UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022

Commission file number 1-2257

TRANS-LUX CORPORATION

(Exact name of registrant as specified in its charter)

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

~~135 East 57~~254 West 31^thst Street, 1412^th Floor, New York, New York		~~10022~~10001
(Address of principal executive offices)		(Zip code)

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

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to file such files). Yes X No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___	Accelerated filer ___
Non-accelerated filer X	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
8/~~12/21~~10/22		Common Stock - $0.001 Par Value		13,446,276

TRANS-LUX CORPORATIONAND SUBSIDIARIES

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

Item 1.	Condensed Consolidated Balance Sheets – June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (see Note 1)	1

	Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	2

	Condensed Consolidated Statements of Comprehensive Loss – Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	2

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	3

	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2423

Item 4.	Controls and Procedures	2524

Part II - Other Information

Item 1.	Legal Proceedings	2524

Item 1A.	Risk Factors	2524

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2524

Item 3.	Defaults upon Senior Securities	2625

Item 4.	Mine Safety Disclosures	2625

Item 5.	Other Information	2625

Item 6.	Exhibits	2625

Signatures		2826

Exhibits

Table of Contents

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

Item 1.	Item 1.

TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)	TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)				TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
					June 30 2022		December 31 2021
In thousands, except share data					June 30 2022		December 31 2021
	June 30 2021		December 31 2020
In thousands, except share data	June 30 2021		December 31 2020
ASSETS
Current assets:
Cash and cash equivalents	$	43	$	43	$	108	$	524
Receivables, net		1,823		1,382		3,456		2,149
Inventories		1,140		1,542		2,380		871
Prepaids and other assets		235		327		1,466		1,551
Total current assets		3,241		3,294		7,410		5,095
Long-term assets:
Rental equipment, net		533		656		318		411
Property, plant and equipment, net		2,069		2,200		1,836		1,950
Right of use assets		713		858		967		1,162
Other assets		47		47		34		33
Total long-term assets		3,362		3,761		3,155		3,556
TOTAL ASSETS	$	6,603	$	7,055	$	10,565	$	8,651
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	3,389	$	1,640	$	5,160	$	5,248
Accrued liabilities		4,216		4,555		4,471		4,287
Current portion of long-term debt		2,954		2,546		2,962		3,030
Current lease liabilities		305		302		430		397
Customer deposits		60		524		3,138		1,951
Total current liabilities		10,924		9,567		16,161		14,913
Long-term liabilities:
Long-term debt, less current portion		-		269		500		500
Long-term lease liabilities		441		591		584		805
Deferred pension liability and other		4,015		3,677		3,251		3,381
Total long-term liabilities		4,456		4,537		4,335		4,686
Total liabilities		15,380		14,104		20,496		19,599
Stockholders' deficit:
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
Preferred Stock						-		-
Preferred Stock Series A - $20 stated value - 416,500 shares authorized; shares issued and outstanding: 0 in 2022 and 2021						-		-
Preferred Stock Series B - $200 stated value - 51,000 shares authorized; shares issued and outstanding: 0 in 2022 and 2021						-		-
Common Stock - $0.001 par value - 30,000,000 shares authorized; shares issued: 13,474,116 in 2022 and 2021; shares outstanding: 13,446,276 in 2022 and 2021						13		13
Additional paid-in-capital		41,330		41,330		41,368		41,330
Accumulated deficit		(39,803)		(38,007)		(41,952)		(42,975)
Accumulated other comprehensive loss		(7,254)		(7,322)		(6,297)		(6,253)
Treasury stock - at cost - 27,840 common shares in 2021 and 2020		(3,063)		(3,063)
Treasury stock - at cost - 27,840 common shares in 2022 and 2021						(3,063)		(3,063)
Total stockholders' deficit		(8,777)		(7,049)		(9,931)		(10,948)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	6,603	$	7,055	$	10,565	$	8,651

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.

Table of Contents

TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)								TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	3 Months Ended June 30				6 Months Ended June 30
	3 Months Ended June 30				6 Months Ended June 30
In thousands, except per share data									In thousands, except per share data	3 Months Ended June 30				6 Months Ended June 30
										3 Months Ended June 30				6 Months Ended June 30
	2021		2020		2021		2020			2022		2021		2022		2021
Revenues:
Digital product sales	$	2,396	$	1,518	$	4,489	$	2,852		$	7,016	$	2,396	$	10,253	$	4,489
Digital product lease and maintenance		491		531		984		1,110			286		491		714		984
Total revenues		2,887		2,049		5,473		3,962			7,302		2,887		10,967		5,473

Cost of revenues:
Cost of digital product sales		3,022		2,003		5,276		3,706			5,800		3,022		8,758		5,276
Cost of digital product lease and maintenance		164		139		317		325			142		164		307		317
Total cost of revenues		3,186		2,142		5,593		4,031			5,942		3,186		9,065		5,593

Gross loss		(299)		(93)		(120)		(69)
Gross income (loss)											1,360		(299)		1,902		(120)
General and administrative expenses		(744)		(1,037)		(1,543)		(2,267)			(822)		(744)		(1,584)		(1,543)
Restructuring costs benefit		-		(10)		-		29
Operating loss		(1,043)		(1,140)		(1,663)		(2,307)
Operating income (loss)											538		(1,043)		318		(1,663)
Interest expense, net		(157)		(155)		(260)		(263)			(130)		(157)		(272)		(260)
(Loss) gain on foreign currency remeasurement		(36)		(89)		(72)		113
Gain (loss) on foreign currency remeasurement											76		(36)		60		(72)
Gain on extinguishment of debt		-		-		77		-			-		-		-		77
Gain on forgiveness of PPP loan											-		-		824		-
Pension benefit		67		37		134		73			52		67		105		134
Loss before income taxes		(1,169)		(1,347)		(1,784)		(2,384)
Income (loss) before income taxes											536		(1,169)		1,035		(1,784)
Income tax expense		(6)		(6)		(12)		(12)			(6)		(6)		(12)		(12)
Net loss	$	(1,175)	$	(1,353)	$	(1,796)	$	(2,396)

Loss per share - basic and diluted	$	(0.09)	$	(0.10)	$	(0.13)	$	(0.17)

Net income (loss)										$	530	$	(1,175)	$	1,023	$	(1,796)
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
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)

3 Months Ended
June 30
6 Months Ended
June 30
In thousands
2021

2020

2021

2020
Net loss
$
(1,175)

$
(1,353)

$
(1,796)

$
(2,396)
Other comprehensive income (loss):
Unrealized foreign currency translation gain (loss)

34

84

68

(107)
Total other comprehensive income (loss), net of tax

34

84

68

(107)
Comprehensive loss
$
(1,141)

$
(1,269)

$
(1,728)

$
(2,503)

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

TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

In thousands	3 Months Ended June 30				6 Months Ended June 30
In thousands	2022		2021		2022		2021
Net income (loss)	$	530	$	(1,175)	$	1,023	$	(1,796)
Other comprehensive (loss) income:
Unrealized foreign currency translation (loss) gain		(71)		34		(44)		68
Total other comprehensive (loss) income, net of tax		(71)		34		(44)		68
Comprehensive income (loss)	$	459	$	(1,141)	$	979	$	(1,728)
The accompanying notes are an integral part of these condensed consolidated financial statements.

