Company Quick10K Filing
Quick10K
Trans Lux
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
10-Q 2013-09-30 Quarter: 2013-09-30
8-K 2019-09-16 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-07-30 Shareholder Vote
8-K 2019-04-05 Sale of Shares, Other Events, Exhibits
8-K 2019-03-04 Enter Agreement, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2019-03-01 Regulation FD, Exhibits
8-K 2019-02-25 Other Events, Exhibits
8-K 2019-01-28 Shareholder Rights, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-11-02 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-10-22 Officers, Exhibits
8-K 2018-09-28 Sale of Shares, Officers, Exhibits
8-K 2018-08-20 Officers
8-K 2018-08-16 Officers, Exhibits
8-K 2018-06-11 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2018-04-26 Officers, Exhibits
8-K 2018-04-24 Officers, Exhibits
8-K 2018-03-30 Officers
8-K 2018-03-14 Enter Agreement, Off-BS Arrangement, Exhibits
DVMT Dell 67,852
SSC Seven Stars Cloud Group 234
NWBO Northwest Biotherapeutics 109
IEHC Iehoration 44
NUMD Nu-Med Plus 25
ABCP Ambase 13
DRNG Drone Guarder 5
AWIN Altegris Winton Futures Fund 0
BENH Bio-En 0
OFFLP Ceres Orion 0
TLX 2019-06-30
Note 1 - Basis of Presentation
Note 2 - Liquidity
Note 3 - Revenue Recognition
Note 4 - Inventories
Note 5 - Rental Equipment, Net
Note 6 - Property, Plant and Equipment, Net
Note 7 - Long-Term Debt
Note 8 - Pension Plan
Note 9 - Leases
Note 10 - Stockholders' Deficit and Loss per Share
Note 11 - Contingencies
Note 12 - Related Party Transactions
Note 13 - Business Segment Data
Note 14 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exhibit31_1.htm
EX-31.2 exhibit31_2.htm
EX-32.1 exhibit32_1.htm
EX-32.2 exhibit32_2.htm

Trans Lux Earnings 2019-06-30

TLX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q.htm FORM 10-Q Form 10-Q

 

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, 2019

 

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 57th Street, 14th Floor, New York, New York

10022

(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

8/13/19

Common Stock - $0.001 Par Value

13,381,476

 



 

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

 

 

 

Table of Contents

 

 

Page No.

Part I - Financial Information (unaudited)

        Item 1.

Condensed Consolidated Balance Sheets – June 30, 2019 and December 31, 2018 (see Note 1)

1

Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2019 and 2018

2

Condensed Consolidated Statements of Comprehensive Loss – Three and Six Months Ended June 30, 2019 and 2018

2

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Three and Six Months Ended June 30, 2019 and 2018

3

Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018

4

Notes to Condensed Consolidated Financial Statements

5

         Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

        Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

         Item 4.

Controls and Procedures

28

Part II - Other Information

          Item 1.

Legal Proceedings

28

          Item 1A.

Risk Factors

29

         Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

          Item 3.

Defaults upon Senior Securities

29

          Item 4.

Mine Safety Disclosures

29

         Item 5.

Other Information

30

          Item 6.

Exhibits

30

Signatures

31

Exhibits

 


Table of Contents

 

Part I - Financial Information (unaudited)

Item 1.

 

TRANS-LUX CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

June 30

2019

 

December 31

2018

In thousands, except share data                        

 

(see Note 1)

ASSETS

 

 

 

 

 

Current assets:

Cash and cash equivalents

$

1,413

 

$

723

Receivables, net

2,552

2,271

Inventories

 

2,533

 

 

2,201

Prepaids and other assets

 

787

 

 

417

Total current assets

 

7,285

 

 

5,612

Long-term assets:

Rental equipment, net

 

1,093

 

 

1,310

Property, plant and equipment, net

2,102

2,180

Right of use assets

 

1,281

 

 

-

Goodwill

744

744

Restricted cash

 

900

 

 

900

Other assets

 

720

 

 

720

Total long-term assets

 

6,840

 

 

5,854

TOTAL ASSETS

$

14,125

 

 $

11,466

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current liabilities:

Accounts payable

$

753

 

$

3,728

Accrued liabilities

5,652

6,332

Current portion of long-term debt

 

572

 

 

2,584

Current portion of long-term debt - related party

-

1,000

Current lease liabilities

 

322

 

 

-

Customer deposits

 

810

 

 

432

Total current liabilities

 

8,109

 

 

14,076

Long-term liabilities:

Long-term debt, less current portion

 

1,650

 

 

1,446

Long-term lease liabilities

994

-

Deferred pension liability and other

 

4,273

 

 

3,708

Total long-term liabilities

 

6,917

 

 

