Overview

Trans-Lux is a leading supplier of LED technology for display applications.

The


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



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



Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

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





                                                                Three months ended March 31
In thousands, except percentages                              2021                      2020

Revenues:


Digital product sales                                 $    2,093     80.9 %   $     1,334       69.7 %
Digital product lease and maintenance                        493     19.1 %           579       30.3 %
Total revenues                                             2,586    100.0 %         1,913      100.0 %
Cost of revenues:
Cost of digital product sales                              2,254     87.2 %         1,703       89.0 %
Cost of digital product lease and maintenance                153      5.9 %           186        9.7 %
Total cost of revenues                                     2,407     93.1 %         1,889       98.7 %
Gross profit                                                 179      6.9 %            24        1.3 %

General and administrative and restructuring expenses (799) (30.9) %


      (1,191)     (62.3) %
Operating loss                                             (620)   (24.0) %       (1,167)     (61.0) %
Interest expense, net                                      (103)    (4.0) %         (108)      (5.6) %
(Loss) gain on foreign currency remeasurement               (36)    (1.4) %           202       10.6 %
Gain on extinguishment of debt                                77      3.0 %             -          - %
Pension benefit                                               67      2.6 %            36        1.9 %
Loss before income taxes                                   (615)   (23.8) %       (1,037)     (54.2) %
Income tax expense                                           (6)    (0.2) %           (6)      (0.3) %
Net loss                                              $    (621)   (24.0) %   $   (1,043)     (54.5) %




Total revenues for the three months ended March 31, 2021 increased $673,000 or
35.2% to $2.6 million from $1.9 million for the three months ended March 31,
2020, primarily due to increases in Digital product sales.



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Digital product sales revenues increased $759,000 or 56.9%, primarily due to the
elimination of the delays and manufacturing facility shutdowns that occurred in
the three months ended March 31, 2020.



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

Total operating loss for the three months ended March 31, 2021 decreased $547,000 to $620,000 from $1.2 million for the three months ended March 31, 2020, principally due to the increase in revenues and a decrease in the cost of revenues as a percentage of revenues.





Digital product sales operating loss decreased $356,000 to $626,000 for the
three months ended March 31, 2021 compared to $982,000 for the three months
ended March 31, 2020, primarily due to the increase in revenues and a decrease
in general and administrative expenses.  The cost of Digital product sales
increased $551,000 or 32.4%, primarily due to the increase in revenues.  The
cost of Digital product sales represented 107.7% of related revenues in 2021
compared to 127.7% in 2020.  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 $148,000
or 24.1%, primarily due to decreases in bad debt expenses and employees'
expenses, partially offset by an increase in consulting expenses.



Digital product lease and maintenance operating income decreased $43,000 or
11.9%, primarily as a result of the decrease in revenues, partially offset by a
decrease in the cost of Digital product lease and maintenance.  The cost of
Digital product lease and maintenance decreased $33,000 or 17.7%, primarily due
to a decrease in depreciation expense.  The cost of Digital product lease and
maintenance revenues represented 31.0% of related revenues in 2021 compared to
32.1% 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
$10,000 or 32.3%, primarily due to a reduction in employees' expenses, partially
offset by an increase in bad debt expenses.

Corporate general and administrative expenses decreased $234,000 or 42.8%, primarily due to reductions in employees' expenses and legal, rent and insurance expenses.

Net interest expense decreased $5,000 or 4.6%, primarily due to a decrease in interest rates.





The effective tax rate for the three months ended March 31, 2021 and 2020 was
0.8% 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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Liquidity and Capital Resources





Current Liquidity



The Company has incurred significant recurring losses and continues to have a
significant working capital deficiency.  The Company incurred a net loss of
$621,000 in the three months ended March 31, 2021 and had a working capital
deficiency of $6.3 million as of March 31, 2021.  As of December 31, 2020, the
Company also had a working capital deficiency of $6.3 million.  The working
capital deficiency was primarily affected by an increase in the accounts
receivable as well as decreases in accrued liabilities and customer deposits,
offset by decreases in inventories and prepaids and other assets, as well as an
increase in accounts payable.



The Company is dependent on future operating performance in order to generate
sufficient cash flows in order to continue to run its businesses.  Future
operating performance is dependent on general economic conditions, as well as
financial, competitive and other factors beyond our control, including the
impact of the current economic environment, the spread of major epidemics
(including coronavirus) and other related uncertainties such as government
imposed travel restrictions, interruptions to supply chains, 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 $238,000 and used cash of $754,000 from operating
activities for the three months ended March 31, 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 $308,000 in the three
months ended March 31, 2021 to $351,000 at March 31, 2021 from $43,000 at
December 31, 2020.  The increase is primarily attributable to cash generated by
operating activities of $238,000 and borrowings on the revolving loan of
$90,000.  The current economic environment has increased the Company's trade
receivables collection cycle, and its allowances for uncollectible accounts
receivable, but collections continue to be favorable.



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



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





                                    Remainder of
In thousands                                2021    2022      2023     2024     2025
Long-term debt, including interest $       3,558   $   406   $    -   $    -   $    -
Pension plan payments                        409       407      355      248      115
Estimated warranty liability                 110       114       73       48       20
Operating lease payments                     281       348      309        -        -
Total                              $       4,358   $ 1,275   $  737   $  296   $  135




As of March 31, 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 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 is expected to be
$465,000, of which the Company has already contributed $56,000 as of March 31,
2021.  See Note 8 to the Condensed Consolidated Financial Statements - Pension
Plan for further details.

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





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



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