洲明科技:关于海外上市子公司Trans-LuxCorporation发布2023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：2023-057
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2023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
2023年半年度报告。
2023 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）733510967-33.12%
净利润（千美元）-17331023-269.40%经营活动产生的现金流
598-1106154.07%
量净额（千美元）基本每股收益（美元/-0.130.08-262.50%
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）942194120.10%
净资产（千美元）-11939-10324-15.64%
Trans-Lux Corporation 2023 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
2023 年 8 月 18 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 2023
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 “largeaccelerated 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 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
8/10/23 Common Stock - $0.001 Par Value 13496276TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.Part I - Financial Information (unaudited)
Item 1. Condensed Consolidated Balance Sheets – June 30 2023
and December 31 2022 (see Note 1) 1
Condensed Consolidated Statements of Operations –
Three and Six Months Ended June 30 2023 and 2022 2
Condensed Consolidated Statements of Comprehensive Loss –
Three and Six Months Ended June 30 2023 and 2022 2
Condensed Consolidated Statements of Changes in Stockholders’ Deficit –
Three and Six Months Ended June 30 2023 and 2022 3
Condensed Consolidated Statements of Cash Flows –
Six Months Ended June 30 2023 and 2022 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
Item 4. Controls and Procedures 25
Part II - Other Information
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults upon Senior Securities 26
Item 4. Mine Safety Disclosures 27
Item 5. Other Information 27
Item 6. Exhibits 27
Signatures 28
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 2023 2022
ASSETS
Current assets:
Cash and cash equivalents $ 198 $ 48
Receivables net 1660 2832
Inventories 2207 2722
Prepaids and other assets 961 1071
Total current assets 5026 6673
Long-term assets:
Rental equipment net 168 225
Property plant and equipment net 1838 1715
Right of use assets 2155 765
Restricted cash 200 -
Other assets 34 34
Total long-term assets 4395 2739
TOTAL ASSETS $ 9421 $ 9412
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 6608 $ 6339
Accrued liabilities 4375 4279
Current portion of long-term debt 3 768 3768
Current lease liabilities 497 393
Customer deposits 1009 1 183
Total current liabilities 16257 15962
Long-term liabilities:
Long-term debt less current portion 500 500
Long-term lease liabilities 1689 412
Deferred pension liability and other 2914 2862
Total long-term liabilities 5103 3774
Total liabilities 21360 19736
Stockholders' deficit:
Preferred Stock Series A - $20 stated value - 416500 shares authorized;
shares issued and outstanding: 0 in 2023 and 2022 - -
Preferred Stock Series B - $200 stated value - 51000 shares authorized;
shares issued and outstanding: 0 in 2023 and 2022 - -
Common Stock - $0.001 par value - 30000000 shares authorized;
shares issued: 13524116 in 2023 and 13474116 in 2022
shares outstanding: 13496276 in 2023 and 13446276 in 2022 13 13
Additional paid-in-capital 41508 41444
Accumulated deficit (44385) (42652)
Accumulated other comprehensive loss (6012) (6066)
Treasury stock - at cost - 27840 common shares in 2023 and 2022 (3063) (3063)
Total stockholders' deficit (11939) (10324)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 9421 $ 9412
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 2023 2022 2023 2022
Revenues:
Digital product sales $ 2767 $ 7016 $ 6888 $ 10253
Digital product lease and maintenance 2 19 2 86 447 714
Total revenues 2986 7302 7335 1 0967
Cost of revenues:
Cost of digital product sales 2617 5800 6 420 8758
Cost of digital product lease and maintenance 115 1 42 220 307
Total cost of revenues 2732 5942 6 640 9065
Gross income 254 1360 695 1902
General and administrative expenses (816) (822) (1894) (1584)
Operating (loss) income (562) 5 38 (1199) 318
Interest expense net (194) (130) (338) (272)
(Loss) gain on foreign currency remeasurement (51) 76 (59) 60
Gain on forgiveness of PPP loan - - - 824
Pension (expense) benefit (62) 52 (125) 105
(Loss) income before income taxes (869) 5 36 (1721) 1035
Income tax expense (6) (6) (12) (12)
Net (loss) income $ ( 875) $ 530 $ (1733) $ 1023
The accompanying notes are an integral part of these condensed consolidated financial statements.TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited)
3 Months Ended 6 Months Ended 5 Months Ended
June 30 June 30 May 31
In thousands 2023 2022 2023 2022
Net (loss) income $ (875) $ 530 $ (1733) $ 1023
Other comprehensive income:
Unrealized foreign currency translation gain (loss) 47 (71) 54 (44)
Total other comprehensive income (loss) net of tax 47 (71) 54 (44)
Comprehensive (loss) income $ (828) $ 459 $ (1679) $ 979
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 2023
