CONCENTRATION OF OWNERSHIP AMONG OUR PRINCIPAL STOCK HOLDERS MAY LIMIT OUR OTHER STOCKHOLDERS FROM INFLUENCING SIGNIFICANT COMPANY DECISIONS

As of March 29, 2018, 10 stockholders who are executive officers and/or directors of the Company beneficially own approximately 48.1% of our Common Stock and19, 2020, one stockholder, who is neither an officer nor a director of the CompanyUnilumin North America Inc. (“Unilumin”), beneficially owns approximately 30.1%52.0% of our Common Stock.  In addition, three of the Company’s five directors are employed by Unilumin or other entities affiliated with Unilumin.  Accordingly, such stockholdersstockholder could exert significant control over any potential stockholder actions. The interests of this stockholder may not align with our interests or the interests of other stockholders and thereby could control our policies and operations, including the election of directors, the appointment of management, future issuances of our Common Stock or other securities, the incurrence or modification of debt by us, amendments to our Certificate of Incorporation and bylaws, and the entering of extraordinary transactions, such as a merger or sale of all or substantially all of our assets.  In addition, this majority stockholder will be able to cause or prevent a change of control of the Company and could preclude any unsolicited acquisition of the Company.  This concentration of ownership could deprive stockholders of an opportunity to receive a premium for their shares of Common Stock as part of a sale of the Company and ultimately might affect the market price of the Common Stock.

WE DO NOT EXPECT TO PAY ANY DIVIDENDS ON OUR COMMON STOCK FOR THE FORESEEABLE FUTURE

We currently expect to retain all future earnings, if any, for future operation, expansion and debt repayment and have no current plans to pay any cash dividends to holders of our Common Stock for the foreseeable future.  Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our operating results, financial condition, cash requirements, contractual restrictions and other factors that our Board of Directors may deem relevant.  In addition, we must comply with the covenants in our credit agreement in order to be able to pay cash dividends, and our ability to pay dividends generally may be further limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur.  As a result, you may not receive any return on an investment in our Common Stock unless you sell our Common Stock for a price greater than that which you paid for it.

OUR COMMON STOCK IS QUOTED ON OTC PINK AND MAY BE SUBJECT TO LIMITED TRADING VOLUME AND PRICE VOLATILITY

Our Common Stock is quoted on the OTC Pink, an inter-dealer electronic quotation and trading system for equity securities.  Quotation of our Common Stock on OTC Pink may limit the liquidity and price of our Common Stock more than if our Common Stock were quoted or listed on the NASDAQ Stock Market or another national exchange.  Some investors may perceive our Common Stock to be less attractive because it is traded in the over-the-counter market.  In addition, as an OTC Pink company, we do not attract the extensive analyst coverage that accompanies companies listed on national exchanges.  Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on OTC Pink.  These factors may have an adverse impact on the trading and price of our Common Stock.

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Our Common Stock is not widely held and the volume of trading has been relatively low and sporadic.  Accordingly, our Common Stock is subject to increased price volatility and reduced liquidity.  There can be no assurance that a more active trading market for our Common Stock will develop or be sustained if it does develop.  The market price of our Common Stock has been and may continue to be subject to wide fluctuations in response to numerous factors, some of which are beyond our control.  These factors include, among other things, the factors described in the sections entitled “Safe Harbor Statement under the Private Securities Reform Act of 1995” and “Risk Factors” in this Annual Report on Form 10-K, the general state of the securities markets and the market for similar stocks, changes in capital markets that affect the perceived availability of capital to companies in our industry, and governmental legislation or regulation, as well as general economic and market conditions.

WE ARE DEPENDENT ON A SIGNIFICANT CUSTOMER

For the year ended December 31, 2017, we had one customer which accounted for 23.2% of our total revenue.  We do not expect similar revenues from this customer in 2018, which could have a material adverse effect on our results of operations.  In 2016, there were no customers that accounted for at least 10% of our total revenues.

