洲明科技:关于海外上市子公司Trans-LuxCorporation发布2022年半年度报告的公告

证券代码：300232证券简称：洲明科技公告编号：2022-071
深圳市洲明科技股份有限公司
关于海外上市子公司Trans-Lux Corporation
发布2022年半年度报告的公告
本公司及董事会全体成员保证信息披露内容真实、准确和完整，没有虚假记载、误导性陈述或者重大遗漏。
深圳市洲明科技股份有限公司的子公司 Trans-Lux Corporation 于近日公布了
2022年半年度报告。
2022 年半年度 Trans-Lux Corporation 主要的财务数据列示如下：
项目本报告期上年同期本报告期比上年同期增减
营业总收入（千美元）109675473100.38%
净利润（千美元）1023-1796156.96%经营活动产生的现金流
-1106-106-943.40%
量净额（千美元）基本每股收益（美元/
0.08-0.13161.54%
股）项目本报告期末上年度末本报告期末比上年度末增减
总资产（千美元）10565865122.12%
净资产（千美元）-9931-109489.29%
随着对 Trans-Lux 的整合进一步深入，成本大幅削减，生产运营效率显著提高，交货率提升，订单增加，2022 年上半年 Trans-Lux Corporation 生产经营有序开展，订单及出货达到良好水平，经营费用大幅降低，经营业绩显著改善，实现营业收入10967千美元，同比增长100.38%，净利润1023千美元，实现扭亏为盈。
Trans-Lux Corporation 2022 年半年度报告的内容详见附录，并可于美国证券交易委员会网站（https://www.sec.gov/）查询。
特此公告，敬请投资者关注。
深圳市洲明科技股份有限公司董事会
2022 年 8 月 15 日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 June 30 2022
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.)
254 West 31st Street 12th Floor New York New York 10001
(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 growthcompany” in Rule 12b-2 of the Exchange Act.Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer X Smaller reporting company X
Emerging growth company ___
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
8/10/22 Common Stock - $0.001 Par Value 13446276TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.Part I - Financial Information (unaudited)
Item 1. Condensed Consolidated Balance Sheets – June 30 2022
and December 31 2021 (see Note 1) 1
Condensed Consolidated Statements of Operations –
Three and Six Months Ended June 30 2022 and 2021 2
Condensed Consolidated Statements of Comprehensive Loss –
Three and Six Months Ended June 30 2022 and 2021 2
Condensed Consolidated Statements of Changes in Stockholders’ Deficit –
Three and Six Months Ended June 30 2022 and 2021 3
Condensed Consolidated Statements of Cash Flows –
Six Months Ended June 30 2022 and 2021 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Item 4. Controls and Procedures 24
Part II - Other Information
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults upon Senior Securities 25
Item 4. Mine Safety Disclosures 25
Item 5. Other Information 25
Item 6. Exhibits 25
Signatures 26
ExhibitsPart I - Financial Information (unaudited)
Item 1.TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30 December 31
In thousands except share data 2022 2021
ASSETS
Current assets:
Cash and cash equivalents $ 108 $ 5 24
Receivables net 3456 2149
Inventories 2380 871
Prepaids and other assets 1466 1551
Total current assets 7410 5095
Long-term assets:
Rental equipment net 318 411
Property plant and equipment net 1836 1950
Right of use assets 967 1162
Other assets 34 33
Total long-term assets 3155 3556
TOTAL ASSETS $ 10565 $ 8651
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 5160 $ 5248
Accrued liabilities 4471 4287
Current portion of long-term debt 2 962 3030
Current lease liabilities 430 397
Customer deposits 3138 1951
Total current liabilities 16161 14913
Long-term liabilities:
Long-term debt less current portion 500 500
Long-term lease liabilities 584 805
Deferred pension liability and other 3251 3381
Total long-term liabilities 4335 4686
Total liabilities 20496 19599
Stockholders' deficit:
Preferred Stock Series A - $20 stated value - 416500 shares authorized;
shares issued and outstanding: 0 in 2022 and 2021 - -
Preferred Stock Series B - $200 stated value - 51000 shares authorized;
shares issued and outstanding: 0 in 2022 and 2021 - -
Common Stock - $0.001 par value - 30000000 shares authorized;
shares issued: 13474116 in 2022 and 2021;
shares outstanding: 13446276 in 2022 and 2021 13 13
Additional paid-in-capital 4 1368 41330
Accumulated deficit (41952) (42975)
Accumulated other comprehensive loss (6297) (6253)
Treasury stock - at cost - 27840 common shares in 2022 and 2021 (3063) (3063)
Total stockholders' deficit (9931) (10948)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 10565 $ 8651
The accompanying notes are an integral part of these condensed consolidated financial statements.