Balance January 1 2023 - $ - - $ - 13474116 $ 13 $ 41444 $ (42652) $ (6066) $ (3063) $( 10324)
Net loss - - - - - - - (1733) - - (1733)
Stock issued to directors/officers - - - - 50000 - 26 - - - 26
Issuance of options - - - - - - 3 8 - - - 38
Other comprehensive income net of tax:
Unrealized foreign currency translation gain - - - - - - - - 54 - 54
Balance June 30 2023 - $ - - $ - 13524116 $ 13 $ 41508 $ (44385) $ (6012) $ (3063) $ (11939)
For the 3 months ended June 30 2023
Balance April 1 2023 - $ - - $ - 13474116 $ 13 $ 41482 $ (43510) $ (6059) $ (3063) $ (11137)
Net loss - - - - - - - (875) - - (875)
Stock issued to directors/officers - - - - 50000 - 2 6 - - - 26
Other comprehensive income net of tax:
Unrealized foreign currency translation gain - - - - - - - - 47 - 47
Balance June 30 2023 - $ - - $ - 13524116 $ 13 $ 41508 $ (44385) $ (6012) $ (3063) $ (11939)
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 - - - - - - 3 8 - - - 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)
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 2023 2022
Cash flows from operating activities
Net (loss) income $ (1733) $ 1023
Adjustment to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 182 219
Amortization of right of use assets 2 11 195
Gain on forgiveness of PPP loan - (824)
Amortization of deferred financing fees and debt discount - 53
Loss on foreign currency remeasurement 59 (60)
Issuance of common stock for compensation 26 -
Amortization of stock options 38 38
Allowance for credit losses (25) 14
Changes in operating assets and liabilities:
Accounts receivable 1197 (1321)
Inventories 515 (1509)
Prepaids and other assets 1 10 84
Accounts payable 2 69 (88)
Accrued liabilities 91 176
Operating lease liabilities (220) (188)
Customer deposits (174) 1187
Deferred pension liability and other 52 (105)
Net cash provided by (used in) operating activities 598 (1106)
Cash flows from investing activities
Purchases of property plant and equipment (248) (12)
Net cash used in investing activities (248) (12)
Cash flows from financing activities
Proceeds from long-term debt 200 703
Payments of long-term debt (200) -
Net cash provided by financing activities - 703
Effect of exchange rate changes - (1)
Net increase (decrease) in cash cash equivalents and restricted cash 3 50 (416)
Cash cash equivalents and restricted cash at beginning of year 48 524
Cash cash equivalents and restricted cash at end of period $ 398 $ 108
Supplemental disclosure of cash flow information:
Interest paid $ 2 3 $ -
Income taxes paid 10 10
Reconciliation of cash cash equivalents and restricted cash to amounts
reported in the Condensed Consolidated Balance Sheets at end of period:
Current assets
Cash and cash equivalents $ 198 $ 108
Long-term assets
Restricted cash 2 00 -
Cash cash equivalents and restricted cash at end of period $ 398 $ 108
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 2022. The Condensed Consolidated
Balance Sheet at December 31 2022 is derived from the December 31 2022 audited financial
statements.Critical Accounting Policies and Estimates
Accounting policies used in the preparation of our financial statements may involve the use of
management judgments and estimates. Certain of our accounting policies are considered critical as
they are both important to the portrayal of our financial statements and require significant or
complex judgments on the part of management. Our judgments and estimates are based on
experience and assumptions that we believe are reasonable under the circumstances. Further we
evaluate our judgments and estimates from time to time as circumstances change. Actual financial
results based on judgments or estimates may vary under different assumptions or circumstances.Our critical accounting policies are discussed in our Annual Report on Form 10-K for the fiscal year
ended December 31 2022 filed with the Securities and Exchange Commission on March 31 2023.Restricted cash: The Company classifies cash as restricted when the cash is unavailable for
withdrawal or usage for general operations. Restrictions may include legally restricted deposits
contracts entered into with others or the Company’s statements of intention with regard to particular
deposits. As of June 30 2023 the Company had $200000 of Restricted cash. The Company had no
Restricted cash as of December 31 2022.The following new accounting pronouncements were adopted in 2023:In June 2016 the FASB issued ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic
5326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities
use a new forward looking “expected loss” model that generally will result in the earlier recognition
of allowance for credit losses. The measurement of expected credit losses is based upon historical
experience current conditions and reasonable and supportable forecasts that affect the collectability
of the reported amount. ASU No. 2016-13 is effective for annual reporting periods including
interim reporting periods within those periods beginning after December 15 2022. The Company
