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 September 30, 20172023
Commission file number 1-2257
(Exact name of registrant as specified in its charter)
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Delaware | 13-1394750 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
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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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes X No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one)
Large accelerated filer ___ | Accelerated filer ___ | |
Non-accelerated filer | Emerging growth company ___ | Smaller reporting company X |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
11/8/17 �� Common Stock - $0.001 Par Value 1,710,671
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| Class | Shares Outstanding | ||||
11/8/23 | Common Stock - $0.001 Par Value | 13,496,276 |
TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No. | ||||
1 | ||||
2 | ||||
2 | ||||
3 | ||||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Exhibits |
Part I – Financial Information (unaudited)
Item 1.
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||
September 30, | December 31, | ||||
In thousands, except share data |
| ||||
(see Note 1) | |||||
ASSETS |
|
|
|
|
|
Current assets: | |||||
Cash and cash equivalents | $ | 503 |
| $ | 606 |
Receivables, net | 2,659 | 3,118 | |||
Inventories |
| 2,387 |
|
| 1,893 |
Prepaids and other assets |
| 2,845 |
|
| 671 |
Total current assets |
| 8,394 |
|
| 6,288 |
Long-term assets: | |||||
Rental equipment, net |
| 2,283 |
|
| 3,089 |
Property, plant and equipment, net | 2,301 | 2,292 | |||
Goodwill |
| 744 |
|
| 744 |
Restricted cash | 1,162 | 612 | |||
Other assets |
| 347 |
|
| 389 |
Total long-term assets |
| 6,837 |
|
| 7,126 |
TOTAL ASSETS | $ | 15,231 |
| $ | 13,414 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||
Current liabilities: |
|
|
|
|
|
Accounts payable | $ | 2,715 | $ | 1,493 | |
Accrued liabilities |
| 6,419 |
|
| 5,566 |
Current portion of long-term debt | 3,064 | 2,984 | |||
Customer deposits |
| 1,829 |
|
| 234 |
Total current liabilities |
| 14,027 |
|
| 10,277 |
Long-term liabilities: |
|
|
|
|
|
Long-term debt, less current portion | 456 | 57 | |||
Long-term debt - related party |
| 500 |
|
| 500 |
Forgivable loan | 650 | - | |||
Deferred pension liability and other |
| 3,418 |
|
| 3,856 |
Total long-term liabilities |
| 5,024 |
|
| 4,413 |
Total liabilities |
| 19,051 |
|
| 14,690 |
Stockholders' deficit: | |||||
Preferred Stock Series A - $20 stated value - 416,500 shares authorized; | - | - | |||
Preferred Stock Series B - $200 stated value - 51,000 shares authorized; |
| 3,302 |
|
| 3,302 |
Common Stock - $0.001 par value - 10,000,000 shares authorized; | 2 | 2 | |||
Additional paid-in-capital |
| 27,935 |
|
| 27,935 |
Accumulated deficit | (26,573) | (23,842) | |||
Accumulated other comprehensive loss |
| (5,423) |
|
| (5,610) |
Treasury stock - at cost - 27,840 common shares in 2017 and 2016 |
| (3,063) |
|
| (3,063) |
Total stockholders' deficit |
| (3,820) |
|
| (1,276) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 15,231 |
| $ | 13,414 |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
Part I - Financial Information (unaudited) | |||||
Item 1. | |||||
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||
In thousands, except share data | September 30 2023 |
| December 31 2022 | ||
| |||||
ASSETS |
|
|
|
|
|
Current assets: | |||||
Cash and cash equivalents | $ | 6 |
| $ | 48 |
Receivables, net | 2,443 | 2,832 | |||
Inventories |
| 3,006 |
|
| 2,722 |
Prepaids and other assets |
| 411 | 1,071 | ||
Total current assets |
| 5,866 |
|
| 6,673 |
Long-term assets: | |||||
Rental equipment, net |
| 139 |
|
| 225 |
Property, plant and equipment, net | 1,800 | 1,715 | |||
Right of use assets |
| 2,046 |
|
| 765 |
Restricted cash | 200 | - | |||
Other assets |
| 34 |
|
| 34 |
Total long-term assets |
| 4,219 |
|
| 2,739 |
TOTAL ASSETS | $ | 10,085 |
| $ | 9,412 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||
Current liabilities: |
|
|
|
|
|
Accounts payable | $ | 8,206 | $ | 6,339 | |
Accrued liabilities |
| 4,885 |
|
| 4,279 |
Current portion of long-term debt | 3,768 | 3,768 | |||
Current lease liabilities |
| 471 |
|
| 393 |
Customer deposits |
| 1,084 | 1,183 | ||
Total current liabilities |
| 18,414 |
|
| 15,962 |
Long-term liabilities: | |||||
Long-term debt, less current portion |
| 500 |
|
| 500 |
Long-term lease liabilities | 1,600 | 412 | |||
Deferred pension liability and other |
| 2,421 |
|
| 2,862 |
Total long-term liabilities |
| 4,521 |
|
| 3,774 |
Total liabilities |
| 22,935 |
|
| 19,736 |
Stockholders' deficit: | |||||
Preferred Stock | - | - | |||
Preferred Stock Series A - $20 stated value - 416,500 shares authorized; shares issued and outstanding: 0 in 2023 and 2022 |
|
- |
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- |
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|
| |||
Preferred Stock Series B - $200 stated value - 51,000 shares authorized; shares issued and outstanding: 0 in 2023 and 2022 | - | - | |||
Common Stock - $0.001 par value - 30,000,000 shares authorized; shares issued: 13,524,116 in 2023 and 13,474,116 in 2022 shares outstanding: 13,496,276 in 2023 and 13,446,276 in 2022 |
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13 |
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13 |
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Additional paid-in-capital | 41,508 | 41,444 | |||
Accumulated deficit |
| (45,239) |
|
| (42,652) |
Accumulated other comprehensive loss | (6,069) | (6,066) | |||
Treasury stock - at cost - 27,840 common shares in 2023 and 2022 |
| (3,063) |
|
| (3,063) |
Total stockholders' deficit |
| (12,850) |
|
| (10,324) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 10,085 |
| $ | 9,412 |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
1
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||
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3 Months Ended September 30, |
| 9 Months Ended September 30, | |||||||||
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In thousands, except per share data | 2017 |
| 2016 | 2017 |
| 2016 | |||||
Revenues: | |||||||||||
Digital product sales | $ | 9,676 | $ | 5,135 | $ | 15,616 | $ | 13,133 | |||
Digital product lease and maintenance |
| 650 |
|
| 720 |
| 1,765 |
|
| 2,333 | |
Total revenues |
| 10,326 |
|
| 5,855 |
| 17,381 |
|
| 15,466 | |
Cost of revenues: | |||||||||||
Cost of digital product sales | 8,291 | 3,745 | 13,929 | 9,885 | |||||||
Cost of digital product lease and maintenance |
| 376 |
|
| 502 |
| 1,123 |
|
| 1,540 | |
Total cost of revenues |
| 8,667 |
|
| 4,247 |
| 15,052 |
|
| 11,425 | |
Gross profit | 1,659 | 1,608 | 2,329 | 4,041 | |||||||
General and administrative expenses |
| (1,512) |
|
| (1,865) |
| (4,354) |
|
| (5,230) | |
Operating income (loss) | 147 | (257) | (2,025) | (1,189) | |||||||
Interest expense, net | (202) | (131) | (514) | (206) | |||||||
(Loss) gain on foreign currency remeasurement | (101) | 47 | (192) | (95) | |||||||
Gain on extinguishment of debt | - | 462 | - | 462 | |||||||
Gain on sale/leaseback transaction | 33 | 33 | 99 | 88 | |||||||
Warrant expense |
| - |
|
| (7) |
| - |
|
| (21) | |
(Loss) income before income taxes | (123) | 147 | (2,632) | (961) | |||||||
Income tax (expense) benefit |
| - |
|
| (7) |
| - |
|
| 66 | |
Net (loss) income | $ | (123) |
| $ | 140 | $ | (2,632) |
| $ | (895) | |
(Loss) earnings per share - basic and diluted | $ | (0.10) |
| $ | 0.05 |
| $ | (1.63) |
| $ | (0.61) |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||
| |||||||||||
| 3 Months Ended September 30 |
| 9 Months Ended September 30 | ||||||||
In thousands, except per share data | 2023 | 2022 | 2023 | 2022 | |||||||
Revenues: |
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|
|
|
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|
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Digital product sales | $ | 3,933 | $ | 4,510 | $ | 10,821 | $ | 14,763 | |||
Digital product lease and maintenance |
| 209 |
|
| 279 |
|
| 656 |
|
| 993 |
Total revenues |
| 4,142 |
|
| 4,789 |
| 11,477 |
|
| 15,756 | |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues: | |||||||||||
Cost of digital product sales |
| 3,698 |
|
| 4,364 |
|
| 10,118 |
|
| 13,122 |
Cost of digital product lease and maintenance |
| 111 |
|
| 124 |
| 331 |
|
| 431 | |
Total cost of revenues |
| 3,809 |
|
| 4,488 |
|
| 10,449 |
|
| 13,553 |
Gross income |
| 333 |
|
| 301 |
|
| 1,028 |
|
| 2,203 |
General and administrative expenses |
| (995) |
|
| (884) |
| (2,889) |
|
| (2,468) | |
Operating loss |
| (662) |
|
| (583) |
|
| (1,861) |
|
| (265) |
Interest expense, net | (183) | (110) | (521) | (382) | |||||||
Gain on foreign currency remeasurement |
| 60 |
|
| 181 |
|
| 1 |
|
| 241 |
Gain on forgiveness of PPP loan | - | - | - | 824 | |||||||
Pension (expense) benefit |
| (62) |
|
| 53 |
|
| (187) |
|
| 158 |
(Loss) income before income taxes | (847) |
|
| (459) | (2,568) |
|
| 576 | |||
Income tax expense |
| (7) |
|
| (7) |
|
| (19) |
|
| (19) |
Net (loss) income | $ | (854) |
| $ | (466) | $ | (2,587) |
| $ | 557 | |
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 September 30 | 9 Months Ended September 30 | ||||||||||
|
| ||||||||||
In thousands | 2023 | 2022 | 2023 | 2022 | |||||||
Net (loss) income | $ | (854) |
| $ | (466) |
| $ | (2,587) |
| $ | 557 |
Other comprehensive (loss) income: | |||||||||||
Unrealized foreign currency translation loss |
| (57) |
|
| (168) |
|
| (3) |
|
| (212) |
Total other comprehensive loss, net of tax |
| (57) |
|
| (168) |
| (3) |
|
| (212) | |
Comprehensive (loss) income | $ | (911) |
| $ | (634) |
| $ | (2,590) |
| $ | 345 |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
2
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited) | |||||||||||
