Disaggregated Revenues

The following table represents a disaggregation of revenue from contracts with customers for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ along with the reportable segment for each category:

		Three months ended September, 30				Nine months ended September, 30
						Nine months ended September, 30				For the Three Months Ended
In thousands		Three months ended September, 30	2020		2019		2020		2019			March 31, 2021		March 31, 2020
Digital product sales:
Catalog and small customized products		$	2,405	$	3,951	$	5,257	$	10,155		$	2,093	$	1,334
Large customized products			-		-		-		-			-		-
Subtotal			2,405		3,951		5,257		10,155			2,093		1,334
Digital product lease and maintenance:
Operating leases			240		270		755		900			209		279
Maintenance agreements	`		251		251		846		763			284		300
Subtotal			491		521		1,601		1,663			493		579
Total		$	2,896	$	4,472	$	6,858	$	11,818		$	2,586	$	1,913

Performance Obligations

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

Digital Product Sales

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

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

Digital Product Lease and Maintenance

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

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

Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements. At ~~September 30, 2020,~~March 31, 2021, the future minimum lease payments due to the Company under operating leases that expire at varying dates through ~~2030~~2028 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating ~~$1,820,000~~$2,270,000 are as follows: ~~$135,000~~$649,000 – remainder of ~~2020, $496,000 –~~ 2021, ~~$320,000~~$516,000 – 2022, ~~$249,000~~$365,000 – 2023, ~~$177,000~~$292,000 – 2024, $200,000 – 2025 and ~~$443,000~~$248,000 thereafter.

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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, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Gross receivables	$	2,340	$	3,124	$	2,397	$	2,042
Allowance for bad debts		730		743		619		660
Net receivables		1,610		2,381		1,778		1,382
Contract liabilities		647		230		609		618

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ 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
	Three months ended September, 30				Nine months ended September, 30				For the Three Months Ended
In thousands	2020		2019		2020		2019		March 31, 2021		March 31, 2020
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period	$	149	$	680	$	82	$	392	$	479	$	69
Performance obligations satisfied in previous periods (for example, due to changes in transaction price)		-		-		-		-	$	-	$	-

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

Remaining performance obligations ~~represents~~represent the transaction price of contracts for which work has not been performed (or has been partially performed). The guidance provides certain practical expedients that limit this requirement and, therefore, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed. As of ~~September 30, 2020,~~March 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations for digital product sales was ~~$2.2~~$1.9 million and digital product lease and maintenance was ~~$1.8~~$2.3 million.

The Company expects to recognize revenue on approximately ~~69%~~67%, ~~15%~~18% and ~~16%~~15% of the remaining performance obligations over the next 12 months, 13 to 36 months and 37 or more months, respectively.

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Costs to Obtain or Fulfill a Customer Contract

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

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

Note 4 – Inventories

Inventories consist of the following:

	September 30 2020		December 31 2019		March 31 2021		December 31 2020
In thousands	September 30 2020		December 31 2019		March 31 2021		December 31 2020
Raw materials	$	1,194	$	1,393	$	1,246	$	1,124
Work-in-progress		463		512		178		324
Finished goods		251		277		13		94
	$	1,908	$	2,182	$	1,437	$	1,542

Note 5 – Rental Equipment, net

Rental equipment consists of the following:

	September 30 2020		December 31 2019		March 31 2021		December 31 2020
In thousands	September 30 2020		December 31 2019		March 31 2021		December 31 2020
Rental equipment	$	4,308	$	4,291	$	3,714	$	3,714
Less accumulated depreciation		3,579		3,364		3,120		3,058
Net rental equipment	$	729	$	927	$	594	$	656

~~Depreciation expense for rental equipment for the nine months ended September 30, 2020 and 2019 was $215,000 and $318,000, respectively.~~ Depreciation expense for rental equipment for the three months ended ~~September 30,~~March 31, 2021 and 2020 was $61,000 and ~~2019 was~~ $72,000, ~~and $107,000,~~ respectively.

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Note 6 – Property, Plant and Equipment, net

Property, plant and equipment consists of the following:

	September 30 2020		December 31 2019		March 31 2021		December 31 2020
In thousands	September 30 2020		December 31 2019		March 31 2021		December 31 2020
Machinery, fixtures and equipment	$	3,040	$	2,884	$	2,923	$	2,923
Leaseholds and improvements		23		23		23		23
		3,063		2,907		2,946		2,946
Less accumulated depreciation		805		623		811		746
Net property, plant and equipment	$	2,258	$	2,284	$	2,135	$	2,200

Machinery, fixtures and equipment having a net book value of ~~$2.3~~$2.1 million and $2.2 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, respectively, were pledged as collateral under various financing agreements.

Depreciation expense for property, plant and equipment for the ~~nine months ended September 30, 2020 and 2019 was $194,000 and $162,000, respectively. Depreciation expense for property, plant and equipment for the~~ three months ended ~~September 30,~~March 31, 2021 and 2020 was $65,000 and ~~2019 was $59,000 and $54,000,~~$76,000, respectively.

Note 7 – Long-Term Debt

Long-term debt consists of the following:

	September 30 2020		December 31 2019		March 31 2021		December 31 2020
In thousands	September 30 2020		December 31 2019		March 31 2021		December 31 2020
8¼% Limited convertible senior subordinated notes due 2012	$	352	$	352	$	302	$	352
9½% Subordinated debentures due 2012		220		220		220		220
Revolving credit line		686		-		702		612
Term loans - related party		1,000		1,000		1,000		1,000
Term loan		811		-		811		811
Forgivable loan		-		650
Total debt		3,069		2,222		3,035		2,995
Less deferred financing costs		211		-
Less deferred financing costs and debt discount						148		180
Net debt		2,858		2,222		2,887		2,815
Less portion due within one year		2,539		1,572		2,618		2,546
Net long-term debt	$	319	$	650	$	269	$	269

On September 16, 2019, the Company entered into ~~the Loan Agreement~~a loan agreement (the “Loan Agreement”) with MidCap. On June 3, 2020, the Company and MidCap entered into a modification agreement to the Loan Agreement. The Loan Agreement has a term of three years, unless earlier terminated by the parties in accordance with the termination provisions of the Loan Agreement. The Loan Agreement allows the Company to borrow up to an aggregate of $4.0 million at an interest rate of the 3-month LIBOR interest rate plus 4.75% (5.00% at ~~September 30, 2020)~~March 31, 2021) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes. As of ~~September 30, 2020,~~March 31, 2021, the balance outstanding under the Loan Agreement was ~~$686,000.~~$702,000. The Loan Agreement also requires the payment of certain fees, including a facility fee, an unused credit line fee and a collateral monitoring charge. The Loan Agreement contains financial and other covenant requirements, including financial covenants that require the Borrowers to attain certain EBITDA amounts for certain periods, the first of which is for the three months ended ~~September 30, 2020. As of September 30, 2020, the~~March 31, 2021. The Company was not in compliance with ~~the minimum EBITDA~~this covenant. The Loan Agreement is secured by substantially all of the Borrowers’ assets.

