shares, by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after warrants and stock options vested under the treasury stock method.

 

As of SeptemberJune 30, 2020,2022, the Company had warrantsincluded the effects of the stock options to purchase 250,000280,000 shares of Common Stock outstanding which were included in the calculation of basic lossdiluted earnings per share because their exercise price was $0.01 and determined to be penny warrants.share. As of SeptemberJune 30, 20212022 and 2020,2021, the Company had other warrants to purchase 1.6 million and 500,000 shares respectively, of Common Stock outstanding, which were excluded from the calculation of diluted lossearnings (loss) per share because their exercise price was greater than the average stock price for the period and their inclusion would have been anti-dilutive.

 

On March 28, 2022, the Company granted stock options to purchase 280,000 shares to executives and employees at an exercise price of $0.40 per share, which become vested on March 28, 2023.  The options were valued at the grant date using the Black-Scholes model with the following inputs:  expiration date March 28, 2026; risk-free rate of return 2.55%; and volatility 108%.

A summary of the status of the Company’s stock options as of June 30, 2022 and the changes during the six months then ended is presented below:

 

 

Number of
Options

 

Weighted Average
Exercise Price

 

Weighted average
remaining contractual
life (in years)

 

Average intrinsic
value

Outstanding at December 31, 2021

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Granted

  

280,000

 

$

0.40

 

 

 

 

 

 

Expired

 

 

 -

 

 

-

 

 

 

 

 

 

Outstanding at June 30, 2022

 

 

280,000

 

$

0.40

 

 

3.8

 

$

0.19

Exercisable at the end of the period

 

 

-

 

 

-

 

 

-

 

 

-

Equity based compensation was $38,000 and $0 for the six months ended June 30, 2022 and 2021, respectively.  Equity based compensation was $38,000 and $0 for the three months ended June 30, 2022 and 2021, respectively.  The total unrecognized equity based compensation cost related to unvested stock options was approximately $114,000 as of June 30, 2022 and will be recognized over the vesting period.

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Table of Contents

Note 11 – Contingencies

 

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance. The Company has accrued reserves individually and in the aggregate for such legal proceedings. Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required. There are no open matters thatat the Company deems material.time of this report.

 

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Table of Contents

Note 12 – Related Party Transactions

 

The Company has the following related party transactions:

 

As of SeptemberJune 30, 2021,2022, Unilumin USA (“Unilumin”) owns 52.0% of the Company’s Common Stock and beneficially owns 53.7% of the Company’s Common Stock.  Nicholas J. Fazio, Yang Liu and Yantao Yu, each directors and/or officers of the Company, are each directors and/or officers of Unilumin.  The Company purchased $1.1$3.8 million and $366,000$596,000 of product from Unilumin in the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $461,000$2.7 million and $177,000$480,000 in the three months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively.  The Company borrowed $250,000 under the revolving credit line with Unilumin in the six months ended June 30, 2022.  The Company did not borrow any funds under the revolving credit line with Unilumin in the three months ended June 30, 2022.  The amount payable by the Company to Unilumin was $2.0$5.6 million and $231,000$3.7 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.  As disclosed in Note 7, the Loan Agreement with MidCap, including all right and responsibilities, was assigned to Unilumin as of July 30, 2021.

 

Note 13 –Business Segment Data

 

Operating segments are based on the Company’s business components about which separate financial information is available and are evaluated regularly by the Company’s chief operating decision makers in deciding how to allocate resources and in assessing performance of the business.

 

The Company evaluates segment performance and allocates resources based upon operating income (loss). The Company’s operations are managed in 2 reportable business segments: Digital product sales and Digital product lease and maintenance.  Both design and produce large-scale, multi-color, real-time digital displays.  Both operating segments are conducted on a global basis, primarily through operations in the United States.  The Company also has operations in Canada.  The Digital product sales segment sells equipment and the Digital product lease and maintenance segment leases and maintains equipment.  Corporate general and administrative items relate to costs that are not directly identifiable with a segment.  There are no intersegment sales.

 

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Table of Contents

Foreign revenues represent less than 10% of the Company’s revenues in the ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.  The Company’s foreign operation does not manufacture its own equipment; the domestic operation provides the equipment that the foreign operation leases or sells.  The foreign operation operates similarly to the domestic operation and has similar profit margins.  Foreign assets are immaterial.