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

																Accumulated Other Comprehensive Loss						Total Stock- holders' Deficit																					Accumulated Other Comprehensive Loss						Total Stock- holders' Deficit
	Preferred Stock									Add'l Paid-in Capital										Preferred Stock													Add'l Paid-in Capital
	Series A			Series B			Common Stock						Accumulated Deficit					Accumulated Other Comprehensive Loss		Treasury Stock				Series A				Series B				Common Stock						Accumulated Deficit			Accumulated Other Comprehensive Loss				Treasury Stock
In thousands, except share data	Shares	Amt		Shares	Amt		Shares	Amt				Accumulated Other Comprehensive Loss	Accumulated Deficit		Shares					Treasury Stock				Amt		Shares		Amt		Shares		Amt						Accumulated Deficit		Accumulated Other Comprehensive Loss					Treasury Stock
For the 6 months ended June 30, 2022
Balance January 1, 2022																					-		$	-	-		$	-	13,474,116		$	13			$	41,330		$	(42,975)					$	(6,253)	(3,063)	$	(10,948)
Net income																							-			-	-			-	-			-			-				1,023			-			-		1,023
Issuance of options																								-			-	-			-	-				-			38			-			-			-			38
Other comprehensive loss, net of tax:
Unrealized foreign currency translation loss																								-			-	-			-	-			-			-			-			(44)			-			(44)
Balance June 30, 2022																								-		$	-	-		$	-	13,474,116		$	13		$	41,368		$	(41,952)		$	(6,297)		$	(3,063)		$	(9,931)

For the 3 months ended June 30, 2022
Balance April 1, 2022																								-		$	-	-		$	-	13,474,116		$	13		$	41,330		$	(42,482)		$	(6,226)		$	(3,063)		$	(10,428)
Net income																								-			-	-			-	-			-			-			530			-			-			530
Issuance of options																								-			-	-			-	-			-			38			-			-			-			38
Other comprehensive loss, net of tax:
Unrealized foreign currency translation loss																								-			-	-			-	-			-			-			-			(71)			-			(71)
Balance June 30, 2022																								-		$	-	-		$	-	13,474,116		$	13		$	41,368		$	(41,952)		$	(6,297)		$	(3,063)		$	(9,931)

For the 6 months ended June 30, 2021
Balance January 1, 2021	-	$	-	-	$	-	13,474,116	$	13		$		41,330		$	(38,007)				$	(7,322)		$	(3,063)		$	(7,049)	-		$	-	-		$	-	13,474,116		$	13		$	41,330		$	(38,007)		$	(7,322)		$	(3,063)	$	(7,049)
Net loss	-		-			-	-		-		-				(1,796)			-			-			(1,796)	-			-	-			-	-			-			-			(1,796)			-			-			(1,796)
Other comprehensive income, net of tax:
Other comprehensive loss, net of tax:
Unrealized foreign currency translation gain	-		-			-	-		-		-			-			68			-			68	-			-	-			-	-			-			-			-			68			-			68
Balance June 30, 2021	-	$	-	-	$	-	13,474,116	$	13	$	41,330		$	(39,803)		$	(7,254)		$	(3,063)		$	(8,777)	-		$	-	-		$	-	13,474,116		$	13		$	41,330		$	(39,803)		$	(7,254)		$	(3,063)		$	(8,777)

For the 3 months ended June 30, 2021
Balance April 1, 2021	-	$	-	-	$	-	13,474,116	$	13	$	41,330		$	(38,628)		$	(7,288)		$	(3,063)		$	(7,636)	-		$	-	-		$	-	13,474,116		$	13		$	41,330		$	(38,628)		$	(7,288)		$	(3,063)		$	(7,636)
Net loss	-		-			-	-		-		-			(1,175)			-			-			(1,175)	-			-	-			-	-			-			-			(1,175)			-			-			(1,175)
Other comprehensive income, net of tax:
Unrealized foreign currency translation gain	-		-			-	-		-		-			-			34			-			34	-			-	-			-	-			-			-			-			34			-			34
Balance June 30, 2021	-	$	-	-	$	-	13,474,116	$	13	$	41,330		$	(39,803)		$	(7,254)		$	(3,063)		$	(8,777)	-		$	-	-		$	-	13,474,116		$	13		$	41,330		$	(39,803)		$	(7,254)		$	(3,063)		$	(8,777)

For the 6 months ended June 30, 2020
Balance January 1, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,088		$	(33,164)		$	(6,618)		$	(3,063)		$	(1,744)
Net loss	-		-			-	-		-		-			(2,396)			-			-			(2,396)
Issuance of warrants	-		-			-	-		-		94			-			-			-			94
Other comprehensive loss, net of tax:
Unrealized foreign currency translation loss	-		-			-	-		-		-			-			(107)			-			(107)
Balance June 30, 2020	-	$	-		$	-	13,474,116	$	13	$	41,182		$	(35,560)		$	(6,725)		$	(3,063)		$	(4,153)

For the 3 months ended June 30, 2020
Balance April 1, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,088		$	(34,207)		$	(6,809)		$	(3,063)		$	(2,978)
Net loss	-		-			-	-		-		-			(1,353)			-			-			(1,353)
Issuance of warrants	-		-			-	-		-		94			-			-			-			94
Other comprehensive income, net of tax:
Unrealized foreign currency translation gain	-		-			-	-		-		-			-			84			-			84
Balance June 30, 2020	-	$	-	-	$	-	13,474,116	$	13	$	41,182		$	(35,560)		$	(6,725)		$	(3,063)		$	(4,153)


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.

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TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)				TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	6 Months Ended June 30
	6 Months Ended June 30
In thousands					6 Months Ended June 30
In thousands	2021		2020		2022		2021
Cash flows from operating activities
Net loss	$	(1,796)	$	(2,396)
Adjustment to reconcile net loss to net cash used in operating activities:
Net income (loss)					$	1,023	$	(1,796)
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		254		278		219		254
Amortization of right of use assets		145		145		195		145
Gain on forgiveness of PPP loan						(824)		-
Amortization of deferred financing fees and debt discount		63		42		53		63
Loss on disposal of assets		-		5
Gain on extinguishment of debt		(77)		-		-		(77)
Loss (gain) on foreign currency remeasurement		72		(113)
Issuance of warrants		-		94
(Gain) loss on foreign currency remeasurement						(60)		72
Amortization of stock options						38		-
Bad debt expense		45		46		14		45
Changes in operating assets and liabilities:
Accounts receivable, net		(487)		581
Accounts receivable						(1,321)		(487)
Inventories		402		29		(1,509)		402
Prepaids and other assets		92		(141)		84		92
Accounts payable		1,749		174		(88)		1,749
Accrued liabilities		131		(96)		176		131
Operating lease liabilities		(147)		(145)		(188)		(147)
Customer deposits		(464)		292		1,187		(464)
Deferred pension liability and other		(88)		(269)		(105)		(88)
Net cash used in operating activities		(106)		(1,474)		(1,106)		(106)
Cash flows from investing activities
Equipment manufactured for rental		-		(16)
Purchases of property, plant and equipment		-		(178)		(12)		-
Net cash used in investing activities		-		(194)		(12)		-
Cash flows from financing activities
Proceeds from long-term debt		125		1,184		703		125
Payments of long-term debt		(20)		-		-		(20)
Net cash provided by financing activities		105		1,184		703		105
Effect of exchange rate changes		1		(3)		(1)		1
Net decrease in cash, cash equivalents and restricted cash		0		(487)
Cash, cash equivalents and restricted cash at beginning of year		43		1,385
Cash, cash equivalents and restricted cash at end of period	$	43	$	898
Net decrease in cash and cash equivalents						(416)		0
Cash and cash equivalents at beginning of year						524		43
Cash and cash equivalents at end of period					$	108	$	43
Supplemental disclosure of cash flow information:
Interest paid	$	162	$	151	$	-	$	162
Income taxes paid		9		15		10		9
Reconciliation of cash, cash equivalents and restricted cash to amounts reported in the Consolidated Balance Sheets at end of period:
Current assets
Cash and cash equivalents	$	43	$	248
Long-term assets
Restricted cash		-		650
Cash, cash equivalents and restricted cash at end of period	$	43	$	898

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.