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On April 23, 2020, the Company entered into a loan note (the “Loan Note”) with Enterprise Bank and Trust (“Lender”) as lender under the CARES Act of the Small Business Administration of the United States of America (“SBA”), dated as of April 20, 2020. Under the Loan Note, the Company borrowed $810,800 from Lender under the Payment Protection Program (“PPP”) included in the SBA’s CARES Act, all of which is outstanding as of September 30, 2020. As of September 30, 2020, the Company had accrued $4,000 of interest related to the Loan Note, which is included in Accrued liabilities in the Consolidated Balance Sheets. The Loan Note proceeds are forgivable as long as the Company uses the loan proceeds for eligible purposes including payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leave; rent; utilities; and maintains its payroll levels. Certain employees were not retained by the Company, so the potential amount of loan forgiveness will be reduced. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1.00%, with a deferral of payments for the first six months. While the Company believes that its use of the loan proceeds will meet the conditions of forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

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 has agreed to not demand payment on the loan through at least December 31, 2020.~~ As of ~~September 30, 2020,~~March 31, 2021, the entire amount was outstanding and is included in current portion of long-term debt in the Consolidated Balance Sheets. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$165,000~~$195,000 and ~~$120,000,~~$180,000, respectively, of interest related to this loan, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets. Marco Elser, a former 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 has agreed to not demand payment on the loan through at least December 31, 2020. As of ~~September 30, 2020,~~March 31, 2021, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$165,000~~$195,000 and ~~$120,000,~~$180,000, 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.

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As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had outstanding $302,000 and $352,000, respectively, of Notes. The Notes matured as of March 1, 2012 and are currently in default. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$322,000~~$289,000 and ~~$300,000,~~$329,000, respectively, of interest related to the Notes, which is included in Accrued liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. On ~~February~~January 15, ~~2019,~~2021, holders of ~~$35,000~~$50,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for ~~$200~~$400 in cash, for an aggregate payment by the Company of ~~$7,000.~~$20,000. As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of ~~$52,000~~$77,000 in the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2021.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$226,000~~$237,000 and ~~$211,000,~~$232,000, respectively, of interest related to the Debentures, which is included in Accrued liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.

~~The Company had a $650,000 forgivable loan from the City~~13

Table of Hazelwood, Missouri. The loan would have been forgiven on a pro-rata basis if predetermined employment levels were attained. If the Company had attained the employment levels required by the forgivable loan, there would have been no interest due, otherwise interest accrued at a rate of prime plus 2.00%. As of December 31, 2019, the Company had accrued $118,000 of interest related to this loan, which is included in accrued liabilities in the Consolidated Balance Sheets. On July 2, 2020, the Company and the City of Hazelwood agreed to a termination of the loan and a forgiveness of all accrued interest. The principal balance of $650,000 was repaid on that date and the forgivable loan was satisfied in full. As a result of the termination, the Company recorded a gain on the extinguishment of debt of $137,000 in the three and nine months ended September 30, 2020.Contents

Note 8 – Pension Plan

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

The following table presents the components of net periodic pension ~~cost for the three and nine months ended September 30, 2020 and 2019:~~cost:

Three months ended
September 30

Nine months ended
September 30
In thousands
2020

2019

2020

2019
Interest cost
$
96

$
125

$
289

$
376
Expected return on plan assets
(203)
(172)
(610)
(517)
Amortization of net actuarial loss

70

65

211

196
Net periodic pension (benefit) expense
$
(37)

$
18

$
(110)

$
55

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	Three months ended March 31
In thousands	2021		2020
Interest cost	$	63	$	97
Expected return on plan assets		(210)		(203)
Amortization of net actuarial loss		80		70
Net periodic pension benefit	$	(67)	$	(36)

As of ~~September 30,~~March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had recorded a current pension liability of ~~$862,000~~$465,000 and ~~$641,000,~~$1.0 million, respectively, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets, and a long-term pension liability of ~~$3.1~~$4.1 million and ~~$3.5~~$3.7 million, respectively, which is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets. The minimum required contribution in ~~2020~~2021 is expected to be ~~$641,000,~~$465,000, of which the Company has already contributed ~~$85,000~~$56,000 as of September 30, 2020. As allowed by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company has elected to defer the payment of the $556,000 of remaining minimum required contributions due in 2020 until January 1,March 31, 2021.

Note 9 – Leases

The Company leases administrative and manufacturing facilities through operating lease agreements. The Company has no finance leases as of ~~September 30, 2020.~~March 31, 2021. Our leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common area or other maintenance costs). The facility leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion, therefore, the renewals to extend the lease terms are not included in our right of use (“ROU”) assets or lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term.

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

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Supplemental information regarding leases:

In thousands, unless otherwise noted

September 30
2020
Balance Sheet:
ROU assets

$
928
Current lease liabilities – operating
294
Non-current lease liabilities – operating

670
Total lease liabilities
964
Weighted average remaining lease term (years)

2.9
Weighted average discount rate
9.0%
Future minimum lease payments:

Remainder of 2020
92
2021

370
2022
348
2023

295
Thereafter

-
Total

1,105
Less: Imputed interest

141
Total lease liabilities

964
Less: Current lease liabilities

294
Long-term lease liabilities

$
670

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		March, 31
In thousands, unless otherwise noted		2021
Balance Sheet:
ROU assets	$	786
Current lease liabilities – operating		304
Non-current lease liabilities - operating		516
Total lease liabilities		820
Weighted average remaining lease term (years)		2.4
Weighted average discount rate		8.9%
Future minimum lease payments:
Remainder of 2021	$	278
2022		348
2023		295
Thereafter		-
Total		921
Less: Imputed interest		101
Total lease liabilities		820
Less: Current lease liabilities		304
Long-term lease liabilities	$	516

Supplemental cash flow information regarding leases:

					For the three months ended
In thousands	For the three months ended September 30, 2020		For the nine months ended September 30, 2020		March 31, 2021
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	91	$	285	$	92
Non-cash activity:
ROU assets obtained in exchange for lease liabilities		-		-		-

Total operating lease expense and short-term lease expense was ~~$289,000~~$94,000 and ~~$56,000,~~$2,000, respectively, for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Total operating lease expense and short-term lease expense was ~~$94,000~~$101,000 and ~~$20,000,~~$18,000, respectively, for the three months ended ~~September 30,~~March 31, 2020. Total operating lease expense and short-term lease expense was $374,000 and $98,000, respectively, for the nine months ended September 30, 2019. Total operating lease expense and short-term lease expense was $125,000 and $34,000, respectively, for the three months ended September 30, 2019.