adopted the new guidance on January 1 2023 and determined it did not have a material impact on its
consolidated financial statements.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.The Company has incurred recurring operating losses and continues to have a working capital
deficiency including being in default of several debt obligations. The Company recorded a loss of
$1.7 million in the six months ended June 30 2023 and had a working capital deficiency of $11.2
million as of June 30 2023. As of December 31 2022 the Company had a working capital
deficiency of $9.3 million. 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 our outstanding 8?% Limited convertible senior subordinated notes due
2012 (the “Notes”) and 9?% Subordinated debentures due 2012 (the “Debentures”) (iv) repay our
obligations under our Loan Agreement (hereinafter defined) with Unilumin and/or (v) repay our
obligations under our loan agreements with Carlisle there would be a significant adverse impact on
6our 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 2023.Revenue from the Company’s digital product and maintenance service is recognized ratably over the
lease term in accordance with ASC Topic 842.Disaggregated Revenues
The following table represents a disaggregation of revenue from contracts with customers for the
three and six months ended June 30 2023 and 2022 along with the reportable segment for each
category:
Three months ended Six months ended
In thousands June 30 2023 June 30 2022 June 30 2023 June 30 2022
Digital product sales:
Catalog and small customized products $2767 $7016 $6888 $10253
Large customized products - - - -
Subtotal 2767 7016 6888 10253
Digital product lease and maintenance:
Operating leases 117 140 248 311
Maintenance agreements ` 102 146 199 403
Subtotal 219 286 447 714
Total $2986 $7302 $7335 $10967
The Company has two primary revenue streams which are Digital product sales and Digital product
lease and maintenance.
7Digital 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 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
8customer’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 2023 the future minimum lease payments due to the Company
under operating leases that expire at varying dates through 2030 for its rental equipment and
maintenance contracts assuming no renewals of existing leases or any new leases aggregating
$1421000 are as follows: $247000 – remainder of 2023 $391000 – 2024 $305000 – 2025
$235000 – 2026 $176000 – 2027 and $67000 thereafter.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 June 30 2023
and December 31 2022 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 2023 December 31 2022
Gross receivables $1828 $3123
Allowance for credit loss 168 291
Net receivables 1660 2832
Contract liabilities 1109 1229
9During the three and six months ended June 30 2023 and 2022 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 2023 June 30 2022 June 30 2023 June 30 2022
Revenue recognized in the period from:
Amounts included in the contract liability at the
beginning of the period $570 $1397 $951 $1868
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 2023 the aggregate amount of the transaction price allocated to remaining
performance obligations for digital product sales was $3.2 million and digital product lease and
maintenance was $1.4 million. The Company expects to recognize revenue on approximately 80%
13% and 7% 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
relate. Applying the practical expedient 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 2023 2022
Raw materials $1808 $2535
Work-in-progress - -
Finished goods 399 187
$2207$2722
10Note 5 – Rental Equipment net
Rental equipment consists of the following:
June 30 December 31
In thousands 2023 2022
Rental equipment $2077 $2077
Less accumulated depreciation 1909 1852
Net rental equipment $ 168 $ 225
Depreciation expense for rental equipment for the six months ended June 30 2023 and 2022 was
$57000 and $93000 respectively. Depreciation expense for rental equipment for the three months
ended June 30 2023 and 2022 was $28000 and $46000 respectively.Note 6 – Property Plant and Equipment net
Property plant and equipment consists of the following:
June 30 December 31
In thousands 2023 2022
Machinery fixtures and equipment $3104 $2856
Leaseholds and improvements 23 23
31272879
Less accumulated depreciation 1289 1164
Net property plant and equipment $1838 $1715
Machinery fixtures and equipment having a net book value of $1.8 million and $1.7 million at June
30 2023 and December 31 2022 respectively were pledged as collateral under various financing
agreements.Depreciation expense for property plant and equipment for the six months ended June 30 2023 and
2022 was $125000 and $126000 respectively. Depreciation expense for property plant and
equipment for the three months ended June 30 2023 and 2022 was $62000 and $63000
respectively.