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TRANS-LUX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2021~~2022

(unaudited)

Note 1 –Basis of Presentation

As used in this report, “Trans-Lux,” the “Company,” “we,” “us,” and “our” refer to Trans-Lux Corporation and its subsidiaries.

Financial information included herein is unaudited, however, such information reflects all adjustments (of a normal and recurring nature), which are, in the opinion of management, necessary for the fair presentation of the Condensed Consolidated Financial Statements for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and therefore do not include all information and footnote disclosures required under accounting principles generally accepted in the United States of America (“GAAP”). The Condensed Consolidated Financial Statements included herein should be read in conjunction with the Consolidated Financial Statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The Condensed Consolidated Balance Sheet at December 31, ~~2020~~2021 is derived from the December 31, ~~2020~~2021 audited financial statements.

~~The following new accounting pronouncements were adopted in 2021:~~

~~In August 2018, the~~ ~~Financial Accounting Standards Board (“FASB”)~~ ~~issued ASU 2018-14,~~ ~~Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20)~~. ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Public business entities should apply the amendments in ASU 2018-14 for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years (i.e., January 1, 2021). Early application is permitted. The adoption of this standard did not have a material effect on the Company’s consolidated financial position and results of operations.

~~The following new accounting pronouncements, and related impacts on adoption, are being evaluated by the Company:~~

~~None.~~

Note 2 – Liquidity and Going Concern

A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, the Company has prepared its accompanying Condensed Consolidated Financial Statements assuming the Company will continue as a going concern.

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Due to the onset of the COVID-19 pandemic in 2020, the Company experienced a reduction in sales orders from ~~customers. As a result, the~~customers in 2020 and 2021, which has just recently started to rebound. The Company ~~incurred a~~recorded net ~~loss~~income of ~~$1.8~~$1.0 million in the six months ended June 30, ~~2021 and~~2022 but recorded a net loss of $5.0 million in the year ended December 31, 2021. The Company had a working capital ~~deficiency~~deficiencies of ~~$7.7~~$8.8 million and $9.8 million as of June 30, ~~2021.~~2022 and December 31, 2021, respectively.

The Company is dependent on future operating performance in order to generate sufficient cash flows in order to continue to run its businesses. Future operating performance is dependent on 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, ~~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.

Our independent registered public accounting firm has issued an opinion on our Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020 that states that the Consolidated Financial Statements were prepared assuming we will continue as a going concern and further states that the continuing losses and uncertainty regarding our ability to make the required minimum funding contributions to the defined benefit pension plan and the past due 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”) raises substantial doubt about our ability to continue as a going concern. In addition, ifIf 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 ~~the Notes~~our outstanding 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) and ~~the Debentures~~9½% Subordinated debentures due 2012 (the “Debentures”) and/or (iv) repay our obligations under our Loan Agreement (hereinafter defined) with ~~MidCap Business Credit LLC (“MidCap”) which was subsequently assigned to~~ Unilumin, ~~USA (“Unilumin”),~~ there would be a significant adverse impact on our financial position and operating results. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities. Due to the above, there is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to continue as a going concern over the next 12 months from the date of issuance of this Form 10-Q.

Note 3 – Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of this standard, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of this standard, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales tax, value added tax and other taxes collected on behalf of third parties are excluded from revenue.

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Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of June 30, 2021.

We recognize revenue in accordance with two different accounting standards: 1) Accounting Standards Codification (“ASC”) Topic 606 and 2) ASC Topic 842. Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. Our contracts with customers generally do not include multiple performance obligations. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services. None of the Company’s contracts contained a significant financing component as of June 30, 2022. Revenue from the Company’s digital product and maintenance service is recognized ratably over the lease term in accordance with ASC Topic 842.

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Disaggregated Revenues

The following table represents a disaggregation of revenue from contracts with customers for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, along with the reportable segment for each category:

	Three months ended				Six months ended				Three months ended				Six months ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Digital product sales:
Catalog and small customized products	$	2,396	$	1,518	$	4,489	$	2,852	$	7,016	$	2,396	$	10,253	$	4,489
Large customized products		-		-		-		-		-		-		-		-
Subtotal		2,396		1,518		4,489		2,852		7,016		2,396		10,253		4,489
Digital product lease and maintenance:
Operating leases		210		236		419		515		140		210		311		419
Maintenance agreements		281		295		565		595		146		281		403		565
Subtotal		491		531		984		1,110		286		491		714		984
Total	$	2,887	$	2,049	$	5,473	$	3,962	$	7,302	$	2,887	$	10,967	$	5,473

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

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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 June 30, ~~2021,~~2022, the future minimum lease payments due to the Company under operating leases that expire at varying dates through ~~2028~~2029 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating ~~$1,996,000~~$1,682,000 are as follows: ~~$375,000~~$266,000 – remainder of ~~2021, $516,000 –~~ 2022, ~~$365,000~~$457,000 – 2023, ~~$292,000~~$349,000 – 2024, ~~$200,000~~$266,000 – 2025, $186,000 – 2026 and ~~$248,000~~$158,000 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had no contract assets. The contract liabilities primarily relate to the advance consideration received from customers for contracts prior to the transfer of control to the customer and therefore revenue is recognized on completion of delivery. Contract liabilities are classified as deferred revenue by the Company and are included in customer deposits and accrued liabilities in the Condensed Consolidated Balance Sheets.

The following table presents the balances in the Company’s receivables and contract liabilities with customers:

In thousands	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Gross receivables	$	2,297	$	2,042	$	3,875	$	2,572
Allowance for bad debts		474		660		419		423
Net receivables		1,823		1,382		3,456		2,149
Contract liabilities		481		618		3,254		2,011

During the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods:

	Three months ended				Six months ended				Three months ended				Six months ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period	$	121	$	28	$	484	$	82	$	1,397	$	121	$	1,868	$	484
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 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 June 30, ~~2021,~~2022, the aggregate amount of the transaction price allocated to remaining performance obligations for digital product sales was ~~$2.6~~$6.8 million and digital product lease and maintenance was ~~$2.0~~$1.7 million.

The Company expects to recognize revenue on approximately ~~73%~~87%, ~~15%~~8% and ~~12%~~5% 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 ASC paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in General and administrative expenses.

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

Note 4 – Inventories

Inventories consist of the following:

	June 30		December 31		June 30 2022			December 31 2021
In thousands	2021		2020		June 30 2022			December 31 2021
Raw materials	$	864	$	1,124		$	1,654	$	467
Work-in-progress		263		324			269		-
Finished goods		13		94			457		404
	$	1,140	$	1,542		$	2,380	$	871

Note 5 – Rental Equipment, net

Rental equipment consists of the following:

	June 30		December 31		June 30 2022			December 31 2021
In thousands	2021		2020		June 30 2022			December 31 2021
Rental equipment	$	3,714	$	3,714		$	3,664	$	3,664
Less accumulated depreciation		3,181		3,058			3,346		3,253
Net rental equipment	$	533	$	656		$	318	$	411

Depreciation expense for rental equipment for the six months ended June 30, 2022 and 2021 was $93,000 and ~~2020 was~~ $123,000, ~~and $143,000,~~ respectively. Depreciation expense for rental equipment for the three months ended June 30, 2022 and 2021 was $46,000 and ~~2020 was~~ $62,000, ~~and $71,000,~~ respectively.