5,154

Total liabilities

 

15,026

 

 

19,230

Stockholders' deficit:

Preferred Stock Series A - $20 stated value -  416,500 shares authorized;
    shares issued and outstanding: 0 in 2019 and 2018

 

-

 

 

-

Preferred Stock Series B - $200 stated value -  51,000 shares authorized;
    shares issued and outstanding: 648 in 2019 and 16,512 in 2018
    (liquidation preference $135,000)

 

130

 

3,302

Common Stock - $0.001 par value -  30,000,000 shares authorized;
    shares issued: 13,409,316 in 2019 and 3,652,813 in 2018;
    shares outstanding: 13,381,476 in 2019 and 3,624,973 in 2018

 

13

 

 

4

Additional paid-in-capital

40,958

30,069

Accumulated deficit

 

(32,643)

 

 

(31,682)

Accumulated other comprehensive loss

(6,296)

(6,394)

Treasury stock - at cost - 27,840 common shares in 2019 and 2018

 

(3,063)

 

 

(3,063)

Total stockholders' deficit

 

(901)

 

 

(7,764)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

14,125

 

 $

11,466

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


1


Table of Contents


 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

3 Months Ended

June 30

 

6 Months Ended

June 30

In thousands, except per share data

2019

 

2018

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Digital product sales

$

3,113

$

2,353

$

6,204

$

6,301

Digital product lease and maintenance

 

634

 

 

709

 

 

1,142

 

 

1,296

Total revenues

 

3,747

 

 

3,062

 

7,346

 

 

7,597

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

Cost of digital product sales

 

2,219

 

 

2,093

 

 

4,741

 

 

4,880

Cost of digital product lease and maintenance

 

180

 

 

420

 

389

 

 

676

Total cost of revenues

 

2,399

 

 

2,513

 

 

5,130

 

 

5,556

Gross profit

 

1,348

 

 

549

 

 

2,216

 

 

2,041

General and administrative expenses

 

(1,313)

 

 

(1,443)

 

(2,420)

 

 

(2,796)

Operating income (loss)

 

35

 

 

(894)

 

 

(204)

 

 

(755)

Interest expense, net

(80)

(218)

(335)

(414)

(Loss) gain on foreign currency remeasurement

 

(50)

 

 

50

 

 

(107)

 

 

122

Loss on extinguishment of debt

(245)

-

(193)

-

Gain on sale/leaseback transaction

 

-

 

 

-

 

 

-

 

 

11

Pension (expense) benefit

 

(19)

 

 

34

 

(37)

 

 

68

Loss before income taxes

 

(359)

 

 

(1,028)

 

 

(876)

 

 

(968)

Income tax expense

 

(6)

 

 

-

 

(12)

 

 

-

Net loss

$

(365)

 

$

(1,028)

 

$

(888)

 

$

(968)

Loss per share - basic and diluted

$

(0.03)

 

$

(0.48)

 

$

(0.10)

 

$

(0.48)

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

2019

 

2018

 

2019

 

2018

Net loss

$

(365)

 

 $

(1,028)

 

 $

(888)

 

 $

(968)

Other comprehensive income (loss):

Unrealized foreign currency translation gain (loss)

 

46

 

 

(47)

 

 

98

 

 

(114)

Total other comprehensive income (loss), net of tax

 

46

 

 

(47)

 

 

98

 

 

(114)

Comprehensive loss

$

(319)

 

 $

(1,075)

 

$

(790)

 

 $

(1,082)

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

 

2


Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(unaudited)

Accumulated

Other

Comprehensive

Loss

Total

Stock-

holders'

Deficit

Preferred Stock

Add'l

Paid-in

Capital

Series A

Series B

Common Stock

Accumulated

Deficit

Treasury

Stock

In thousands, except share data

Shares

Amt

Shares

Amt

Shares

Amt

For the 6 months ended June 30, 2019

Balance January 1, 2019

-

$

-

16,512

$

3,302

3,652,813

$

4

$

30,069

$

(31,682)

$

(6,394)

$

(3,063)

(7,764)

Net loss

-

-

-

-

-

-

-

(888)

-

-

(888)

Preferred stock converted to Common Stock

-

-

  (15,864)

(3,172)

1,586,400

1

3,171

-

-

-

-

Exercise of warrants, net of costs

-

-

-

-

5,670,103

6

5,292

-

-

-

5,298

Rights Offering, net of costs

-

-

-

-

2,500,000

2

2,426

-

-

-

2,428

Dividends paid on preferred stock

-

-

-

-

-

-

-

(73)

-

-

(73)

Other comprehensive income, net of tax:

Unrealized foreign currency translation gain

-

-

-

-

-

-

-

-

98

-

98

Balance June 30, 2019

-

$

-

648

$

130

  13,409,316

$

13

$

  40,958

$

(32,643)