11Note 7 – Long-Term Debt
Long-term debt consists of the following:
June 30 December 31
In thousands 2023 2022
8?% Limited convertible senior subordinated notes due 2012 $ 302 $ 302
9?% Subordinated debentures due 2012 220 220
Revolving credit line – related party 2246 2246
Term loans – related party 1000 1000
Term loans 500 500
Total debt 4268 4268
Less deferred financing costs and debt discount - -
Net debt 4268 4268
Less portion due within one year 3768 3768
Net long-term debt $ 500 $ 500
On September 16 2019 the Company entered into a loan agreement (the “Loan Agreement”) with
MidCap which was subsequently modified. On July 30 2021 MidCap assigned the loan to
Unilumin. On March 20 2023 the Company and Unilumin entered into a modification agreement
to the Loan Agreement effective December 31 2022. The Loan Agreement matures on December
31 2023. The Loan Agreement allows the Company to borrow up to an aggregate of $2.2 million at
an interest rate of the Prime Rate as published in the Wall Street Journal plus 4.75% (13.00% at June
30 2023) on a revolving credit loan based on accounts receivable inventory and equipment for
general working capital purposes. As of June 30 2023 the balance outstanding under the Loan
Agreement was $2.2 million. 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 year ended June 30 2023. The Loan Agreement is
secured by substantially all of the Company’s assets.The 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
2023 $500000 was outstanding. The loan matures on December 10 2051 and carries an interest
rate of 3.75%. As of June 30 2023 and December 31 2022 the Company had accrued $29000 and
$20000 respectively 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 $811000 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 $453000 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.
12The Company has a $500000 loan from Carlisle Investments Inc. (“Carlisle”) 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
2023 the entire amount was outstanding and is included in current portion of long-term debt in the
Consolidated Balance Sheets. As of June 30 2023 and December 31 2022 the Company had
accrued $330000 and $300000 respectively of interest related to this loan which are included in
accrued liabilities in the Condensed Consolidated Balance Sheets. Marco Elser a director of the
Company exercises voting and dispositive power as investment manager of Carlisle.The Company has an additional $500000 loan from Carlisle at a fixed interest rate of 12.00% whichmatured on December 10 2017 with a bullet payment of all principal due at such time (the “SecondCarlisle 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 2023 and December 31 2022 the
Company had accrued $330000 and $300000 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 2023 and December 31 2022 the Company had outstanding $302000 of Notes. The
Notes matured as of March 1 2012 and are currently in default. As of June 30 2023 and December
31 2022 the Company had accrued $345000 and $332000 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.As of June 30 2023 and December 31 2022 the Company had outstanding $220000 of Debentures.The Debentures matured as of December 1 2012 and are currently in default. As of June 30 2023
and December 31 2022 the Company had accrued $284000 and $273000 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.