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Note 6 – Property, Plant and Equipment, net

Property, plant and equipment consists of the following:

In thousands	June 30 2021		December 31 2020		June 30 2022		December 31 2021
Machinery, fixtures and equipment	$	2,923	$	2,923	$	2,920	$	2,908
Leaseholds and improvements		23		23		23		23
		2,946		2,946		2,943		2,931
Less accumulated depreciation		877		746		1,107		981
Net property, plant and equipment	$	2,069	$	2,200	$	1,836	$	1,950

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Machinery, fixtures and equipment having a net book value of ~~$2.1~~$1.8 million and ~~$2.2~~$2.0 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, were pledged as collateral under various financing agreements.

Depreciation expense for property, plant and equipment for the six months ended June 30, 2022 and 2021 was $126,000 and ~~2020 was~~ $131,000, ~~and $135,000,~~ respectively. Depreciation expense for property, plant and equipment for the three months ended June 30, 2022 and 2021 was $63,000 and ~~2020 was~~ $66,000, ~~and $59,000,~~ respectively.

Note 7 –Long-Term Debt

Long-term debt consists of the following:

In thousands	June 30 2021			December 31 2020		June 30 2022			December 31 2021
In thousands	June 30 2021			December 31 2020		June 30 2022			December 31 2021
8¼% Limited convertible senior subordinated notes due 2012		$	302	$	352		$	302	$	302
9½% Subordinated debentures due 2012			220		220			220		220
Revolving credit line			737		612
Revolving credit line – related party								1,440		1.189
Term loans – related party			1,000		1,000			1,000		1,000
Term loan			811		811
Term loans								500		871
Total debt			3,070		2,995			3,462		3,582
Less deferred financing costs and debt discount			116		180			-		52
Net debt			2,954		2,815			3,462		3,530
Less portion due within one year			2,954		2,546			2,962		3,030
Net long-term debt		$	-	$	269		$	500	$	500

On September 16, 2019, the Company entered into a loan agreement (the “Loan Agreement”) with MidCap. On June 3, 2020, March 23, 2021 and May 31, 2021, the Company and MidCap entered into modification agreements to the Loan Agreement. ~~Subsequent to the June~~On July 30, 2021, MidCap assigned the loan to Unilumin. The Loan Agreement ~~has a term of three years,~~terminates on September 16, 2022, unless earlier terminated by the parties in accordance with the termination provisions of the Loan Agreement. The Loan Agreement allows the Company to borrow up to an aggregate of $4.0 million at an interest rate of the 3-month LIBOR interest rate plus 4.75% ~~(7.93%~~(12.00% at June 30, ~~2021)~~2022) on a revolving credit loan based on accounts receivable, inventory and equipment for general working capital purposes. As of June 30, ~~2021,~~2022, the balance outstanding under the Loan Agreement was ~~$737,000.~~$1.4 million, including $250,000 of borrowings in the six months ended June 30, 2022. The Loan Agreement also requires the payment of certain fees, including a facility fee, an unused credit line fee and a collateral monitoring charge. The Loan Agreement contains financial and other covenant requirements, including financial covenants that require the Company to attain certain EBITDA amounts for certain periods, including the ~~six months~~period ended June 30, ~~2021.~~2022. The Company was not in compliance with this covenant. As such, Unilumin has the right to demand payment of the outstanding balance, but no such demand has been made as of the time of this filing. The Loan Agreement is secured by substantially all of the Company’s assets.

12The Company entered into a loan note (the “Loan Note”) with the SBA (“Lender”) as lender under their Economic Injury Disaster Loan (“EIDL”) program, dated as of December 10, 2021. Under the Loan Note, the Company borrowed $500,000 from Lender under the EIDL Program. As of June 30, 2022, $500,000 was outstanding. The loan matures on December 10, 2051 and carries an interest rate of 3.75%. As of June 30, 2022, the Company had accrued $10,000 of interest related to the Loan Note, which is included in Accrued liabilities in the Consolidated Balance Sheets.

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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 Paycheck Protection Program (“PPP”) included in the SBA’s CARES Act, all of which is outstanding as of June 30, 2021. As of June 30, 2021, the Company had accrued $10,000 of interest related to the Loan Note, which is included in Accrued liabilities in the Consolidated Balance Sheets.Act. The Loan Note proceeds ~~are~~were forgivable as long as the Company uses the loan proceeds for eligible purposes including payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leave; rent; utilities; and maintains its payroll levels. ~~Certain employees~~In January 2022, the loan was forgiven in full and the payments that had previously been paid were ~~not retained by~~refunded. Refund proceeds in the ~~Company, so the potential~~ amount of ~~loan forgiveness will be reduced. The unforgiven portion~~$ 452,631 are included in proceeds from long-term debt in the accompanying condensed consolidated statements of ~~the PPP loan is payable over two years at an interest rate of 1.00%, with a deferral of payments~~Cash Flows 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.months ended June 30, 2022.

The Company has a $500,000 loan from Carlisle Investments Inc. (“Carlisle”), a related party managed by a shareholder and former director at a fixed interest rate of 12.00%, which matured on April 27, 2019 with a bullet payment of all principal due at such time. Interest is payable monthly. Carlisle had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of June 30, ~~2021,~~2022, the entire amount was outstanding and is included in current portion of long-term debt in the Consolidated Balance Sheets. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$210,000~~$270,000 and ~~$180,000,~~$240,000, 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 had agreed to not demand payment on the loan through at least December 31, 2020, and has not made any such demands as of the date of this filing. As of June 30, ~~2021,~~2022, the entire amount was outstanding and is included in current portion of long-term debt Consolidated Balance Sheets. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$210,000~~$270,000 and ~~$180,000,~~$240,000, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$295,000~~$320,000 and ~~$329,000,~~$307,000, 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 January 15, 2021, holders of $50,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $400 in cash, for an aggregate payment by the Company of $20,000. As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of $77,000 in the six months ended June 30, 2021.

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As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$242,000~~$263,000 and ~~$232,000,~~$253,000, 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.

Note 8 –Pension Plan

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

The following table presents the components of net periodic pension cost for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

	Three months ended June 30				Six months ended June 30				Three months ended June 30				Six months ended June 30
In thousands	2021		2020		2021		2020		2022		2021		2022		2021
Interest cost	$	64	$	96	$	127	$	193	$	76	$	64	$	152	$	127
Expected return on plan assets		(210)		(204)		(420)		(407)		(200)		(210)		(400)		(420)
Amortization of net actuarial loss		80		71		160		141		72		80		143		160
Net periodic pension (benefit) expense	$	(66)	$	(37)	$	(133)	$	(73)	$	(52)	$	(66)	$	(105)	$	(133)

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had recorded a current pension liability of ~~$481,000~~$138,000 and ~~$1.0 million,~~$129,000, respectively, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets, and a long-term pension liability of ~~$4.0~~$3.3 million and ~~$3.7~~$3.4 million, respectively, which is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets. The minimum required contribution in ~~2021~~2022 is expected to be ~~$537,000,~~$138,000, which the Company expects to contribute in 2022, but none of which the Company has contributed ~~$56,000~~ as of June 30, ~~2021.~~2022.