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|
3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||
In thousands | 2017 |
| 2016 |
| 2017 |
| 2016 | ||||
Net (loss) income | $ | (123) |
| $ | 140 |
| $ | (2,632) |
| $ | (895) |
Other comprehensive income (loss): | |||||||||||
Unrealized foreign currency translation gain (loss) |
| 97 |
|
| (38) |
|
| 187 |
|
| 111 |
Total other comprehensive income (loss), net of tax |
| 97 |
|
| (38) |
|
| 187 |
|
| 111 |
Comprehensive (loss) income | $ | (26) |
| $ | 102 |
| $ | (2,445) |
| $ | (784) |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
2
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||
9 Months Ended September 30, | |||||
In thousands | 2017 |
| 2016 | ||
Cash flows from operating activities |
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|
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|
|
Net loss | $ | (2,632) | $ | (895) | |
Adjustment to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization | 1,007 | 1,334 | |||
Amortization of gain on sale/leaseback transaction |
| (99) |
|
| (88) |
Amortization of deferred financing fees | 89 | - | |||
Gain on extinguishment of debt |
| - |
|
| (462) |
Loss on foreign currency remeasurement | 192 | 95 | |||
Amortization of warrants - stock compensation expense |
| - |
|
| 21 |
Bad debt expense | 33 | 294 | |||
Changes in operating assets and liabilities: |
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|
|
|
|
Receivables | 427 | (434) | |||
Inventories |
| (494) |
|
| (547) |
Prepaids and other assets | (2,132) | (580) | |||
Accounts payable |
| 1,222 |
|
| 564 |
Accrued liabilities | 778 | (386) | |||
Customer deposits |
| 1,595 |
|
| 286 |
Deferred pension liability and other |
| (280) |
|
| (977) |
Net cash used in operating activities |
| (294) |
|
| (1,775) |
Cash flows from investing activities | |||||
Proceeds from sale/leaseback transaction |
| - |
|
| 1,100 |
Equipment manufactured for rental | (21) | (32) | |||
Purchases of property, plant and equipment |
| (189) |
|
| (279) |
Deposits for property, plant and equipment | - | (1,066) | |||
Restricted cash |
| (550) |
|
| (397) |
Net cash used in investing activities |
| (760) |
|
| (674) |
Cash flows from financing activities |
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Proceeds from long-term debt | 2,100 | 2,177 | |||
Proceeds from long-term debt - related parties |
| - |
|
| 500 |
Proceeds from forgivable loan | 650 | - | |||
Payments of long-term debt |
| (1,680) |
|
| (404) |
Payments of dividends on preferred stock | (99) | (78) | |||
Payments for deferred financing fees |
| (30) |
|
| (65) |
Payments for fees on extinguishment of debt |
| - |
|
| (27) |
Net cash provided by financing activities |
| 941 |
|
| 2,103 |
Effect of exchange rate changes |
| 10 |
|
| 2 |
Net decrease in cash and cash equivalents |
| (103) |
|
| (344) |
Cash and cash equivalents at beginning of year |
| 606 |
|
| 547 |
Cash and cash equivalents at end of period | $ | 503 |
| $ | 203 |
Supplemental disclosure of cash flow information: | |||||
Interest paid | $ | 355 |
| $ | 109 |
Income taxes paid |
| 23 |
|
| 23 |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
3
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (unaudited) | |||||||||||||||||||||||||||||
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Accumulated Other Comprehensive Loss | Total Stock- holders' Deficit | ||||||||||||||||||||||||||||
Preferred Stock | Add'l Paid-in Capital | ||||||||||||||||||||||||||||
Series A | Series B | Common Stock | Accumulated Deficit | Treasury Stock | |||||||||||||||||||||||||
In thousands, except share data | Shares |
| Amt |
| Shares |
| Amt |
| Shares |
| Amt |
|
|
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|
| |||||||||||||
For the 9 months ended September 30, 2023 |
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Balance January 1, 2023 | - | $ | - | - | $ | - | 13,474,116 | $ | 13 | $ | 41,444 | $ | (42,652) | $ | (6,066) | $ | (3,063) | $ | (10,324) | ||||||||||
Net loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (2,587) |
|
| - |
|
| - |
|
| (2,587) |
Stock issued to directors/officers | - | - | - | - | 50,000 | - | 26 | - | - | - | 26 | ||||||||||||||||||
Issuance of options | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| 38 |
|
| - |
|
| - |
|
| - |
|
| 38 |
Other comprehensive loss, net of tax: | |||||||||||||||||||||||||||||
Unrealized foreign currency translation loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| (3) |
|
| - |
|
| (3) |
Balance September 30, 2023 | - |
| $ | - |
| - |
| $ | - |
| 13,524,116 |
| $ | 13 |
| $ | 41,508 |
| $ | (45,239) |
| $ | (6,069) |
| $ | (3,063) |
| $ | (12,850) |
| |||||||||||||||||||||||||||||
For the 3 months ended September 30, 2023 | |||||||||||||||||||||||||||||
Balance July 1, 2023 | - |
| $ | - |
| - |
| $ | - |
| 13,524,116 |
| $ | 13 |
| $ | 41,508 |
| $ | (44,385) |
| $ | (6,012) |
| $ | (3,063) |
| $ | (11,939) |
Net loss | - | - | - | - | - | - | - | (854) | - | - | (854) | ||||||||||||||||||
Other comprehensive loss, net of tax: |
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|
Unrealized foreign currency translation loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| (57) |
|
| - |
|
| (57) |
Balance September 30, 2023 | - |
| $ | - |
| - |
| $ | - |
| 13,524,116 |
| $ | 13 |
| $ | 41,508 |
| $ | (45,239) |
| $ | (6,069) |
| $ | (3,063) |
| $ | (12,850) |
| |||||||||||||||||||||||||||||
For the 9 months ended September 30, 2022 |
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Balance January 1, 2022 | - | $ | - | - | $ | - | 13,474,116 | $ | 13 | $ | 41,330 | $ | (42,975) | $ | (6,253) | $ | (3,063) | $ | (10,948) | ||||||||||
Net income | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| 557 |
|
| - |
|
| - |
|
| 557 |
Issuance of options | - | - | - | - | - | - | 76 | - | - | - | 76 | ||||||||||||||||||
Other comprehensive loss, net of tax: |
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|
|
|
|
|
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|
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|
|
|
|
|
|
Unrealized foreign currency translation loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| (212) |
|
| - |
|
| (212) |
Balance September 30, 2022 | - |
| $ | - |
| - |
| $ | - |
| 13,474,116 |
| $ | 13 |
| $ | 41,406 |
| $ | (42,418) |
| $ | (6,465) |
| $ | (3,063) |
| $ | (10,527) |
| |||||||||||||||||||||||||||||
For the 3 months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 1, 2022 | - | $ | - | - | - | 13,474,116 | $ | 13 | $ | 41,368 | $ | (41,952) | $ | (6,297) | $ | (3,063) | $ | (9,931) | |||||||||||
Net loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (466) |
|
| - |
|
| - |
|
| (466) |
Issuance of options | - | - | - | - | - | - | 38 | - | - | - | 38 | ||||||||||||||||||
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Unrealized foreign currency translation loss | - |
|
| - |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| (168) |
|
| - |
|
| (168) |
Balance September 30, 2022 | - |
| $ | - |
| - |
| $ | - |
| 13,474,116 |
| $ | 13 |
| $ | 41,406 |
| $ | (42,418) |
| $ | (6,465) |
| $ | (3,063) |
| $ | (10,527) |
| |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
3
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||
| |||||
In thousands | 9 Months Ended September 30 | ||||
2023 |
| 2022 | |||
Cash flows from operating activities |
|
|
|
|
|
Net (loss) income | $ | (2,587) | $ | 557 | |
Adjustment to reconcile net (loss) income to net cash |
|
|
|
|
|
Depreciation and amortization | 278 | 328 | |||
Amortization of right of use assets |
| 320 |
|
| 295 |
Gain on forgiveness of PPP loan | - | (824) | |||
Amortization of deferred financing fees and debt discount |
| - |
|
| 52 |
Loss on foreign currency remeasurement | (1) | (241) | |||
Issuance of common stock for compensation |
| 26 |
|
| - |
Amortization of stock options | 38 | 76 | |||
Allowance for credit losses |
| (36) |
|
| - |
Changes in operating assets and liabilities: | |||||
Accounts receivable |
| 425 |
|
| (1,019) |
Inventories | (284) | (3,517) | |||
Prepaids and other assets |
| 660 |
|
| 247 |
Accounts payable | 1,867 | 766 | |||
Accrued liabilities |
| 606 |
|
| 600 |
Operating lease liabilities | (335) | (291) | |||
Customer deposits |
| (99) |
|
| 1,133 |
Deferred pension liability and other |
| (441) | (158) | ||
Net cash provided by (used in) operating activities |
| 437 |
|
| (1,996) |
Cash flows from investing activities | |||||
Purchases of property, plant and equipment |
| (277) |
|
| (18) |
Net cash used in investing activities |
| (277) |
|
| (18) |
Cash flows from financing activities |
|
|
|
|
|
Proceeds from long-term debt | 200 | 1,510 | |||
Payments of long-term debt |
| (200) |
|
| - |
Net cash provided by financing activities |
| - |
|
| 1,510 |
Effect of exchange rate changes |
| (2) |
|
| - |
Net increase (decrease) in cash, cash equivalents and restricted cash | 158 | (504) | |||
Cash, cash equivalents and restricted cash at beginning of year |
| 48 |
|
| 524 |
Cash, cash equivalents and restricted cash at end of period | $ | 206 |
| $ | 20 |
Supplemental disclosure of cash flow information: |
|
|
|
|
|
Interest paid | $ | 23 | $ | - | |
Income taxes paid |
| 10 |
|
| 10 |
Reconciliation of cash, cash equivalents and restricted cash to amounts | |||||
Current assets |
|
|
|
|
|
Cash and cash equivalents | $ | 6 | $ | 20 | |
Long-term assets |
|
|
|
|
|
Restricted cash |
| 200 | - | ||
Cash, cash equivalents and restricted cash at end of period | $ | 206 |
| $ | 20 |
| |||||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
4
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20172023
(unaudited)
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, 2016.2022. The Condensed Consolidated Balance Sheet at December 31, 20162022 is derived from the December 31, 20162022 audited financial statements.