 

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Table of Contents


Information about the Company’s operations in its two business segments for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 is as follows:

 

 

Three months ended
September 30

Nine months ended
September 30

 

Three months ended June 30

 

Six months ended June 30

In thousands

 

2021

2020

2021

2020

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

 

$

2,393

$

2,405

$

6,882

$

5,257

 

$

7,016

 

$

2,396

 

$

10,253

 

$

4,489

Digital product lease and maintenance

 

 

472

 

491

 

1,456

 

1,601

 

 

286

 

491

 

714

 

984

Total revenues

 

$

2,865

$

2,896

$

8,338

$

6,858

 

$

7,302

 

$

2,887

 

$

10,967

 

$

5,473

Operating (loss) income:

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

 

 

 

Digital product sales

 

$

(1,093)

$

(1,008)

$

(2,814)

$

(2,902)

 

$

831

 

$

(1,095)

 

$

760

 

$

(1,721)

Digital product lease and maintenance

 

 

335

 

346

 

977

 

1,074

 

133

 

 

323

 

390

 

642

Corporate general and administrative expenses

 

 

(259)

 

(114)

 

(843)

 

(1,255)

 

 

(426)

 

(271)

 

(832)

 

(584)

Total operating loss

 

 

(1,017)

 

(776)

 

(2,680)

 

(3,083)

Total operating income (loss)

 

538

 

(1,043)

 

318

 

(1,663)

Interest expense, net

  

(103)

 

(100)

 

(363)

 

(363)

 

(130)

 

(157)

 

(272)

 

(260)

Gain (loss) on foreign currency remeasurement

 

 

62

 

(49)

 

(10)

 

64

 

76

 

(36)

 

60

 

(72)

Gain on debt extinguishment

  

 -

 

137

 

77

 

137

Gain on extinguishment of debt

 

 -

 

 -

 

-

 

77

Gain on forgiveness of PPP loan

 

-

 

-

 

824

 

-

Pension benefit

 

 

66

 

37

 

200

 

110

 

 

52

 

67

 

105

 

134

Loss before income taxes

  

(992)

 

(751)

 

(2,776)

 

(3,135)

Income (loss) before income taxes

 

536

 

(1,169)

 

1,035

 

(1,784)

Income tax expense

 

 

(7)

 

(7)

 

(19)

 

(19)

 

 

(6)

 

(6)

 

(12)

 

(12)

Net loss

 

$

(999)

$

(758)

$

(2,795)

$

(3,154)

Net income (loss)

 

$

530

 

$

(1,175)

 

$

1,023

 

$

(1,796)

 

 

 

June 30

2022

 

December 31

2021

 

 

 

Assets

 

 

 

 

 

 

Digital product sales

 

$

8,956

 

$

6,379

Digital product lease and maintenance

 

 

1,501

 

 

1,748

Total identifiable assets

 

 

10,457

 

 

8,127

General corporate

 

 

108

 

 

524

Total assets

 

$

10,565

 

$

8,651

 

 

September 30

2021

December 31

2020

 

Assets

 

 

 

 

Digital product sales

$

5,441

$

5,231

Digital product lease and maintenance

 

1,280

 

1,781

Total identifiable assets

 

6,721

 

7,012

General corporate

 

286

 

43

Total assets

$

7,007

$

7,055

Note 14 –Subsequent Events

 

The Company has evaluated events and transactions subsequent to SeptemberJune 30, 20212022 and through the date these Condensed Consolidated Financial Statements were included in this Form 10-Q and filed with the SEC.

 

Item 2.             Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

Trans-Lux is a leading supplier of LED technology for display applications.  The essential elements of these systems are the real-time, programmable digital products that we design, manufacture, distribute and service.  Designed to meet the digital signage solutions for any size venue’s indoor and outdoor needs, these displays are used primarily in applications for the financial, banking, gaming, corporate, advertising, transportation, entertainment and sports markets.  The Company operates in two reportable segments: Digital product sales and Digital product lease and maintenance.

 

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Table of Contents

 

The Digital product sales segment includes worldwide revenues and related expenses from the sales of both indoor and outdoor digital product signage.  This segment includes the financial, government/private, gaming, scoreboards and outdoor advertising markets.  The Digital product lease and maintenance segment includes worldwide revenues and related expenses from the lease and maintenance of both indoor and outdoor digital product signage.  This segment includes the lease and maintenance of digital product signage across all markets.