1TRANS-LUX CORPORATION AND SUBSIDIARIES YTD previous month
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
3 Months Ended 6 Months Ended 5 Months Ended
June 30 June 30 May 31
In thousands except per share data 2022 2021 2022 2021
Revenues:
Digital product sales $ 7016 $ 2 396 $ 10253 $ 4489
Digital product lease and maintenance 286 491 714 984
Total revenues 7302 2887 10967 5 473
Cost of revenues:
Cost of digital product sales 5 800 3022 8758 5 276
Cost of digital product lease and maintenance 142 164 307 317
Total cost of revenues 5942 3186 9065 5 593
Gross income (loss) 1 360 (299) 1902 (120)
General and administrative expenses (822) (744) (1584) (1543)
Operating income (loss) 538 (1043) 318 (1663)
Interest expense net (130) (157) (272) (260)
Gain (loss) on foreign currency remeasurement 76 (36) 60 (72)
Gain on extinguishment of debt - - - 77
Gain on forgiveness of PPP loan - - 824 -
Pension benefit 52 67 105 134
Income (loss) before income taxes 536 (1169) 1035 (1784)
Income tax expense (6) (6) (12) (12)
Net income (loss) $ 530 $ (1175) $ 1 023 $ (1796)
The accompanying notes are an integral part of these condensed consolidated financial statements.TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
3 Months Ended 6 Months Ended 5 Months Ended
June 30 June 30 May 31
In thousands 2022 2021 2022 2021
Net income (loss) $ 5 30 $ (1175) $ 1023 $ (1796)
Other comprehensive (loss) income:
Unrealized foreign currency translation (loss) gain (71) 34 (44) 68
Total other comprehensive (loss) income net of tax (71) 34 (44) 68
Comprehensive income (loss) $ 4 59 $ (1141) $ 979 $ (1728)
The accompanying notes are an integral part of these condensed consolidated financial statements.
2TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(unaudited)
Accumulated Total
Preferred Stock Add'l Other Stock-
Series A Series B Common Stock Paid-in Accumulated Comprehensive Treasury holders'
In thousands except share data Shares Amt Shares Amt Shares Amt Capital Deficit Loss Stock Deficit
For the 6 months ended June 30 2022
Balance January 1 2022 - $ - - $ - 13474116 $ 13 $ 41330 $ (42975) $ (6253) $ (3063) $( 10948)
Net income - - - - - - - 1023 - - 1023
Issuance of options - - - - - - 3 8 - - - 38
Other comprehensive loss net of tax:
Unrealized foreign currency translation loss - - - - - - - - (44) - (44)
Balance June 30 2022 - $ - - $ - 13474116 $ 13 $ 41368 $ (41952) $ (6297) $ (3063) $ (9931)
For the 3 months ended June 30 2022
Balance April 1 2022 - $ - - $ - 13474116 $ 13 $ 41330 $ (42482) $ (6226) $ (3063) $( 10428)
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 - $ - - $ - 13474116 $ 13 $ 41368 $ (41952) $ (6297) $ (3063) $ (9931)
For the 6 months ended June 30 2021
Balance January 1 2021 - $ - - $ - 13474116 $ 13 $ 41330 $ (38007) $ (7322) $ (3063) $ (7049)
Net loss - - - - - - - (1796) - - (1796)
Other comprehensive loss net of tax:
Unrealized foreign currency translation gain - - - - - - - - 68 - 68
Balance June 30 2021 - $ - - $ - 13474116 $ 13 $ 41330 $ (39803) $ (7254) $ (3063) $ (8777)
For the 3 months ended June 30 2021
Balance April 1 2021 - $ - - $ - 13474116 $ 13 $ 41330 $ (38628) $ (7288) $ (3063) $ (7636)
Net loss - - - - - - - (1175) - - (1175)
Other comprehensive income net of tax:
Unrealized foreign currency translation gain - - - - - - - - 34 - 34
Balance June 30 2021 - $ - - $ - 13474116 $ 13 $ 41330 $ (39803) $ (7254) $ (3063) $ (8777)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
6 Months Ended
June 30
In thousands 2022 2021
Cash flows from operating activities
Net income (loss) $ 1023 $ (1796)
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 219 254