There have been no material changesCritical Accounting Policies and Estimates
Accounting policies used in the preparation of our significantfinancial statements may involve the use of management judgments and estimates. Certain of our accounting policies duringare considered critical as they are both important to the nine months ended September 30, 2017portrayal 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 the significanttime to time as circumstances change. Actual financial results based on judgments or estimates may vary under different assumptions or circumstances. Our critical accounting policies describedare discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2022, filed with the Securities and Exchange Commission on March 31, 2023.
Recent Accounting Pronouncements:Restricted cash: In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 improves the presentation of net periodic pension cost and net periodic postretirement benefit cost. Public business entities should apply the amendments in ASU 2017-07 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years (i.e., January 1, 2018), early application is permitted. The Company does not expectclassifies cash as restricted when the adoption of this standard to have a material effect oncash is unavailable for withdrawal or usage for general operations. Restrictions may include legally restricted deposits, contracts entered into with others, or the Company’s consolidated financial position and resultsstatements of operations.intention with regard to particular deposits. As of September 30, 2023, the Company had $200,000 of Restricted cash. The Company had no Restricted cash as of December 31, 2022.
5
The following new accounting pronouncements were adopted in 2023:
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350). ASU 2017-04 simplifies the test for goodwill impairment. Public business entities should apply the amendments in ASU 2017-04 for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (i.e., January 1, 2020), early application is permitted. The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial position and results of operations.
4
In NovemberJune 2016, the FASB issued ASU 2016-18, StatementNo. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Cash Flows (Topic 230).Credit Losses on Financial Instruments.” ASU 2016-18 modifies2016-13 requires that entities use a new forward looking “expected loss” model that generally will result in the presentationearlier recognition of Restricted Cash onallowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the Statement of Cash Flows. Public business entities should apply the amendments in ASU 2016-18 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years (i.e., January 1, 2018), early application is permitted. The Company has not yet determined the effectcollectability of the adoption of this standard on the Company’s consolidated financial position and results of operations.
In February 2016, the FASB issuedreported amount. ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lesseeNo. 2016-13 is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019), early application is permitted. The Company is in the process of evaluating this pronouncement but has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations.
In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interimannual reporting periods, within those years, beginning after December 15, 2017, which for the Company is the first quarter of 2018. Earlier application is permitted for fiscal years beginning after December 15, 2016, including interim reporting periods within those years, which for the Company is the first quarter of 2017.periods, beginning after December 15, 2022. The Company is inadopted the process of evaluating this pronouncement but doesnew guidance on January 1, 2023 and determined it did not expect the adoption of this standard to have a material effectimpact on the Company’sits consolidated financial position and results of operations.
We will adopt the requirements of the new standard on January 1, 2018 and anticipate using the modified retrospective transition method. Under the modified retrospective method, we will recognize the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods.
Presented below is the status of the process we have utilized for the adoption of the new standard and the significant implementation matters addressed:
We established a team to assess all potential impacts of this standard. We are reviewing our current accounting policies and practices to identify potential differences that would result from the application of this standard. We are determining key factors to recognize revenue as prescribed by the new standard that may be applicable to each of our business segments. Customers and contracts from each business segment are being identified. Evaluation of the contract provisions and the comparison of historical accounting policies and practices to the requirements of the new standard (including the related qualitative disclosures regarding the potential impact of the effects of the accounting policies we expect to apply and a comparison to our current revenue recognition policies), is in process. We expect to complete this process prior to the filing of, and make disclosures in, our Annual Report on Form 10-K for the year ended December 31, 2017.
5
Based on our evaluation so far, we believe there will be no significant changes required to our business processes, systems and controls to effectively report revenue recognition under the new standard. Adoption of the new standard is not expected to materially change the timing or amount of revenue recognized in our Consolidated Financial Statements.statements.
Reclassifications: Certain reclassifications of prior years’ amounts have been made to conform toThe following new accounting pronouncements, and related impacts on adoption, are being evaluated by the current year’s presentation.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.
We do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business. The Company has incurred recurring operating losses and continues to have a networking capital deficiency including being in default of several debt obligations.The Company recorded a loss of $2.6 million in the nine months ended September 30, 20172023, and had a working capital deficiency of $5.6$12.5 million as of September 30, 2017. As a result, our short-term business focus continues to be 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 date of issuance of this Form 10-Q. 2023.In addition, the Company’s obligations under its pension plan exceeded plan assets by $4.1 million at September 30, 2017, including $719,000the Loan Agreement mature on December 31, 2023.As of minimum required contributions due overDecember 31, 2022, the next 12 months. Company had a working capital deficiency of $9.3 million.The Company is dependent on future operating performance in defaultorder 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 has, 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 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) and 9½% Subordinated debentures due 2012 (the “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 minimum required contributions to the defined benefit pension plan(iv) repay our obligations under our Loan Agreement (hereinafter defined) with Unilumin and/or (iii) make the required principal and interest payments on the Notes and the Debentures,(v) repay our obligations under our loan agreements with Carlisle, there would be a significant adverse impact on theour financial position and operating resultsresults. 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 Company. The accompanying financial statementsabove, 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.
6
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 any adjustments relatingmultiple 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 September 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 nine months ended September 30, 2023 and 2022, along with the reportable segment for each category:
| Three months ended | Nine months ended | |||||||||
In thousands | September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||
Digital product sales: |
|
|
|
|
|
|
|
|
|
|
|
Catalog and small customized products | $ | 3,933 | $ | 4,510 | $ | 10,821 | $ | 14,763 | |||
Large customized products |
| - |
|
| - |
|
| - |
|
| - |
Subtotal |
| 3,933 |
|
| 4,510 |
|
| 10,821 |
|
| 14,763 |
Digital product lease and maintenance: |
|
|
|
|
|
|
|
|
| ||
Operating leases | 113 | 135 | 361 | 446 | |||||||
Maintenance agreements |
| 96 |
|
| 144 |
|
| 295 |
|
| 547 |
Subtotal |
| 209 |
|
| 279 |
|
| 656 |
|
| 993 |
Total | $ | 4,142 |
| $ | 4,789 |
| $ | 11,477 |
| $ | 15,756 |
The Company has two primary revenue streams which are Digital product sales and Digital product lease and maintenance.
7
Digital Product Sales
The Company recognizes net revenue on digital product sales to its distribution partners and to end users related to digital display solutions and fixed digit scoreboards. For the Company’s catalog products, revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. For the Company’s customized products, revenue is either recognized at a point in time or over time depending on the length of the contract. For those customized product contracts that are smaller in size, revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract. For those customized product contracts that are larger in size, revenue is recognized over time based on incurred costs as compared to projected costs using the input method, as this best reflects the Company’s progress in transferring control of the customized product to the recoverability and classificationcustomer. The Company may also contract with a customer to perform installation services of asset carrying amounts ordigital display products. Similar to the amounts and classification of liabilities that may result fromlarger customized products, the outcome of this uncertainty. See Note 6 – Long-Term Debt for further details.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.
In additionRevenue on sales to the recently consummated $500,000 loan from Carlisle as described in Note 6 – Long-Term Debt, the Company is seeking 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,distribution partners are recorded net of prompt-pay discounts, if any, the Company will receive in any additional financings or the terms thereofoffered, and the Company has no agreements, commitments or understandings with respect to any such additional financing.other deductions. To the extent the transaction price includes variable consideration, the Company issues additional equity securities, it couldestimates the amount of variable consideration that should be dilutiveincluded in the transaction price utilizing the most likely amount method to existing shareholders.which the Company expects to be entitled. In addition,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 outstanding debt and other obligationsforecasted) 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 limit its abilityresult in the estimated amounts to incur more debt.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.
6Digital Product Lease and Maintenance
Digital product lease revenues represent revenues from leasing equipment that we own. We do not generally provide an option for the lessee to purchase the rented equipment at the end of the lease and do not generate material revenue from sales of equipment under such options. Our lease revenues do not include material amounts of variable payments. Digital product maintenance revenues represent revenues from maintenance agreements for equipment that we do not own. Lease and maintenance contracts generally run for periods of one month to 10 years. A contract entered into by the Company with a customer may contain both lease and maintenance services (either or both services may be agreed upon based on the individual customer contract). Maintenance services may consist of providing labor, parts and software maintenance as may be required to maintain the customer’s equipment in proper operating condition at the customer’s service location. The Company concluded the lease and maintenance services represent a series of distinct services and the most representative method for measuring progress towards satisfying the performance obligation of these services is the input method. Additionally, maintenance services require the Company to “stand ready” to provide support to the customer when and if needed. As there is no discernable pattern of efforts other than evenly over the lease and maintenance terms, the Company will recognize revenue straight-line over the lease and maintenance terms of service.
8
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 September 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 $1,281,000 are as follows: $106,000 – remainder of 2023, $391,000 – 2024, $305,000 – 2025, $235,000 – 2026, $176,000 – 2027 and $68,000 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 September 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 | September 30, 2023 |
| December 31, 2022 | ||
Gross receivables | $ | 2,588 |
| $ | 3,123 |
Allowance for credit loss | 145 |
|
| 291 | |
Net receivables | 2,443 |
|
| 2,832 | |
Contract liabilities | 1,147 |
|
| 1,229 |
9
During the three and nine months ended September 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 September 30 |
| Nine months ended September 30 | |||||||||
In thousands | 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Revenue recognized in the period from: | |||||||||||
Amounts included in the contract liability at the | $ | 382 | $ | 335 | $ | 1,128 | $ | 1,895 | |||
Performance obligations satisfied in previous periods |
| - |
|
| - |
|
| - |
|
| - |
Transaction Price Allocated to Future Performance Obligations
As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations for digital product sales was $2.6 million and digital product lease and maintenance was $1.3 million.
The Company expects to recognize revenue on approximately 78%, 15% 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 34 – Inventories
Inventories consist of the following:
September 30, 2017 | December 31, 2016 | |||||||||
In thousands | September 30 2023 | December 31 2022 | ||||||||
September 30, 2017 |
| December 31, 2016 |
| |||||||
Raw materials |
| $ | 2,219 |
| $ | 2,535 | ||||
Work-in-progress | 767 | 410 | Work-in-progress | - | - | |||||
Finished goods |
| 287 |
| 238 |
| 787 |
|
| 187 | |
| $ | 2,387 |
| $ | 1,893 | $ | 3,006 |
| $ | 2,722 |
10
Note 45 – Rental Equipment, net
Rental equipment net, consists of the following:
September 30, 2017 | December 31, 2016 | |||||||||
In thousands |
|
| September 30 |
|
| December 31 | ||||
Rental equipment | $ | 15,375 |
| $ | 15,354 | $ | 2,077 |
| $ | 2,077 |
Less accumulated depreciation |
| 13,092 |
|
| 12,265 | 1,938 |
|
| 1,852 | |
Net rental equipment | $ | 2,283 |
| $ | 3,089 | $ | 139 |
| $ | 225 |
Depreciation expense for rental equipment for the nine months ended September 30, 20172023 and 20162022 was $827,000$86,000 and $1.2 million,$139,000, respectively. Depreciation expense for rental equipment for the three months ended September 30, 20172023 and 20162022 was $275,000$29,000 and $409,000,$46,000, respectively.
