Overview

Trans Lux is a leading provider of LED technology for visual applications.

Of

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.



Results of Operations


Nine months are up September 30, 2021 Compared to nine months September 30, 2020

The following table shows the data for our performance statements, which are expressed as a percentage of income completed for nine months September 30, 2021 And 2020:




                                                              Nine months ended September 30
In thousands, except percentages                               2021                     2020

Earnings

Digital product sales                                 $     6,882     82.5 %   $     5,257     76.7 %
Digital product lease and maintenance                       1,456     17.5 %         1,601     23.3 %
Total revenues                                              8,338    100.0 %         6,858    100.0 %
Cost of revenues:
Cost of digital product sales                               8,286     99.4 %         6,528     95.2 %
Cost of digital product lease and maintenance                 462      5.5 %           471      6.9 %
Total cost of revenues                                      8,748    104.9 %         6,999    102.1 %
Gross loss                                                  (410)    (4.9) %         (141)    (2.1) %
General and administrative and restructuring expenses     (2,270)   (27.2) %       (2,942)   (42.9) %
Operating loss                                            (2,680)   (32.1) %       (3,083)   (45.0) %
Interest expense, net                                       (363)    (4.4) %         (363)    (5.3) %
(Loss) gain on foreign currency remeasurement                (10)    (0.1) %            64      1.0 %
Gain on extinguishment of debt                                 77      0.9 %           137      2.0 %
Pension benefit                                               200      2.4 %           110      1.6 %
Loss before income taxes                                  (2,776)   (33.3) %       (3,135)   (45.7) %
Income tax expense                                           (19)    (0.2) %          (19)    (0.3) %
Net loss                                              $   (2,795)   (33.5) %   $   (3,154)   (46.0) %



Nine months’ total income is over. September 30, 2021 Increased $ 1.5 million Or 21.6% to $ 8.3 million from $ 6.9 million The nine months are over
September 30, 2020, Mainly due to the increase in digital product sales.




Digital product sales revenues increased $1.6 million or 30.9% for the nine
months ended September 30, 2021 compared to the nine months ended September 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 $145,000 or 9.1% for
the nine months ended September 30, 2021 compared to the nine months ended
September 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.



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The total loss is over for nine months. September 30, 2021 Reduced
$ 403,000 Or 13.1% to $ 2.7 million from $ 3.1 million The nine months are over
September 30, 2020Primarily due to increased income.




Digital product sales operating loss decreased $88,000 or 3.0% to $2.8 million
for the nine months ended September 30, 2021 compared to $2.9 million for the
nine months ended September 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 $1.8 million or 26.9%, primarily due to the
increase in revenues.  The cost of Digital product sales represented 120.4% of
related revenues in 2021 compared to 124.2% in 2020.  This decrease as a
percentage of revenues is primarily due to the greater volume of revenues.
General and administrative expenses for Digital product sales decreased $221,000
or 13.5%, primarily due to decreases in employees' expenses, partially offset by
an increase in consulting expenses.



Digital product lease and maintenance operating income decreased $97,000 or 9.0%
for the nine months ended September 30, 2021 compared to the nine months ended
September 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 $9,000 or 1.9%, 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 31.7% of related
revenues in 2021 compared to 29.4% 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 $39,000 or 69.6%, primarily due to a reduction in
employees' expenses.



General and administrative costs of the organization have been reduced $ 412,000 Or 32.8% for nine months September 30, 2021 Compared to the end of nine months
September 30, 2020This is mainly due to the reduction in labor costs and legal, rent and insurance costs.




Net interest expense remained level for the nine months ended September 30, 2021
compared to the nine months ended September 30, 2020, primarily due to increases
in the outstanding balances for most of the year, offset by decreases in the
outstanding balances on the loans as of September 30, 2021 and decreases in
interest rates.



The effective tax rate for the nine months ended September 30, 2021 and 2020 was
0.7% and 0.6%, 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.



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Three months passed September 30, 2021 Compared to the end of three months September 30, 2020

The following table provides information on our operations, the percentage of revenue completed for the three months September 30, 2021 And 2020:




                                                               Three months ended September 30
In thousands, except percentages                               2021                      2020

Earnings

Digital product sales                                 $     2,393     83.5 %   $     2,405       83.0 %
Digital product lease and maintenance                         472     16.5 %           491       17.0 %
Total revenues                                              2,865    100.0 %         2,896      100.0 %
Cost of revenues:
Cost of digital product sales                               3,010    105.0 %         2,822       97.4 %
Cost of digital product lease and maintenance                 145      5.1 %           146        5.1 %
Total cost of revenues                                      3,155    110.1 %         2,968      102.5 %
Gross loss                                                  (290)   (10.1) %          (72)      (2.5) %
General and administrative and restructuring expenses       (727)   (25.4) %         (704)     (24.3) %
Operating loss                                            (1,017)   (35.5) %         (776)     (26.8) %
Interest expense, net                                       (103)    (3.6) %         (100)      (3.4) %
Gain (loss) on foreign currency remeasurement                  62      2.2 %          (49)      (1.7) %
Gain on extinguishment of debt                                  -        - %           137        4.7 %
Pension benefit                                                66      2.3 %            37        1.3 %
Loss before income taxes                                    (992)   (34.6) %         (751)     (25.9) %
Income tax expense                                            (7)    (0.3) %           (7)      (0.3) %
Net loss                                              $     (999)   (34.9) %   $     (758)     (26.2) %




Total revenues for the three months ended September 30, 2021 decreased $31,000
or 1.1% to $2.9 million compared to the three months ended September 30, 2020,
primarily due to decreases in Digital product lease and maintenance revenues and
sales revenues.