ITEM 1B.              UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.                 PROPERTIES

The Company’s headquarters and principal executive offices are located in a leased facility at 135 East 57^th Street, 14^th Floor, New York, New York, at an annual rental of $143,000,$135,000, which it uses as its primary executive, sales and administrative office.  The Company leases a facility in Des Moines, Iowa, at an annual rental of $158,000, which is used for manufacturing, sales and administrative operations.  The Company leases a facility in Hazelwood, Missouri, at an annual rental of $323,000,$334,000, which is being used for manufacturing operations.The Company leases a facility in Urbandale, Iowa, at an annual rental of $28,000, which is used for sales and administrative operations.

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The aggregate property rent expense was $848,000$608,000 and $625,000$662,000 for the years ended December 31, 20172019 and 2016,2018, respectively.

ITEM 3.                 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.  A vendor has brought a claim against us for $87,000 plus interest and damages.  TheThere are no open matters that the Company has accrued for the $87,000 plus interest in Accounts payable and in Accrued liabilites in the Consolidated Balance Sheet at December 31, 2017. deems material.

ITEM 4.                 MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.                 5.                MARKET FOR THE REGISTRANT’S COMMON EQUITY,, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)               The Company’s Common Stock trades on the OTCQBOTC Pink under the symbol “TNLX.”  Sales price information is set forth in Item 5(d) below.

(b)  The Company had approximately 22386 holders of record of its Common Stock as of March 29, 2018.19, 2020.  The number of record holders does not include DTC participants or beneficial owners holding shares through nominee names.

(c)  The Board of Directors did not declare any cash dividends on Common Stock during 20172019 and the Company does not anticipate paying any cash dividends on its Common Stock for the foreseeable future.  In addition,As discussed in Note 14 to the terms ofConsolidated Financial Statements – Stockholders’ Deficit, the Company’s Credit Agreement with CNH restrict the payment ofCompany paid dividends on our Common Stock.  The Board of Directors declared cash dividends of $6.00 per shareits then outstanding SBCPS in April and November 2017, aggregating approximately $198,000, for each share of SBCPS.  As described herein, the SBCPS carries a 6.0% cumulative annual dividend.accordance with their terms.

(d)           The following table sets forth the range of Common Stock prices on the OTCQB:(b)           Not applicable.

(e)                 (c)          The Company did not purchase any of its equity securities during any month of the fourth fiscal quarter of 2017.2019.

ITEM 6.                SELECTED FINANCIAL DATA

(a)                 Not applicable.

(b)                 Not applicable.

ITEM 7.                 7.                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Trans-Lux is a leading supplier of LED technology for displays and lightingdisplay applications.  The essential elements of these systems are the real-time, programmable digital products and lighting fixtures 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’s LED lighting fixtures offer energy-saving lighting solutions that feature a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs.  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 and LED lighting solutions.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.

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Going Concern

We do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business.  As a result, our short-term business focus has been to preserve our liquidity position.  Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months from the issuance of this Form 10-K.  In addition, the Company’s obligations under its defined benefit pension plan exceeded plan assets by $4.2 million at December 31, 2017, including $576,000 of minimum contributions due over the next 12 months.  The Company is in default on its Notes and Debentures, which have remaining principal balances of $387,000 and $220,000, respectively.  As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan, (iii) make the required principal and interest payments on the Notes and the Debentures and/or (iv) repay our obligations under our Credit Agreement with CNH, there would be a significant adverse impact on the financial position and operating results of the Company.

Moreover, because of the uncertainty surrounding our ability to obtain additional liquidity and the potential of the noteholders and/or trustees to give notice to the Company of a default on either the Debentures or the Notes, our independent registered public accounting firm has issued an opinion on our Consolidated Financial Statements that states that the Consolidated Financial Statements were prepared assuming we will continue as a going concern.  See Note 2 to the Consolidated Financial Statements - Going Concern.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an ongoing basis, management evaluates its estimates and judgments, including those related to uncollectible accounts receivable, slow-moving and obsolete inventories, rental equipment, goodwill, income taxes, warranty reserve, warrant liabilities,warrants, pension plan obligations, contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  Management has discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of the Board of Directors.

Management believes the following critical accounting policies, among others, involve its more significant judgments and estimates used in the preparation of its Consolidated Financial Statements:

Uncollectible Accounts Receivable:  The Company maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of its customers to make required payments.  Should non-payment by customers differ from the Company’s estimates, a revision to increase or decrease the allowance for uncollectible accounts receivable may be required.