$

(6,296)

$

(3,063)

$

(901)

For the 3 months ended June 30, 2019

Balance April 1, 2019

-

$

-

648

$

130

7,301,069

$

7

$

35,238

$

(32,278)

$

(6,342)

$

(3,063)

(6,308)

Net loss

-

-

-

-

-

-

-

(365)

-

-

(365)

Exercise of warrants, net of costs

-

-

-

-

3,608,247

4

3,294

-

-

-

3,298

Rights Offering, net of costs

-

-

-

-

2,500,000

2

2,426

-

-

-

2,428

Other comprehensive income, net of tax:

Unrealized foreign currency translation gain

-

-

-

-

-

-

-

-

46

-

46

Balance June 30, 2019

-

$

-

648

$

130

13,409,316

$

13

$

40,958

$

(32,643)

$

(6,296)

$

(3,063)

$

(901)

For the 6 months ended June 30, 2018

Balance January 1, 2018

-

$

-

16,512

$

3,302

2,190,011

$

2

$

28,273

$

(26,889)

$

(5,536)

$

(3,063)

(3,911)

Net loss

-

-

-

-

-

-

-

(968)

-

-

(968)

Dividends paid on preferred stock

-

-

-

-

127,013

-

-

-

-

-

-

Warrants issued for financing

-

-

-

-

-

-

287

-

-

-

287

Other comprehensive loss, net of tax:

Unrealized foreign currency translation loss

-

-

-

-

-

-

-

-

(114)

-

(114)

Balance June 30, 2018

-

$

-

16,512

$

3,302

2,317,024

$

2

$

28,560

$

(27,857)

$

(5,650)

$

(3,063)

$

(4,706)

For the 3 months ended June 30, 2018

Balance April 1, 2018

-

$

-

16,512

$

3,302

2,190,011

$

2

$

28,273

$

(26,829)

$

(5,603)

$

(3,063)

(3,918)

Net loss

-

-

-

-

-

-

-

(1,028)

-

-

(1,028)

Dividends paid on preferred stock

-

-

-

-

127,013

-

-

-

-

-

-

Warrants issued for financing

-

-

-

-

-

-

287

-

-

-

287

Other comprehensive loss, net of tax:

Unrealized foreign currency translation loss

-

-

-

-

-

-

-

-

(47)

-

(47)

Balance June 30, 2018

-

$

-

16,512

$

3,302

2,317,024

$

      2

$

28,560

$

(27,857)

$

(5,650)

$

(3,063)

$

(4,706)

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

 

3


Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

6 Months Ended

June 30

In thousands

2019

 

2018

Cash flows from operating activities

 

 

 

 

 

Net loss

$

(888)

$

(968)

Adjustment to reconcile net loss to net cash (used in) provided by
    operating activities:

 

 

 

 

 

Depreciation and amortization

320

497

Amortization of right of use assets

 

182

 

 

-

Amortization of gain on sale/leaseback transaction

-

(11)

Amortization of deferred financing fees and debt discount

 

71

 

 

81

Loss on extinguishment of debt

193

-

Loss (gain) on foreign currency remeasurement

 

107

 

 

(122)

Bad debt expense

162

222

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

(445)

205

Inventories

 

(332)

 

 

26

Prepaids and other assets

(370)

770

Accounts payable

 

(2,975)

 

 

93

Accrued liabilities

(481)

161

Operating lease liabilities

 

(179)

 

 

-

Customer deposits

378

(567)

Deferred pension liability and other

 

417

 

 

(63)

Net cash (used in) provided by operating activities

 

(3,840)

 

 

324

Cash flows from investing activities

 

 

 

 

 

Purchases of rental equipment and property, plant and equipment

 

(25)

 

 

(133)

Net cash used in investing activities

 

(25)

 

 

(133)

Cash flows from financing activities

Proceeds from long-term debt

 

-

 

 

1,000

Proceeds from warrant exercise, net of costs

5,298

-

Proceeds from rights offering, net of costs

 

2,428

 

 

-

Payments of long-term debt

(3,037)

(1,885)

Payments of dividends on preferred stock

 

(73)

 

 

-

Payments for fees on extinguishment of debt

 

(62)

 

 

-

Net cash provided by (used in) financing activities

 

4,554

 

 

(885)

Effect of exchange rate changes

 

1

 

 

(1)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

690

 

 

(695)

Cash, cash equivalents and restricted cash at beginning of year

 

1,623

 

 

1,909

Cash, cash equivalents and restricted cash at end of period

$

2,313

 

$

1,214

Supplemental disclosure of cash flow information:

Interest paid

$

267

 

$

293

Income taxes paid

 