Note 10 – Stockholders’ Deficit and Loss Per Share

The following table presents the calculation of loss per share for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Three months ended September 30				Nine months ended September 30				Three months ended March 31
In thousands, except per share data	2020		2019		2020		2019		2021		2020
Numerator:
Net loss, as reported	$	(758)	$	(277)	$	(3,154)	$	(1,165)	$	(621)	$	(1,043)
Change in dividends accumulated on preferred shares		-		(2)		-		(40)
Net loss attributable to common shares	$	(758)	$	(279)	$	(3,154)	$	(1,205)
Denominator:
Weighted average shares outstanding		13,696		13,650		13,696		10,648		13,696		13,696
Basic and diluted loss per share	$	(0.06)	$	(0.02)	$	(0.23)	$	(0.11)	$	(0.05)	$	(0.08)

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

~~At September 30, 2020 and 2019, the Company had no accumulated unpaid dividends related to the Series B Convertible Preferred Stock (“SBCPS”).~~

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As of ~~September 30,~~March 31, 2021 and 2020, and 2019, the Company had no shares of SBCPS outstanding. For each holder of the 15,864 shares of SBCPS that converted their shares into Common Stock in March 2019, the Company declared a dividend of $4.60 per share of SBCPS on March 29, 2019, aggregating $73,000, which was distributed to these former holders of the SBCPS on April 2, 2019. For a holder of 151 shares of SBCPS that converted its shares into Common Stock in August 2019, the Company declared a dividend of $9.50 per share of SBCPS on August 8, 2019, aggregating $1,000, which was distributed to this former holder of the SBCPS on August 8, 2019. On August 9, 2019, the Company notified the holders of the remaining 497 shares of SBCPS that it was exercising its mandatory conversion right on the SBCPS. As a result, each remaining outstanding share of SBCPS was converted into 100 shares of Common Stock on September 12, 2019. The Company declared a dividend of $11.00 per share of SBCPS on September 9, 2019, aggregating $6,000, which was distributed to these former holders of the SBCPS on September 12, 2019.

~~As of September 30, 2020 and 2019,~~ the Company had warrants to purchase 250,000 shares of Common Stock outstanding which were included in the calculation of diluted loss per share because their exercise price was less than the average stock price for the period so their inclusion was dilutive. As of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company had other warrants to purchase ~~500,000 shares~~1.6 million and 10,000 shares, respectively, of Common Stock outstanding, which were excluded from the calculation of diluted loss per share because their exercise price was greater than the average stock price for the period and their inclusion would have been anti-dilutive. ~~The remaining warrants to purchase 500,000 shares could be dilutive in the future if the average share price increases and is greater than the exercise price of these warrants.~~

On June 4, 2020, the Company entered into a Contract Manufacturing Agreement (the “CMA”) with Craftsmen Industries Inc. (“Craftsmen”). The CMA commenced June 15, 2020 and the initial term terminates December 31, 2020. The CMA allows for renewal terms of 180 days each. Under the CMA, Craftsmen shall manufacture and supply goods and provide all necessary labor, materials, management expertise, and oversight necessary to manufacture the goods at the Company’s manufacturing facility located in Hazelwood, Missouri. The Company shall provide Craftsmen assistance to the manufacturing process, the technical details as well as the amount of goods to be produced. The CMA provides that all payments owed by the Company to Craftsmen under the CMA are secured by a second lien on company assets and have been guaranteed by Unilumin USA LLC (“Unilumin USA”). Unilumin USA is wholly owned by Unilumin North America, who owns 52% of the Company’s outstanding Common Stock. In connection with the Unilumin Guarantee in the CMA, the Company issued warrants (the “Warrants”) to purchase 500,000 shares of the Company’s Common Stock to Unilumin USA at an exercise price of $1.00 per share. The Warrants are exercisable until June 4, 2024. The Company calculated the fair value of the Warrants as $94,000 utilizing the Black-Scholes method, using a volatility of 151% and a risk free rate of 0.28%. The Company recorded an expense of $94,000 in general and administrative expenses in June 2020.

Note 11 – Contingencies

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

~~Table of Contents~~

~~Note 12 – Restructuring~~

The Company records restructuring liabilities that represent charges in connection with consolidations of certain operations as well as headcount reduction programs. In the third quarter of 2019, the Company approved restructuring plans to consolidate the manufacturing facilities. The Company recorded restructuring costs of $306,000 for the year ended December 31, 2019, which mainly consisted of costs to relocate equipment and inventory and other costs to consolidate the manufacturing facilities. This restructuring relates to the digital product sales segment. Through December 31, 2019, the Company paid $53,000 of costs to relocate equipment and inventory. Therefore, the remaining $253,000 was included in accrued liabilities in the Condensed Consolidated Balance Sheet at December 31, 2019. In the nine months ended September 30, 2020, the Company paid $224,000 to complete the consolidation of the manufacturing facilities. As a result, the Company adjusted the accrual and recognized restructuring costs of ($29,000) in the nine months ended September 30, 2020. No adjustments or payments were made in the 3 months ended September 30, 2020. ~~The Company recorded restructuring costs of $179,000 for the three and nine months ended September 30, 2019~~.