Amortization of right of use assets 195 145
Gain on forgiveness of PPP loan (824) -
Amortization of deferred financing fees and debt discount 53 63
Gain on extinguishment of debt - (77)
(Gain) loss on foreign currency remeasurement (60) 72
Amortization of stock options 38 -
Bad debt expense 14 45
Changes in operating assets and liabilities:
Accounts receivable (1321) (487)
Inventories (1509) 402
Prepaids and other assets 84 92
Accounts payable (88) 1749
Accrued liabilities 176 131
Operating lease liabilities ( 188) (147)
Customer deposits 1187 (464)
Deferred pension liability and other (105) (88)
Net cash used in operating activities (1106) (106)
Cash flows from investing activities
Purchases of property plant and equipment (12) -
Net cash used in investing activities (12) -
Cash flows from financing activities
Proceeds from long-term debt 703 125
Payments of long-term debt - (20)
Net cash provided by financing activities 703 105
Effect of exchange rate changes (1) 1
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 $ - $ 162
Income taxes paid 10 9
The accompanying notes are an integral part of these condensed consolidated financial statements.
4TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30 2022
(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
2021. The Condensed Consolidated Balance Sheet at December 31 2021 is derived from the
December 31 2021 audited financial statements.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.Due to the onset of the COVID-19 pandemic in 2020 the Company experienced a reduction in
sales orders from customers in 2020 and 2021 which has just recently started to rebound. The
Company recorded net income of $1.0 million in the six months ended June 30 2022 but
recorded a net 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 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
5general 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 our outstanding 8?% Limited convertible senior subordinated
notes due 2012 (the “Notes”) and 9?% Subordinated debentures due 2012 (the “Debentures”)
and/or (iv) repay our obligations under our Loan Agreement (hereinafter defined) with Unilumin
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 continue as a going concern over the next 12 months from the date of issuance
of this Form 10-Q.Note 3 – Revenue Recognition
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.
6Disaggregated Revenues
The following table represents a disaggregation of revenue from contracts with customers for the
three and six months ended June 30 2022 and 2021 along with the reportable segment for each
category:
Three months ended Six months ended
In thousands June 30 2022 June 30 2021 June 30 2022 June 30 2021
Digital product sales:
Catalog and small customized products $7016 $2396 $10253 $4489
Large customized products - - - -
Subtotal 7016 2396 10253 4489
Digital product lease and maintenance:
Operating leases 140 210 311 419
Maintenance agreements ` 146 281 403 565
Subtotal 286 491 714 984
Total $7302 $2887 $10967 $5473
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 length 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.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
7Company 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 June 30 2022 the future minimum lease payments due to the
Company under operating leases that expire at varying dates through 2029 for its rental
equipment and maintenance contracts assuming no renewals of existing leases or any new leases
aggregating $1682000 are as follows: $266000 – remainder of 2022 $457000 – 2023
8$349000 – 2024 $266000 – 2025 $186000 – 2026 and $158000 thereafter.