Note 56 – Property, Plant and Equipment, net
Property, plant and equipment net, consists of the following:
September 30, 2017 | December 31, 2016 | ||||
In thousands |
| ||||
Machinery, fixtures and equipment | $ | 3,018 |
| $ | 2,839 |
Leaseholds and improvements |
| 35 |
|
| 25 |
|
| 3,053 |
|
| 2,864 |
Less accumulated depreciation |
| 752 |
|
| 572 |
Net property, plant and equipment | $ | 2,301 |
| $ | 2,292 |
In thousands |
| September 30 |
|
| December 31 |
Machinery, fixtures and equipment | $ | 3,133 |
| $ | 2,856 |
Leaseholds and improvements |
| 23 |
|
| 23 |
|
| 3,156 |
|
| 2,879 |
Less accumulated depreciation |
| 1,356 |
|
| 1,164 |
Net property, plant and equipment | $ | 1,800 |
| $ | 1,715 |
Machinery, fixtures and equipment having a net book value of $2.3$1.8 million and $1.7 million at September 30, 20172023 and December 31, 20162022, respectively, were pledged as collateral under various financing agreements.
7
Depreciation expense for property, plant and equipment for the nine months ended September 30, 20172023 and 20162022 was $180,000$192,000 and $108,000,$189,000, respectively. Depreciation expense for property, plant and equipment for the three months ended September 30, 20172023 and 20162022 was $60,000$67,000 and $40,000,$63,000, respectively.
11
Note 6 7 –Long-Term Debt
Long-term debt consists of the following:
September 30, 2017 | December 31, 2016 | |||||||||
In thousands | September 30 | December 31 2022 | ||||||||
September 30, 2017 |
| December 31, 2016 |
| |||||||
8¼% Limited convertible senior | $ | 302 |
| $ | 302 | |||||
9½% Subordinated debentures | 220 | 220 | 220 | 220 | ||||||
Revolving credit line |
| 1,507 |
|
| 1,805 | |||||
Revolving credit line – related party |
| 2,246 |
|
| 2,246 | |||||
Term loans – related party | 1,000 | 1,000 | ||||||||
Term loans | 1,590 | 872 |
| 500 |
|
| 500 | |||
Term loan – related party |
| 500 |
|
| 500 | |||||
Total debt | 4,204 | 3,784 |
| 4,268 |
|
| 4,268 | |||
Less deferred financing costs |
| 184 |
|
| 243 | |||||
Less deferred financing costs and debt discount |
| - |
|
| - | |||||
Net debt | 4,020 | 3,541 |
| 4,268 |
|
| 4,268 | |||
Less portion due within one year |
| 3,064 |
|
| 2,984 |
| 3,768 |
|
| 3,768 |
Net long-term debt | $ | 956 |
| $ | 557 | $ | 500 |
| $ | 500 |
On July 12, 2016,September 16, 2019, the Company entered into a credit and securityloan agreement as(the “Loan Agreement”) with MidCap, which was subsequently amended on September 8, 2016, February 14, 2017,modified. On July 30, 2021, MidCap assigned the loan to Unilumin. On March 28, 2017, July 28, 2017, October 10, 2017 and November 9, 2017 (collectively, the “Credit Agreement”), with its wholly-owned subsidiaries Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation as borrowers and SCM Specialty Finance Opportunities Fund, L.P. (“SCM”) as lender. Under the Credit Agreement,20, 2023, the Company is ableand 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 $4.0$2.2 million which includes (i) up to $3.0 million of a revolving loan, at an interest rate of primethe Prime Rate as published in the Wall Street Journal plus 4.00% (8.25% and 7.75%4.75% (13.25% at September 30, 20172023) on a revolving credit loan based on accounts receivable, inventory and December 31, 2016, respectively),equipment for an equipment purchase, repayment of certain outstanding obligations, including payments to the Company’s pension plan, the purchase of inventory/product and general working capital purposes, and (ii) a $1.0 million term loan, at an interest rate of prime plus 6.00% (10.25% and 9.75% at September 30, 2017 and December 31, 2016, respectively), for the purchase of equipment. The availability under the revolving loan is calculated based on certain percentages of eligible receivables and inventory. Due to limited availability at the inception of the Credit Agreement, the Company capped the revolving loan at $2.0 million, while reserving the option to remove the cap when needed. During 2017, the Company made net payments of $298,000 of the revolving loan and borrowed the remaining $600,000 on the term loan, of which $1.5 million and $840,000, respectively, were outstanding as of September 30, 2017, and $1.8 million and $380,000, respectively, were outstanding as of December 31, 2016. 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.
8
The Credit Agreement contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Company to maintain a fixed charge coverage ratio, as amended by the Sixth Amendment to the Credit Agreement dated Novemeber 9, 2017 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 (or 45 days for certain periods). The Credit Agreement allows the Company to continue to pay dividends on all its Series B Convertible Preferred Stock (the “Preferred Stock”) or any other new preferred stock, if any, which dividends will be excluded as fixed charges.purposes. As of September 30, 2017 and as a result of2023, the Sixth Amendment tobalance outstanding under the CreditLoan Agreement the Company was in compliance with all financial covenants.
$2.2 million. The CreditLoan Agreement is secured by substantially all of the Company’s assets and expires on July 12, 2019, unless earlier terminated by the parties in accordanceassets.
The Company entered into a loan note (the “SBA Loan Note”) with the termination provisionsSmall Business Administration of the Credit Agreement. United States of America (“SBA”) as lender (“SBA Lender”) under their Economic Injury Disaster Loan (“EIDL”) program, dated as of December 10, 2021.Under the SBA Loan Note, the Company borrowed $500,000 from SBA Lender under the EIDL Program.As of September 30, 2023, $500,000 was outstanding.The foregoing descriptionloan matures on December 10, 2051 and carries an interest rate of 3.75%.As of September 30, 2023 and December 31, 2022, the Company had accrued $34,000 and $20,000, respectively, of interest related to the SBA 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 “CARES Loan Note”) with Enterprise Bank and Trust (“CARES Lender”) as lender under the CARES Act of the Credit Agreement isSBA, dated as of April 20, 2020.Under the CARES Loan Note, the Company borrowed $811,000 from CARES Lender under the Paycheck Protection Program (“PPP”) included to provide information regardingin the SBA’s CARES Act.The CARES 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 terms. It does not purport to be a complete descriptionpayroll levels.In January 2022, the loan was forgiven in full and is qualifiedthe payments that had previously been paid were refunded.Refund proceeds in its entirety by reference to the full textamount of $453,000 are included in proceeds from long-term debt in the Credit Agreement.accompanying condensed consolidated statements of Cash Flows for the nine months ended September 30, 2022.
12
The Company has a $500,000 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 on principal or interest as of the date of this filing. As of September 30, 2023, the entire amount was outstanding $387,000and is included in current portion of Noteslong-term debt in the Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, the Company had accrued $345,000 and $300,000, respectively, of interest related to this loan, which are no longer convertible into Common Stock.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 $500,000 loan from Carlisle at a fixed interest rate of 12.00%, which matured on December 10, 2017 with a bullet payment of all principal due at such time (the “Second Carlisle Agreement”). Interest is payable monthly. Carlisle had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands on principal or interest as of the date of this filing. As of September 30, 2023, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, the Company had accrued $345,000 and $300,000, respectively, of interest related to this loan, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets. Under the Second Carlisle Agreement, the Company granted a security interest to Carlisle in accounts receivable, materials and intangibles relating to a certain purchase order for equipment issued in April 2017.
As of September 30, 2023 and December 31, 2022, the Company had outstanding $302,000 of Notes. The Notes matured as of March 1, 2012 and are currently in default. As of September 30, 20172023 and December 31, 2016,2022, the Company had accrued $258,000$351,000 and $234,000,$332,000, respectively, of interest related to the Notes, 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 Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.
TheAs of September 30, 2023 and December 31, 2022, the Company hashad outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of September 30, 20172023 and December 31, 2016,2022, the Company had accrued $164,000$289,000 and $148,000,$273,000, respectively, of interest related to the Debentures, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.
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. Mr. Elser, a director of the Company, exercises voting and dispositive power as investment manager of Carlisle.
On July 28, 2017, the Company entered into a credit agreement with Mr. Penner, pursuant to which the Company could borrow up to $1.5 million at a loan fee of $35,000, with a maturity date of August 19, 2017 (the “Penner Agreement”). As of September 30, 2017, the Company had borrowed the entire amount and had repaid $750,000, leaving the remaining $750,000 outstanding. Subsequent to September 30, 2017, the Company repaid the balance of the loan and satisfied the agreement in full.
9
In connection with the Penner Agreement, the Company entered into a Fourth Amendment to the Credit Agreement dated as of July 28, 2017 with SCM, to provide for certain adjustments to the Credit Agreement to allow for the Company’s entry into the Penner Agreement and the security interest granted to Mr. Penner thereunder. The Company, Mr. Penner and SCM also entered into a Mutual Lien Intercreditor Agreement, dated as of July 28, 2017, setting forth SCM’s senior lien position to all collateral of the Company, except for the purchase order securing the Penner Agreement, and the rights of each of SCM and Mr. Penner with respect to the collateral of the Company.
On November 6, 2017, the Company entered into a second credit agreement with Carlisle, pursuant to which the Company can borrow up to $500,000 at a fixed interest rate of 12.00%, which is due to mature on December 10, 2017 (the “Second Carlisle Agreement”). As of November 9, 2017, the entire amount was outstanding. 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.
In connection with the Carlisle Agreement, the Company entered into a Fifth Amendment to the Credit Agreement dated as of October 10, 2017 with SCM, to provide for certain adjustments to the Credit Agreement to allow for the Company’s entry into the Second Carlisle Agreement and the security interest granted to Carlisle thereunder. The Company, Carlisle and SCM also entered into a Mutual Lien Intercreditor Agreement, dated as of October 10, 2017, setting forth SCM’s senior lien position to all collateral of the Company, except for the purchase order securing the Second Carlisle Agreement, and the rights of each of SCM and Carlisle with respect to the collateral of the Company.