Note 1312 – Related Party Transactions

The Company has the following related party transactions:

OnAs of March ~~4, 2019, the~~31, 2021, Unilumin exercised $2.0 million of the Unilumin Warrant, and on April 5, 2019, Unilumin exercised the remaining $3.5 million of the Unilumin Warrant, raising an aggregate of $5.5 million for the Company. UniluminUSA (“Unilumin”) owns 52.0% of the Company’s ~~outstanding~~Common Stock and beneficially owns 53.7% of the Company’s Common Stock. Nicholas J. Fazio, Yang Liu and Yantao Yu, each directors of the Company, are each directors and/or officers of Unilumin. The Company purchased ~~$366,000~~$419,000 and ~~$83,000 of product from Unilumin in the nine months ended September 30, 2020 and 2019, respectively. The Company purchased $177,000 and $62,000~~$32,000 of product from Unilumin in the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The amount payable by the Company to Unilumin was ~~$215,000~~$1.1 million and $231,000 as of ~~September 30, 2020. The Company did not owe any amount to Unilumin as of~~March 31, 2021 and December 31, ~~2019.~~ In connection with the Unilumin Guarantee in the CMA, the Company issued Warrants to purchase 500,000 shares of the Company’s Common Stock to Unilumin USA at an exercise price of $1.00 per share. See Note 10 – Stockholders’ Deficit and Loss Per Share for further details.2020, respectively.

In connection with the Company’s agreement with Unilumin in 2018, the Company paid $175,000 to Durkin Law, LLC in early 2019. In connection with Durkin Law, LLC’s representation of the Company in regards to the Loan Agreement and certain other general corporate matters later in 2019, the Company paid $26,000 to Durkin Law, LLC. Thomas E. Durkin, principal of Durkin Law, LLC, was appointed the Company’s Executive Vice President, General Counsel & Corporate Secretary on July 30, 2019.

~~Table of Contents~~

On April 5, 2019, the Rights Offering terminated. At the closing of the Rights Offering on April 9, 2019, the Company received gross proceeds of $2.5 million in exchange for 2,500,000 shares of Common Stock. Participants in the Rights Offering included (a) Gabelli Funds, LLC, a greater than 5% stockholder, (b) Salvatore Zizza, a director of the Company, (c) Todd Dupee, an executive officer of the Company, and (d) George Schiele and Alberto Shaio, former directors and/or former executive officers of the Company.

Note 14 – Business Segment Data

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

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

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Foreign revenues represent less than 10% of the Company’s revenues in ~~2020~~the three months ended March 31, 2021 and ~~2019.~~2020. 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.

~~Table of Contents~~

Information about the Company’s operations in its two business segments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as follows:

Three months ended
September 30

Nine months ended
September 30
In thousands
2020

2019

2020

2019
Revenues:

Digital product sales
$
     2,405
$
     3,951
$
    5,257
$
      10,155
Digital product lease and maintenance

491

521

1,601

1,663
Total revenues
$
     2,896

$
     4,472

$
    6,858

$
      11,818
Operating (loss) income:

Digital product sales
$
    (1,008)
$
         220
$
    (2,902)
$
          584
Digital product lease and maintenance

346

296

1,074

969
Corporate general and administrative expenses

(114)

(730)

(1,255)

(1,971)
Total operating loss

(776)

(214)

(3,083)

(418)
Interest expense, net
(100)
(67)
(363)
(402)
(Loss) gain on foreign currency remeasurement

(49)

29

64

(78)
Gain (loss) on debt extinguishment
137
                -
137
(193)
Pension benefit (expense)

37

(18)

110

(55)
Loss before income taxes
(751)
(270)
(3,135)
(1,146)
Income tax expense

(7)

(7)

(19)

(19)
Net loss
$
(758)

$
       (277)

$
    (3,154)

$
      (1,165)
September 30
2020

December 31
2019
Assets

Digital product sales
$
       6,925
$
      8,204
Digital product lease and maintenance

2,308

3,515
Total identifiable assets
9,233
11,719
General corporate

31

535
Total assets
$
       9,264

$
    12,254

	Three Months Ended March 31
In thousands	2021		2020
Revenues:
Digital product sales	$	2,093	$	1,334
Digital product lease and maintenance		493		579
Total revenues	$	2,586	$	1,913
Operating (loss) income:
Digital product sales	$	(626)	$	(982)
Digital product lease and maintenance		319		362
Corporate general and administrative expenses		(313)		(547)
Total operating loss		(620)		(1,167)
Interest expense, net		(103)		(108)
(Loss) gain on foreign currency remeasurement		(36)		202
Gain on extinguishment of debt		77		-
Pension benefit		67		36
Loss before income taxes		(615)		(1,037)
Income tax expense		(6)		(6)
Net loss	$	(621)	$	(1,043)

	March 31		December 31
	2021		2020
Assets
Digital product sales	$	5,397	$	5,231
Digital product lease and maintenance		1,620		1,781
Total identifiable assets		7,017		7,012
General corporate		351		43
Total assets	$	7,368	$	7,055

Note 15 – Subsequent Events

The Company has evaluated events and transactions subsequent to ~~September 30, 2020~~March 31, 2021 and through the date these Condensed Consolidated Financial Statements were included in this Form 10-Q and filed with the SEC.

2017

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

Overview

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

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

Results of Operations

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

~~The following table presents our Statements of Operations data, expressed as a percentage of revenue for the nine months ended September 30, 2020 and 2019:~~

Nine months ended
September 30
In thousands, except percentages
2020

2019
Revenues:

Digital product sales
$
5,257
76.7
%
$
10,155
85.9
%
Digital product lease and maintenance

1,601

23.3
%

    1,663

14.1
%
Total revenues

6,858

100.0
%

11,818

100.0
%
Cost of revenues:

Cost of digital product sales
6,528
95.2
%
    7,919
67.0
%
Cost of digital product lease and maintenance

471

6.9
%

       584

4.9
%
Total cost of revenues

6,999

102.1
%

    8,503

71.9
%
Gross (loss) profit

(141)

(2.1)
%

    3,315

28.1
%
General and administrative and restructuring expenses

(2,942)

(42.9)
%

   (3,733)

(31.6)
%
Operating loss

(3,083)

(45.0)
%

      (418)

(3.5)
%
Interest expense, net
(363)
(5.3)
%
      (402)
(3.4)
%
Gain (loss) on foreign currency remeasurement

64

1.0
%

        (78)

(0.7)
%
Loss on extinguishment of debt

137

2.0
%

      (193)

(1.6)
%
Pension benefit (expense)

110

1.6
%

        (55)

(0.5)
%
Loss before income taxes
(3,135)
(45.7)
%
   (1,146)
(9.7)
%
Income tax expense

(19)

(0.3)
%

        (19)

(0.2)
%
Net loss
$
(3,154)

(46.0)
%

$
(1,165)

(9.9)
%

Total revenues for the nine months ended September 30, 2020 decreased $4.9 million or 42.0% to $6.9 million from $11.8 million for the nine months ended September 30, 2019, primarily due to decreases in Digital product sales.