9Contract 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 June 30
2022 and December 31 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
June 30 2022 December 31 2021
Gross receivables $3875 $2572
Allowance for bad
419423
debts
Net receivables 3456 2149
Contract liabilities 3254 2011
During the three and six months ended June 30 2022 and 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 Six months ended
In thousands 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 $1397 $121 $1868 $484
Performance obligations satisfied in previous periods
(for example due to changes in transaction price) - - - -
Transaction Price Allocated to Future Performance Obligations
As of June 30 2022 the aggregate amount of the transaction price allocated to remaining
performance obligations for digital product sales was $6.8 million and digital product lease and
maintenance was $1.7 million. The Company expects to recognize revenue on approximately
87% 8% and 5% of the remaining performance obligations over the next 12 months 13 to 36
months and 37 or more months respectively.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
10relate. 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.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:
June 30 December 31
In thousands 2022 2021
Raw materials $1654 $467
Work-in-progress 269 -
Finished goods 457 404
$2380$871
Note 5 – Rental Equipment net
Rental equipment consists of the following:
June 30 December 31
In thousands 2022 2021
Rental equipment $3664 $3664
Less accumulated depreciation 3346 3253
Net rental equipment $ 318 $ 411
Depreciation expense for rental equipment for the six months ended June 30 2022 and 2021 was
$93000 and $123000 respectively. Depreciation expense for rental equipment for the three
months ended June 30 2022 and 2021 was $46000 and $62000 respectively.Note 6 – Property Plant and Equipment net
Property plant and equipment consists of the following:
June 30 December 31
In thousands 2022 2021
Machinery fixtures and equipment $2920 $2908
11Leaseholds and improvements 23 23
29432931
Less accumulated depreciation 1107 981
Net property plant and equipment $1836 $1950
Machinery fixtures and equipment having a net book value of $1.8 million and $2.0 million at
June 30 2022 and December 31 2021 respectively were pledged as collateral under various
financing agreements.Depreciation expense for property plant and equipment for the six months ended June 30 2022
and 2021 was $126000 and $131000 respectively. Depreciation expense for property plant
and equipment for the three months ended June 30 2022 and 2021 was $63000 and $66000
respectively.Note 7 – Long-Term Debt
Long-term debt consists of the following:
June 30 December 31
In thousands 2022 2021
8?% Limited convertible senior subordinated notes due 2012 $ 302 $ 302
9?% Subordinated debentures due 2012 220 220
Revolving credit line – related party 1440 1.189
Term loans – related party 1000 1000
Term loans 500 871
Total debt 3462 3582
Less deferred financing costs and debt discount - 52
Net debt 3462 3530
Less portion due within one year 2962 3030
Net long-term debt $ 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 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% (12.00% at June 30
2022) on a revolving credit loan based on accounts receivable inventory and equipment for
general working capital purposes. As of June 30 2022 the balance outstanding under the Loan
Agreement was $1.4 million including $250000 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 period ended June
30 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 $500000 from Lender under the EIDL Program.As of June 30 2022 $500000 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 $10000 of
interest related to the Loan Note which is included in Accrued liabilities in the Consolidated
Balance Sheets.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 $810800 from Lender under the Paycheck Protection Program (“PPP”)
included in the SBA’s CARES Act. The Loan Note proceeds were 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. In January 2022 the loan was forgiven in full and the payments
that had previously been paid were refunded. Refund proceeds in the amount of $ 452631 are
included in proceeds from long-term debt in the accompanying condensed consolidated
statements of Cash Flows for the six months ended June 30 2022.The Company has a $500000 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 June 30 2022 the
entire amount was outstanding and is included in current portion of long-term debt in the
Consolidated Balance Sheets. As of June 30 2022 and December 31 2021 the Company had
accrued $270000 and $240000 respectively of interest related to this loan which are included
in accrued liabilities in the Condensed Consolidated Balance Sheets.The Company has an additional $500000 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 June 30 2022 the entire amount was outstanding and is included