On SeptemberNote 8 2016, the Company entered into a credit agreement with BFI Capital Fund II, LLC (the “BFI Agreement”), pursuant to which the Company could borrow up to $750,000 at a fixed rate of interest of 10.00%, with a maturity date of March 1, 2017. As of December 31, 2016, the outstanding balance was $492,000. On March 1, 2017, the Company repaid the loan in full and terminated the BFI Agreement.
Note 7 – 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.
13
The following table presents the components of net periodic pension cost:cost for the three and nine months ended September 30, 2023 and 2022:
Three months ended | Nine months ended | Three months ended | Nine months ended | |||||||||||||||||||
In thousands | 2017 |
| 2016 |
| 2017 |
| 2016 | 2023 | 2022 | 2023 | 2022 | |||||||||||
Interest cost | $ | 117 |
| $ | 124 |
| $ | 350 |
| $ | 365 | $ | 134 |
| $ | 75 |
| $ | 402 |
| $ | 227 |
Expected return on plan assets | (180) | (168) | (539) | (504) | (145) | (200) | (436) | (600) | ||||||||||||||
Amortization of net actuarial loss |
| 54 |
| 53 |
|
| 163 |
| 149 |
| 73 |
|
| 72 |
|
| 221 |
| 215 | |||
Net periodic pension cost | $ | (9) |
| $ | 9 |
| $ | (26) |
| $ | 10 | |||||||||||
Net periodic pension expense (benefit) | $ | 62 |
| $ | (53) |
| $ | 187 |
| $ | (158) |
10
As of September 30, 2017 and December 31, 2016,2023, the Company had recorded a current pension liability of $719,000 and $660,000, respectively,$629,000, which is included in Accruedaccrued liabilities in the Condensed Consolidated Balance Sheets, and a long-term pension liability of $3.4$2.4 million, and $3.8 million, respectively, which is included in Deferreddeferred pension liability and other in the Condensed Consolidated Balance Sheets. TheAs 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 20172023.
Note 9 –Leases
The Company leases administrative and manufacturing facilities through operating lease agreements. The Company has no finance leases as of September 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 expectedtypically at our sole discretion, therefore, the renewals to be $444,000. 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 2017,April 2023, the Company has made $298,000 of contributions.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.
14
Supplemental information regarding leases:
September 30 | ||
In thousands, unless otherwise noted | ||
Balance Sheet: |
|
|
ROU assets | $ | 2,046 |
Current lease liabilities – operating |
| 471 |
Non-current lease liabilities - operating | 1,600 | |
Total lease liabilities |
| 2,071 |
Weighted average remaining lease term (years) | 4.2 | |
Weighted average discount rate |
| 10.4% |
Future minimum lease payments: | ||
Remainder of 2023 | $ | 99 |
2024 | 545 | |
2025 |
| 560 |
2026 | 577 | |
2027 |
| 451 |
Thereafter |
| 414 |
Total |
| 2,646 |
Less: Imputed interest |
| 575 |
Total lease liabilities |
| 2,071 |
Less: Current lease liabilities |
| 471 |
Long-term lease liabilities | $ | 1,600 |
Supplemental cash flow information regarding leases:
In thousands | For the three months ended September 30, 2023 | For the nine months ended September 30, 2023 | |||
| |||||
Operating cash flow information: |
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities | $ | 124 | $ | 372 | |
Non-cash activity: |
|
|
|
|
|
ROU assets obtained in exchange for lease liabilities |
| - |
|
| 1,601 |
Total operating lease expense was $355,000 and $357,000 for the nine months ended September 30, 2023 and 2022, respectively. Total operating lease expense was $118,000 and $118,000 for the three months ended September 30, 2023 and 2022, respectively. There was no short-term lease expense for the nine months or three months ended September 30, 2023 and 2022.
15
Note 8 10 – Loss (Earnings)Stockholders’ Deficit and (Loss) Income Per Share
The following table presents the calculation of (loss) earningsincome per share for the three and nine months ended September 30, 20172023 and 2016:2022:
Three months ended | Nine months ended | ||||||||||
In thousands | 2017 |
| 2016 |
| 2017 |
| 2016 | ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as reported | $ | (123) | $ | 140 | $ | (2,632) | $ | (895) | |||
Change in dividends accumulated on preferred shares |
| (50) |
|
| (50) |
|
| (149) |
|
| (149) |
Net (loss) income attributable to common shares | $ | (173) |
| $ | 90 |
| $ | (2,781) |
| $ | (1,044) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
| 1,711 |
|
| 1,711 |
|
| 1,711 |
|
| 1,711 |
Basic and diluted (loss) earnings per share | $ | (0.10) |
| $ | 0.05 |
| $ | (1.63) |
| $ | (0.61) |
In thousands, except per share data | Three months ended September 30 | Nine months ended September 30 | |||||||||
2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as reported | $ | (854) |
| $ | (466) |
| $ | (2,587) |
| $ | 557 |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – |
| 13,496 |
|
| 13,446 |
|
| 13,478 |
|
| 13,446 |
(Loss) earnings per share – basic and diluted | $ | (0.06) |
| $ | (0.03) |
| $ | (0.19) |
| $ | 0.04 |
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.
At September 30, 2017 and 2016,On March 28, 2022, the Company accumulated unpaid dividendsissued stock options to purchase 280,000 shares to executives and employees at an exercise price of $94,000 related to$0.40 per share, which vested on March 28, 2023. The options were valued at the Preferred Stock.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%.
On November 6, 2017, the Company declared a semi-annual dividend of $6.00 per share of Preferred Stock aggregating $99,000, which was paid on November 9, 2017. On April 18, 2017, the Company declared a semi-annual dividend of $6.00 per share of Preferred Stock aggregating $99,000, which was paid on April 21, 2017.
As of September 30, 20172023, the Company excluded the effects of the outstanding stock options to purchase 235,000 shares in the calculation of diluted loss per share since their inclusion would have been anti-dilutive. As of September 30, 2023 and 2016,2022, the Company had warrants to purchase 52,0001.6 million shares of Common Stock outstanding, none of which were used inexcluded from the calculation of diluted (loss) earningsincome per share because their exercise price was greater than the average stock price for the period and their inclusion would have been anti-dilutive. These warrants could be dilutive in the future if the average share price increases and is greater than the exercise price of these warrants.
AsA summary of the status of the Company’s stock options as of September 30, 20172023 and 2016, the Company had 16,512 shares of Preferred Stock outstanding, which were convertible into 330,240 shares of Common Stock, none of which were used inchanges during the calculation of diluted (loss) earnings per share because their conversion pricenine months then ended is presented below:
Number of Options | Weighted Average | Weighted average | Average intrinsic value | |||||||
Outstanding at December 31, 2022 |
| 280,000 |
| $ | 0.40 |
| 3.3 |
| $ | 0.19 |
Granted | - | - | ||||||||
Expired |
| 45,000 |
| $ | 0.40 |
|
|
| $ | 0.19 |
Outstanding at September 30, 2023 |
| 235,000 | $ | 0.40 | 2.5 | $ | 0.19 | |||
Exercisable at the end of the period |
| 235,000 |
| $ | 0.40 |
| 2.5 |
| $ | 0.19 |
Equity based compensation was greater than the average stock price$38,000 and $76,000 for the periodnine months ended September 30, 2023 and their inclusion would have been anti-dilutive. These shares2022, respectively. There was no equity based compensation for the three months ended September 30, 2023. Equity based compensation was $38,000 for the three months ended September 30, 2022. There is no unrecognized equity based compensation cost related to unvested stock options as of Preferred Stock could be dilutive in the future if the average share price increases and is greater than the purchase price of these shares of Preferred Stock.September 30, 2023.
1116
Note 9 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 believes that it has accrued adequate 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.
On May 23, 2017, the Company received $650,000 structured as a forgivable loan from the City of Hazelwood, Missouri, which is included in Forgivable loan in the Condensed Consolidated Balance Sheets. The loan will be forgiven on a pro-rata basis when predetermined employment levels are attained and expires on April 1, 2024. 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% (6.25% at September 30, 2017). As of September 30, 2017, no interest has been accrued.
In addition to the Company’s loans from Carlisle described in Note 6, theThe Company has the following related party transactions:
Yaozhong Shi, a directorAs of September 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, isare each directors and/or officers of Unilumin. Mr. Fazio and Mr. Yu are both executive officers of the ChairmanCompany, but had not yet been added to the Company’s payroll until January 2023 at annual rates of Transtech LED Company Limited (“Transtech”), which is onecompensation of our primary LED suppliers.$125,000 and $26,000, 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 $1.4$2.7 million and $3.1$5.9 million of product from TranstechUnilumin in the nine months ended September 30, 20172023 and 2016,2022, respectively, and purchased $1.7 million and $2.1 million of product from Unilumin in the three months ended September 30, 2023 and 2022, respectively. AmountsThe total amount payable by the Company to Transtech were $403,000Unilumin, including accounts payable, accrued interest and $0long-term debt, was $9.6 million and $7.3 million as of September 30, 20172023 and December 31, 2016,2022, respectively. The Company occupies space at no cost in a New York office that is leased by Unilumin. In addition, Unilumin is currently the lender under the Loan Agreement described in Note 7 – Long-Term Debt.
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 September 30, 2023 and December 31, 2022, respectively.
On June 30, 2016, the Company entered into a 1-year Trademark Licensing Agreement with Transtech, pursuant to which Transtech paid the Company $72,500 upon signing the agreement and would pay the Company a 3% royalty on any equipment sold using the Company’s trademark. There were no such sales in the six months ended June 30, 2017, at which time the agreement expired.
Operating segments are based on the Company’s business components aboutfor 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.
12
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 and LED lighting, which has a line of energy-saving lighting solutions that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs.displays. Both operating segments are conducted on a global basis, primarily through operations in the United States. The Company also has operations in Canada. The Digital product sales segment sells equipment and the Digital product lease and maintenance segment leases and maintains equipment. Corporate general and administrative items relate to costs that are not directly identifiable with a segment. There are no intersegment sales.