Digital product sales revenues decreased $12,000 or 0.5% for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020,
primarily due to a decrease in the sports market.



Digital product lease and maintenance revenues decreased $19,000 or 3.9% for the
three months ended September 30, 2021 compared to the three months ended
September 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 for the three months ended September 30, 2021 increased
$241,000 to $1.0 million from $776,000 for the three months ended September 30,
2020, principally due to an increase in corporate general and administrative
expenses.



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Digital product sales operating loss increased $85,000 to $1.1 million for the
three months ended September 30, 2021 compared to $1.0 million for the three
months ended September 30, 2020, primarily due to an increase in the cost of
revenue as a percentage of revenues, partially offset by a decrease in general
and administrative expenses.  The cost of Digital product sales increased
$188,000 or 6.7%, primarily due to increased manufacturing costs.  The cost of
Digital product sales represented 125.8% of related revenues in 2021 compared to
117.3% in 2020.  This increase as a percentage of revenues is primarily due to
increases in the manufacturing supply chain costs and consulting costs.  General
and administrative expenses for Digital product sales decreased $115,000 or
19.5%, primarily due to a decrease in employees' expenses, partially offset by
increases in consulting expenses and bad debt expenses.



Digital product lease and maintenance operating income decreased $11,000 or 3.2%
for the three months ended September 30, 2021 compared to the three months ended
September 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 $1,000 or 0.7%, 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.
The cost of Digital product lease and maintenance revenues represented 30.7% of
related revenues in 2021 compared to 29.7% 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 $7,000, primarily due to a decrease in
bad debt expenses.



Corporate general and administrative expenses increased $145,000 or 127.2% for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020, primarily due to the non-recurrence of certain credits
recorded in 2020, partially offset by reductions in employees' expenses and
legal, rent and insurance expenses.



Net interest expenditure increased. $ 3,000 Or 3.0% completed for three months
September 30, 2021 Compared to the last three months September 30, 2020This is mainly due to the increase in the balance of the loan and the reduction of the partial interest rate.




The effective tax rate for the three months ended September 30, 2021 and 2020
was 0.7% and 0.9%, 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.



Fluid and Capital Resources



Current Liquidity



The Company has incurred significant recurring losses and continues to have a
significant working capital deficiency.  The Company incurred a net loss of $2.8
million in the nine months ended September 30, 2021 and had a working capital
deficiency of $8.6 million as of September 30, 2021.  As of December 31, 2020,
the Company had a working capital deficiency of $6.3 million.  The working
capital deficiency increased primarily due to an increase in accounts payable
and a decrease in inventories, partially offset by increases in cash,
receivables and prepaids, as well as decreases in accrued 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.



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 generated cash of $605,000 and used cash of $2.0 million from
operating activities for the nine months ended September 30, 2021 and 2020,
respectively.  The Company has implemented several initiatives to improve
operational results and cash flows over future periods, including reducing head
count, reorganizing its sales department and outsourcing certain administrative
functions.  The Company continues to explore ways to reduce operational and
overhead costs.  The Company periodically takes steps to reduce the cost to
maintain the digital products on lease and maintenance agreements.



Cash, cash equivalents and restricted cash increased $243,000 in the nine months
ended September 30, 2021.  The increase is primarily attributable to cash
generated by operating activities of $605,000, partially offset by payments of
long-term debt of $362,000.  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 until the underlying debts mature.



The following table summarizes the firm’s fixed financial obligations
September 30, 2021 For the rest of 2021 and the next four fiscal years,




                                    Remainder of
In thousands                                2021   2022    2023    2024    

2025

Long-term debt, including interest $       3,216   $ 372   $   -   $   -   $   -
Pension plan payments                         82      47     354     247     115
Estimated warranty liability                  44     140      93      67      33
Operating lease payments                      97     348     309       -       -
Total                              $       3,439   $ 907   $ 756   $ 314   $ 148




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As of September 30, 2021, 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.



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 more information on the company’s long-term debt, see Connected Financial Statements Note 7 – Long-term debt.



Pension Plan Contributions


The minimum pension plan contribution required for 2021 is expected
$ 388,000, Which the company has already contributed $ 306,000 as such September 30, 2021. See Note 8 for consolidated financial statements for more details – Retirement Plan.

Safe Harbor Statement in 1995 under the Privacy Guarantee Amendment Act




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

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