13The following table presents the components of net periodic pension cost for the three and six
months ended June 30 2023 and 2022:
Three months ended June 30 Six months ended June 30
In thousands 2023 2022 2023 2022
Interest cost $ 134 $ 76 $ 268 $ 152
Expected return on plan assets (146) (200) (291) (400)
Amortization of net actuarial loss 74 72 148 143
Net periodic pension expense (benefit) $ 62 $ (52) $ 125 $(105)
As of June 30 2023 the Company had recorded a current pension liability of $73000 which is
included in accrued liabilities in the Condensed Consolidated Balance Sheets and a long-term
pension liability of $2.9 million which is included in deferred pension liability and other in the
Condensed Consolidated Balance Sheets. As of December 31 2022 all pension contributions were
due more than one year from the reporting date so the Company did not record a current pension
liability and the Company had recorded a long-term pension liability of $2.9 million. There is not
expected to be a minimum required contribution in 2023.Note 9 – Leases
The Company leases administrative and manufacturing facilities through operating lease agreements.The Company has no finance leases as of June 30 2023. 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. In April 2023 the Company exercised its 5-year renewal
option at its Hazelwood MO facility. In connection with the renewal the Company remeasured its
lease liability which increased the ROU asset and lease liability by $1.6 million on the
remeasurement date.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.
14Supplemental information regarding leases:
June 30
In thousands unless otherwise noted 2023
Balance Sheet:
ROU assets $2155
Current lease liabilities – operating 497
Non-current lease liabilities - operating 1689
Total lease liabilities 2186
Weighted average remaining lease term (years) 4.0
Weighted average discount rate 10.1%
Future minimum lease payments:
Remainder of 2023 $ 223
2024545
2025560
2026577
2027451
Thereafter 414
Total 2770
Less: Imputed interest 584
Total lease liabilities 2186
Less: Current lease liabilities 497
Long-term lease liabilities $1689
Supplemental cash flow information regarding leases:
For the three months ended For the six months ended
In thousands June 30 2023 June 30 2023
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities $ 124 $ 248
Non-cash activity:
ROU assets obtained in exchange for lease liabilities 1601 1601
Total operating lease expense was $237000 and $239000 for the six months ended June 30 2023
and 2022 respectively. Total operating lease expense was $118000 and $109000 for the three
months ended June 30 2023 and 2022 respectively. There was no short-term lease expense for the
six months ended June 30 2023 and 2022. There was no short-term lease expense for the three
months ended June 30 2023 and 2022.
15Note 10 – Stockholders’ Deficit and (Loss) Income Per Share
The following table presents the calculation of (loss) income per share for the three and six months
ended June 30 2023 and 2022:
Three months ended June 30 Six months ended June 30
In thousands except per share data 2023 2022 2023 2022
Numerator:
Net (loss) income as reported $ (875) $ 530 $ (1733) $ 1023
Denominator:
Weighted average shares outstanding - basic 13491 13446 13469 13446
Weighted average shares outstanding - diluted 13491 13489 13469 13489
(Loss) earnings per share – basic and diluted $ (0.06) $ 0.04 $ (0.13) $ 0.08
Basic (loss) earnings per common share is computed by dividing net (loss) income attributable to
common shares by the weighted average number of common shares outstanding for the period.Diluted (loss) earnings per common share is computed by dividing net (loss) income 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.On March 28 2022 the Company issued stock options to purchase 280000 shares to executives and
employees at an exercise price of $0.40 per share which 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%.As of June 30 2023 the Company excluded the effects of the outstanding stock options to purchase
235000 shares in the calculation of diluted loss per share since their inclusion would have been anti-
dilutive. As of June 30 2023 and 2022 the Company had other warrants to purchase 1.6 million
shares of Common Stock outstanding which were excluded from the calculation of diluted income
(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.A summary of the status of the Company’s stock options as of June 30 2023 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 2022 280000 $0.40 3.3 $0.19
Granted - -
Expired 45000 $0.40 $0.19
Outstanding at June 30 2023 235000 $0.40 2.8 $0.19
Exercisable at the end of the period 235000 $0.40 2.8 $0.19
Equity based compensation was $38000 for each of the six months ended June 30 2023 and 2022.There was no equity based compensation for the three months ended June 30 2023. Equity based
compensation was $38000 for the three months ended June 30 2022. There is no more
unrecognized equity based compensation cost related to unvested stock options as of June 30 2023.