22

 

 

26

Supplemental non-cash financing activities:

 

 

 

 

 

Preferred Stock Series B converted to Common Stock

$

3,172

$

-

Warrants issued to SMI and SMII

 

-

 

 

287

Reconciliation of cash, cash equivalents and restricted cash to amounts
    reported in the Condensed Consolidated Balance Sheets at end of period:

Current assets

 

 

 

 

 

Cash and cash equivalents

$

1,413

$

264

Long-term assets

 

 

 

 

 

Restricted cash

 

900

 

 

950

Cash, cash equivalents and restricted cash at end of period

$

2,313

 

$

1,214

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

 

4


Table of Contents

 

TRANS-LUX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

(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, 2018.  The Condensed Consolidated Balance Sheet at December 31, 2018 is derived from the December 31, 2018 audited financial statements.

 

The following new accounting pronouncements were adopted in 2019:

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842).  Under ASU 2016-02, a company must recognize for all leases (with the exception of leases with terms of 12 months or less) a lease liability representing a lessee's obligation to make lease payments arising from a lease and a right of use (“ROU”) asset representing the lessee's right to use, or control the use of, a specified asset for the lease term.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and an ROU asset representing its right to use the underlying asset for the lease term.  For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.  In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provided an additional (and optional) transition method to adopt the new leases standard whereby an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  The Company adopted this standard effective January 1, 2019 using the modified retrospective method in the period of adoption.  The adoption of the standard had a material impact to our Condensed Consolidated Balance Sheets for the recognition of certain operating leases as ROU assets of approximately $1,463,000, long-term lease liabilities of $1,127,000 and current lease liabilities of $368,000, but did not have a material impact on our Condensed Consolidated Statements of Operations, Comprehensive Loss, Changes in Stockholders’ Deficit or Cash Flows.  We have analyzed our leases, implemented systems, developed processes and internal controls and updated our accounting policies to comply with the standard's adoption requirements.  The Company's rental revenue agreements were accounted for under previous lease accounting standards through December 31, 2018 and are accounted for within the scope of Topic 842 following our adoption on January 1, 2019.  Topic 842 does not significantly affect the timing of recognition or presentation of revenue for our rental contracts.  See Note 9 – Leases for further details.

 

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In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting.  ASU 2018-07 eliminates the separate accounting model for nonemployee share-based payment awards and generally requires companies to account for share-based payment transactions with nonemployees in the same way as share-based payment transactions with employees.  The accounting remains different for attribution, which represents how the equity-based payment cost is recognized over the vesting period, and a contractual term election for valuing nonemployee equity share options.  As required by this standard, the Company adopted ASU 2018-07 on January 1, 2019. The adoption of this standard did not have a material effect on the Company’s consolidated financial position and results of operations.

 

Other than the foregoing changes, there have been no material changes in our significant accounting policies during the six months ended June 30, 2019 from the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on April 15, 2019.

 

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

 

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350).  ASU 2017-04 simplifies the test for goodwill impairment.  Public business entities should apply the amendments in ASU 2017-04 for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (i.e., January 1, 2020), early application is permitted.  The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial position and results of operations.

 

In August 2018, the 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 Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial position and results of operations.

 

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Note 2 Liquidity

 

The Company has incurred recurring losses and has a working capital deficiency.  The Company incurred a net loss of $888,000 in the six months ended June 30, 2019 and had a working capital deficiency of $824,000 as of June 30, 2019.

 

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.  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.

 

In April 2019, the Company received aggregate proceeds of $6.0 million from (i) a rights offering to current shareholders under which the shareholders could purchase shares of our Common Stock at an exercise price of $1.00 per share, resulting in gross proceeds of $2.5 million (the “Rights Offering”) and (ii) the exercise of the remaining $3.5 million warrant (the “Unilumin Warrant”) issued to Unilumin North America Inc. (“Unilumin”).  Of these proceeds, a portion has been used to satisfy outstanding obligations including certain long-term debt, certain payables, certain accrued liabilities and pension obligations.  Certain directors deferred the timing of payments owed to them related to directors’ fees and current portion of long-term debt beyond one year.  In addition, a stockholder of the Company has committed to providing additional capital up to $2.0 million, to the extent necessary to fund operations.  Management believes that its current cash resources and cash provided by operations will be sufficient to fund its anticipated current and near-term cash requirements within one year from the date of issuance of this Form 10-Q.  The Company continually evaluates the need and availability of long-term capital, including replacing the Credit Agreement (hereinafter defined) which terminated in April 2019, in order to meet its cash requirements and fund potential new opportunities.

 

Note 3 Revenue Recognition

 

Under the revenue recognition guidance provided by ASU 2014-09, 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, 2019.