Slow-Moving and Obsolete Inventories:  The Company writes down its inventory for estimated obsolescence equal to the difference between the carrying value of the inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.  If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

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Rental Equipment:  The Company evaluates rental equipment assets for possible impairment annually to determine if the $2.0 million$927,000 carrying amount of such assets may not be recoverable.  The Company uses a cash flow model to determine the fair value under the income approach, based on the remaining lengths of existing leases.  Changes in the assumptions used could materially impact our fair value estimates.  Assumptions critical to our fair value estimates are projected renewal rates and CPI rate changes.  These and other assumptions are impacted by national and global economic conditions including changes in national and international interest rates, taxes, inflation, etc. and will change in the future based on period-specific facts and circumstances, thereby possibly requiring an impairment charge in the future.  The December 31, 20172019 impairment analysis included a renewal rate estimate of 89.2%90.2% and a CPI rate change of approximately 1.8%2.2%, which were the actual average rates for the two-year period ended December 31, 2017.2019.  Based on these assumptions, the cash flow model determined a fair value of $8.0$6.7 million, exceeding its carrying value by 298%617%.  Therefore there is no impairment of the Rental Equipment.  For every 1-percentage-point change in the renewal rate, the valuation would change by approximately $151,000.$155,000.  For every 0.1-percentage-point change in the CPI rate, the valuation would change by approximately $23,000.$14,000.

Rental equipment is comprised of installed digital products on lease that are primarily used for indoor trading applications, time and temperature displays and other digital message displays and have estimated useful lives of 10-15 years.  For example, the Company is party to contracts for equipment originally installed over 30 or 40 years ago in the 1970’s and 1980’s, as well as dozens of installations from the 1990’s that are still in operation.  Current contracts have an average age of 19.620.4 years from their installation dates through the expiration of their current terms.

Goodwill:  The Company evaluates goodwill for possible impairment annually and when events or changes in circumstances indicate that the carrying amount may not be recoverable.  The Company uses the income and the market approach to test for impairment of its goodwill, and considers other factors including economic trends and our market capitalization relative to net book value.  The Company weighs these approaches by using a 67% factor for the income approach and a 33% factor for the market approach.  Together these two factors estimate the fair value of the reporting unit.  The Company’s $744,000 goodwill relates to its digital product sales reporting unit.  The Company uses a discounted cash flow model to determine the fair value under the income approach which contemplates a conservative overall weighted average revenue growth rate.  If the Company were to reduce its revenue projections on the reporting unit by 3.35.5 percentage points within the income approach, the fair value of the reporting unit would be below carrying value.  The gross profit margins used were consistent with historical margins achieved by the Company during previous years.  If there is a margin decline of 3.06.7 percentage points or more, the model would yield results of a fair value less than the carrying amount.  The Company uses a market multiple approach based on revenue to determine the fair value under the market approach which includes a selection of and market price of a group of comparable companies and the performance of the guidelines of the comparable companies and of the reporting unit.

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The October 1, 20172019 annual review indicated that the fair value of the reporting unit exceeded its carrying value by 169.2%96.1%.  Therefore, there was no impairment of goodwill related to our digital product sales reporting unit.  Changes in the assumptions used could materially impact our fair value estimates.  Assumptions critical to our fair value estimates are: (i) discount rate used to derive the present value factors used in determining the fair value of the reporting unit, (ii) projected average revenue growth rates used in the reporting unit models and (iii) projected long-term growth rates used in the derivation of terminal year values.  These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period-specific facts and circumstances, thereby possibly requiring an impairment charge in the future.

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.  In May 2017, the Company deposited $650,000 in a savings account as collateral for a letter of credit in favor of the City of Hazelwood, Missouri as collateral for a forgivable loan.  In July 2016, the Company deposited $400,000 in a savings account as collateral for a letter of credit in favor of the landlord at its Hazelwood, Missouri manufacturing facility as a security deposit.  In October 2017, the security deposit was reduced by $100,000 to $300,000, in October 2018, the security deposit was reduced by $50,000 to $250,000, and in October 2019, the security deposit was reduced by an additional $50,000 to $200,000, so the related letter of credit and savings account deposit were also reduced.  In July 2014, the Company deposited $212,000 in a savings account as collateral for a letter of credit in favor of the landlord at its former New York headquarters as a security deposit.  The lease expired on November 29, 2017 and the related letter of credit was released on February 9, 2018.  The Company has presented these funds in Restricted cash in the Consolidated Balance Sheets since the use of the funds under the letters of credit is restricted.