in current portion of long-term debt Consolidated Balance Sheets. As of June 30 2022 and
December 31 2021 the Company had accrued $270000 and $240000 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 June 30 2022 and December 31 2021 the Company had outstanding $302000 of Notes.The Notes matured as of March 1 2012 and are currently in default. As of June 30 2022 and
13December 31 2021 the Company had accrued $320000 and $307000 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 $50000 of
the Notes accepted the Company’s offer to exchange each $1000 of principal forgiving any
related interest for $400 in cash for an aggregate payment by the Company of $20000. As a
result of the transaction the Company recorded a gain on the extinguishment of debt net of
expenses of $77000 in the six months ended June 30 2021.As of June 30 2022 and December 31 2021 the Company had outstanding $220000 of
Debentures. The Debentures matured as of December 1 2012 and are currently in default. As of
June 30 2022 and December 31 2021 the Company had accrued $263000 and $253000
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 six
months ended June 30 2022 and 2021:
Three months ended June 30 Six months ended June 30
In thousands 2022 2021 2022 2021
Interest cost $ 76 $ 64 $ 152 $ 127
Expected return on plan assets (200) (210) (400) (420)
Amortization of net actuarial loss 72 80 143 160
Net periodic pension (benefit) expense $ (52) $ (66) $(105) $(133)
As of June 30 2022 and December 31 2021 the Company had recorded a current pension
liability of $138000 and $129000 respectively which is included in accrued liabilities in the
Condensed Consolidated Balance Sheets and a long-term pension liability of $3.3 million and
$3.4 million respectively which is included in deferred pension liability and other in the
Condensed Consolidated Balance Sheets. The minimum required contribution in 2022 is
expected to be $138000 which the Company expects to contribute in 2022 but none of which
the Company has contributed as of June 30 2022.Note 9 – Leases
14The Company leases administrative and manufacturing facilities through operating lease
agreements. The Company has no finance leases as of June 30 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.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:
June 30
In thousands unless otherwise noted 2022
Balance Sheet:
ROU assets $967
Current lease liabilities – operating 430
Non-current lease liabilities - operating 584
Total lease liabilities 1014
Weighted average remaining lease term (years) 2.2
Weighted average discount rate 7.8%
Future minimum lease payments:
Remainder of 2022 $ 245
2023437
2024146
2025149
2026152
Thereafter 13
Total 1142
Less: Imputed interest 128
Total lease liabilities 1014
Less: Current lease liabilities 430
Long-term lease liabilities $ 584
Supplemental cash flow information regarding leases:
For the six months
For the three months ended
ended
In thousands June 30 2022 June 30 2022
15Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities $110 $232
Non-cash activity:
ROU assets obtained in exchange for lease liabilities - -
Total operating lease expense was $239000 for the six months ended June 30 2022. Total
operating lease expense was $109000 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 $190000 and $3000 respectively for
the six months ended June 30 2021. Total operating lease expense and short-term lease expense
was $96000 and $1000 respectively for the three months ended June 30 2021.Note 10 – Stockholders’ Deficit and Income (Loss) Per Share
The following table presents the calculation of income (loss) per share for the three and six
months ended June 30 2022 and 2021:
Three months ended June 30 Six months ended June 30
In thousands except per share data 2022 2021 2022 2021
Numerator:
Net income (loss) as reported $ 530 $(1175) $ 1023 $(1796)
Denominator:
Weighted average shares outstanding - basic 13446 13643 13446 13670
Weighted average shares outstanding - diluted 13489 13643 13489 13670
Earnings (loss) per share – basic and diluted $ 0.04 $ (0.09) $ 0.08 $ (0.13)
Basic earnings (loss) per common share is computed by dividing net income (loss) attributable to
common shares by the weighted average number of common shares outstanding for the period.Diluted earnings (loss) per common share is computed by dividing net income (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 June 30 2022 the Company included the effects of the stock options to purchase 280000
shares outstanding in the calculation of diluted earnings per share. As of June 30 2022 and 2021
the Company had other warrants to purchase 1.6 million shares of Common Stock outstanding
which were excluded from the calculation of diluted earnings (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 280000 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%.