Critical Accounting Estimates

There have been no changes to the Company’s critical accounting estimates as previously reported in the Company’s 2021 Form 10-K.

 

Results of Operations

 

NineSix Months Ended SeptemberJune 30, 20212022 Compared to NineSix Months Ended SeptemberJune 30, 20202021

 

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

 

Nine months ended September 30

In thousands, except percentages

2021

 

2020

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

$

6,882

 

82.5

%

 

$

 5,257

 

76.7

%

Digital product lease and maintenance

 

   1,456

 

17.5

%

 

 

    1,601

 

23.3

%

Total revenues

 

   8,338

 

100.0

%

 

 

    6,858

 

100.0

%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Cost of digital product sales

 

   8,286

 

99.4

%

 

 

    6,528

 

95.2

%

Cost of digital product lease and maintenance

 

      462

 

5.5

%

 

 

       471

 

6.9

%

Total cost of revenues

 

   8,748

 

104.9

%

 

 

    6,999

 

102.1

%

Gross loss

 

     (410)

 

(4.9)

%

 

 

     (141)

 

(2.1)

%

General and administrative and restructuring expenses

 

  (2,270)

 

(27.2)

%

 

 

  (2,942)

 

(42.9)

%

Operating loss

 

  (2,680)

 

(32.1)

%

 

 

  (3,083)

 

(45.0)

%

Interest expense, net

 

     (363)

 

(4.4)

%

 

 

     (363)

 

(5.3)

%

(Loss) gain on foreign currency remeasurement

 

       (10)

 

(0.1)

%

 

 

         64

 

1.0

%

Gain on extinguishment of debt

 

         77

 

0.9

%

 

 

       137

 

2.0

%

Pension benefit

 

       200

 

2.4

%

 

 

       110

 

1.6

%

Loss before income taxes

 

  (2,776)

 

(33.3)

%

 

 

  (3,135)

 

(45.7)

%

Income tax expense

 

       (19)

 

(0.2)

%

 

 

       (19)

 

(0.3)

%

Net loss

$

(2,795)

 

(33.5)

%

 

$

(3,154)

 

(46.0)

%

 

Six months ended June 30

In thousands, except percentages

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

$

10,253

 

93.5

%

 

$

  4,489

 

82.0

%

Digital product lease and maintenance

 

       714

 

6.5

%

 

 

       984

 

18.0

%

Total revenues

 

  10,967

 

100.0

%

 

 

    5,473

 

100.0

%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Cost of digital product sales

 

    8,758

 

79.9

%

 

 

    5,276

 

96.4

%

Cost of digital product lease and maintenance

 

       307

 

2.8

%

 

 

       317

 

5.8

%

Total cost of revenues

 

    9,065

 

82.7

%

 

 

    5,593

 

102.2

%

Gross income (loss)

 

    1,902

 

17.3

%

 

 

     (120)

 

(2.2)

%

General and administrative expenses

 

   (1,584)

 

(14.4)

%

 

 

  (1,543)

 

(28.2)

%

Operating income (loss)

 

       318

 

2.9

%

 

 

  (1,663)

 

(30.4)

%

Interest expense, net

 

      (272)

 

(2.5)

%

 

 

     (260)

 

(4.7)

%

Gain (loss) on foreign currency remeasurement

 

         60

 

0.5

%

 

 

       (72)

 

(1.3)

%

Gain on extinguishment of debt

 

           -

 

- 

%

 

 

        77

 

1.4

%

Gain on forgiveness of PPP loan

 

       824

 

7.5

%

 

 

          -

 

-

%

Pension benefit

 

       105

 

1.0

%

 

 

      134

 

2.4

%

Income (loss) before income taxes

 

    1,035

 

9.4

%

 

 

  (1,784)

 

(32.6)

%

Income tax expense

 

        (12)

 

(0.1)

%

 

 

       (12)

 

(0.2)

%

Net income (loss)

$

1,023

 

9.3

%

 

$

(1,796)

 

(32.8)

%

 

Total revenues for the ninesix months ended SeptemberJune 30, 20212022 increased $1.5$5.5 million or 21.6%100.4% to $8.3$11.0 million from $6.9$5.5 million for the ninesix months ended SeptemberJune 30, 2020,2021, primarily due to an increase in Digital product sales.