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Income Taxes:  The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized.  While the Company has considered future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.  Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.

Warranty Reserve:  The Company provides for the estimated cost of product warranties at the time revenue is recognized.  While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates.  Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.

Pension Plan Obligations:  The Company is required to make estimates and assumptions to determine the obligation of our pension benefit plan, which includes investment returns and discount rates.  The Company recorded after-tax charges in unrecognized pension liability of $95,000$342,000 and $409,000$653,000 in 20172019 and 2016,2018, respectively, in other comprehensive loss.  Estimates and assumptions are reviewed annually with the assistance of external actuarial professionals and adjusted as circumstances change.  Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of liability and expense we recognize.  At December 31, 2017,2019, plan assets were invested 28.0%30.7% in fixed income contracts and 72.0%69.3% in equity and index funds.  The investment return assumption takes the asset mix into consideration.  The assumed discount rate reflects the rate at which the pension benefits could be settled.  The Company utilizes a yield curve in lieu of a single weighted discount rate in determining liabilities and the interest cost for the following year.  At December 31, 2017,2019, the weighted average rates used for the computation of benefit plan liabilities were: investment returns, 8.00% and discount rate, 3.66%4.30%.  The net periodic cost for 20182020 will be based on the December 31, 20172019 valuation.  The defined benefit pension plan periodic cost (benefit) was ($31,000)$79,000 and $14,000($103,000) in 20172019 and 2016,2018, respectively.  At December 31, 2017,2019, assuming no change in the other assumptions, a one-percentage point increase/(decrease) in the discount rate would have increased/(decreased) the net periodic cost by $7,000/$5,000/($16,000)13,000).

As of December 31, 2003, the benefit service under the defined benefit pension plan had been frozen and, accordingly, there is no service cost for the years ended December 31, 20172019 and 2016.2018.  In March 2010, 2011 and 2013, the Company submitted to the IRS requests for waivers of the 2009, 2010 and 2012 minimum funding standards for its defined benefit pension plan.  As of December 31, 2017, the Company has fully repaid the amounts deferred for each of these waivers.  In 2017,2019, we made $298,000 of the $444,000$629,000 of minimum required contributions to the plan.  Subsequent to December 31, 2019, we made an $85,000 contribution to the plan.  At this time, we expect to make our remaining minimum required contributions in 20182020 of $576,000, which includes the balance of the 2017 minimum required contributions;$556,000; however, there is no assurance that we will be able to make any or all of such remaining payments.  See Note 1315 to the Consolidated Financial Statements – Pension Plan for further details.

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Contingencies and Litigation:  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.A vendor has brought a claim against us for $87,000 plus interest and damages.  There are no open matters that the Company deems material.

The Company has accrued for the $87,000 plus interest in Accounts payable and in Accrued liabilites in the Consolidated Balance Sheet at December 31, 2017.  Potential damages, if any, are not yet determinable.

On May 23, 2017, the Company receiveda $650,000 structured as a forgivable loan from the City of Hazelwood, Missouri, which is included in Forgivable loanLong-term debt in the Consolidated Balance Sheets.  The loan will be forgiven on a pro-rata basis if predetermined employment levels are attained and would expire on April 1, 2024.2025.  If the Company attains the employment levels required by the agreement, there is no interest due, otherwise interest accrues at a rate of prime plus 2.00% (6.50%(6.75% at December 31, 2017)2019).  In February 2018, in accordance with the agreement, the Company requested a 1-year extension of the terms of the agreement, which was approved by the City of Hazelwood in March 2018, so the agreement now terminates on April 1, 2025.  As of December 31, 2017,2019, the Company hashad accrued interest of $26,000.

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Results of Operations

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the years ended December 31, 20172019 and 2016:2018:

20172019 Compared to 20162018

Total revenues for the year ended December 31, 20172019 increased $3.2$2.6 million or 15.3%18.3% to $24.4$17.0 million from $21.2$14.4 million for the year ended December 31, 2016,2018, primarily due to an increase in Digital product sales, partially offset by a decreasedecreases in consulting services and Digital product lease and maintenance.