16A 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:
Weighted average
Number of Weighted Average remaining contractual
Options Exercise Price life (in years) Average intrinsic value
Outstanding at December 31 2021 - - - -
Granted 280000 $0.40
Expired - -
Outstanding at June 30 2022 280000 $0.40 3.8 $0.19
Exercisable at the end of the period - - - -
Equity based compensation was $38000 and $0 for the six months ended June 30 2022 and
2021 respectively. Equity based compensation was $38000 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 $114000 as of June 30 2022 and will be
recognized over the vesting period.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 at the time of this report.Note 12 – Related Party Transactions
The Company has the following related party transactions:
As of June 30 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 of the Company are each directors and/or officers of
Unilumin. The Company purchased $3.8 million and $596000 of product from Unilumin in the
six months ended June 30 2022 and 2021 respectively and $2.7 million and $480000 in the
three months ended June 30 2022 and 2021 respectively. The Company borrowed $250000
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 $5.6
million and $3.7 million as of June 30 2022 and December 31 2021 respectively.Note 13 – Business Segment Data
17Operating 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 two 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.Foreign revenues represent less than 10% of the Company’s revenues in the six months ended
June 30 2022 and 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.Information about the Company’s operations in its two business segments for the three and six
months ended June 30 2022 and 2021 is as follows:
Three months ended June 30 Six months ended June 30
In thousands 2022 2021 2022 2021
Revenues:
Digital product sales $7016 $ 2396 $10253 $4489
Digital product lease and maintenance 286 491 714 984
Total revenues $7302 $ 2887 $10967 $ 5473
Operating income (loss):
Digital product sales $ 831 $(1095) $ 760 $(1721)
Digital product lease and maintenance 133 323 390 642
Corporate general and administrative expenses (426) (271) (832) (584)
Total operating income (loss) 538 (1043) 318 (1663)
Interest expense net (130) (157) (272) (260)
Gain (loss) on foreign currency remeasurement 76 (36) 60 (72)
Gain on extinguishment of debt - - - 77
Gain on forgiveness of PPP loan - - 824 -
Pension benefit 52 67 105 134
Income (loss) before income taxes 536 (1169) 1035 (1784)
Income tax expense (6) (6) (12) (12)
Net income (loss) $ 530 $(1175) $ 1023 $(1796)
June 30 December 31
20222021
Assets
Digital product sales $ 8956 $6379
Digital product lease and maintenance 1501 1748
Total identifiable assets 10457 8127
General corporate 108 524
Total assets $10565 $8651
18Note 14 – Subsequent Events
The Company has evaluated events and transactions subsequent to June 30 2022 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.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
Six Months Ended June 30 2022 Compared to Six Months Ended June 30 2021
The following table presents our Statements of Operations data expressed as a percentage of
revenue for the six months ended June 30 2022 and 2021:
Six months ended June 30
In thousands except percentages 2022 2021
R evenues:
Digital product sales $ 10253 93.5 % $ 4489 82.0 %
Digital product lease and maintenance 714 6.5 % 984 18.0 %
19Total revenues 10967 100.0 % 5473 100.0 %
C os t of revenues:
Cost of digital product sales 8758 79.9 % 5276 96.4 %
Cost of digital product lease and maintenance 307 2.8 % 317 5.8 %
Total cost of revenues 9065 82.7 % 5593 102.2 %
Gros s income (loss) 1902 17.3 % (120) (2.2)%
General and administrative expenses (1584) (14.4)% (1543) (28.2)%
Operating income (loss) 318 2.9 % (1663) (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 1035 9.4 % (1784) (32.6)%
Income tax expense (12) (0.1)% (12) (0.2)%
Net income (loss) $ 1023 9.3 % $(1796) (32.8)%
Total revenues for the six months ended June 30 2022 increased $5.5 million or 100.4% to $11.0
million from $5.5 million for the six months ended June 30 2021 primarily due to an increase in
Digital product sales.Digital product sales revenues increased $5.8 million or 128.4% for the six months ended June
30 2022 compared to the six months ended June 30 2021 primarily due to the return of
customer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the
past year.Digital product lease and maintenance revenues decreased $270000 or 27.4% for the six months
ended June 30 2022 compared to the six months ended June 30 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 income (loss) for the six months ended June 30 2022 increased $2.0 million to
income of $318000 from a loss of $1.7 million for the six months ended June 30 2021
principally due to the increase in revenues.Digital product sales operating income (loss) increased $2.5 million to income of $760000 for
the six months ended June 30 2022 compared to a loss of $1.7 million for the six months ended
June 30 2021 primarily due to the increase in revenues and a decrease in the cost of revenues as
a percentage of revenues as well as a decrease in general and administrative expenses. The cost
of Digital product sales increased $3.5 million or 66.0% primarily due to the increase in
revenues. The cost of Digital product sales represented 85.4% of related revenues in 2022
compared to 117.5% in 2021. This decrease as a percentage of revenues is primarily due to the
increase in revenues. General and administrative expenses for Digital product sales decreased
$199000 or 21.3% primarily due to decreases in consulting expenses and bad debt expenses.Digital product lease and maintenance operating income decreased $252000 or 39.3% for the six
months ended June 30 2022 compared to the six months ended June 30 2021 primarily as a
20result of the decrease in revenues. The cost of Digital product lease and maintenance decreased
$10000 or 3.2% primarily due to a decrease in depreciation expense partially offset by an
increase in service agents. The cost of Digital product lease and maintenance revenues
represented 43.0% of related revenues in 2022 compared to 32.2% 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
decreased $8000 or 32.0% primarily due to a reduction in bad debt expenses.Corporate general and administrative expenses increased $248000 or 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 $12000 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.