~~Table of Contents~~

Digital product sales revenues decreased $4.9 million or 48.2% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to a decrease in shipments as we completed the consolidation of our manufacturing facilities, followed by delays in shipments from suppliers due to the onset of the coronavirus in Asia, followed by a brief shutdown of our manufacturing facility at the onset of the coronavirus in the United States.

Digital product lease and maintenance revenues decreased $62,000 or 3.7% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to the continued expected revenue decline in the older outdoor display equipment rental bases acquired in the early 1990s, partially offset by an increase in display equipment maintenance agreements. 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, 2020 increased $2.7 million to $3.1 million from $418,000 for the nine months ended September 30, 2019, principally due to the decrease in revenues and an increase in the cost of revenues as a percentage of revenues.

Digital product sales operating income (loss) decreased $3.5 million to a loss of $2.9 million for the nine months ended September 30, 2020 compared to income of $584,000 for the nine months ended September 30, 2019, primarily due to the decrease in revenues. The cost of Digital product sales decreased $1.4 million or 17.6%, primarily due to the reduction in revenues and the completion of the consolidation of our manufacturing facilities. The cost of Digital product sales represented 124.2% of related revenues in 2020 compared to 78.0% in 2019. This increase as a percentage of revenues is primarily due to the lack of reduction of fixed manufacturing costs despite the reduction in revenues, as well as the completion of the consolidation of our manufacturing facilities. General and administrative expenses for Digital product sales decreased $21,000 or 1.3%, primarily due to a decrease in bad debt expenses and employees’ expenses, partially offset by an increase in marketing expenses.

Digital product lease and maintenance operating income increased $105,000 or 10.8% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily as a result of a decrease in the cost of Digital product lease and maintenance and a decrease in general and administrative expenses. The cost of Digital product lease and maintenance decreased $113,000 or 19.3%, primarily due to a decrease in depreciation expense. The cost of Digital product lease and maintenance revenues represented 29.4% of related revenues in 2020 compared to 35.1% in 2019. The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. General and administrative expenses for Digital product lease and maintenance decreased $54,000 or 49.1%, primarily due to a reduction in employees’ expenses.

Corporate general and administrative expenses decreased $716,000 or 36.3% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to a reduction in relocation, employee, rent, legal and directors’ expenses, partially offset by an increase in warrant expense.

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Net interest expense decreased $39,000 or 9.7% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to decreases in interest rates and the average outstanding long-term debt, primarily due to the decrease in the balance owed under revolving credit loans and term loans, partially offset by the increase in the balance owed under the PPP loan.

The gain on extinguishment of debt for the nine months ended September 30, 2020 represented the reversal of accrued interest on the Hazelwood loan, which was terminated in July 2020. The loss on extinguishment of debt for the nine months ended September 30, 2019 represented the write-off of the remaining debt discount costs and the termination fees related to former loans from CNH and SM Investors.

The effective tax rate for the nine months ended September 30, 2020 and 2019 was 0.6% and 1.7%, respectively. Both the 2020 and 2019 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

Three Months Ended ~~September 30, 2020~~March 31, 2021 Compared to Three Months Ended ~~September 30, 2019~~March 31, 2020

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

	Three months ended September 30								Three months ended March 31
In thousands, except percentages	2020				2019				2021				2020
Revenues:
Digital product sales	$	2,405	83.0	%	$	3,951	88.3	%	$	2,093	80.9	%	$	1,334	69.7	%
Digital product lease and maintenance		491	17.0	%		521	11.7	%		493	19.1	%		579	30.3	%
Total revenues		2,896	100.0	%		4,472	100.0	%		2,586	100.0	%		1,913	100.0	%
Cost of revenues:
Cost of digital product sales		2,822	97.4	%		3,178	71.0	%		2,254	87.2	%		1,703	89.0	%
Cost of digital product lease and maintenance		146	5.1	%		195	4.4	%		153	5.9	%		186	9.7	%
Total cost of revenues		2,968	102.5	%		3,373	75.4	%		2,407	93.1	%		1,889	98.7	%
Gross (loss) profit		(72)	(2.5)	%		1,099	24.6	%
Gross profit										179	6.9	%		24	1.3	%
General and administrative and restructuring expenses		(704)	(24.3)	%		(1,313)	(29.4)	%		(799)	(30.9)	%		(1,191)	(62.3)	%
Operating loss		(776)	(26.8)	%		(214)	(4.8)	%		(620)	(24.0)	%		(1,167)	(61.0)	%
Interest expense, net		(100)	(3.4)	%		(67)	(1.5)	%		(103)	(4.0)	%		(108)	(5.6)	%
(Loss) gain on foreign currency remeasurement		(49)	(1.7)	%		29	0.7	%		(36)	(1.4)	%		202	10.6	%
Gain on extinguishment of debt		137	4.7	%		-	-	%		77	3.0	%		-	-	%
Pension benefit (expense)		37	1.3	%		(18)	(0.4)	%
Pension benefit										67	2.6	%		36	1.9	%
Loss before income taxes		(751)	(25.9)	%		(270)	(6.0)	%		(615)	(23.8)	%		(1,037)	(54.2)	%
Income tax expense		(7)	(0.3)	%		(7)	(0.2)	%		(6)	(0.2)	%		(6)	(0.3)	%
Net loss	$	(758)	(26.2)	%	$	(277)	(6.2)	%	$	(621)	(24.0)	%	$	(1,043)	(54.5)	%

Total revenues for the three months ended ~~September 30, 2020 decreased $1.6 million~~March 31, 2021 increased $673,000 or 35.2% to ~~$2.9~~$2.6 million from ~~$4.5~~$1.9 million for the three months ended ~~September 30, 2019,~~March 31, 2020, primarily due to ~~a decrease~~increases in Digital product sales.

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Digital product sales revenues ~~decreased $1.5 million~~increased $759,000 or ~~39.1% for~~56.9%, primarily due to the elimination of the delays and manufacturing facility shutdowns that occurred in the three months ended ~~September 30, 2020 compared to the three months ended September 30, 2019, primarily due to a decrease in the sports market, principally due to coronavirus concerns.~~March 31, 2020.