Digital product sales revenues increased $2.7 million or 23.0% to $14.7 million for the year ended December 31, 2017 increased $4.02019 compared to $12.0 million or 21.8%,for the year ended December 31, 2018, primarily due to a single large scoreboard customer sale,increases in the sports market, partially offset by a reductiondecrease in other sales to the scoreboard and lighting markets.consulting services.

Digital product lease and maintenance revenues decreased $116,000 or 4.8% to $2.3 million for the year ended December 31, 2017 decreased $703,000 or 23.0%,2019 compared to $2.4 million for the year ended December 31, 2018, primarily due to the continued expected revenue decline in the older outdoor display equipment rental and maintenance bases acquired in the early 1990s.

Total gross margin  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 the year ended December 31, 2017 decreased to 15.3% from 27.4% for the year ended December 31, 2016, primarily due to the strategically reduced margin on the single large scoreboard customer sale, partially offset by lower depreciation expense related to Digital product lease and maintenance revenues, as well as increased efficiencies achieved in our manufacturing facility.smaller applications.

Total operating loss for the year ended December 31, 2017 increased $2.02019 decreased $3.6 million to $2.8$451,000 from $4.0 million as compared to $820,000 for the year ended December 31, 2016,2018, principally due to the decreaseincrease in gross margin.revenues and a reduction in general and administrative expenses, partially offset by an increase in restructuring costs.

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Digital product sales operating income (loss) increased $1.9 million to income decreased $1.8 millionof $183,000 for the year ended December 31, 2019 compared to a loss of $149,000 as compared to income of $1.6$1.7 million for the year ended December 31, 2018, primarily due to the increase in revenues and a decrease in gross margin.general and administrative expenses.  The cost of Digital product sales increased $5.9$2.2 million or 43.9%21.6%, primarily due to the decreased gross margin on the single large scoreboard customer sale and the increase in revenues.  The cost of Digital product sales represented 87.0%83.4% of related revenues in 20172019 compared to 73.6%84.4% in 2016.2018.  General and administrative expenses for Digital product sales general and administrative expenses decreased $131,000$1.4 million or 4.2%37.5%, primarily due to a decrease in bad debt expense.expenses, specifically related to two customers in 2018.

Digital product lease and maintenance operating income decreased $172,000increased $690,000 or 20.8%,65.0% to $1.8 million for the year ended December 31, 2019 compared to $1.1 million for the year ended December 31, 2018, primarily as a result of a decreasedecreases in revenues,general and administrative expenses and in the cost of Digital product lease and maintenance, partially offset by the decrease in depreciation expense.revenues.  The cost of Digital product lease and maintenance decreased $542,000$459,000 or 26.7%37.2%, primarily due to thea decrease in depreciation expense.  The cost of Digital product lease and maintenance revenues represented 63.4%33.3% of related revenues in 20172019 compared to 66.6%50.6% in 2016.2018.  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 general and administrative expenses increased $11,000decreased $347,000 or 5.6%239.3%, primarily due to an increasea decrease in bad debt expense.

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Corporate general and administrative expenses increased $74,000decreased $978,000 or 2.3%,29.1% to $2.4 million for the year ended December 31, 2019 compared to $3.4 million for the year ended December 31, 2018, primarily due to decreases in payroll and expenses related to employees and directors of $670,000, consulting expenses of $355,000 and professional fees of $216,000, partially offset by an increase in payroll and benefits, partially offset by decreases in insurance, legal and pension plan expenses.restructuring costs of $306,000.

Net interest expense increased $334,000decreased $436,000 or 89.3%,46.4% to $504,000 for the year ended December 31, 2019 compared to $940,000 for the year ended December 31, 2018, primarily due to an increasea decrease in the average outstanding long-term debt, as well as an increase in interest rates.due to the termination of the CNH Finance Fund I, L.P. (“CNH”) loans and the SMI and SMII notes (hereinafter defined).

The loss on foreign currency remeasurement increased $133,000 to $178,000 in 2017 as compared to $45,000 in 2016, primarily due to increased fluctuations in the exchange rate between currency in Canada and the United States.