 

Digital product sales revenues increased $1.6$5.8 million or 30.9%128.4% for the ninesix months ended SeptemberJune 30, 20212022 compared to the ninesix months ended SeptemberJune 30, 2020, primarily due to an increase in the sports market, principally due to the reduced sales revenues in 2020 due to the onset and uncertainty of the coronavirus.

Digital product lease and maintenance revenues decreased $145,000 or 9.1% for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to the continued expected revenue decline inreturn of customer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the older outdoor display equipment rental bases acquired in the early 1990s.  The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications.past year.

 

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Total operating loss for the nine months ended September 30, 2021 decreased $403,000 or 13.1% to $2.7 million from $3.1 million for the nine months ended September 30, 2020, principally due to the increase in revenues.

Digital product sales operating loss decreased $88,000 or 3.0% to $2.8 million for the nine months ended September 30, 2021 compared to $2.9 million for the nine months ended September 30, 2020, primarily due to the increase in revenues and a decrease in the cost of revenue as a percentage of revenues.  The cost of Digital product sales increased $1.8 million or 26.9%, primarily due to the increase in revenues.  The cost of Digital product sales represented 120.4% of related revenues in 2021 compared to 124.2% in 2020.  This decrease as a percentage of revenues is primarily due to the greater volume of revenues.  General and administrative expenses for Digital product sales decreased $221,000 or 13.5%, primarily due to decreases in employees’ expenses, partially offset by an increase in consulting expenses.

Digital product lease and maintenance operating income decreased $97,000 or 9.0% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily as a result of the decrease in revenues, partially offset by a decrease in general and administrative expenses.  The cost of Digital product lease and maintenance decreased $9,000 or 1.9%, primarily due to a decrease in depreciation expense, partially offset by an increase in employees’ expenses, primarily caused by the extraordinarily low expenses incurred in 2020 due to the onset and uncertainty of the coronavirus.  The cost of Digital product lease and maintenance revenues represented 31.7% of related revenues in 2021 compared to 29.4% in 2020.  The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation.  General and administrative expenses for Digital product lease and maintenance decreased $39,000 or 69.6%, primarily due to a reduction in employees’ expenses.

Corporate general and administrative expenses decreased $412,000 or 32.8% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to reductions in employees’ expenses and legal, rent and insurance expenses.

Net interest expense remained level for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to increases in the outstanding balances for most of the year, offset by decreases in the outstanding balances on the loans as of September 30, 2021 and decreases in interest rates.

The effective tax rate for the nine months ended September 30, 2021 and 2020 was 0.7% and 0.6%, respectively.  Both the 2021 and 2020 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

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Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the three months ended September 30, 2021 and 2020:

 

Three months ended September 30

In thousands, except percentages

2021

 

2020

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

$

2,393

 

83.5

%

 

$

  2,405

 

83.0

%

Digital product lease and maintenance

 

     472

 

16.5

%

 

 

        491

 

17.0

%

Total revenues

 

   2,865

 

100.0

%

 

 

     2,896

 

100.0

%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Cost of digital product sales

 

    3,010

 

105.0

%

 

 

     2,822

 

97.4

%

Cost of digital product lease and maintenance

 

       145

 

5.1

%

 

 

       146

 

5.1

%

Total cost of revenues

 

    3,155

 

110.1

%

 

 

    2,968

 

102.5

%

Gross loss

 

     (290)

 

(10.1)

%

 

 

        (72)

 

(2.5)

%

General and administrative and restructuring expenses

 

     (727)

 

(25.4)

%

 

 

      (704)

 

(24.3)

%

Operating loss

 

  (1,017)

 

(35.5)

%

 

 

      (776)

 

(26.8)

%

Interest expense, net

 

     (103)

 

(3.6)

%

 

 

      (100)

 

(3.4)

%

Gain (loss) on foreign currency remeasurement

 

        62

 

2.2

%

 

 

        (49)

 

(1.7)

%

Gain on extinguishment of debt

 

          -

 

-

%

 

 

       137

 

4.7

%

Pension benefit

 

        66

 

2.3

%

 

 

         37

 

1.3

%

Loss before income taxes

 

     (992)

 

(34.6)

%

 

 

      (751)

 

(25.9)

%

Income tax expense

 

         (7)

 

(0.3)

%

 

 

          (7)

 

(0.3)

%

Net loss

$

(999)

 

(34.9)

%

 

$

  (758)

 

   (26.2)

%

Total revenues for the three months ended September 30, 2021 decreased $31,000 or 1.1% to $2.9 million compared to the three months ended September 30, 2020, primarily due to decreases in Digital product lease and maintenance revenues and sales revenues.