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Note 9 –Leases

The Company leases administrative and manufacturing facilities through operating lease agreements. The Company has no finance leases as of June 30, ~~2021.~~2022. Our leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common area or other maintenance costs). The facility leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion, therefore, the renewals to extend the lease terms are not included in our right of use (“ROU”) assets or lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term.

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

Supplemental information regarding leases:

	June 30 2021		June 30 2022
In thousands, unless otherwise noted	June 30 2021		June 30 2022
Balance Sheet:
ROU assets	$	713	$	967
Current lease liabilities – operating		305		430
Non-current lease liabilities - operating		441		584
Total lease liabilities		746		1,014
Weighted average remaining lease term (years)		2.2		2.2
Weighted average discount rate		8.9%		7.8%
Future minimum lease payments:
Remainder of 2021	$	186
2022		348
Remainder of 2022			$	245
2023		295		437
2024				146
2025				149
2026				152
Thereafter		-		13
Total		829		1,142
Less: Imputed interest		83		128
Total lease liabilities		746		1,014
Less: Current lease liabilities		305		430
Long-term lease liabilities	$	441	$	584

Supplemental cash flow information regarding leases:

	For the three months ended June 30, 2021		For the six months ended June 30, 2021		For the three months ended June 30, 2022		For the six months ended June 30, 2022
In thousands	For the three months ended June 30, 2021		For the six months ended June 30, 2021		For the three months ended June 30, 2022		For the six months ended June 30, 2022
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	92	$	184	$	110	$	232
Non-cash activity:
ROU assets obtained in exchange for lease liabilities		-		-		-		-

~~Table of Contents~~

Total operating lease expense was $239,000 for the six months ended June 30, 2022. Total operating lease expense was $109,000 for the three months ended June 30, 2022. There was no short-term lease expense for the six months or three months ended June 30, 2022. Total operating lease expense and short-term lease expense was $190,000 and $3,000, respectively, for the six months ended June 30, 2021. Total operating lease expense and short-term lease expense was $96,000 and $1,000, respectively, for the three months ended June 30, 2021. Total operating lease expense and short-term lease expense was $195,000 and $36,000, respectively, for the six months ended June 30, 2020. Total operating lease expense and short-term lease expense was $94,000 and $18,000, respectively, for the three months ended June 30, 2020.

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Note 10 – Stockholders’ Deficit and ~~Loss~~Income (Loss) Per Share

The following table presents the calculation of ~~loss~~income (loss) per share for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

	Three months ended June 30				Six months ended June 30				Three months ended June 30				Six months ended June 30
In thousands, except per share data	2021		2020		2021		2020		2022		2021		2022		2021
Numerator:
Net loss, as reported	$	(1,175)	$	(1,353)	$	(1,796)	$	(2,396)
Net income (loss), as reported									$	530	$	(1,175)	$	1,023	$	(1,796)
Denominator:
Weighted average shares outstanding		13,643		13,696		13,670		13,696
Basic and diluted loss per share	$	(0.09)	$	(0.10)	$	(0.13)	$	(0.17)
Weighted average shares outstanding - basic										13,446		13,643		13,446		13,670
Weighted average shares outstanding - diluted										13,489		13,643		13,489		13,670
Earnings (loss) per share – basic and diluted									$	0.04	$	(0.09)	$	0.08	$	(0.13)

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

As of June 30, ~~2021,~~2022, the Company ~~did not have any warrants~~included the effects of the stock options to purchase 280,000 shares ~~of Common Stock~~ outstanding ~~which were included~~ in the calculation of ~~basic loss~~diluted earnings per ~~share because their exercise price was less than the average stock price for the period.~~share. As of June 30, 2020, the Company had warrants to purchase 250,000 shares of Common Stock outstanding which were included in the calculation of basic loss per share because their exercise price was less than the average stock price for the period so their inclusion was dilutive. As of June 30,2022 and 2021, ~~and 2020,~~ the Company had other warrants to purchase 1.6 million ~~and 500,000~~ shares ~~respectively,~~ of Common Stock outstanding, which were excluded from the calculation of diluted ~~loss~~earnings (loss) per share because their exercise price was greater than the average stock price for the period and their inclusion would have been anti-dilutive.

On March 28, 2022, the Company granted stock options to purchase 280,000 shares to executives and employees at an exercise price of $0.40 per share, which become vested on March 28, 2023. The options were valued at the grant date using the Black-Scholes model with the following inputs: expiration date March 28, 2026; risk-free rate of return 2.55%; and volatility 108%.

A summary of the status of the Company’s stock options as of June 30, 2022 and the changes during the six months then ended is presented below:

	Number of Options		Weighted Average Exercise Price		Weighted average remaining contractual life (in years)		Average intrinsic value
Outstanding at December 31, 2021		-		-		-		-
Granted		280,000	$	0.40
Expired		-		-
Outstanding at June 30, 2022		280,000	$	0.40		3.8	$	0.19
Exercisable at the end of the period		-		-		-		-

Equity based compensation was $38,000 and $0 for the six months ended June 30, 2022 and 2021, respectively. Equity based compensation was $38,000 and $0 for the three months ended June 30, 2022 and 2021, respectively. The total unrecognized equity based compensation cost related to unvested stock options was approximately $114,000 as of June 30, 2022 and will be recognized over the vesting period.

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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~~at the ~~Company deems material.~~time of this report.

~~Table of Contents~~

Note 12 – Related Party Transactions

The Company has the following related party transactions:

As of June 30, ~~2021,~~2022, Unilumin USA (“Unilumin”) owns 52.0% of the Company’s Common Stock and beneficially owns 53.7% of the Company’s Common Stock. Nicholas J. Fazio, Yang Liu and Yantao Yu, each directors ~~and/or officers~~ of the Company, are each directors and/or officers of Unilumin. The Company purchased ~~$596,000~~$3.8 million and ~~$189,000~~$596,000 of product from Unilumin in the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$480,000~~$2.7 million and ~~$156,000~~$480,000 in the three months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. The Company borrowed $250,000 under the revolving credit line with Unilumin in the six months ended June 30, 2022. The Company did not borrow any funds under the revolving credit line with Unilumin in the three months ended June 30, 2022. The amount payable by the Company to Unilumin was ~~$1.4~~$5.6 million and ~~$231,000~~$3.7 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~As disclosed in Note 7, the Loan Agreement with MidCap, including all right and responsibilities, was assigned to Unilumin subsequent to June 30, 2021.~~

Note 13 –Business Segment Data

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

The Company evaluates segment performance and allocates resources based upon operating income (loss). The Company’s operations are managed in 2 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 the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. The Company’s foreign operation does not manufacture its own equipment; the domestic operation provides the equipment that the foreign operation leases or sells. The foreign operation operates similarly to the domestic operation and has similar profit margins. Foreign assets are immaterial.