16Note 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 that the Company deems material.Note 12 – Related Party Transactions
The Company has the following related party transactions:
As of June 30 2023 Unilumin USA (“Unilumin”) owns 51.8% of the Company’s Common Stock
and beneficially owns 53.5% of the Company’s Common Stock. Nicholas J. Fazio Jie Feng and
Yantao Yu each directors of the Company are each directors and/or officers of Unilumin. Mr.Fazio and Mr. Yu are both executive officers of the Company but had not yet been added to the
Company’s payroll until January 2023 at annual rates of compensation of $125000 and $26000
respectively. In 2022 and prior they had been compensated solely by Unilumin with no charge to
the Company. In 2023 they continue to receive some compensation directly from Unilumin. The
Company purchased $1.1 million and $3.8 million of product from Unilumin in the six months
ended June 30 2023 and 2022 respectively and purchased $587000 and $2.7 million of product
from Unilumin in the three months ended June 30 2023 and 2022 respectively. The total amount
payable by the Company to Unilumin including accounts payable accrued interest and long-term
debt was $8.2 million and $7.3 million as of June 30 2023 and December 31 2022 respectively.The Company occupies space at no cost in a New York office that is leased by Unilumin.Marco Elser a director of the Company exercises voting and dispositive power as investment
manager of Carlisle. The total amount payable by the Company to Carlisle including accrued
interest and long-term debt was $1.7 million and $1.6 million as of June 30 2023 and December 31
2022 respectively.
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 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
17product 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 2023 and 2022. 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 2023 and 2022 is as follows:
Three months ended June 30 Six months ended June 30
In thousands 2023 2022 2023 2022
Revenues:
Digital product sales $2767 $7016 $ 6888 $10253
Digital product lease and maintenance 219 286 447 714
Total revenues $2986 $7302 $ 7335 $10967
Operating income (loss):
Digital product sales $ (181) $ 831 $ (482) $ 760
Digital product lease and maintenance 109 133 232 390
Corporate general and administrative expenses (490) (426) (949) (832)
Total operating (loss) income (562) 538 (1199) 318
Interest expense net (194) (130) (338) (272)
(Loss) gain on foreign currency remeasurement (51) 76 (59) 60
Gain on forgiveness of PPP loan - - - 824
Pension (expense) benefit (62) 52 (125) 105
(Loss) income before income taxes (869) 536 (1721) 1035
Income tax expense (6) (6) (12) (12)
Net (loss) income $(875) $ 530 $(1733) $ 1023
June 30 December 31
20232022
Assets
Digital product sales $6769 $8221
Digital product lease and maintenance 2454 1143
Total identifiable assets 9223 9364
General corporate 198 48
Total assets $9421 $9412
Note 14 – Subsequent Events
The Company has evaluated events and transactions subsequent to June 30 2023 and through the
date these Condensed Consolidated Financial Statements were included in this Form 10-Q and filed
with the SEC.
18Item 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 2022 Form 10-K.
19Results of Operations
Six Months Ended June 30 2023 Compared to Six Months Ended June 30 2022
The following table presents our Statements of Operations data expressed as a percentage of
revenue for the six months ended June 30 2023 and 2022:
Six months ended June 30
In thousands except percentages 2023 2022
Revenues:
Digital product sales $ 6888 93.9 % $10253 93.5 %
Digital product lease and maintenance 447 6.1 % 714 6.5 %
Total revenues 7346 100.0 % 10967 100.0 %
Cost of revenues:
Cost of digital product sales 6420 87.5 % 8758 79.9 %
Cost of digital product lease and maintenance 220 3.0 % 307 2.8 %
Total cost of revenues 6640 90.5 % 9065 82.7 %
Gross income 695 9.5 % 1902 17.3 %
General and administrative expenses (1894) (25.8)% (1584) (14.4)%
Operating (loss) income (1199) (16.3)% 318 2.9 %
Interest expense net (338) (4.6)% (272) (2.5)%
(Loss) gain on foreign currency remeasurement (59) (0.8)% 60 0.5 %
Gain on forgiveness of PPP loan - - % 824 7.5 %
Pension (expense) benefit (125) (1.7)% 105 1.0 %
(Loss) income before income taxes (1721) (23.5)% 1035 9.4 %
Income tax expense (12) (0.1)% (12) (0.1)%
Net (loss) income $ (1733) (23.6)% $ 1023 9.3 %
Total revenues for the six months ended June 30 2023 decreased $3.7 million or 33.1% to $7.3
million from $11.0 million for the six months ended June 30 2022 primarily due to a decrease in
Digital product sales as well as a decrease in Digital lease and maintenance revenues.Digital product sales revenues decreased $3.4 million or 32.8% for the six months ended June 30
2023 compared to the six months ended June 30 2022 primarily due to the non-recurrence of a