Gain on extinguishment of debt in 2016 relatesfor the year ended December 31, 2019 represented the write-off of the remaining debt discount costs and the termination fees related to the Company’s offers to exchange each $1,000 of principal of its NotesCNH and Debentures, forgiving any related interest, for $200 in cash, for an aggregate paymentSM Investors loans, partially offset by the Companygain on the extinguishment of $71,000.

Warrant expense in 2016 is attributable to the amortization$35,000 of equity warrants granted to directors in 2013.Notes.

The effective tax rate for the years ended December 31, 20172019 and 20162018 was a benefitan expense of 20.9%3.0% and 9.7%1.0%, respectively.  In 20172019 and 2016,2018, the Company recognized benefitsincome tax expense of $777,000$41,000 and $89,000, respectively, as a result of refundable alternative minimum tax (“AMT”) credits.$47,000, respectively.  The income tax benefitexpense in 20172019 and 20162018 is also affected by income tax expense related to the Company’s Canadian subsidiary and 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 hascontinues to have a significant working capital deficiency.  The Company incurred a net loss of $2.8$1.4 million in 2017the year ended December 31, 2019 and had a working capital deficiency of $5.8$3.1 million as of December 31, 2017.2019.  As of December 31, 2018, the Company had a working capital deficiency of $8.5 million.  The decrease in the working capital deficiency as compared to December 31, 2018 is primarily due to the $5.3 million of net proceeds received from the exercises of the Unilumin Warrant and the $2.4 million of net proceeds raised from the Rights Offering (hereinafter defined), which allowed us to decrease the current portion of long-term debt and accounts payable.

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.  As a result, we have experienced a decline in our lease and maintenance bases.  The cash flows of the Company are constrained, and inIn order to more effectively manage its cash resources, in these challenging economic times, the Company has,had, from time to time, increased the timetable of its payment of some of its payables.  There can be no assurance that we will meetpayables, which had, from time to time,  delayed certain product deliveries from our anticipated current and near-termvendors, which in turn had, from time to time, delayed certain deliveries to our customers.  The recent cash requirements.infusions have resolved these previous issues.

A stockholder of the Company has committed to providing additional capital of up to $2.0 million, to the extent necessary to fund operations.  Management believes that its current cash resources and cash provided by operations would notwill be sufficient to fund its anticipated current and near-term cash requirements and is seeking additional financing in order to execute our operating plan.  We cannot predict whether future financing, if any, will be in the form of equity, debt, or a combination of both.  We may not be able to obtain additional funds on a timely basis, on acceptable terms, or at all, and we have no commitments, agreements or understandings with respect to any equity or debt financing.  Moreover, our ability to receive debt financing could be restricted by the covenants of our Credit Agreement with CNH and any equity financing we receive could be substantially dilutive to our shareholders.  The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities.

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The Company used cash for operating activities of $810,000$4.3 million and $772,000 for$1.1 million in the years ended December 31, 20172019 and 2016,2018, respectively.  The Company has implemented several initiatives to improve operational results and cash flows over future periods, including reducing headcount, reorganizing its sales department and outsourcing its human resources department and expanding its sales and marketing efforts in the LED lighting market.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 increased $141,000and restricted cash decreased $238,000 in 2017.2019.  The increasedecrease is primarily attributable to borrowingscash used in operating activities of long-term debt of $3.5$4.3 million, and proceeds from a forgivable loan of $650,000, offsetprimarily to reduce accounts payable by $2.8 million, payments of long-term debt of $2.2$1.6 million cash used for operations of $810,000, cash designated as restricted cash of $550,000, investments in equipment for rental, property and equipment of $222,000to terminate term loans and payments of dividends on$1.4 million to terminate the SBCPSCredit Agreement (hereinafter defined), partially offset by the net proceeds from the exercises of $198,000.the Unilumin Warrant (hereinafter defined) of $5.3 million and the net proceeds from the Rights Offering (hereinafter defined) of $2.4 million.  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 long-term debt agreements, payments to the Company’s pension plan, employment agreement payments, warranty liabilities and rental 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 20172019 until the underlying debts mature.