17
Foreign revenues representedrepresent less than 10% of the Company’s revenues in the three and nine months ended September 30, 20172023 and 2016.2022. 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 nine months ended September 30, 20172023 and 2016 and as of September 30, 2017 and December 31, 20162022 is as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||
In thousands | 2017 |
| 2016 |
| 2017 |
| 2016 | 2023 | 2022 | 2023 | 2022 | |||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Digital product sales | $ | 9,676 | $ | 5,135 | $ | 15,616 | $ | 13,133 | $ | 3,933 | $ | 4,510 | $ | 10,821 | $ | 14,763 | ||||||
Digital product lease and maintenance |
| 650 |
|
| 720 |
|
| 1,765 |
| 2,333 |
| 209 |
|
| 279 |
|
| 656 |
|
| 993 | |
Total revenues | $ | 10,326 |
| $ | 5,855 |
| $ | 17,381 |
| $ | 15,466 | $ | 4,142 |
| $ | 4,789 |
| $ | 11,477 |
| $ | 15,756 |
Operating income (loss): |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating (loss) income: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Digital product sales | $ | 697 | $ | 351 | $ | (291) | $ | 602 | $ | (357) | $ | (385) | $ | (839) | $ | 375 | ||||||
Digital product lease and maintenance |
| 227 |
|
| 160 |
|
| 485 |
| 651 |
| 98 |
|
| 148 |
|
| 330 |
|
| 538 | |
Corporate general and administrative expenses |
| (777) |
|
| (768) |
|
| (2,219) |
| (2,442) |
| (403) |
|
| (346) |
|
| (1,352) |
|
| (1,178) | |
Total operating income (loss) |
| 147 |
|
| (257) |
|
| (2,025) |
| (1,189) | ||||||||||||
Total operating loss |
| (662) |
|
| (583) |
|
| (1,861) |
|
| (265) | |||||||||||
Interest expense, net | (202) | (131) | (514) | (206) | (183) | (110) | (521) | (382) | ||||||||||||||
(Loss) gain on foreign currency remeasurement |
| (101) |
|
| 47 |
|
| (192) |
| (95) | ||||||||||||
Gain on extinguishment of debt | - | 462 | - | 462 | ||||||||||||||||||
Gain on sale/leaseback transaction |
| 33 |
|
| 33 |
|
| 99 |
| 88 | ||||||||||||
Warrant expense |
| - |
|
| (7) |
|
| - |
|
| (21) | |||||||||||
Gain on foreign currency remeasurement |
| 60 |
|
| 181 |
|
| 1 |
|
| 241 | |||||||||||
Gain on forgiveness of PPP loan | - | - | - | 824 | ||||||||||||||||||
Pension (expense) benefit |
| (62) |
|
| 53 |
|
| (187) |
|
| 158 | |||||||||||
(Loss) income before income taxes |
| (123) |
|
| 147 |
|
| (2,632) |
| (961) | (847) | (459) | (2,568) | 576 | ||||||||
Income tax (expense) benefit |
| - |
|
| (7) |
|
| - |
|
| 66 | |||||||||||
Income tax expense |
| (7) |
|
| (7) |
|
| (19) |
|
| (19) | |||||||||||
Net (loss) income | $ | (123) |
|
| 140 |
| $ | (2,632) |
| $ | (895) | $ | (854) |
| $ | (466) |
| $ | (2,587) |
| $ | 557 |
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||
| ||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Digital product sales | $ | 10,748 | $ | 8,753 | ||||||||||||||||||
Digital product lease & maintenance |
|
|
|
|
|
|
| 3,980 |
| 4,055 | ||||||||||||
Total identifiable assets | 14,728 | 12,808 | ||||||||||||||||||||
General corporate |
|
|
|
|
|
|
| 503 |
| 606 | ||||||||||||
Total assets |
|
|
|
|
|
| $ | 15,231 |
| $ | 13,414 |
September 30 2023 | December 31 2022 | ||||
| |||||
Assets |
|
|
|
|
|
Digital product sales | $ | 7,769 | $ | 8,221 | |
Digital product lease and maintenance |
| 2,310 |
|
| 1,143 |
Total identifiable assets | 10,079 | 9,364 | |||
General corporate |
| 6 |
|
| 48 |
Total assets | $ | 10,085 |
| $ | 9,412 |
The Company has evaluated events and transactions subsequent to September 30, 20172023 and through the date these Condensed Consolidated Financial Statements were included in this Form 10-Q and filed with the SEC.
1318
As further discussed in Note 6, subsequent to September 30, 2017, the Company entered into the Second Carlisle Agreement, pursuant to which the Company borrowed $500,000, the Fifth Amendment to the Credit Agreement and a Mutual Lien Intercreditor Agreement with Carlisle and SCM.
As further discussed in Note 6, subsequent to September 30, 2017, the Company entered into the Sixth Amendment to the Credit Agreement.
As further discussed in Note 8, subsequent to September 30, 2017, the Company declared a semi-annual dividend of $6.00 per share of Preferred Stock aggregating $99,000, which was paid on November 9, 2017.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 displays and lighting fixturesproducts 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 display signage and LED lighting solutions.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 displayproduct signage. This segment includes the lease and maintenance of digital displayproduct signage across all markets.
There have been no changes to the Company’s critical accounting estimates as previously reported in the Company’s 2022 Form 10-K.
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 date of issuance of this Form 10-Q. In addition, the Company’s obligations under its defined benefit pension plan exceeded plan assets by $4.1 million at September 30, 2017, including $719,000 of minimum required 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 minimum required contributions to the defined benefit pension plan and/or (iii) make the required principal and interest payments on the Notes and the Debentures, there would be a significant adverse impact on the financial position and operating results of the Company.
1419
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 December 31, 2016 Consolidated Financial Statements that states that the Consolidated Financial Statements were prepared assuming we will continue as a going concern and further states that the uncertainty regarding the ability to make the required principal and interest payments on the Notes and the Debentures, in addition to the significant amount due to the Company’s defined benefit pension plan over the next 12 months, net losses and working capital deficiencies, raises substantial doubt about our ability to continue as a going concern. See Note 2 to the Condensed Consolidated Financial Statements – Going Concern.
Results of Operations
Nine Months Ended September 30, 20172023 Compared to Nine Months Ended September 30, 20162022
The following table presents our Statements of Operations data, expressed as a percentage of revenue for the nine months ended September 30, 20172023 and 2016:2022:
Nine months ended September 30, | |||||||||||
In thousands, except percentages | 2017 |
| 2016 | ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Digital product sales | $ | 15,616 | 89.8 | % | $ | 13,133 | 84.9 | % | |||
Digital product lease and maintenance |
| 1,765 |
| 10.2 | % |
|
| 2,333 |
| 15.1 | % |
Total revenues |
| 17,381 |
| 100.0 | % |
|
| 15,466 |
| 100.0 | % |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
Cost of digital product sales | 13,929 | 80.1 | % | 9,885 | 63.9 | % | |||||
Cost of digital product lease and maintenance |
| 1,123 |
| 6.5 | % |
|
| 1,540 |
| 10.0 | % |
Total cost of revenues |
| 15,052 |
| 86.6 | % |
|
| 11,425 |
| 73.9 | % |
Gross profit |
| 2,329 |
| 13.4 | % |
|
| 4,041 |
| 26.1 | % |
General and administrative expenses |
| (4,354) |
| (25.1) | % |
|
| (5,230) |
| (33.8) | % |
Operating loss |
| (2,025) |
| (11.7) | % |
|
| (1,189) |
| (7.7) | % |
Interest expense, net | (514) | (3.0) | % | (206) | (1.3) | % | |||||
Loss on foreign currency remeasurement |
| (192) |
| (1.1) | % |
|
| (95) |
| (0.6) | % |
Gain on extinguishment of debt | - | 462 | 3.0 | % | |||||||
Gain on sale/leaseback transaction |
| 99 |
| 0.5 | % |
|
| 88 |
| 0.5 | % |
Warrant expense |
| - |
| - | % |
|
| (21) |
| (0.1) | % |
Loss before income taxes |
| (2,632) |
| (15.1) | % |
|
| (961) |
| (6.2) | % |
Income tax benefit |
| - |
| - | % |
|
| 66 |
| 0.4 | % |
Net loss | $ | (2,632) |
| (15.1) | % |
| $ | (895) |
| (5.8) | % |
Nine months ended September 30 | |||||||||||
In thousands, except percentages | 2023 |
| 2022 | ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Digital product sales | $ | 10,821 | 94.3 | % | $ | 14,763 | 93.7 | % | |||
Digital product lease and maintenance |
| 656 |
| 5.7 | % |
|
| 993 |
| 6.3 | % |
Total revenues |
| 11,477 |
| 100.0 | % |
|
| 15,756 |
| 100.0 | % |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
| |
Cost of digital product sales | 10,118 | 88.1 | % | 13,122 | 83.3 | % | |||||
Cost of digital product lease and maintenance |
| 331 |
| 2.9 | % |
|
| 431 |
| 2.7 | % |
Total cost of revenues |
| 10,449 |
| 91.0 | % |
|
| 13,553 |
| 86.0 | % |
Gross income |
| 1,028 |
| 9.0 | % |
|
| 2,203 |
| 14.0 | % |
General and administrative expenses |
| (2,889) |
| (25.2) | % |
|
| (2,468) |
| (15.7) | % |
Operating loss |
| (1,861) |
| (16.2) | % |
|
| (265) |
| (1.7) | % |
Interest expense, net | (521) | (4.5) | % | (382) | (2.4) | % | |||||
Gain on foreign currency remeasurement |
| 1 |
| - | % |
|
| 241 |
| 1.5 | % |
Gain on forgiveness of PPP loan | - | - | % | 824 | 5.3 | % | |||||
Pension (expense) benefit |
| (187) |
| (1.6) | % |
|
| 158 |
| 1.0 | % |
(Loss) income before income taxes | (2,568) | (22.3) | % | 576 | 3.7 | % | |||||
Income tax expense |
| (19) |
| (0.2) | % |
|
| (19) |
| (0.2) | % |
Net (loss) income | $ | (2,587) |
| (22.5) | % |
| $ | 557 |
| 3.5 | % |
Total revenues for the nine months ended September 30, 2017 increased $1.92023 decreased $4.3 million or 12.4%27.2% to $17.4$11.5 million from $15.5$15.8 million for the nine months ended September 30, 2016,2022, primarily due to an increase in Digital product sales, partially offset by a decrease in Digital product sales, as well as a decrease in Digital lease and maintenance.maintenance revenues.
15
Digital product sales revenues increased $2.5decreased $3.9 million or 18.9%,26.7% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to the non-recurrence of a singlecouple of large scoreboard customer sale, offset by a reductionsales that were delivered in other sales to the scoreboard and lighting markets.nine months ended September 30, 2022.
Digital product lease and maintenance revenues decreased $568,000$337,000 or 24.3%,33.9% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to the continued expected revenue decline in the older outdoor display equipment rental and maintenance 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 loss for the nine months ended September 30, 20172023 increased $836,000 or 70.3%$1.6 million to $2.0$1.9 million from $1.2 millioncompared to $265,000 for the nine months ended September 30, 2016,2022, principally due to the increase in cost of sales related to the single large scoreboard customer revenues, partially offset by a reduction in general and administrative expenses.
