Going Concern

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Substantial Doubt about Going Concern [Text Block]

Note 2 - Going Concern

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

We do not currently have adequate liquidity, including access to the debt and equity capital markets, to operate our business in the manner in which we have historically operated. The Company incurred a net loss of $1.1 million in the nine months ended September 30, 2015 and had a working capital deficiency of $5.1 million as of September 30, 2015. As a result, our short-term business focus has been to preserve our liquidity position. Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months. In addition, the Company’s obligations under its pension plan exceeded plan assets by $6.4 million at September 30, 2015 and the Company has a significant amount due to its pension plan over the next 12 months. In addition, the Company has not made the December 1, 2009, 2010 and 2011 required sinking fund payments on its 9½% Subordinated debentures due 2012 (the "Debentures") and the June 1, 2010, 2011 and 2012 as well as its December 1, 2010, 2011 and 2012 interest payments totaling $301,000. The Company also did not make the March 1, 2010, 2011 and 2012 as well as its September 1, 2010 and 2011 interest payments totaling $2.1 million on its 8¼% Limited convertible senior subordinated notes due 2012 (the "Notes"). As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the pension plan, (iii) make the required sinking fund payments on the Debentures and/or (iv) make the required principal and interest payments on the Notes and the Debentures, there would be a significant adverse impact on the financial position and operating results of the Company, which could require the disposition of some or all of our assets, which could require us to curtail or cease operations. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty. See Note 5 - Long-Term Debt for further details.

Of these fixed cash obligations, thus far in 2015 using cash on hand and cash from operating activities, the Company has made $650,000 of payments to the Company’s pension plan, with approximately $591,000 of contributions remaining for 2015. Historically, we have made certain required contributions after their respective due dates, and we have not yet made required contributions of $197,000 due in each of April, July and October 2015. The Pension Benefit Guaranty Corporation (the “PBGC”) has placed a lien on all of the Company’s assets in respect of amounts owed under the plan. If we are unable to fulfill our related obligations, the enforcement of such lien would have a material adverse impact on our financial condition, results of operations and liquidity. 

The Company continues to consider further exchanges of the $1.1 million of remaining Notes and the $334,000 of remaining Debentures. The Company will seek additional financing in the form of debt and/or equity (though currently the only ongoing financing is the rights offering described in the next paragraph) in order to provide enough cash to cover our remaining current fixed cash obligations as well as providing working capital. During the three months ended June 30, 2015, the Company entered into a credit agreement for $1.5 million, of which $1.0 million has been borrowed to date. See Note 5 – Long-Term Debt for further details. However, there can be no assurance as to the amounts, if any, the Company will receive in any additional financings (including the rights offering described in the next paragraph) or the terms thereof (other than the rights offering). To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders. 

On June 25, 2015, the Company filed a registration statement (as subsequently amended on July 31, 2015, August 7, 2015, August 19, 2015 and September 15, 2015) relating to a rights offering of Series B Convertible Preferred Stock intended to raise up to $10.2 million before expenses. The registration statement was declared effective by the SEC on September 24, 2015. The rights offering commenced on October 14, 2015 and expires on November 19, 2015 (extended from the original expiration date November 4, 2015). The Company intends to use the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes. Under the terms of the rights offering, the Company distributed one non-transferrable right for each outstanding share of Common Stock to stockholders of record on September 28, 2015. Thirty-three non-transferable rights entitle the holder to purchase one share of Series B Convertible Preferred Stock at a subscription price of $20.00 per share. The Series B Convertible Preferred Stock carries a 6.0% cumulative annual dividend and is convertible into shares of Common Stock at an initial conversion price of $10.00 per share, representing a conversion ratio of 20 shares of Common Stock for each share of Series B Convertible Preferred Stock held at the time of conversion, subject to adjustment. The shares of Series B Convertible Preferred Stock may be subject to mandatory conversion after three years, or as early as one year if the closing sale price of the Common Stock has been greater than or equal to $15.00 for 30 consecutive trading days. There can be no assurance as to the amount that the Company will raise in the rights offering. This Quarterly Report on Form 10-Q does not constitute an offer to sell, or the solicitation of an offer to buy, any securities, and there will be no sale of any securities in any state in which such an offer, solicitation, or purchase would be unlawful prior to the registration or qualification of such securities under the securities laws of any such state. The offer of the shares of Series B Convertible Preferred Stock issuable upon exercise of the rights is made only by means of the prospectus dated October 14, 2015 forming a part of Trans-Lux’s registration statement filed with and declared effective by the SEC, and related documents.