Digital product sales revenues decreased $12,000 or 0.5% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to a decrease in the sports market.

Digital product lease and maintenance revenues decreased $19,000$270,000 or 3.9%27.4% for the threesix months ended SeptemberJune 30, 20212022 compared to the threesix months ended SeptemberJune 30, 2020,2021, primarily due to the continued expected revenue decline in the older outdoor display equipment rental bases acquired in the early 1990s.  The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications.

 

Total operating lossincome (loss) for the threesix months ended SeptemberJune 30, 20212022 increased $241,000$2.0 million to $1.0income of $318,000 from a loss of $1.7 million from $776,000 for the threesix months ended SeptemberJune 30, 2020,2021, principally due to anthe increase in corporate general and administrative expenses.

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Table of Contentsrevenues.

 

Digital product sales operating income (loss) increased $2.5 million to income of $760,000 for the six months ended June 30, 2022 compared to a loss increased $85,000 to $1.1of $1.7 million for the threesix months ended SeptemberJune 30, 2021, compared to $1.0 million for the three months ended September 30, 2020, primarily due to anthe increase in revenues and a decrease in the cost of revenuerevenues as a percentage of revenues, partially offset byas well as a decrease in general and administrative expenses.  The cost of Digital product sales increased $188,000$3.5 million or 6.7%66.0%, primarily due to increased manufacturing costs.the increase in revenues.  The cost of Digital product sales represented 125.8%85.4% of related revenues in 20212022 compared to 117.3%117.5% in 2020.2021.  This increasedecrease as a percentage of revenues is primarily due to increasesthe increase in the manufacturing supply chain costs and consulting costs.revenues.  General and administrative expenses for Digital product sales decreased $115,000$199,000 or 19.5%21.3%, primarily due to a decrease in employees’ expenses, partially offset by increasesdecreases in consulting expenses and bad debt expenses.

 

Digital product lease and maintenance operating income decreased $11,000$252,000 or 3.2%39.3% for the threesix months ended SeptemberJune 30, 20212022 compared to the threesix months ended SeptemberJune 30, 2020,2021, primarily as a result of the decrease in revenues, partially offset by a decrease in general and administrative expenses.revenues.  The cost of Digital product lease and maintenance decreased $1,000$10,000 or 0.7%3.2%, primarily due to a decrease in depreciation expense, partially offset by an increase in service agents and employees’ expenses, primarily caused by the extraordinarily low expenses incurred in 2020 due to the onset and uncertainty of the coronavirus.agents.  The cost of Digital product lease and maintenance revenues represented 30.7%43.0% of related revenues in 20212022 compared to 29.7%32.2% in 2020.2021.  The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation.  General and administrative expenses for Digital product lease and maintenance decreased $7,000,$8,000 or 32.0%, primarily due to a decreasereduction in bad debt expenses.

 

Corporate general and administrative expenses increased $145,000$248,000 or 127.2%42.5% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to an increase in employees’ expenses, partially offset by a decrease in consulting expenses.

Net interest expense increased $12,000 or 4.6% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to an increase in interest rates and outstanding debt.

The effective tax rate for the six months ended June 30, 2022 and 2021 was 1.2% and 0.7%, respectively.  Both the 2022 and 2021 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

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Table of Contents


Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the three months ended SeptemberJune 30, 2022 and 2021:

 

Three months ended June 30

In thousands, except percentages

2022

 

2021

Revenues:

 

 

 

 

 

��

 

 

 

 

 

Digital product sales

$

  7,016

 

96.1

%

 

$

   2,396

 

83.0

%

Digital product lease and maintenance

 

       286

 

3.9

%

 

 

        491

 

17.0

%

Total revenues

 

    7,302

 

100.0

%

 

 

     2,887

 

100.0

%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Cost of digital product sales

 

    5,800

 

79.5

%

 

 

    3,022

 

104.7

%

Cost of digital product lease and maintenance

 

       142

 

1.9

%

 

 

       164

 

5.7

%

Total cost of revenues

 

    5,942

 

81.4

%

 

 

    3,186

 

110.4

%

Gross income (loss)

 

    1,360

 

18.6

%

 

 

     (299)

 

(10.4)