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The following table summarizes the Company’s fixed cash obligations as of December 31, 20172019 over the next five fiscal years:

OfAs of December 31, 2019, the fixed cash obligations for debt for 2018, $1.0 million, including interest,Company still had outstanding $352,000 of Notes and Debentures remains outstanding.which matured as of March 1, 2012.  The Company also still had outstanding $220,000 of Debentures which matured on December 1, 2012.  The Company continues to consider future exchanges of the $352,000 of remaining Notes and $220,000 of remaining Debentures, but has no agreements, commitments or understandings with respect to any further exchanges.  See Note 12 to the Consolidated Financial Statements – Long-Term Debt for further details.

On September 16, 2019, the Company entered into the Loan Agreement (hereinafter defined) with MidCap (hereinafter defined).  The Loan Agreement has a term of three years, 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% (6.66% at December 31, 2019) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes.  LIBOR is seekingexpected to be discontinued after 2021.  The Loan Agreement with MidCap provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable.  We however can provide no assurance regarding the impact of the discontinuation of LIBOR on the interest rate that we would be required to pay or on our financial condition.  As of December 31, 2019, there is no balance outstanding under the Loan Agreement.

For a further description of the Company’s long-term debt, see Note 12 to the Consolidated Financial Statements – Long-Term Debt.  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.

Long-Term Debt

On July 12, 2016, the Company and its wholly-owned subsidiaries Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation (the “Borrowers”) entered into a credit and security agreement, as subsequently amended on September 8, 2016, February 14, 2017, March 28, 2017, July 28, 2017, October 10, 2017, November 9, 2017, November 16, 2017 and March 14, 2018 (collectively, the “Credit Agreement”) with CNH as lender.  Under the Credit Agreement, the Company can borrow up to an aggregate of $4.0 million, which includes (i) up to $3.0 million of a revolving loan, at an interest rate of prime plus 4.0% (amended to be prime plus 6.0% effective March 1, 2018), and (ii) a $1.0 million term loan, at an interest rate of prime plus 6.0%.  The availability under the revolving loan is calculated based on certain percentages of eligible receivables and inventory.  During 2017, the Company had drawn $917,000 on the revolving loan and $600,000 on the term loan.  As of December 31, 2017, $2.7 million and $790,000, respectively, were outstanding on the revolving loan and the term loan, respectively.  Interest under the Credit Agreement is payable monthly in arrears.  The Credit Agreement also requires the payment of certain fees, including, but not limited to a facility fee, an unused line fee and a collateral management fee.  See Note 11 to the Consolidated Financial Statements – Long-Term Debt for further details.

The Credit Agreement contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Borrowers to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 starting with their August 31, 2017 financial statements and a loan turnover rate of no more than 35 days.  As of December 31, 2017, the fixed charge ratio was 0.0 to 1.0 and the loan turnover rate was 44 days, so the Company was not in compliance with all covenants.  The Company entered into an Eighth Amendment to the Credit Agreement dated as of March 14, 2018 with CNH, to waive the Company’s non-compliance with these financial covenants and to amend the interest rate of prime plus 4.0% to be prime plus 6.0% effective March 1, 2018.

On April 27, 2016, the Company received a $500,000 loan from Carlisle Investments Inc. (“Carlisle”) at a fixed interest rate of 12.00%, which is due to mature on April 27, 2019 with a bullet payment of all principal due at such time.  Interest is payable monthly.  Marco Elser, a director of the Company, exercises voting and dispositive power as investment manager of Carlisle.

On November 6, 2017, the Company received an additional $500,000 loan from Carlisle at a fixed interest rate of 12.00%, which was due to mature on December 10, 2017 with a bullet payment of all principal due at such time (the “Second Carlisle Agreement”).  Interest is payable monthly.  As of December 31, 2017, the outstanding balance was $500,000.  Marco Elser, a director of the Company, exercises voting and dispositive power as investment manager of Carlisle.

On July 15, 2016, holders of $239,000 of the Notes and $114,000 of the Debentures accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $200 in cash, for an aggregate payment by the Company of $71,000.  The Company continues to consider future exchanges of the $387,000 of remaining Notes and $220,000 of remaining Debentures, but has no agreements, commitments or understandings with respect to any further such exchanges.  As of December 31, 2017, the Company still had outstanding $387,000 of Notes which matured as of March 1, 2012.  The Company also still had outstanding $220,000 of Debentures which matured on December 1, 2012.  See Note 11 to the Consolidated Financial Statements – Long-Term Debt for further details.