~~Table of Contents~~

Information about the Company’s operations in its two business segments for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 is as follows:

	Three months ended June 30				Six months ended June 30				Three months ended June 30				Six months ended June 30
In thousands	2021		2020		2021		2020		2022		2021		2022		2021
Revenues:
Digital product sales	$	2,396	$	1,518	$	4,489	$	2,852	$	7,016	$	2,396	$	10,253	$	4,489
Digital product lease and maintenance		491		531		984		1,110		286		491		714		984
Total revenues	$	2,887	$	2,049	$	5,473	$	3,962	$	7,302	$	2,887	$	10,967	$	5,473
Operating (loss) income:
Operating income (loss):
Digital product sales	$	(1,095)	$	(912)	$	(1,721)	$	(1,894)	$	831	$	(1,095)	$	760	$	(1,721)
Digital product lease and maintenance		323		366		642		728		133		323		390		642
Corporate general and administrative expenses		(271)		(594)		(584)		(1,141)		(426)		(271)		(832)		(584)
Total operating loss		(1,043)		(1,140)		(1,663)		(2,307)
Total operating income (loss)										538		(1,043)		318		(1,663)
Interest expense, net		(157)		(155)		(260)		(263)		(130)		(157)		(272)		(260)
(Loss) gain on foreign currency remeasurement		(36)		(89)		(72)		113
Gain on debt extinguishment		-		-		77		-
Gain (loss) on foreign currency remeasurement										76		(36)		60		(72)
Gain on extinguishment of debt										-		-		-		77
Gain on forgiveness of PPP loan										-		-		824		-
Pension benefit		67		37		134		73		52		67		105		134
Loss before income taxes		(1,169)		(1,347)		(1,784)		(2,384)
Income (loss) before income taxes										536		(1,169)		1,035		(1,784)
Income tax expense		(6)		(6)		(12)		(12)		(6)		(6)		(12)		(12)
Net loss	$	(1,175)	$	(1,353)	$	(1,796)	$	(2,396)
Net income (loss)									$	530	$	(1,175)	$	1,023	$	(1,796)

	June 30 2021		December 31 2020		June 30 2022		December 31 2021
	June 30 2021		December 31 2020		June 30 2022		December 31 2021
Assets
Digital product sales	$	5,099	$	5,231	$	8,956	$	6,379
Digital product lease and maintenance		1,461		1,781		1,501		1,748
Total identifiable assets		6,560		7,012		10,457		8,127
General corporate		43		43		108		524
Total assets	$	6,603	$	7,055	$	10,565	$	8,651

Note 14 –Subsequent Events

The Company has evaluated events and transactions subsequent to June 30, ~~2021~~2022 and through the date these Condensed Consolidated Financial Statements were included in this Form 10-Q and filed with the SEC.

~~As disclosed in Note 7, the Loan Agreement with MidCap, including all right and responsibilities, was assigned to Unilumin subsequent to June 30, 2021.~~

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.

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

Critical Accounting Estimates

There have been no changes to the Company’s critical accounting estimates as previously reported in the Company’s 2021 Form 10-K.

Results of Operations

Six Months Ended June 30, ~~2021~~2022 Compared to Six Months Ended June 30, ~~2020~~2021

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Six months ended June 30
In thousands, except percentages
2021

2020
Revenues:

Digital product sales
$
4,489

82.0
%

$
2,852

72.0
%
Digital product lease and maintenance

      984

18.0
%

    1,110

28.0
%
Total revenues

   5,473

100.0
%

    3,962

100.0
%
Cost of revenues:

Cost of digital product sales

   5,276

96.4
%

    3,706

93.5
%
Cost of digital product lease and maintenance

      317

5.8
%

       325

8.2
%
Total cost of revenues

   5,593

102.2
%

    4,031

101.7
%
Gross loss

     (120)

(2.2)
%

       (69)

(1.7)
%
General and administrative and restructuring expenses

(1,543)

(28.2)
%

(2,238)

(56.5)
%
Operating loss

(1,663)

(30.4)
%

(2,307)

(58.2)
%
Interest expense, net

     (260)

(4.7)
%

     (263)

(6.6)
%
(Loss) gain on foreign currency remeasurement

       (72)

(1.3)
%

       113

2.8
%
Gain on extinguishment of debt

         77

1.4
%

           -

-
%
Pension benefit

       134

2.4
%

         73

1.8
%
Loss before income taxes

(1,784)

(32.6)
%

  (2,384)

(60.2)
%
Income tax expense

       (12)

(0.2)
%

       (12)

(0.3)
%
Net loss
$
(1,796)

(32.8)
%

$
(2,396)

(60.5)
%

	Six months ended June 30
In thousands, except percentages	2022				2021
Revenues:
Digital product sales	$	10,253	93.5	%	$	4,489	82.0	%
Digital product lease and maintenance		714	6.5	%		984	18.0	%
Total revenues		10,967	100.0	%		5,473	100.0	%
Cost of revenues:
Cost of digital product sales		8,758	79.9	%		5,276	96.4	%
Cost of digital product lease and maintenance		307	2.8	%		317	5.8	%
Total cost of revenues		9,065	82.7	%		5,593	102.2	%
Gross income (loss)		1,902	17.3	%		(120)	(2.2)	%
General and administrative expenses		(1,584)	(14.4)	%		(1,543)	(28.2)	%
Operating income (loss)		318	2.9	%		(1,663)	(30.4)	%
Interest expense, net		(272)	(2.5)	%		(260)	(4.7)	%
Gain (loss) on foreign currency remeasurement		60	0.5	%		(72)	(1.3)	%
Gain on extinguishment of debt		-	-	%		77	1.4	%
Gain on forgiveness of PPP loan		824	7.5	%		-	-	%
Pension benefit		105	1.0	%		134	2.4	%
Income (loss) before income taxes		1,035	9.4	%		(1,784)	(32.6)	%
Income tax expense		(12)	(0.1)	%		(12)	(0.2)	%
Net income (loss)	$	1,023	9.3	%	$	(1,796)	(32.8)	%

Total revenues for the six months ended June 30, ~~2021~~2022 increased ~~$1.5~~$5.5 million or ~~38.1%~~100.4% to ~~$5.5~~$11.0 million from ~~$4.0~~$5.5 million for the six months ended June 30, ~~2020,~~2021, primarily due to an increase in Digital product sales.

Digital product sales revenues increased ~~$1.6~~$5.8 million or ~~57.4%~~128.4% for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, primarily due to ~~an increase in~~ the ~~sports market, principally due to~~return of customer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the ~~reduced sales revenues in 2020 due to the onset and uncertainty~~past year.

Table of ~~the coronavirus.~~Contents

Digital product lease and maintenance revenues decreased ~~$126,000~~$270,000 or ~~11.4%~~27.4% for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020, 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.

~~Table of Contents~~

~~Total operating loss for the six months ended June 30,~~ 2021, ~~decreased $644,000 or 27.9% to $1.7 million from $2.3 million for the six months ended June 30, 2020, principally due to the increase in revenues.~~

Digital product sales operating loss decreased $173,000 to $1.7 million for the six months ended June 30, 2021 compared to $1.9 million for the six months ended June 30, 2020, primarily due to the increase in revenues and a decrease in the cost of revenue as a percentage of revenues. The cost of Digital product sales increased $1.6 million or 42.4%, primarily due to the increase in revenues. The cost of Digital product sales represented 117.5% of related revenues in 2021 compared to 129.9% in 2020. This decrease as a percentage of revenues is primarily due to greater volume of revenues. General and administrative expenses for Digital product sales decreased $106,000 or 10.2%, primarily due to decreases in employees’ expenses, partially offset by an increase in consulting expenses.

Digital product lease and maintenance operating income decreased $86,000 or 11.8% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of the decrease in revenues, partially offset by a decrease in general and administrative expenses. The cost of Digital product lease and maintenance decreased $8,000 or 2.5%, primarily due to a decrease in depreciation expense, partially offset by an increase in employees’ expenses, primarily caused by the extraordinarily low expenses incurred in 2020 due to the onset and uncertainty of the coronavirus. The cost of Digital product lease and maintenance revenues represented 32.2% of related revenues in 2021 compared to 29.3% in 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 $32,000 or 56.1%, primarily due to a reduction in employees’ expenses.

Corporate general and administrative expenses decreased $557,000 or 48.8% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to reductions in employees’ expenses and legal, rent and insurance expenses.