Digital product sales operating income decreased $893,000 to a loss of $291,000 for the nine months ended September 30, 2017 compared to income of $602,000 for the nine months ended September 30, 2016, primarily due to the increase in cost of sales related to the single large scoreboard customer revenues, partially offset by the increase in revenues from the single large scoreboard customer and a reduction in general and administrative expenses. The cost of Digital product sales increased $4.0 million or 40.9%, primarily due to the single large scoreboard customer. The cost of Digital product sales represented 89.2% of related revenues in 2017 compared to 75.3% in 2016. The cost of Digital product sales in 2017 includes additional expenses and depreciation related to our new manufacturing facility and equipment which are not being fully absorbed since the facility and equipment are not yet being utilized to full capacity. Digital product sales general and administrative expenses decreased $668,000 or 25.2%, primarily due to a decrease in payroll and benefits.
Digital product lease and maintenance operating income decreased $166,000 or 25.5%, primarily as a result of the decrease in revenues and an increase in general and administrative expenses.
Digital product sales operating income (loss) decreased $1.2 million to a loss of $839,000 for the nine months ended September 30, 2023 compared to income of $375,000 for the nine months ended September 30, 2022, primarily due to the decrease in revenues. The cost of Digital product sales decreased $3.0 million or 22.9%, 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 93.5% of related revenues in 2023 compared to 88.9% 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 $276,000 or 21.8%, primarily due to increases in supplies, employees’ expenses and marketing expenses, partially offset by a decrease in the costconsulting expenses.
20
Digital product lease and maintenance.maintenance operating income decreased $208,000 or 38.7% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily as a result of the decrease in revenues. The cost of Digital product lease and maintenance decreased $417,000$100,000 or 27.1%23.2%, primarily due to a decrease in depreciation expense. The cost of Digital product lease and maintenance revenues represented 63.6%50.5% of related revenues in 20172023 compared to 66.0%43.4% in 2016.2022. 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 general and administrative expenses increased $15,000decreased $29,000 or 10.6%120.8%, primarily due to an increasea reduction in the allowance for bad debts and an increase in payroll and benefits.debt expenses.
Corporate general and administrative expenses decreased $223,000increased $174,000 or 9.1%,14.8% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to a decreaseincreases in insurance expensesemployees’ and a decrease in payroll and benefits.consulting expenses.
Net interest expense increased $308,000,$139,000 or 36.4% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to an increaseincreases in the averageinterest rates and outstanding long-term debt, primarily due to the Credit Agreement.debt.
Warrant expense is attributable to the amortization of equity warrants granted to directors in 2013.
The effective tax rate for the nine months ended September 30, 20172023 and 20162022 was 0.0%0.7% and a benefit of 6.9%3.3%, respectively. Both the 20172023 and 20162022 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses. The 2016 tax rate is affected by alternative minimum tax credits from prior years in which the Company applied for allowable refunds.
1621
Three Months Ended September 30, 20172023 Compared to Three Months Ended September 30, 20162022
The following table presents our Statements of Operations data, expressed as a percentage of revenue for the three months ended September 30, 20172023 and 2016:2022:
Three months ended September 30 | |||||||||||
In thousands, except percentages | 2017 |
| 2016 | ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Digital product sales | $ | 9,676 | 93.7 | % | $ | 5,135 | 87.7 | % | |||
Digital product lease and maintenance |
| 650 |
| 6.3 | % |
|
| 720 |
| 12.3 | % |
Total revenues |
| 10,326 |
| 100.0 | % |
|
| 5,855 |
| 100.0 | % |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
Cost of digital product sales | 8,291 | 80.3 | % | 3,745 | 63.9 | % | |||||
Cost of digital product lease and maintenance |
| 376 |
| 3.6 | % |
|
| 502 |
| 8.6 | % |
Total cost of revenues |
| 8,667 |
| 83.9 | % |
|
| 4,247 |
| 72.5 | % |
Gross profit |
| 1,659 |
| 16.1 | % |
|
| 1,608 |
| 27.5 | % |
General and administrative expenses |
| (1,512) |
| (14.6) | % |
|
| (1,865) |
| (31.9) | % |
Operating income (loss) |
| 147 |
| 1.4 | % |
|
| (257) |
| (4.4) | % |
Interest expense, net | (202) | (2.0) | % | (131) | (2.3) | % | |||||
(Loss) gain on foreign currency remeasurement |
| (101) |
| (0.9) | % |
|
| 47 |
| 0.8 | % |
Gain on extinguishment of debt | - | - | % | 462 | 7.9 | % | |||||
Gain on sale/leaseback transaction |
| 33 |
| 0.3 | % |
|
| 33 |
| 0.6 | % |
Warrant expense |
| - |
| - | % |
|
| (7) |
| (0.1) | % |
Loss (income) before income taxes |
| (123) |
| (1.2) | % |
|
| 147 |
| 2.5 | % |
Income tax expense |
| - |
| - | % |
|
| (7) |
| (0.1) | % |
Net (loss) income | $ | (123) |
| (1.2) | % |
| $ | 140 |
| 2.4 | % |
| Three months ended September 30 | ||||||||||
In thousands, except percentages | 2023 |
| 2022 | ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Digital product sales | $ | 3,933 | 95.0 | % | $ | 4,510 | 94.2 | % | |||
Digital product lease and maintenance |
| 209 |
| 5.0 | % |
|
| 279 |
| 5.8 | % |
Total revenues |
| 4,142 |
| 100.0 | % |
|
| 4,789 |
| 100.0 | % |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
| |
Cost of digital product sales | 3,698 | 89.3 | % | 4,364 | 91.1 | % | |||||
Cost of digital product lease and maintenance |
| 111 |
| 2.7 | % |
|
| 124 |
| 2.6 | % |
Total cost of revenues |
| 3,809 |
| 92.0 | % |
|
| 4,488 |
| 93.7 | % |
Gross income |
| 333 |
| 8.0 | % |
|
| 301 |
| 6.3 | % |
General and administrative expenses |
| (995) |
| (24.0) | % |
|
| (884) |
| (18.5) | % |
Operating loss |
| (662) |
| (16.0) | % |
|
| (583) |
| (12.2) | % |
Interest expense, net | (183) | (4.4) | % | (110) | (2.3) | % | |||||
Gain on foreign currency remeasurement |
| 60 |
| 1.5 | % |
|
| 181 |
| 3.8 | % |
Pension (expense) benefit |
| (62) |
| (1.5) | % |
|
| 53 |
| 1.1 | % |
Loss before income taxes |
| (847) |
| (20.4) | % |
|
| (459) |
| (9.6) | % |
Income tax expense |
| (7) |
| (0.2) | % |
|
| (7) |
| (0.1) | % |
Net loss | $ | (854) |
| (20.6) | % |
| $ | (466) |
| (9.7) | % |
Total revenues for the three months ended September 30, 2017 increased $4.5 million2023 decreased $647,000 or 76.4%13.5% to $10.3$4.1 million from $5.9$4.8 million for the three months ended September 30, 2016,2022, primarily due to an increase in Digital product sales, partially offset by a decrease in Digital product sales, as well as a decrease in Digital lease and maintenance.maintenance revenues.
Digital product sales revenues increased $4.5 milliondecreased $577,000 or 88.4%,12.8% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to the non-recurrence of a single large scoreboard customer sale offset by a reductionthat were delivered in other sales to the scoreboard and lighting markets.three months ended September 30, 2022.
Digital product lease and maintenance revenues decreased $70,000 or 9.7%,25.1% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to the continued expected revenue decline in the older outdoor display equipment rental and maintenance 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)loss for the three months ended September 30, 20172023 increased $404,000$79,000 to income of $147,000$662,000 from a loss of $257,000$583,000 for the three months ended September 30, 2016,2022, principally due to the increasedecrease in revenues and a reductionan increase in general and administrative expenses, partially offset by the increase in cost of sales related to the single large scoreboard customer revenues.
17
Table of Contentsexpenses.
Digital product sales operating income increased $346,000loss decreased $28,000 to $697,000$357,000 for the three months ended September 30, 20172023 compared to $351,000$385,000 for the three months ended September 30, 2016,2022, primarily due to a decrease in the cost of revenues as a percentage of revenues. The cost of Digital product sales decreased $666,000 or 15.3%, primarily due to the increasedecrease in revenues and a decrease in general and administrative expenses, partially offset by an increase inthe cost of sales related to the single large scoreboard customer. The costrevenue as a percentage of Digital product sales increased $4.5 million or 121.4%, primarily due to the increase in revenues. The cost of Digital product sales represented 85.7%94.0% of related revenues in 20172023 compared to 72.9%96.8% in 2016. The cost2022. This decrease as a percentage of revenues is primarily due to the gain of some manufacturing efficiencies. General and administrative expenses for Digital product sales in 2017 includes additional expenses and depreciation related to our new manufacturing facility and equipment which are not being fully absorbed since the facility and equipment are not yet being utilized to full capacity. Digital product sales general and administrative expenses decreased $351,000increased $61,000 or 33.8%11.5%, primarily due to increases in employees’ expenses and bad debt expenses, partially offset by a decrease in payrollsupplies and benefits.consulting expenses.
22
Digital product lease and maintenance operating income increased $67,000decreased $50,000 or 41.9%,33.8% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as a result of a decrease in the cost of Digital product lease and maintenance, partially offset by the decrease in revenues. The cost of Digital product lease and maintenance decreased $126,000$13,000 or 25.1%10.5%, primarily due to a decrease in depreciation expense. The cost of Digital product lease and maintenance revenues represented 57.8%53.1% of related revenues in 20172023 compared to 69.7%44.4% in 2016.2022. 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 general and administrative expenses decreased $11,000$7,000 or 19.0%100.0%, primarily due to a decrease in payroll and benefits.bad debt expenses.
Corporate general and administrative expenses increased $9,000$57,000 or 1.2%,16.5% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to an increase in professional services.consulting expenses, partially offset by a decrease in employees’ expenses.
Net interest expense increased $71,000,$73,000 or 66.4% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to an increaseincreases in the averageinterest rates and outstanding long-term debt, primarily due to the Credit Agreement.debt.
Warrant expense is attributable to the amortization of equity warrants granted to directors in 2013.