 

In March 2016, the FASB issued updated lease accounting guidance ("Topic 842"), as explained further in Note 9 – Leases.  We adopted Topic 842 on January 1, 2019.  Topic 842 is an update to Topic 840, which was the lease accounting standard in place through December 31, 2018.  There were no significant changes to our revenue accounting upon adoption of Topic 842.

 

We recognize revenue in accordance with two different accounting standards: 1) Topic 606 and 2) 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.

 

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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, 2019 and 2018, along with the reportable segment for each category:

 

 

Three months ended

 

Six months ended

In thousands

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

June 30, 2018

Digital product sales:

 

 

 

 

 

 

 

 

 

 

 

Catalog and small customized products

$

3,113

 

$

2,353

 

$

6,204

 

$

5,301

Large customized products

 

-

 

 

-

 

 

-

 

 

1,000

Subtotal

 

3,113

 

 

2,353

 

 

6,204

 

 

6,301

Digital product lease and maintenance:

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

338

 

 

439

 

 

630

 

 

766

Maintenance agreements

 

296

 

 

270

 

 

512

 

 

530

Subtotal

 

634

 

 

709

 

 

1,142

 

 

1,296

Total

$

3,747

 

$

3,062

 

$

7,346

 

$

7,597

 

Performance Obligations

 

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

 

Digital Product Sales

 

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

 

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

 

Digital Product Lease and Maintenance

 

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

 

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

 

Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements.  At June 30, 2019, the future minimum lease payments due to the Company under operating leases that expire at varying dates through 2028 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating $2,100,000, are as follows:  $470,000 – remainder of 2019, $1,025,000 – 2020, $329,000 – 2021, $137,000 – 2022, $71,000 – 2023 and $68,000 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, 2019 and December 31, 2018, 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, 2019

 

December 31, 2018

Gross receivables

$

3,196

 

$

4,067

Allowance for bad debts

 

644

 

 

1,796

Net receivables

 

2,552

 

 

2,271

Contract liabilities

 

1,325

 

 

465

 

During the three and six months ended June 30, 2019 and 2018, 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

In thousands

June 30, 2019

June 30, 2018

June 30,2019

June 30,2018

Revenue recognized in the period from:

Amounts included in the contract liability at the
     beginning of the period

$

149

$

205

$

350

$

753

 

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

 

Remaining performance obligations represents 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, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for digital product sales was $2.4 million and digital product lease and maintenance was $2.1 million.  

 

The Company expects to recognize revenue on approximately 83%, 13% and 4% 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

 

Prior to the adoption of ASU 2014-09, the Company expensed incremental commissions paid to sales representatives for obtaining customer contracts.  Under ASU 2014-09, the Company currently capitalizes these incremental costs of obtaining customer contracts.  Capitalized commissions are amortized based on the transfer of the products or services to which the assets relate.  Applying the practical expedient in paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.  These costs are included in General and administrative expenses.

 

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

 

Note 4 – Inventories

 

Inventories consist of the following:

 

 

June 30, 2019

 

December 31, 2018

In thousands

 

Raw materials

$

1,396

 

$

1,178

Work-in-progress

840

626

Finished goods

 

297

 

 

397

 

$

2,533

 

$

2,201

 

Note 5 – Rental Equipment, net

 

Rental equipment consists of the following:

 

 

June 30, 2019

 

December 31, 2018

In thousands

 

Rental equipment

$

7,104

 

$

7,109

Less accumulated depreciation

6,011

 

5,799

Net rental equipment

$

1,093

 

$

1,310

 

Depreciation expense for rental equipment for the six months ended June 30, 2019 and 2018 was $212,000 and $353,000, respectively.  Depreciation expense for rental equipment for the three months ended June 30, 2019 and 2018 was $106,000 and $177,000, respectively.

 

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Note 6 – Property, Plant and Equipment, net

 

Property, plant and equipment consists of the following:

 

 

June 30, 2019

 

December 31, 2018

In thousands

 

Machinery, fixtures and equipment

$

2,721

    

$

2,691

Leaseholds and improvements

 

12

 

 

12

 

 

2,733

 

 

2,703

Less accumulated depreciation

 

631

 

 

523

Net property, plant and equipment

$

2,102

 

$

2,180

 

Machinery, fixtures and equipment having a net book value of $2.2 million at December 31, 2018 were pledged as collateral under various financing agreements.

 

Depreciation expense for property, plant and equipment for the six months ended June 30, 2019 and 2018 was $108,000 and $144,000, respectively.  Depreciation expense for property, plant and equipment for the three months ended June 30, 2019 and 2018 was $54,000 and $72,000, respectively.