%

General and administrative expenses

 

      (822)

 

(11.2)

%

 

 

     (744)

 

(25.7)

%

Operating income (loss)

 

       538

 

7.4

%

 

 

  (1,043)

 

(36.1)

%

Interest expense, net

 

     (130)

 

(1.8)

%

 

 

     (157)

 

(5.5)

%

Income (loss) on foreign currency remeasurement

 

        76

 

1.0

%

 

 

       (36)

 

(1.2)

%

Pension benefit

 

        52

 

0.7

%

 

 

         67

 

2.3

%

Income (loss) before income taxes

 

      536

 

7.3

%

 

 

  (1,169)

 

(40.5)

%

Income tax expense

 

         (6)

 

-   

%

 

 

         (6)

 

(0.2)

%

Net income (loss)

$

    530

 

7.3

%

 

$

(1,175)

 

   (40.7)

%

Total revenues for the three months ended June 30, 2022 increased $4.4 million or 152.9% to $7.3 million from $2.9 million for the three months ended June 30, 2021, primarily due to an increase in Digital product sales.

Digital product sales revenues increased $4.6 million or 192.8% for the three months ended June 30, 2022 compared to the three months ended SeptemberJune 30, 2020,2021, primarily due to the non-recurrencereturn of certain credits recordedcustomer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the past year.

Digital product lease and maintenance revenues decreased $205,000 or 41.8% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to the continued expected revenue decline in 2020,the older outdoor display equipment rental bases acquired in the early 1990s.  The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications.

Total operating income (loss) for the three months ended June 30, 2022 increased $1.6 million to income of $538,000 from a loss of $1.0 million for the three months ended June 30, 2021, principally due to an increase in revenues, partially offset by reductionsa decrease in general and administrative expenses.

Digital product sales operating income (loss) increased $1.9 million to income of $831,000 for the three months ended June 30, 2022 compared to a loss of $1.1 million for the three months ended June 30, 2021, primarily due to an increase in revenues and a decrease in the cost of revenue as a percentage of revenues.  The cost of Digital product sales decreased $2.8 million or 91.9%, primarily due to the increase in revenues.  The cost of Digital product sales represented 82.7% of related revenues in 2022 compared to 126.1% in 2021.  This decrease as a percentage of revenues is primarily due to manufacturing efficiencies due to the increase in revenues.  General and administrative expenses for Digital product sales decreased $84,000 or 17.9%, primarily due to decreases in consulting expenses and bad debt expenses.

Digital product lease and maintenance operating income decreased $190,000 or 58.8% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily as a result of a decrease in the cost of Digital product lease and maintenance and the decrease in revenues, partially offset by an increase in general and administrative expenses.  The cost of Digital product lease and maintenance decreased $22,000 or 13.4%, primarily due to a decrease in depreciation expense, partially offset by an increase in service agents and employees’ expenses.  The cost of Digital product lease and maintenance revenues represented 49.7% of related revenues in 2022 compared to 33.4% in 2021.  The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation.  General and administrative expenses for Digital product lease and maintenance increased $7,000 or 175.0%, primarily due to an increase in bad debt expenses.

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Table of Contents

Corporate general and administrative expenses increased $155,000 or 57.2% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to an increase in employees’ expenses, and legal, rent and insurance expenses.partially offset by a decrease in consulting fees.

 

Net interest expense increased $3,000decreased $27,000 or 3.0%17.2% for the three months ended SeptemberJune 30, 20212022 compared to the three months ended SeptemberJune 30, 2020,2021, primarily due to an increasea decrease in the outstanding balances on the loans, partially offset by decreases in interest rates.debt.

 

The effective tax rate for the three months ended SeptemberJune 30, 2022 and 2021 was 1.1% and 2020 was 0.7% and 0.9%0.5%, respectively.  Both the 20212022 and 20202021 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

 

Liquidity and Capital Resources

 

Current Liquidity

 

The Company has incurred significant recurring losses and continues to have a significant working capital deficiency. The Company incurred a net lossrecorded income of $2.8$1.0 million in the ninesix months ended SeptemberJune 30, 2022, which included the gain on forgiveness of the PPP loan of $824,000, but recorded a loss of $5.0 million in the year ended December 31, 2021. The Company had working capital deficiencies of $8.8 million and $9.8 million as of June 30, 2022 and December 31, 2021, and had arespectively. The change in the working capital deficiency of $8.6 million as of September 30, 2021.  As of December 31, 2020, the Company had a working capital deficiency of $6.3 million.  The working capital deficiency increasedwas primarily due to an increase in accounts payable and a decrease in inventories, partially offsetaffected by increases in cash, receivablesthe accounts receivable and prepaids,inventories, as well as decreases in accrued liabilities and current portion of long-term debt, partially offset by a decreases in cash and prepaids and other assets, as well as increases in accounts payable, current lease liabilities and customer deposits.