Digital product lease and maintenance revenues decreased ~~$30,000~~$86,000 or ~~5.8% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019,~~14.9%, primarily due to the continued expected revenue decline in the older outdoor display equipment rental bases acquired in the early 1990s. The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications.

Total operating loss for the three months ended ~~September 30, 2020 increased $562,000~~March 31, 2021 decreased $547,000 to ~~$776,000~~$620,000 from ~~$214,000~~$1.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, principally due to the ~~decrease~~increase in revenues and ~~an increase~~a decrease in the cost of revenues as a percentage of revenues.

Digital product sales operating ~~income (loss)~~loss decreased ~~$1.2 million~~$356,000 to ~~a loss of $1.0 million~~$626,000 for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~income of $220,000~~$982,000 for the three months ended ~~September 30, 2019,~~March 31, 2020, primarily due to the ~~decrease~~increase in revenues and ~~an increase~~a decrease in ~~the cost of revenue as a percentage of revenues.~~general and administrative expenses. The cost of Digital product sales ~~decreased $356,000~~increased $551,000 or ~~11.2%~~32.4%, primarily due to the ~~decrease~~increase in revenues. The cost of Digital product sales represented ~~117.3%~~107.7% of related revenues in ~~2020~~2021 compared to ~~80.4%~~127.7% in ~~2019.~~2020. This ~~increase~~decrease as a percentage of revenues is primarily due to manufacturing efficiencies due to the ~~lack of reduction of fixed manufacturing costs despite the reduction~~increase in revenues.General and administrative expenses for Digital product sales ~~increased $38,000~~decreased $148,000 or ~~6.9%~~24.1%, primarily due to ~~an increase~~decreases in bad debt expenses and employees’ expenses, partially offset by ~~a decrease~~an increase in ~~employees’~~consulting expenses.

Digital product lease and maintenance operating income ~~increased $50,000~~decreased $43,000 or ~~16.9% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019,~~11.9%, primarily as a result of the decrease in revenues, partially offset by a decrease in the cost of Digital product lease and ~~maintenance and a decrease in general and administrative expenses, partially offset by the decrease in revenues.~~maintenance. The cost of Digital product lease and maintenance decreased ~~$49,000~~$33,000 or ~~25.1%~~17.7%, primarily due to a decrease in depreciation expense. The cost of Digital product lease and maintenance revenues represented ~~29.7%~~31.0% of related revenues in ~~2020~~2021 compared to ~~37.4%~~32.1% in ~~2019.~~2020. The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. General and administrative expenses for Digital product lease and maintenance decreased ~~$31,000~~$10,000 or ~~103.3%~~32.3%, primarily due to a reduction in employees’ expenses, ~~and~~partially offset by an increase in bad debt expenses.

Corporate general and administrative expenses decreased ~~$616,000~~$234,000 or ~~84.4% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019,~~42.8%, primarily due to ~~a reduction~~reductions in ~~employee,~~employees’ expenses and legal, rent ~~legal~~ and ~~directors’~~insurance expenses.

Net interest expense ~~increased $33,000~~decreased $5,000 or ~~49.3% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, primarily due an increase in the average outstanding long-term debt,~~4.6%, primarily due to ~~an increase in the balance owed under revolving credit loans and term loans including the PPP loan, partially offset by decreases~~a decrease in interest rates.

~~Table of Contents~~

~~The gain on extinguishment of debt for the three months ended September 30, 2020 represented the reversal of accrued interest on the Hazelwood loan, which was terminated in July 2020.~~

The effective tax rate for the three months ended ~~September 30,~~March 31, 2021 and 2020 was 0.8% and ~~2019 was 0.9% and 2.6%~~0.6%, respectively. Both the ~~2020~~2021 and ~~2019~~2020 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

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Liquidity and Capital Resources

Current Liquidity

The Company has incurred significant recurring losses and continues to have a significant working capital deficiency. The Company incurred a net loss of ~~$3.2 million~~$621,000 in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and had a working capital deficiency of ~~$5.9~~$6.3 million as of ~~September 30, 2020.~~March 31, 2021. As of December 31, ~~2019,~~2020, the Company also had a working capital deficiency of ~~$3.1~~$6.3 million. The working capital deficiency was primarily affected by an increase in the ~~working capital deficiency is primarily due to increases in the current portion of long-term debt, customer deposits and accrued liabilities,~~accounts receivable as well as decreases in ~~receivables, cash,~~accrued liabilities and customer deposits, offset by decreases in inventories and prepaids and other assets, ~~partially offset by a decrease~~as well as an increase in accounts payable.

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

There is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to operate our business over the next 12 months from the date of issuance of this Form 10-Q. ~~A stockholder of the Company has committed to providing additional capital up to $2.0 million, to the extent necessary to fund operations.~~ 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 $238,000 and used cash of ~~$2.0 million and $4.8 million~~$754,000 from operating activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019,~~2020, 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 ~~manufacturing and~~ 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.

~~Table of Contents~~

Cash, cash equivalents and restricted cash ~~decreased $1.4 million~~increased $308,000 in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 to ~~$31,000~~$351,000 at ~~September 30, 2020~~March 31, 2021 from ~~$1.4 million~~$43,000 at December 31, ~~2019.~~2020. The ~~decrease~~increase is primarily attributable to cash ~~used in~~generated by operating activities of ~~$2.0 million, paydown of $650,000 on the Hazelwood loan~~$238,000 and ~~investments in equipment for rental, property and equipment of $190,000, partially offset by borrowing~~borrowings on the revolving loan of ~~$686,000 and proceeds from the PPP loan of $811,000.~~$90,000. The current economic environment has increased the Company’s trade receivables collection cycle, and its allowances for uncollectible accounts receivable, but collections continue to be favorable.

Under various agreements, the Company is obligated to make future cash payments in fixed amounts. These include payments under the Company’s current and long-term debt agreements, pension plan minimum required contributions, employment agreement payments and rent payments required under operating lease agreements. The Company has both variable and fixed interest rate debt. Interest payments are projected based on actual interest payments incurred in ~~2020~~2021 until the underlying debts mature.