 

Note 7 Long-Term Debt

 

Long-term debt consists of the following:

 

 

June 30, 2019

 

December 31, 2018

In thousands

 

8¼% Limited convertible senior subordinated notes due 2012

$

352

    

$

387

9½% Subordinated debentures due 2012

220

220

Revolving credit line

 

-

 

 

1,440

Term loans

-

1,590

Term loans - related party

 

1,000

 

 

1,000

Forgivable loan

 

650

 

 

650

Total debt

 

2,222

 

 

5,287

Less deferred financing costs

 

-

 

 

257

Net debt

 

2,222

 

 

5,030

Less portion due within one year

 

572

 

 

3,584

Net long-term debt

$

1,650

 

$

1,446

 

On July 12, 2016, the Company and its wholly-owned subsidiaries Trans-Lux Display Corporation, FairPlay Corporation (formerly Trans-Lux Midwest Corporation) and Trans-Lux Energy Corporation entered into a credit agreement, as subsequently amended on various dates, the latest being on March 1, 2019 (collectively, the “Credit Agreement”) with CNH Finance Fund I, L.P. (“CNH”) as lender.  Under the Credit Agreement, the Company was able to borrow up to an aggregate of $4.0 million, which included (i) up to $3.0 million of a revolving loan, at an interest rate of prime plus 9.0% (11.50% at December 31, 2018), and (ii) a $1.0 million term loan, at an interest rate of prime plus 11.0% (11.50% at December 31, 2018).  The availability under the revolving loan was calculated based on certain percentages of eligible receivables and inventory.  On November 6, 2018, the Company and CNH agreed to a forbearance agreement which was effective through February 28, 2019, as long as there were no additional defaults under the Credit Agreement.  On March 1, 2019, the effectiveness of the forbearance agreement was extended through April 15, 2019.  On April 10, 2019, the Company satisfied the Credit Agreement in full and the Credit Agreement was terminated.  The termination fee of $60,000 and the remaining debt discount of $23,000 were written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

 

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On June 11, 2018, the Company entered into a Subordinated Secured Promissory Note (the “SMI Note”) with SM Investors, L.P. (“SMI”), pursuant to which the Company borrowed $330,000 from SMI at an interest rate of 12.00%.  The maturity date of the SMI Note was the earlier of June 11, 2020 or the Company’s completion of an additional financing package of at least $1 million.  The Company also issued SMI a three-year warrant to purchase 82,500 shares of the Company at an exercise price of $0.01 per share.  The Company utilized the Black-Scholes method to calculate the fair value of this warrant at the time of issuance, which was $95,000, and was being treated as a debt discount amortized over the two-year term of the loan.  On April 17, 2019, the Company satisfied the SMI Note in full and the remaining debt discount of $53,000 was written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

 

On June 11, 2018, the Company entered into another Subordinated Secured Promissory Note (the “SMII Note”) with SM Investors II, L.P. (“SMII”), pursuant to which the Company borrowed $670,000 from SMII at an interest rate of 12.00%.  The maturity date of the SMII Note was the earlier of June 11, 2020 or the Company’s completion of an additional financing package of at least $1 million.  The Company also issued SMII a three-year warrant to purchase 167,500 shares of the Company at an exercise price of $0.01 per share.  The Company utilized the Black-Scholes method to calculate the fair value of this warrant at the time of issuance, which was $192,000, and was being treated as a debt discount amortized over the two-year term of the loan.  On April 17, 2019, the Company satisfied the SMII Note in full and the remaining debt discount of $109,000 was written off and included in loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

 

The Company has a $500,000 loan from Carlisle Investments Inc. (“Carlisle”) at a fixed interest rate of 12.00%, which matured on April 27, 2019 with a bullet payment of all principal due at such time.  Interest is payable monthly.  Carlisle has agreed to not demand payment on the loan through at least December 31, 2020.  As of June 30, 2019, the entire amount was outstanding and is included in long-term debt, less current portion in the Condensed Consolidated Balance Sheets.  As of June 30, 2019 and December 31, 2018, the Company had accrued $90,000 and $60,000, respectively, of interest related to this loan.  Carlisle has agreed to not demand payment on $60,000 of the interest as of June 30, 2019, so it is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets.  The remaining $30,000 of accrued interest as of June 30, 2019 and the $60,000 of accrued interest as of December 31, 2019 are included in accrued liabilities in the Condensed Consolidated Balance Sheets.  Marco Elser, a former director of the Company, exercises voting and dispositive power as investment manager of Carlisle.