~~Net interest expense decreased $3,000 or 1.1% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to a decrease in interest rates.~~

The effective tax rate for the six months ended June 30, 2021 and 2020 was 0.7% and 0.5%, respectively. Both the 2021 and 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.

~~Table of Contents~~

~~Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020~~

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

Three months ended June 30
In thousands, except percentages
2021

2020
Revenues:

Digital product sales
$
2,396

83.0
%

$
1,518

74.1
%
Digital product lease and maintenance

     491

17.0
%

        531

25.9
%
Total revenues

2,887

100.0
%

    2,049

100.0
%
Cost of revenues:

Cost of digital product sales

  3,022

104.7
%

    2,003

97.7
%
Cost of digital product lease and maintenance

     164

5.7
%

       139

6.8
%
Total cost of revenues

  3,186

110.4
%

    2,142

104.5
%
Gross loss

   (299)

(10.4)
%

         (93)

(4.5)
%
General and administrative and restructuring expenses

    (744)

(25.7)
%

  (1,047)

(51.1)
%
Operating loss

  (1,043)

(36.1)
%

  (1,140)

(55.6)
%
Interest expense, net

    (157)

(5.5)
%

     (155)

(7.6)
%
Loss on foreign currency remeasurement

       (36)

(1.2)
%

       (89)

(4.3)
%
Pension benefit

        67

2.3
%

         37

1.8
%
Loss before income taxes

  (1,169)

(40.5)
%

  (1,347)

(65.7)
%
Income tax expense

       (6)

(0.2)
%

         (6)

(0.3)
%
Net loss
$
(1,175)

(40.7)
%

$
(1,353)

   (66.0)
%

Total revenues for the three months ended June 30, 2021 increased $838,000 or 40.9% to $2.9 million from $2.0 million for the three months ended June 30, 2020, primarily due to an increase in Digital product sales.

Digital product sales revenues increased $878,000 or 57.8% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to an increase in the sports market, principally due to the reduced sales revenues in 2020 due to the onset and uncertainty of the coronavirus.

~~Digital product lease and maintenance revenues decreased $40,000 or 7.5% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020,~~ 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~~income (loss) for the ~~three~~six months ended June 30, 2022 increased $2.0 million to income of $318,000 from a loss of $1.7 million for the six months ended June 30, 2021, ~~decreased $97,000 to $1.0 million from $1.1 million for the three months ended June 30, 2020,~~ principally due to ~~a decrease~~the increase in ~~corporate general and administrative expenses.~~revenues.

Digital product sales operating income (loss) increased $2.5 million to income of $760,000 for the six months ended June 30, 2022 compared to a loss ~~increased $183,000 to $1.1~~of $1.7 million for the ~~three~~six months ended June 30, 2021, ~~compared to $912,000 for the three months ended June 30, 2020,~~ primarily due to anthe increase in revenues and a decrease in the cost of ~~revenue~~revenues as a percentage of ~~revenues.~~revenues, as well as a decrease in general and administrative expenses. The cost of Digital product sales increased ~~$1.0~~$3.5 million or ~~50.9%~~66.0%, primarily due to the increase in revenues. The cost of Digital product sales represented ~~126.1%~~85.4% of related revenues in ~~2021~~2022 compared to ~~131.9%~~117.5% in ~~2020.~~2021. This decrease as a percentage of revenues is primarily due to the ~~greater volume of~~increase in revenues. General and administrative expenses for Digital product sales decreased ~~$42,000~~$199,000 or ~~9.8%~~21.3%, primarily due to ~~a decrease in employees’ expenses, partially offset by increases~~decreases in consulting expenses and bad debt expenses.

~~Table of Contents~~

Digital product lease and maintenance operating income decreased ~~$43,000~~$252,000 or ~~11.7%~~39.3% for the ~~three~~six months ended June 30, 2022 compared to the six months ended June 30, 2021, ~~compared to the three months ended June 30, 2020,~~ primarily as a result of ~~an increase in the cost of Digital product lease and maintenance and~~ the decrease in ~~revenues, partially offset by a decrease in general and administrative expenses.~~revenues. The cost of Digital product lease and maintenance ~~increased $25,000~~decreased $10,000 or ~~18.0%~~3.2%, primarily due to a decrease in depreciation expense, partially offset by an increase in service agents and employees’ expenses, primarily caused by the extraordinarily low expenses incurred in 2020 due to the onset and uncertainty of the coronavirus, partially offset by a decrease in depreciation expense.agents. The cost of Digital product lease and maintenance revenues represented ~~33.4%~~43.0% of related revenues in ~~2021~~2022 compared to ~~26.2%~~32.2% in ~~2020.~~2021. The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. General and administrative expenses for Digital product lease and maintenance decreased ~~$22,000~~$8,000 or ~~84.6%~~32.0%, primarily due to ~~decreases~~a reduction in bad debt ~~expenses and employees’~~ expenses.

Corporate general and administrative expenses ~~decreased $323,000~~increased $248,000 or ~~54.4%~~42.5% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to an increase in employees’ expenses, partially offset by a decrease in consulting expenses.

Net interest expense increased $12,000 or 4.6% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to an increase in interest rates and outstanding debt.

The effective tax rate for the six months ended June 30, 2022 and 2021 was 1.2% and 0.7%, respectively. Both the 2022 and 2021 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

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Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The following table presents our Statements of Operations data, expressed as a percentage of revenue for the three months ended June 30, 2022 and 2021:

	Three months ended June 30
In thousands, except percentages	2022					2021
Revenues:					��
Digital product sales	$	7,016	96.1	%		$	2,396	83.0	%
Digital product lease and maintenance		286	3.9	%			491	17.0	%
Total revenues		7,302	100.0	%			2,887	100.0	%
Cost of revenues:
Cost of digital product sales		5,800	79.5	%			3,022	104.7	%
Cost of digital product lease and maintenance		142	1.9	%			164	5.7	%
Total cost of revenues		5,942	81.4	%			3,186	110.4	%
Gross income (loss)		1,360	18.6	%			(299)	(10.4)	%
General and administrative expenses		(822)	(11.2)	%			(744)	(25.7)	%
Operating income (loss)		538	7.4	%			(1,043)	(36.1)	%
Interest expense, net		(130)	(1.8)	%			(157)	(5.5)	%
Income (loss) on foreign currency remeasurement		76	1.0	%			(36)	(1.2)	%
Pension benefit		52	0.7	%			67	2.3	%
Income (loss) before income taxes		536	7.3	%			(1,169)	(40.5)	%
Income tax expense		(6)	-	%			(6)	(0.2)	%
Net income (loss)	$	530	7.3	%		$	(1,175)	(40.7)	%

Total revenues for the three months ended June 30, 2022 increased $4.4 million or 152.9% to $7.3 million from $2.9 million for the three months ended June 30, 2021, primarily due to an increase in Digital product sales.

Digital product sales revenues increased $4.6 million or 192.8% for the three months ended June 30, 2022 compared to the three months ended June 30, ~~2020,~~2021, primarily due to ~~reductions in employees’ expenses and legal, rent and insurance expenses.~~the return of customer orders since COVID-19 pandemic restrictions have been reduced or eliminated over the past year.

~~Net interest expense~~Digital product lease and maintenance revenues decreased $205,000 or 41.8% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to the continued expected revenue decline in the older outdoor display equipment rental bases acquired in the early 1990s. The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications.