The effective tax rate for the three months ended September 30, 20172023 and 20162022 was an expense of 0.0%0.8% and 4.8%1.5%, respectively. Both the 20172023 and 20162022 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.deficiency, including being in default on several debt obligations. The Company incurredrecorded a net loss of $2.6 million in the nine months ended September 30, 2017 and2023. The Company had a working capital deficiencydeficiencies of $5.6$12.5 million and $9.3 million as of September 30, 2017. As of2023 and December 31, 2016, the Company had a working capital deficiency of $4.0 million.2022, respectively. The increase in the working capital deficiency iswas primarily due toaffected by increases in customer deposits and accounts payable, accrued liabilities and a reductioncurrent lease liabilities, as well as decreases in accounts receivable,prepaids and other assets, receivables and cash. These changes were partially offset by increasesan increase in prepaidsinventory and inventory.a decrease in customer deposits.
18
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 flowscontrol, including the impact of the Company are constrained,current economic environment, the spread of major epidemics (including coronavirus) and inother 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 has,had, from time to time, increased the timetable of its payment of some of its payables. payables, which delayed certain product deliveries from our vendors, which in turn delayed certain deliveries to our customers.
23
There can be no assurance thatis substantial doubt as to whether we will meet our anticipated currenthave adequate liquidity, including access to the debt and near term cash requirements. Management believes that its current cash resources and cash provided by operations would not be sufficientequity capital markets, 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 incontinue as a going concern over the formnext 12 months from the date of equity, debt or a combinationissuance of both. We may not be able to obtain additional funds on a timely basis, on acceptable terms or at all. The Company has no agreements, commitments or understandings with respect to any such additional financing.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 $437,000 and used cash of $294,000 for$2.0 million from operating activities for the nine months ended September 30, 2017, primarily due to an increase in Prepaids2023 and other assets of $2.1 million, partially offset by an increase in Customer deposits of $1.6 million both due to two large customer orders currently in process, and used cash of $1.8 million for the nine months ended September 30, 20162022, respectively. The Company has implemented several initiatives to improve operational results and cash flows over future periods, including reducing head count, reorganizing its sales department and outsourcing certain administrative functions. The Company continues to explore ways to reduce operational and overhead costs. The Company periodically takes steps to reduce the cost to maintain the digital products on lease and maintenance agreements.
Cash, and cash equivalents decreased $103,000and restricted cash increased $158,000 in the nine months ended September 30, 20172023 to $503,000$206,000 at September 30, 20172023 from $606,000$48,000 at December 31, 2016.2022. The decreaseincrease is primarily attributable to net payments on the revolving loan of $298,000, the payoff of the BFI Agreement of $492,000, payments on the Penner loan of $750,000, scheduled payments of long-term debt of $140,000, investment in property and equipment of $189,000, Preferred Stock dividends of $99,000, an increase in restricted cash of $550,000 and cash used inprovided by operating activities of $294,000,$437,000, partially offset by proceedspurchases of $1.5 million received from borrowing on the Penner loan, proceedsequipment of $600,000 received from borrowing on the term loan and proceeds of $650,000 from a forgivable loan.$277,000. The current economic environment has increased the Company’s trade receivables collection cycle, and its allowances for uncollectible accounts receivable, but collections continue to be favorable.
On November 6, 2017, the Company declared a semi-annual dividend of $6.00 per share of Preferred Stock aggregating $99,000, which was paid on November 9, 2017. On April 14, 2017, the Company declared a semi-annual dividend of $6.00 per share of Preferred Stock aggregating $99,000, which was paid on April 21, 2017.
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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 20172023 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 September 30, 20172023 for the remainder of 20172023 and over the next four fiscal years:
In thousands |
Remainder of 2017 |
|
2018 |
|
2019 |
|
2020 |
|
2021 | Remainder of |
|
2024 |
|
2025 |
|
2026 |
|
2027 | ||||||||||
Long-term debt, including interest | $ | 3,391 |
| $ | 333 |
| $ | 1,143 |
| $ | - |
| $ | - | $ | 5,273 | $ | 31 | $ | 31 | $ | 31 | $ | 31 | ||||
Pension plan contributions | 148 | 735 | 361 | 367 | 318 | |||||||||||||||||||||||
Employment agreement obligations |
| 138 |
|
| 100 |
| - |
|
| - |
| - | ||||||||||||||||
Pension plan payments | - | 702 | 364 | 323 | 298 | |||||||||||||||||||||||
Estimated warranty liability | 56 | 96 | 80 | 56 | 36 | 24 | 81 | 63 | 53 | 41 | ||||||||||||||||||
Operating lease payments |
| 158 |
|
| 342 |
| 335 |
|
| 337 |
| 342 | 99 |
| 545 |
| 560 |
| 577 |
| 451 | |||||||
Total | $ | 3,891 |
| $ | 1,606 |
| $ | 1,919 |
| $ | 760 |
| $ | 696 | $ | 5,396 |
| $ | 1,359 |
| $ | 1,018 |
| $ | 984 |
| $ | 821 |
OfThe Company’s obligations under the fixed cash obligations for debt for the remainder of 2017, $1.0 million, including interest, of Notes and Debentures remained outstandingLoan Agreement mature on December 31, 2023.In addition as of September 30, 2017 with consideration of an offer by2023, the Company to settle for $121,000 in accordance with the Company’s offer to exchange that closed in July 2016.had outstanding $302,000 of Notes which matured as of March 1, 2012. The Company also had outstanding $220,000 of Debentures which matured on December 1, 2012. The Company continues to consider future exchanges of the Notes and Debentures, but has no agreements, commitments or understandings with respect to any further such exchanges. As described in Note 6 to the Condensed Consolidated Financial Statements – Long-Term Debt, subsequent to September 30, 2017, theexchanges.
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The Company entered into the Second Carlisle Agreement, pursuant to which the Company borrowed $500,000. In addition to the recently consummated Second Carlisle Agreement, the Company is seekingmay 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. In addition,
For a further description of the Company’s current outstandinglong-term debt, and other obligations could limit its abilitysee Note 7 to incur more debt.the Condensed Consolidated Financial Statements – Long-Term Debt.
Pension Plan Contributions
In March 2010, 2011 and 2013, the Company submitted to the Internal Revenue Service requests for waivers of the 2009, 2010 and 2012 minimum funding standards for its defined benefit pension plan. As of September 30, 2017, the Company had fully repaid the amounts deferred for the 2009 and 2010 plan years and has repaid $520,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $149,000, whichThere is schedulednot expected to be repaid in 2017. In 2017, the Company made $298,000 of contributions to its pension plan. At this time, we expect to make oura minimum required contributions in 2017 of $444,000; however, there is no assurance that we will be able to make any or all of such remaining payments.pension plan contribution for 2023. See Note 78 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.
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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. At September 30, 2017,The fair value of the Company’s fixed rate long-term debt outstanding of $2.3 million was at variable rates ranging from 8.25%is disclosed in Note 7 to 10.25% and $1.9 million was at fixed rates ranging from 8.25% to 12.00%. A one-percentage pointthe 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 $23,000.
The$22,000. In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of its investment in its Canadian subsidiary. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency remeasurement expense fluctuation of approximately $273,000,$246,000, 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 September 30, 2017.2023.
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 executive officer and 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 hashave concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management (including our Chief Executive Officer and our Chief Accounting Officer) to allow timely decisions regarding required disclosures. Based on such evaluation, our Chief Executive Officer and Chief Accounting Officer hashave concluded that these disclosure controls are effective as of September 30, 2017.2023.
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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 September 30, 2017 and2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
21
Item 1. Legal Proceedings
None.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, 2016. There have been no material changes to those previously disclosed risk factors.2022.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds and Issuer Purchases of Equity Securities
None.
Item 3. Defaults upon Senior Securities
As disclosed in Note 67 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company hashad outstanding $387,000$302,000 of Notes which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. As of September 30, 20172023 and December 31, 2016,2022, the Company had accrued $258,000$351,000 and $234,000,$332,000, respectively, of interest related to the Notes, which is included in Accruedaccrued liabilities in the Condensed Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders
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As disclosed in Note 67 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company has outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of September 30, 20172023 and December 31, 2016,2022, the Company had accrued $164,000$289,000 and $148,000,$273,000, respectively, of interest related to the Debentures, which is included in Accruedaccrued 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.
22
Item 5. Other Information
As described herein, on November 6, 2017, the Company entered into the Second Carlisle Agreement for a loan of $500,000 and entered into the Fifth Amendment to the Credit Agreement. See Note 6 to the Condensed Consolidated Financial Statements – Long-Term Debt.None.
Item 6. Exhibits
Item 6.31.1 Exhibits
10.1 Credit Agreement with Arnold Penner, datedCertification of Nicholas J. Fazio, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as of July 28, 2017, (incorporated by referenceadopted pursuant to Exhibit 10.1Section 302 of the Company’s Form 8-KSarbanes-Oxley Act of 2002, filed August 2, 2017)herewith.
10.2 Fourth Amendment to Credit and Security Agreement, dated as of July 28, 2017, by and among SCM Specialty Finance Opportunities Fund, L.P., Trans-Lux Corporation, Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation (incorporated by reference to Exhibit 10.2 of Form 8-K filed August 2, 2017).
10.3 Mutual Lien Intercreditor Agreement between SCM Specialty Finance Opportunities Fund, L.P. and Arnold Penner, dated as of July 28, 2017 (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed August 2, 2017).
10.4 Fifth Amendment to Credit and Security Agreement, dated as of October 10, 2017, by and among SCM Specialty Finance Opportunities Fund, L.P., Trans-Lux Corporation, Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation, filed herewith.
10.5 Credit Agreement with Carlisle Investments Inc., dated as of November 6, 2017, filed herewith.
10.6 Mutual Lien Intercreditor Agreement between SCM Specialty Finance Opportunities Fund, L.P. and Carlisle Investments Inc., dated as of October 10, 2017, filed herewith.
10.7 Sixth Amendment to Credit and Security Agreement, dated as of November 9, 2017, by and among SCM Specialty Finance Opportunities Fund, L.P., Trans-Lux Corporation, Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation, filed herewith.
31 31.2Certification of Jean-Marc Allain,Todd Dupee, Senior Vice President Chief Executive Officer 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 32.1Certification of Jean-Marc Allain, President,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.
32.2Certification 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.herewith.
23
101 The following financial information from the Company’s Form 10-Q for the quarterly period ended September 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 extension information contained in Exhibits 101.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION | |||
(Registrant) | |||
|
| ||
| /s/ Nicholas J. Fazio | ||
| Nicholas J. Fazio | ||
Chief Executive Officer | |||
by | /s/ Todd Dupee | ||
Todd Dupee | |||
Senior Vice President and Chief Accounting Officer | |||
| | ||
| |||
| |||
Date: November 9, |
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