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Table of Contents

 

The Company is dependent on future operating performance in order to generate sufficient cash flows in order to continue to run its businesses.  Future operating performance is dependent on general economic conditions, as well as financial, competitive and other factors beyond our control, including the impact of the current economic environment, the spread of major epidemics (including coronavirus) and other related uncertainties such as government imposed travel restrictions, interruptions to supply chains, extended shut down of businesses and the impact of inflation.  In order to more effectively manage its cash resources, the Company had, from time to time, increased the timetable of its payment of some of its payables, which delayed certain product deliveries from our vendors, which in turn delayed certain deliveries to our customers.

 

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Table of Contents

There is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to operate our business over the next 12 months from the date of issuance of this Form 10-Q.  The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities.

 

The Company generatedused cash of $605,000$1.1 million and used cash of $2.0 million$106,000 from operating activities for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.  The Company has implemented several initiatives to improve operational results and cash flows over future periods, including reducing head count, reorganizing its sales department and outsourcing certain administrative functions.  The Company continues to explore ways to reduce operational and overhead costs.  The Company periodically takes steps to reduce the cost to maintain the digital products on lease and maintenance agreements.

 

Cash and cash equivalents and restricted cash increased $243,000decreased $416,000 in the ninesix months ended SeptemberJune 30, 2022 to $108,000 at June 30, 2022 from $524,000 at December 31, 2021.  The increasedecrease is primarily attributable to cash generated byused in operating activities of $605,000,$1.1 million, partially offset by payments ofproceeds from long-term debt borrowings of $362,000.$250,000 and refund proceeds from loan forgiveness of $453,000.  The current economic environment has increased the Company’s trade receivables collection cycle, and its allowances for uncollectible accounts receivable, but collections continue to be favorable.

 

Under various agreements, the Company is obligated to make future cash payments in fixed amounts.  These include payments under the Company’s current and long-term debt agreements, pension plan minimum required contributions, employment agreement payments and rent payments required under operating lease agreements.  The Company has both variable and fixed interest rate debt.  Interest payments are projected based on actual interest payments incurred in 20212022 until the underlying debts mature.  As interest rates have increased in 2022, and may continue to increase, the amounts the Company pays for interest could exceed the projected amounts.

 

The following table summarizes the Company’s fixed cash obligations as of SeptemberJune 30, 20212022 for the remainder of 20212022 and over the next four fiscal years:

 

In thousands

Remainder of
2021

 

2022

 

2023

 

2024

 

2025

Long-term debt, including interest

$

3,216

 

$

372

 

$

-

 

$

 -

 

$

-

Pension plan payments

82

47

354

247

115

Estimated warranty liability

44

140

93

67

33

Operating lease payments

 

97

 

 

348

 

 

309

 

 

-

 

 

-

Total

$

3,439

 

$

907

 

$

756

 

$

314

 

$

148

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In thousands

Remainder of
2022

 

2023

 

2024

 

2025

 

2026

Long-term debt, including interest

$

4,024

 

$

   -

 

$

  31

 

$

 31

 

$

$ 31

Pension plan payments

138

-

179

129

60

Estimated warranty liability

170

113

89

59

43

Operating lease payments

 

245

 

 

438

 

 

146

 

 

149

 

 

152

Total

$

4,577

 

$

551

 

$

445

 

$

368

 

$

286

 

As of SeptemberJune 30, 2021,2022, the Company had outstanding $302,000 of Notes which matured as of March 1, 2012.  The Company also had outstanding $220,000 of Debentures which matured on December 1, 2012.  The Company continues to consider future exchanges of the Notes and Debentures, but has no agreements, commitments or understandings with respect to any further such exchanges.

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The Company may still seek additional financing in order to provide enough cash to cover our remaining current fixed cash obligations as well as providing working capital.  However, there can be no assurance as to the amounts, if any, the Company will receive in any such financing or the terms thereof.  The Company has no agreements, commitments or understandings with respect to any such financings.  To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders.