Table of Contents

The following table summarizes the Company’s fixed cash obligations as of ~~September 30, 2020~~March 31, 2021 for the remainder of ~~2020~~2021 and over the next four fiscal years:

In thousands	Remainder of 2020		2021		2022		2023		2024		Remainder of 2021		2022		2023		2024		2025
Long-term debt, including interest	$	3,247	$	547	$	183	$	-	$	-	$	3,558	$	406	$	-	$	-	$	-
Pension plan payments		-		973		490		324		212		409		407		355		248		115
Employment agreement obligations		-		-		-		-		-
Estimated warranty liability		47		152		116		70		44		110		114		73		48		20
Contract manufacturing agreement		32		-		-		-		-
Operating lease payments		112		370		348		309		-		281		348		309		-		-
Total	$	3,438	$	2,042	$	1,137	$	703	$	256	$	4,358	$	1,275	$	737	$	296	$	135

As of ~~September 30, 2020,~~March 31, 2021, the Company ~~still~~ had outstanding ~~$352,000~~$302,000 of Notes which matured as of March 1, 2012. The Company also ~~still~~ had outstanding $220,000 of Debentures which matured on December 1, 2012. The Company continues to consider future exchanges of the Notes and Debentures, but has no agreements, commitments or understandings with respect to any further such exchanges.

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

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

~~Table of Contents~~

Pension Plan Contributions

The minimum required pension plan contribution for ~~2020~~2021 is expected to be ~~$641,000,~~$465,000, of which the Company has already contributed ~~$85,000~~$56,000 as of ~~June 30, 2020. As allowed by the CARES Act, the Company has elected to defer the payment of the $556,000 of remaining minimum required contributions due in 2020 until January 1,~~March 31, 2021. See Note 8 to the Condensed Consolidated Financial Statements – Pension Plan for further details.

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

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

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to interest rate risk on its long-term debt. The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt. The fair value of the Company’s fixed rate long-term debt is disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt. Every 1-percentage-point change in interest rates would result in an annual interest expense fluctuation of approximately $7,000. 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 ~~$262,000,~~$272,000, 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, 2020.~~March 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and our Chief Accounting Officer (our principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Our Chief Executive Officer and Chief Accounting Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management (including our Chief Executive Officer and our Chief Accounting Officer) to allow timely decisions regarding required disclosures. Based on such evaluation, our Chief Executive Officer and Chief Accounting Officer have concluded that these disclosure controls are effective as of ~~September 30, 2020.~~March 31, 2021.

~~Table of Contents~~

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, 2020~~March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1. 1. Legal Proceedings

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Item ~~1A.~~ 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, ~~2019.~~2020.

~~The Company is supplementing the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 with the following risk factor:~~

~~Our results of operations may be negatively impacted by the coronavirus outbreak.~~

We are closely monitoring the impact of the 2019 novel coronavirus, or COVID-19, on all aspects of our business. In March 2020, the World Health Organization characterized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Since then, the COVID-19 pandemic has rapidly spread across the globe and has already resulted in significant volatility, uncertainty and economic disruption. The outbreak of COVID-19 has caused and may continue to cause travel bans or disruptions, and in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses and greater uncertainty in global financial markets. The impact of COVID-19 is fluid and uncertain, but it has caused and may continue to cause various negative effects, including an inability to meet with actual or potential customers, our end customers deciding to delay or abandon their planned purchases or failing to make payments, and delays or disruptions in our or our partners’ supply chains. As a result, we may experience extended sales cycles, our ability to close transactions with new and existing customers and partners may be negatively impacted, and the efficiency and effect of those activities, may be negatively affected, and it has been and, until the COVID-19 outbreak is contained, will continue to be more difficult for us to forecast our operating results. These uncertainties have, and may continue to, put pressure on global economic conditions and overall LED display spending and may cause our end customers to modify spending priorities or delay or abandon purchasing decisions, thereby lengthening sales cycles and potentially lowering prices for our solutions, and may make it difficult for us to forecast our sales and operating results and to make decisions about future investments, any of which could materially harm our business, operating results and financial condition.

~~Table of Contents~~

Further, our management team is focused on addressing the impacts of COVID-19 on our business, which has required and will continue to require, a large investment of their time and resources and may distract our management team or disrupt our 2020 operating plans. The extent to which COVID-19 ultimately impacts our results of operations, cash flow and financial position will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including as a result of any recession that may occur.

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

None.

Item 3. 3. Defaults upon Senior Securities

As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company had outstanding ~~$352,000~~$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, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$322,000~~$289,000 and ~~$300,000,~~$329,000, respectively, of interest related to the Notes, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company has outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had accrued ~~$226,000~~$237,000 and ~~$211,000,~~$232,000, respectively, of interest related to the Debentures, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.

Item 4. 4. Mine Safety Disclosures

Not applicable.

~~Table of Contents~~

Item 5. 5. Other Information

None.

Table of Contents

Item 6. 6. Exhibits

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

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

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

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

3024

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SIGNATURES

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

	TRANS-LUX CORPORATION
	(Registrant)

	by	/s/ Nicholas J. Fazio
		Nicholas J. Fazio
		Chief Executive Officer

	by	/s/ Todd Dupee
		Todd Dupee
		Senior Vice President and Chief Accounting Officer

Date: ~~November 6, 2020~~May 14, 2021

Delaware		13-1394750
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

135 East 57^th Street, 14^th Floor, New York, New York		10022
(Address of principal executive offices)		(Zip code)

	(800) 243-5544
(Registrant's telephone number, including area code)

Large accelerated filer ___	Accelerated filer ___
Non-accelerated filer X	Emerging growth company ___	Smaller reporting company X

Date		Class		Shares Outstanding
~~11/~~5/2013/21		Common Stock - $0.001 Par Value		~~13,474,116~~13,446,276

	Table of Contents
		Page No.
Part I - Financial Information (unaudited)

Item 1.	Condensed Consolidated Balance Sheets – ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (see Note 1)	1

	Condensed Consolidated Statements of Operations – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2

	Condensed Consolidated Statements of Comprehensive Loss – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit ~~–Three and Nine~~– Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	3

	Condensed Consolidated Statements of Cash Flows – ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2118

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2722

Item 4.	Controls and Procedures	2722

Part II - Other Information

Item 1.	Legal Proceedings	2822

Item 1A.	Risk Factors	2823

�� Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2923

Item 3.	Defaults upon Senior Securities	2923

Item 4.	Mine Safety Disclosures	2923

Item 5.	Other Information	3023

Item 6.	Exhibits	3024

Signatures		3125

Exhibits

Part I - Financial Information (unaudited)	Part I - Financial Information (unaudited)				Part I - Financial Information (unaudited)

Item 1.

TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)					TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

	September 30 2020		December 31 2019		March 31 2021		December 31 2020
In thousands, except share data	September 30 2020		December 31 2019		March 31 2021		December 31 2020

ASSETS
Current assets:
Cash and cash equivalents	$	31	$	535	$	351	$	43
Receivables, net		1,610		2,381		1,778		1,382
Inventories		1,908		2,182		1,437		1,542
Prepaids and other assets		639		807		240		327
Total current assets		4,188		5,905		3,806		3,294
Long-term assets:
Rental equipment, net		729		927		594		656
Property, plant and equipment, net		2,258		2,284		2,135		2,200
Right of use assets		928		1,141		786		858
Goodwill		744		744
Restricted cash		-		850
Other assets		417		403		47		47
Total long-term assets		5,076		6,349		3,562		3,761
TOTAL ASSETS	$	9,264	$	12,254	$	7,368	$	7,055
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	781	$	945	$	2,699	$	1,640
Accrued liabilities		6,137		6,046		4,331		4,555
Current portion of long-term debt		2,539		1,572		2,618		2,546
Current lease liabilities		294		284		304		302
Customer deposits		320		123		169		524
Total current liabilities		10,071		8,970		10,121		9,567
Long-term liabilities:
Long-term debt, less current portion		319		650		269		269
Long-term lease liabilities		670		893		516		591
Deferred pension liability and other		3,069		3,485		4,098		3,677
Total long-term liabilities		4,058		5,028		4,883		4,537
Total liabilities		14,129		13,998		15,004		14,104
Stockholders' deficit:
Preferred Stock Series A - $20 stated value - 416,500 shares authorized; shares issued and outstanding: 0 in 2020 and 2019		-		-
Preferred Stock Series B - $200 stated value - 51,000 shares authorized; shares issued and outstanding: 0 in 2020 and 2019		-		-
Common Stock - $0.001 par value - 30,000,000 shares authorized; shares issued: 13,474,116 in 2020 and 2019; shares outstanding: 13,446,276 in 2020 and 2019		13		13
Preferred Stock Series A - $20 stated value - 416,500 shares authorized; shares issued and outstanding: 0 in 2021 and 2020						-		-
Preferred Stock Series B - $200 stated value - 51,000 shares authorized; shares issued and outstanding: 0 in 2021 and 2020						-		-
Common Stock - $0.001 par value - 30,000,000 shares authorized; shares issued: 13,474,116 in 2021 and 2020; shares outstanding: 13,446,276 in 2021 and 2020						13		13
Additional paid-in-capital		41,182		41,088		41,330		41,330
Accumulated deficit		(36,318)		(33,164)		(38,628)		(38,007)
Accumulated other comprehensive loss		(6,679)		(6,618)		(7,288)		(7,322)
Treasury stock - at cost - 27,840 common shares in 2020 and 2019		(3,063)		(3,063)
Treasury stock - at cost - 27,840 common shares in 2021 and 2020						(3,063)		(3,063)
Total stockholders' deficit		(4,865)		(1,744)		(7,636)		(7,049)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	9,264	$	12,254	$	7,368	$	7,055

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

TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (unaudited)

	Preferred Stock									Add'l Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss				Total Stock- holders' Deficit
	Series A			Series B			Common Stock									Treasury Stock
In thousands, except share data	Shares	Amt		Shares	Amt		Shares	Amt								Treasury Stock
For the 9 months ended September 30, 2020
Balance January 1, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,088	$	(33,164)	$	(6,618)	$	(3,063)	$	(1,744)
Net loss	-		-	-		-	-		-		-		(3,154)		-		-		(3,154)
Issuance of warrants	-		-	-		-	-		-		94		-		-		-		94
Other comprehensive loss, net of tax:
Unrealized foreign currency translation loss	-		-	-		-	-		-		-		-		(61)		-		(61)
Balance September 30, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,182	$	(36,318)	$	(6,679)	$	(3,063)	$	(4,865)

For the 3 months ended September 30, 2020
Balance July 1, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,182	$	(35,560)	$	(6,725)	$	(3,063)	$	(4,153)
Net loss	-		-	-		-	-		-		-		(758)		-		-		(758)
Other comprehensive income, net of tax:
Unrealized foreign currency translation gain	-		-	-		-	-		-		-		-		46		-		46
Balance September 30, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,182	$	(36,318)	$	(6,679)	$	(3,063)	$	(4,865)

For the 9 months ended September 30, 2019
Balance January 1, 2019	-	$	-	16,512	$	3,302	3,652,813	$	4	$	30,069	$	(31,682)	$	(6,394)	$	(3,063)	$	(7,764)
Net loss	-		-	-		-	-		-		-		(1,165)		-		-		(1,165)
Preferred stock converted to Common Stock	-		-	(16,512)		(3,302)	1,651,200		1		3,301		-		-		-		-
Exercise of warrants, net of costs	-		-	-		-	5,670,103		6		5,292		-		-		-		5,298
Rights Offering, net of costs	-		-	-		-	2,500,000		2		2,426		-		-		-		2,428
Dividends paid on preferred stock	-		-	-		-	-		-		-		(80)		-		-		(80)
Other comprehensive income, net of tax:
Unrealized foreign currency translation gain	-		-	-		-	-		-		-		-		71		-		71
Balance September 30, 2019	-	$	-	-	$	-	13,474,116	$	13	$	41,088	$	(32,927)	$	(6,323)	$	(3,063)	$	(1,212)

For the 3 months ended September 30, 2019
Balance July 1, 2019	-	$	-	648	$	130	13,409,316	$	13	$	40,958	$	(32,643)	$	(6,296)	$	(3,063)	$	(901)
Net loss	-		-	-		-	-		-		-		(277)		-		-		(277)
Preferred stock converted to Common Stock	-		-	(648)		(130)	64,800		-		130		-		-		-		-
Dividends paid on preferred stock	-		-	-		-	-		-		-		(7)		-		-		(7)
Other comprehensive loss, net of tax:
Unrealized foreign currency translation loss	-		-	-		-	-		-		-		-		(27)		-		(27)
Balance September 30, 2019	-	$	-	-	$	-	13,474,116	$	13	$	41,088	$	(32,927)	$	(6,323)	$	(3,063)	$	(1,212)


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

TRANS-LUX CORPORATION

Note 1 – Basis of Presentation

Note 1312 – Related Party Transactions

Note 14 – Business Segment Data

Note 15 – Subsequent Events

Overview