 

The Company has an additional $500,000 loan from Carlisle at a fixed interest rate of 12.00%, which matured on December 10, 2017 with a bullet payment of all principal due at such time (the “Second Carlisle Agreement”).  Interest is payable monthly.  Carlisle has agreed to not demand payment on the loan through at least December 31, 2020.  As of June 30, 2019, the entire amount was outstanding and is included in long-term debt, less current portion in the Condensed Consolidated Balance Sheets.  As of June 30, 2019 and December 31, 2018, the Company had accrued $90,000 and $60,000, respectively, of interest related to this loan.  Carlisle has agreed to not demand payment on $60,000 of the interest as of June 30, 2019, so it is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets.  The remaining $30,000 of accrued interest as of June 30, 2019 and the $60,000 of accrued interest as of December 31, 2019 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, 2019 and December 31, 2018, the Company had outstanding $352,000 and $387,000, respectively, of 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) which are no longer convertible into common shares.  The Notes matured as of March 1, 2012 and are currently in default.  On February 15, 2019, holders of $35,000 of the Notes accepted the Company’s offer to exchange each $1,000 of principal, forgiving any related interest, for $200 in cash, for an aggregate payment by the Company of $7,000.  As a result of the transaction, the Company recorded a gain on the extinguishment of debt, net of expenses, of $52,000 in 2019.  As of June 30, 2019 and December 31, 2018, the Company had accrued $286,000 and $298,000, respectively, of interest related to the Notes, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

 

As of June 30, 2019 and December 31, 2018, the Company had outstanding $220,000 of 9½% Subordinated debentures due 2012 (the “Debentures”).  The Debentures matured as of December 1, 2012 and are currently in default.  As of June 30, 2019 and December 31, 2018, the Company had accrued $200,000 and $190,000, respectively, of interest related to the Debentures, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

 

On May 23, 2017, the Company received $650,000 structured as a forgivable loan from the City of Hazelwood, Missouri.  The loan will be forgiven on a pro-rata basis if predetermined employment levels are attained and would expire on April 1, 2024.  If the Company attains the employment levels required by the agreement, there is no interest due, otherwise interest accrues at a rate of prime plus 2.00% (7.50% at June 30, 2019).  As of June 30, 2019 and December 31, 2018, the Company had accrued $95,000 and $71,000, respectively, of interest related to this loan, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets.  In February 2018, in accordance with the agreement, the Company requested a 1-year extension of the terms of the agreement, which was approved by the City of Hazelwood in March 2018, so the agreement now terminates on April 1, 2025.  As of the March 31, 2019 measurement date, the Company has not yet attained the appropriate employment levels and has requested an additional extension from the City of Hazelwood.

 

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.

 

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The following table presents the components of net periodic pension cost for the three and six months ended June 30, 2019 and 2018:

 

 

Three months ended June 30

 

Six months ended June 30

In thousands

2019

 

2018

 

2019

 

2018

Interest cost

$

126

 

$

114

 

$

251

 

$

227

Expected return on plan assets

(173)

(203)

(345)

(406)

Amortization of net actuarial loss

 

66

 

 

56

 

 

131

 

 

112

Net periodic pension expense (benefit)

$

19

 

$

(33)

 

$

37

 

$

(67)

 

As of June 30, 2019 and December 31, 2018, the Company had recorded a current pension liability of $475,000 and $623,000, respectively, which is included in accrued liabilities in the Condensed Consolidated Balance Sheets, and a long-term pension liability of $3.5 million and $3.7 million, respectively, which is included in deferred pension liability and other in the Condensed Consolidated Balance Sheets.  The minimum required contribution in 2019 is expected to be $629,000, of which the Company contributed $391,000 in the first half of the year and $85,000 subsequent to June 30, 2019.

 

Note 9 Leases

 

The Company leases administrative and manufacturing facilities through operating lease agreements. The Company has no finance leases as of June 30, 2019.  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 ROU assets or lease liabilities as they are not reasonably certain of exercise.  We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term.

 

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

 

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Supplemental information regarding leases:

 

 

June 30

2019

In thousands, unless otherwise noted

Balance Sheet:

 

 

ROU assets

$

1,281

Current lease liabilities

 

322

Non-current lease liabilities

994

Total lease liabilities

 

1,316

Weighted average remaining lease term (years)

3.0

Weighted average discount rate

 

8.9%

Future minimum lease payments:

2019

$

245

2020

349

2021

 

342

2022

348

2023

 

295

Thereafter

 

-

Total

 

1,579

Less: Imputed interest

 

263

Total lease liabilities

 

1,316

Less: Current lease liabilities

 

322

Long-term lease liabilities

$

994

 

Supplemental cash flow information regarding leases:

 

 

For the three months ended

June 30,

2019

 

For the six
months ended

June 30,

2019

 

 

In thousands

 

Operating cash flow information:

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

$

121

$

243

Non-cash activity:

 

 

 

 

 

ROU assets obtained in exchange for lease liabilities

 

-

 

 

162

 

Total operating lease expense and short-term lease expense was $249,000 and $64,000, respectively, for the six months ended June 30, 2019.  Total operating lease expense and short-term lease expense was $124,000 and $32,000, respectively, for the three months ended June 30, 2019.