 

For a further description of the Company’s long-term debt, see Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt.

 

Pension Plan Contributions

 

The minimum required pension plan contribution for 20212022 is expected to be $388,000,$138,000, which the Company expects to contribute in 2022, but none of which the Company has already contributed $306,000 as of SeptemberJune 30, 2021.2022.  See Note 8 to the Condensed Consolidated Financial Statements – Pension Plan for further details.

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

 

The Company may, from time to time, provide estimates as to future performance.  These forward-looking statements will be estimates and may or may not be realized by the Company.  The Company undertakes no duty to update such forward-looking statements.  Many factors could cause actual results to differ from these forward-looking statements, including loss of market share through competition, introduction of competing products by others, pressure on prices from competition or purchasers of the Company’s products, interest rate and foreign exchange fluctuations, the impact of inflation, terrorist acts and war.

 

Item 3.             Quantitative and Qualitative Disclosures about Market Risk

 

The Company is subject to interest rate risk on its long-term debt.  The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt.  The fair value of the Company’s fixed rate long-term debt is disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt.  Every 1-percentage-point change in interest rates would result in an annual interest expense fluctuation of approximately $4,000.$19,000.  In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of its investment in its Canadian subsidiary. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency remeasurement expense fluctuation of approximately $268,000,$261,000, based on dealer quotes, considering current exchange rates.  The Company does not enter into derivatives for trading or speculative purposes and did not hold any derivative financial instruments at SeptemberJune 30, 2021.2022

 

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Item 4.             Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures.  As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and our Chief Accounting Officer (our principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures.  Our Chief Executive Officer and Chief Accounting Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management (including our Chief Executive Officer and our Chief Accounting Officer) to allow timely decisions regarding required disclosures.  Based on such evaluation, our Chief Executive Officer and Chief Accounting Officer have concluded that these disclosure controls are effective as of SeptemberJune 30, 2021.2022.

 

Changes in Internal Control over Financial Reporting.  There has been no change in the Company’s internal control over financial reporting that occurred in the quarter ended SeptemberJune 30, 20212022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Part II – Other Information

 

Item 1.             Legal Proceedings

 

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance.  The Company has accrued reserves individually and in the aggregate for such legal proceedings.  Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required.  There are no open matters that the Company deems material.

 

Item 1A.          Risk Factors

 

The Company is subject to a number of risks including general business and financial risk factors.  Any or all of such factors could have a material adverse effect on the business, financial condition or results of operations of the Company.  You should carefully consider the risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

 

Item 2.             Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

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Item 3.             Defaults upon Senior Securities

 

As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company had outstanding $302,000 of Notes which are no longer convertible into common shares.  The Notes matured as of March 1, 2012 and are currently in default.  As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $301,000$320,000 and $329,000,$307,000, respectively, of interest related to the Notes, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

 

As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company has outstanding $220,000 of Debentures.  The Debentures matured as of December 1, 2012 and are currently in default.  As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had accrued $247,000$263,000 and $232,000,$253,000, respectively, of interest related to the Debentures, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.  The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.

 

Item 4.             Mine Safety Disclosures

 

Not applicable.

 

Item 5.             Other Information

 

None.

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Item 6.             Exhibits

10.1 Assignment Without Recourse of Loan Agreement with MidCap Business Credit LLC to Unilumin USA dated as of July 30, 2021 (incorporated by reference to Exhibit 10.2 of Form 10-Q filed August 13, 2021).

 

31.1     Certification of Nicholas J. Fazio, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

31.2     Certification of Todd Dupee, Senior Vice President and Chief Accounting Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

32.1     Certification of Nicholas J. Fazio, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

32.2     Certification of Todd Dupee, Senior Vice President and Chief Accounting Officer,  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101      The following financial information from the Company’s Form 10-Q for the quarterly period ended June 30, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Deficit, and (v) Notes to Condensed Consolidated Financial Statements.

 

27104      Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.)

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

TRANS-LUX CORPORATION

(Registrant)

by 

/s/  Nicholas J. Fazio

Nicholas J. Fazio

Chief Executive Officer

by 

 /s/  Todd Dupee

Todd Dupee

Senior Vice President and

Chief Accounting Officer

 

 

 

Date:  November 12, 2021August 11, 2022

 

2826

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