21Three 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 June 30 2022 and 2021:
Three months ended June 30
In thousands except percentages 2022 2021
R evenues:
Digital product sales $ 7016 96.1 % $ 2396 83.0 %
Digital product lease and maintenance 286 3.9 % 491 17.0 %
Total revenues 7302 100.0 % 2887 100.0 %
Cos t of revenues:
Cost of digital product sales 5800 79.5 % 3022 104.7 %
Cost of digital product lease and maintenance 142 1.9 % 164 5.7 %
Total cost of revenues 5942 81.4 % 3186 110.4 %
Gros s income (loss) 1360 18.6 % (299) (10.4)%
General and administrative expenses (822) (11.2)% (744) (25.7)%
Operating income (loss) 538 7.4 % (1043) (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 % (1169) (40.5)%
Income tax expense (6) - % (6) (0.2)%
Net income (loss) $ 530 7.3 % $(1175) (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 June 30 2021 primarily due to the return of
customer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the
past year.Digital product lease and maintenance revenues decreased $205000 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 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 $538000 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 a decrease in general and
administrative expenses.Digital product sales operating income (loss) increased $1.9 million to income of $831000 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
22revenue 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 $84000 or 17.9%
primarily due to decreases in consulting expenses and bad debt expenses.Digital product lease and maintenance operating income decreased $190000 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 $22000 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 $7000 or 175.0%
primarily due to an increase in bad debt expenses.Corporate general and administrative expenses increased $155000 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 partially offset by a decrease in consulting fees.Net interest expense decreased $27000 or 17.2% for the three months ended June 30 2022
compared to the three months ended June 30 2021 primarily due to a decrease in outstanding
debt.The effective tax rate for the three months ended June 30 2022 and 2021 was 1.1% and 0.5%
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.Liquidity and Capital Resources
Current Liquidity
The Company has incurred significant recurring losses and continues to have a significant
working capital deficiency. The Company recorded income of $1.0 million in the six months
ended June 30 2022 which included the gain on forgiveness of the PPP loan of $824000 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 respectively. The change in the working capital deficiency was primarily affected by
increases in the accounts receivable and 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.
23The 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.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 used cash of $1.1 million and used cash of $106000 from operating activities for
the six months ended June 30 2022 and 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 decreased $416000 in the six months ended June 30 2022 to
$108000 at June 30 2022 from $524000 at December 31 2021. The decrease is primarily
attributable to cash used in operating activities of $1.1 million partially offset by proceeds from
long-term debt borrowings of $250000 and refund proceeds from loan forgiveness of $453000.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
2022 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 June 30 2022 for
the remainder of 2022 and over the next four fiscal years:
24Remainder of
In thousands 2022 2023 2024 2025 2026
Long-term debt including interest $4024 $ - $ 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 $4577 $551 $445 $368 $286
As of June 30 2022 the Company had outstanding $302000 of Notes which matured as of
March 1 2012. The Company also had outstanding $220000 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.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 2022 is expected to be $138000 which the
Company expects to contribute in 2022 but none of which the Company has contributed as of
June 30 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
25Consolidated Financial Statements – Long-Term Debt. Every 1-percentage-point change in
interest rates would result in an annual interest expense fluctuation of approximately $19000. 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 $261000
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 June 30 2022
26Item 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 June 30 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 June 30
2022 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 2021.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
27Item 3. Defaults upon Senior Securities
As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt
the Company had outstanding $302000 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 June 30 2022
and December 31 2021 the Company had accrued $320000 and $307000 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 $220000 of Debentures. The Debentures matured as of December
1 2012 and are currently in default. As of June 30 2022 and December 31 2021 the Company
had accrued $263000 and $253000 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.Item 6. Exhibits
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.
2832.2 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.
104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy
extension information contained in Exhibits 101.)
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: August 11 2022
29