 

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Note 10 – Stockholders’ Deficit and Loss Per Share

 

The following table presents the calculation of loss per share for the three and six months ended June 30, 2019 and 2018:

 

 

Three months ended June 30

 

Six months ended June 30

In thousands, except per share data

2019

 

2018

 

2019

 

2018

Numerator:

 

 

 

 

 

 

 

 

 

 

 

Net loss, as reported

$

(365)

$

(1,028)

$

(888)

$

(968)

Change in dividends accumulated on preferred shares

 

(3)

 

 

(50)

 

 

(38)

 

 

(99)

Net loss attributable to common shares

$

(368)

 

$

(1,078)

 

 

(926)

 

$

(1,067)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

13,226

 

 

2,243

 

 

9,123

 

 

2,203

Basic and diluted loss per share

$

(0.03)

 

$

(0.48)

 

$

(0.10)

 

$

(0.48)

 

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

 

At June 30, 2019 and 2018, the Company had accumulated unpaid dividends of $5,000 and $41,000, respectively, related to the Series B Convertible Preferred Stock (“SBCPS”).

 

For each holder of SBCPS that converted their shares into Common Stock in March 2019, the Company declared a dividend of $4.60 per share of SBCPS on March 29, 2019, aggregating $73,000, which was distributed to these former holders of the SBCPS on April 2, 2019.

 

As of June 30, 2019, the Company had warrants to purchase 250,000 shares of Common Stock outstanding, which were included in the calculation of diluted loss per share because their exercise price was less than the average share price of our Common Stock for the period, so their inclusion was dilutive.  As of June 30, 2019 and 2018, the Company had other warrants to purchase 10,000 and 52,000 shares, respectively, of Common Stock outstanding, which were excluded from the calculation of diluted loss per share because their exercise price was greater than the average share price for the period and their inclusion would have been anti-dilutive.  The remaining warrants to purchase 10,000 shares as of June 30, 2019 could be dilutive in the future if the average share price increases and is greater than the exercise price of these warrants.

 

As of June 30, 2019 and 2018, the Company had 648 and 16,512 shares, respectively, of SBCPS outstanding, which were convertible into 64,800 and 330,240 shares of Common Stock, none of which were used in the calculation of diluted loss per share because their conversion price was greater than the average share price for the period and their inclusion would have been anti-dilutive.  These shares of SBCPS could be dilutive in the future if the average share price of our Common Stock increases and is greater than the purchase price of these shares of SBCPS.

 

On February 5, 2019, the Company commenced a Rights Offering to current shareholders under which the shareholders could purchase shares of our Common Stock at an exercise price of $1.00 per share.  On April 5, 2019, the Company completed its Rights Offering and accepted subscriptions for a total of 2,500,000 shares of its Common Stock, representing approximately all of the shares offered, for aggregate gross proceeds to the Company of $2.5 million, less issuance costs of $72,000.

 

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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 the Company deems material.

 

Note 12 Related Party Transactions

 

In addition to the Company’s loans from Carlisle described in Note 7, the Company has the following related party transactions:

 

Yaozhong Shi, a former director of the Company, is the Chairman of Transtech LED Company Limited (“Transtech”), which is one of our LED suppliers.  The Company purchased $416,000 and $127,000 of product from Transtech in the six months ended June 30, 2019 and 2018, respectively.  The Company purchased $406,000 and $64,000 of product from Transtech in the three months ended June 30, 2019 and 2018, respectively.  Amounts payable by the Company to Transtech were $0 and $305,000 as of June 30, 2019 and December 31, 2018, respectively.

 

On March 4, 2019, 96.1% of our issued and outstanding SBCPS holders converted their SBCPS into 1,586,400 shares of Common Stock.  Such amount included shares of SBCPS held by a greater than 5% stockholder of the Company and certain directors of the Company.

 

On March 4, 2019, Unilumin exercised $2.0 million of the Unilumin Warrant and the Company issued 2,061,856 shares of Common Stock, and on April 5, 2019, Unilumin exercised the remaining $3.5 million of the Unilumin Warrant and the Company issued 3,608,247, raising an aggregate of $5.5 million for the Company, less issuance costs of $202,000.  As a result of the exercises, Unilumin now holds 52.2% of the Company’s outstanding Common Stock, which resulted in a change in control event.  The Company did not elect to apply pushdown accounting.  Nicholas Fazio, Yang Liu and Yantao Yu, each directors of the Company, are also each directors and/or officers of other subsidiaries of Unilumin’s parent company Un