couple large sales that were delivered in the six months ended June 30 2022.Digital product lease and maintenance revenues decreased $267000 or 37.4% for the six months
ended June 30 2023 compared to the six months ended June 30 2022 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 2023 decreased $1.5 million to a
loss of $1.2 million from income of $318000 for the six months ended June 30 2022 principally
due to the decrease in revenues.Digital product sales operating income (loss) decreased $1.2 million to a loss of $482000 for the six
months ended June 30 2023 compared to income of $760000 for the six months ended June 30
2022 primarily due to the decrease in revenues. The cost of Digital product sales decreased $2.3
million or 26.7% primarily due to the decrease in revenues and an increase in the cost of revenue as
20a percentage of revenues. The cost of Digital product sales represented 93.2% of related revenues in
2023 compared to 85.4% in 2022. This increase as a percentage of revenues is primarily due to the
loss of some manufacturing efficiencies due to the decrease in revenues. General and administrative
expenses for Digital product sales increased $215000 or 29.3% primarily due to increases in
supplies employees’ expenses consulting expenses and marketing expenses partially offset by a
decrease in bad debt expenses.Digital product lease and maintenance operating income decreased $158000 or 40.5% for the six
months ended June 30 2023 compared to the six months ended June 30 2022 primarily as a result
of the decrease in revenues. The cost of Digital product lease and maintenance decreased $87000 or
28.3% primarily due to a decrease in depreciation expense. The cost of Digital product lease and
maintenance revenues represented 49.2% of related revenues in 2023 compared to 43.0% in 2022.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 $22000 or 129.4% primarily due to a reduction in bad debt expenses.Corporate general and administrative expenses increased $117000 or 14.1% for the six months
ended June 30 2023 compared to the six months ended June 30 2022 primarily due to increases in
employees’ expenses and consulting expenses.Net interest expense increased $66000 or 24.3% for the six months ended June 30 2023 compared
to the six months ended June 30 2022 primarily due to increases in interest rates and outstanding
debt.The effective tax rate for the six months ended June 30 2023 and 2022 was 0.7% and 1.2%
respectively. Both the 2023 and 2022 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 2023 Compared to Three Months Ended June 30 2022
The following table presents our Statements of Operations data expressed as a percentage of
revenue for the three months ended June 30 2023 and 2022:
Three months ended June 30
In thousands except percentages 2023 2022
Revenues:
Digital product sales $ 2767 92.7 % $ 7016 96.1 %
Digital product lease and maintenance 219 7.3 % 286 3.9 %
Total revenues 3015 100.0 % 7302 100.0 %
Cost of revenues:
Cost of digital product sales 2617 87.7 % 5800 79.5 %
Cost of digital product lease and maintenance 115 3.8 % 142 1.9 %
Total cost of revenues 2732 91.5 % 5942 81.4 %
Gross income 254 8.5 % 1360 18.6 %
General and administrative expenses (816) (27.3)% (822) (11.2)%
Operating (loss) income (562) (18.8)% 538 7.4 %
Interest expense net (194) (6.5)% (130) (1.8)%
(Loss) income on foreign currency remeasurement (51) (1.7)% 76 1.0 %
Pension (expense) benefit (62) (2.1)% 52 0.7 %
(Loss) income before income taxes (869) (29.1)% 536 7.3 %
Income tax expense (6) (0.2)% (6) - %
Net (loss) income $ (875) (29.3)% $ 530 7.3 %
Total revenues for the three months ended June 30 2023 decreased $4.3 million or 59.1% to $3.0
million from $7.3 million for the three months ended June 30 2022 primarily due to an decrease in
Digital product sales.Digital product sales revenues decreased $4.2 million or 60.6% for the three months ended June 30
2023 compared to the three months ended June 30 2022 primarily due to the non-recurrence of a
couple large sales that were delivered in the three months ended June 302022.Digital product lease and maintenance revenues decreased $67000 or 23.4% for the three months
ended June 30 2023 compared to the three months ended June 30 2022 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 2023 decreased $1.1 million to a
loss of $562000 from income of $538000 for the three months ended June 30 2022 principally due
to the decrease in revenues
Digital product sales operating income (loss) decreased $1.0 million to a loss of $181000 for the
three months ended June 30 2023 compared to income of $831000 for the three months ended June
30 2022 primarily due to the decrease in revenues. The cost of Digital product sales decreased $3.2
million or 54.9% primarily due to the decrease in revenues and an increase in the cost of revenue as