Total operating income (loss) for the three months ended June 30, 2022 increased ~~$2,000 or 1.3%~~$1.6 million to income of $538,000 from a loss of $1.0 million for the three months ended June 30, 2021, principally due to an increase in revenues, partially offset by a decrease in general and administrative expenses.

Digital product sales operating income (loss) increased $1.9 million to income of $831,000 for the three months ended June 30, 2022 compared to a loss of $1.1 million for the three months ended June 30, 2021, primarily due to an increase in revenues and a decrease in the cost of revenue as a percentage of revenues. The cost of Digital product sales decreased $2.8 million or 91.9%, primarily due to the increase in revenues. The cost of Digital product sales represented 82.7% of related revenues in 2022 compared to 126.1% in 2021. This decrease as a percentage of revenues is primarily due to manufacturing efficiencies due to the increase in revenues. General and administrative expenses for Digital product sales decreased $84,000 or 17.9%, primarily due to decreases in consulting expenses and bad debt expenses.

Digital product lease and maintenance operating income decreased $190,000 or 58.8% for the three months ended June 30, 2022 compared to the three months ended June 30, ~~2020,~~2021, primarily as a result of a decrease in the cost of Digital product lease and maintenance and the decrease in revenues, partially offset by an increase in general and administrative expenses. The cost of Digital product lease and maintenance decreased $22,000 or 13.4%, primarily due to a decrease in depreciation expense, partially offset by an increase in service agents and employees’ expenses. The cost of Digital product lease and maintenance revenues represented 49.7% of related revenues in 2022 compared to 33.4% in 2021. The cost of Digital product lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. General and administrative expenses for Digital product lease and maintenance increased $7,000 or 175.0%, primarily due to an increase in bad debt expenses.

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Corporate general and administrative expenses increased $155,000 or 57.2% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to an increase in employees’ expenses, partially offset by a decrease in consulting fees.

Net interest ~~rates.~~expense decreased $27,000 or 17.2% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to a decrease in outstanding debt.

The effective tax rate for the three months ended June 30, 2022 and 2021 was 1.1% and ~~2020 was~~ 0.5% ~~and 0.4%~~, respectively. Both the ~~2021~~2022 and ~~2020~~2021 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.

Liquidity and Capital Resources

Current Liquidity

The Company has incurred significant recurring losses and continues to have a significant working capital deficiency. The Company ~~incurred a net loss~~recorded income of ~~$1.8~~$1.0 million in the six months ended June 30, ~~2021 and~~2022, which included the gain on forgiveness of the PPP loan of $824,000, but recorded a loss of $5.0 million in the year ended December 31, 2021. The Company had a working capital ~~deficiency~~deficiencies of ~~$7.7~~$8.8 million and $9.8 million as of June 30, ~~2021. As of~~2022 and December 31, ~~2020,~~2021, respectively. The change in the ~~Company had a~~ working capital deficiency ~~of $6.3 million. The working capital deficiency increased~~was primarily ~~due to~~affected by increases in the accounts receivable and inventories, as well as decreases in ~~inventories~~accrued liabilities and current portion of long-term debt, partially offset by a decreases in cash and prepaids and other assets, as well as increases in accounts payable, ~~and~~ current ~~portion of long-term debt, offset by an increase in receivables, as well as decreases in accrued~~lease liabilities and customer deposits.

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

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There is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to operate our business over the next 12 months from the date of issuance of this Form 10-Q. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities.

The Company used cash of ~~$106,000~~$1.1 million and ~~$1.5 million~~used cash of $106,000 from operating activities for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company has implemented several initiatives to improve operational results and cash flows over future periods, including reducing head count, reorganizing its sales department and outsourcing certain administrative functions. The Company continues to explore ways to reduce operational and overhead costs. The Company periodically takes steps to reduce the cost to maintain the digital products on lease and maintenance agreements.

Cash and cash equivalents ~~and restricted cash remained level~~decreased $416,000 in the six months ended June 30, ~~2021 as compared~~2022 to ~~the balance of $43,000~~$108,000 at June 30, 2022 from $524,000 at December 31, ~~2020.~~2021. The ~~fluctuations are~~decrease is primarily attributable to ~~net borrowings on the revolving loan of $125,000, partially offset by~~ cash used in operating activities of ~~$106,000.~~$1.1 million, partially offset by proceeds from long-term debt borrowings of $250,000 and refund proceeds from loan forgiveness of $453,000. 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 ~~2021~~2022 until the underlying debts mature. As interest rates have increased in 2022, and may continue to increase, the amounts the Company pays for interest could exceed the projected amounts.

The following table summarizes the Company’s fixed cash obligations as of June 30, ~~2021~~2022 for the remainder of ~~2021~~2022 and over the next four fiscal years:

In thousands	Remainder of 2021		2022		2023		2024		2025		Remainder of 2022		2023		2024		2025		2026
Long-term debt, including interest	$	3,499	$	542	$	-	$	-	$	-	$	4,024	$	-	$	31	$	31	$	$ 31
Pension plan payments		326		406		355		248		114		138		-		179		129		60
Estimated warranty liability		79		124		81		56		27		170		113		89		59		43
Operating lease payments		195		348		309		-		-		245		438		146		149		152
Total	$	4,099	$	1,420	$	745	$	304	$	141	$	4,577	$	551	$	445	$	368	$	286

As of June 30, ~~2021,~~2022, the Company 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.

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

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

Pension Plan Contributions

The minimum required pension plan contribution for ~~2021~~2022 is expected to be ~~$537,000,~~$138,000, which the Company expects to contribute in 2022, but none of which the Company has ~~already~~ contributed ~~$56,000~~ as of June 30, ~~2021.~~2022. See Note 8 to the Condensed Consolidated Financial Statements – Pension Plan for further details.

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

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to interest rate risk on its long-term debt. The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt. The fair value of the Company’s fixed rate long-term debt is disclosed in Note 7 to the Condensed 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.~~$19,000. 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 ~~$275,000,~~$261,000, 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 June 30, ~~2021.~~2022

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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 June 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting. There has been no change in the Company’s internal control over financial reporting that occurred in the quarter ended June 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings

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, ~~2020.~~2021.

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

None.

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Item 3. Defaults upon Senior Securities

As disclosed in Note 7 to the Condensed Consolidated Financial Statements – Long-Term Debt, the Company had outstanding $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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$295,000~~$320,000 and ~~$329,000,~~$307,000, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had accrued ~~$242,000~~$263,000 and ~~$232,000,~~$253,000, 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. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On August 2, 2021, the Company appointed Yantao Yu to be the Company’s Chief Operating Officer. Mr. Yu, 45, has served as an independent director of the Company since July 30, 2019. Mr. Yu has been the Chief Financial Officer of subsidiaries of the Unilumin Group Co. Ltd. in the United States, since September 2018. During the last two years, other than the Company’s transactions with Unilumin, there have been no transactions or proposed transactions by the Company in which Mr. Yu has had or is to have a direct or indirect material interest, and there are no family relationships between Mr. Yu and any of the Company’s other executive officers or directors.
None.

Item 6. Exhibits

~~10.1Modification Agreement to the Loan Agreement with MidCap Business Credit LLC dated as of May 31, 2021, filed herewith.~~

~~10.2Assignment Without Recourse of Loan Agreement with MidCap Business Credit LLC to Unilumin USA dated as of July 30, 2021, filed herewith.~~

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.

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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.

101 The following financial information from the Company’s Form 10-Q for the quarterly period ended June 30, 2022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Deficit, and (v) Notes to Condensed Consolidated Financial Statements.

27104 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)

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

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

Date: August ~~13, 2021~~11, 2022

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