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Pension Plan Contributions

In March 2010, 2011 and 2013, the Company submitted to the IRS requests for waivers of the 2009, 2010 and 2012 minimum funding standards for its defined benefit pension plan.  As of December 31, 2017, the Company had fully repaid the amounts deferred for each of these waivers.  In 2017,2019, we made $298,000 of the $444,000$629,000 of minimum required contributions to the pension benefit plan.  Subsequent to December 31, 2019, we made an $85,000 contribution to the pension benefit plan.  At this time, we expect to make our minimum required contributions to the pension benefit plan in 20182020 of $576,000, which includes the balance of the 2017 minimum required contributions;$556,000; however, there is no assurance that we will be able to make any or all of such remaining payments.  See Note 1315 to the Consolidated Financial Statements – Pension Plan for further details.

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Off-Balance Sheet Arrangements:  The Company has no majority-owned subsidiaries that are not included in the Consolidated Financial Statements nor does it have any interests in or relationships with any special purpose off-balance sheet financing entities.

Safe Harbor Statement under the Private Securities Reform Act of 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Any statement that is not a statement of historical fact should be considered a forward-looking statement.  We often use words or phrases of expectation or uncertainty like “believe,” “anticipate,” “plan,” “expect,” “intent,” “project,” “future,” “may,” “will,” “could,” “would” and similar words to help identify forward-looking statements.  Examples of forward-looking statements include statements regarding our future financial results, operating results, business strategies, projected costs, product development or future sales, competitive positions and plans and objectives of management for future operations.

We have based these forward-looking statements on our current expectations and projections about future events.  However, they are subject to various risks and uncertainties, many of which are outside our control, including the circumstances described in the section entitled “Risk Factors” in this report.  Accordingly, our actual results or financial condition could differ materially and adversely from those discussed in, or implied by, these forward-looking statements.  We caution you not to place undue reliance on our forward-looking statements.  Each forward-looking statement speaks only as of the date on which it is made, and, except to the extent required by federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 7A.              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 1112 to the Consolidated Financial Statements – Long-Term Debt.  Every 1-percentage-point change in interest rates would result in an annual interest expense fluctuation of approximately $42,000.$7,000.  In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of investment in its Canadian subsidiary.  A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $284,000,$263,000, based on dealer quotes, considering current exchange rates.  The Company does not enter into derivatives for trading or speculative purposes and did not hold any derivative financial instruments at December 31, 2017.2019.

ITEM 8.                 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements of Trans-Lux Corporation and its subsidiaries are included on the following pages:

Consolidated Balance Sheets as of December 31, 2019 and 201816

Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018                                                    17

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019 and 2018                                    17

Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended December 31, 2019 and 2018                18

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018                                                   19

Notes to Consolidated Financial Statements                                                              ��                                                               20

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Trans-Lux Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Trans-Lux Corporation and Subsidiaries (the “Company”) as of December 31, 20172019 and 2016,2018, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2017,2019, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017,2019, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going ConcernAdoption of New Accounting Standards

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As more fully describeddiscussed in Note 21 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a significant working capital deficiency that raise substantial doubt aboutchanged its ability to continue as a going concern.  Further, the Company ismethod of accounting for leases in default of the indenture agreements governing its outstanding 9½% subordinated debentures which were due in 2012 (the "Debentures") and its 8¼% limited convertible senior subordinated notes which were due in 2012 (the "Notes") so that the trustees or holders of 25% of the outstanding Debentures and Notes have the right to demand payment immediately.  Additionally, the Company has a significant amount2019 due to their pension plan over the next 12 months.  Management's plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result fromadoption of ASU No. 2016-12, Leases (Topic 842), as amended, effective January 1, 2019, using the outcome of this uncertainty.modified retrospective approach.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’sCompany's management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that our audits provide a reasonable basis for our opinion.

/s/ S/ Marcum LLP

Marcum LLPllp

We have served as the Company’s auditor since 2015.

Hartford, CT

March 30, 201820, 2020

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