a percentage of revenues. The cost of Digital product sales represented 94.6% of related revenues in
2023 compared to 82.7% in 2022. This increase as a percentage of revenues is primarily due to the
22loss of some manufacturing efficiencies due to the decrease in revenues. General and administrative
expenses for Digital product sales decreased $54000 or 14.0% primarily due to decreases in
consulting expenses and bad debt expenses.Digital product lease and maintenance operating income decreased $24000 or 18.0% for the three
months ended June 30 2023 compared to the three months ended June 30 2022 primarily as a result
of the decrease in revenues. The cost of Digital product lease and maintenance decreased $27000 or
19.0% primarily due to a decrease in depreciation expense. The cost of Digital product lease and
maintenance revenues represented 52.5% of related revenues in 2023 compared to 49.7% in 2022.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 $16000 or 145.5% primarily due to a decrease in bad debt expenses.Corporate general and administrative expenses increased $64000 or 15.0% for the three months
ended June 30 2023 compared to the three months ended June 30 2022 primarily due to increases
in consulting expenses and employees’ expenses.Net interest expense increased $64000 or 49.2% for the three months ended June 30 2023
compared to the three months ended June 30 2022 primarily due to increases in interest rates and
outstanding debt.The effective tax rate for the three months ended June 30 2023 and 2022 was 0.7% and 1.1%
respectively. Both the 2023 and 2022 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 including being in default on several debt obligations. The Company recorded a
loss of $1.7 million in the six months ended June 30 2023. The Company had working capital
deficiencies of $11.2 million and $9.3 million as of June 30 2023 and December 31 2022
respectively. The increase in the working capital deficiency was primarily affected by decreases in
inventories and prepaids and other assets as well as increases in accounts payable and accrued
liabilities. These changes were partially offset by increases in receivables and cash as well as
decreases in customer deposits and current lease liabilities.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
23our 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 continue as a going concern 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 generated cash of $598000 from operating activities and used cash of $1.1 million
from operating activities for the six months ended June 30 2023 and 2022 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 cash equivalents and restricted cash increased $350000 in the six months ended June 30 2023
to $398000 at June 30 2023 from $48000 at December 31 2022. The increase is primarily
attributable to cash provided by operating activities of $598000 partially offset by purchases of
equipment of $248000. 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 2023 until the
underlying debts mature. As interest rates have increased in 2023 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 2023 for the
remainder of 2023 and over the next four fiscal years:
Remainder of
In thousands 2023 2024 2025 2026 2027
Long-term debt including interest $5267 $ 31 $ 31 $ 31 $ 31
Pension plan payments - 702 364 323 298
Estimated warranty liability 236 81 61 51 38
Operating lease payments 223 545 560 577 451
Total $5726 $1359 $1016 $982 $818
As of June 30 2023 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
24be 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
There is not expected to be a minimum required pension plan contribution for 2023. 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 $22000. 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 $249000 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 2023.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
25disclosure 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 2023.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 2023 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 2022.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.Item 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 2023 and
December 31 2022 the Company had accrued $345000 and $332000 respectively of interest
related to the Notes which is included in accrued liabilities in the Condensed Consolidated Balance
Sheets.
26As 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 2023 and December 31 2022 the Company had
accrued $284000 and $273000 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.
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 2023 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
27extension 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 2023
28