INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AND REGULATION 14C THEREUNDER
PLEASE BE ADVISED THAT THIS IS ONLY AN INFORMATION STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
.
GENERAL INFORMATION
We are furnishing this Information Statement to the stockholders of Trans-Lux Corporation (the
Corporation
,
Company
,
we
,
us
, as the context may require) in the manner required by Regulation 14C of the Securities Exchange Act of 1934, as amended (the
Exchange Act
), and the Delaware General Corporation Law (the
DGCL
), of the actions that have been authorized by a majority of our issued and outstanding common stock, par value $0.001 per share (
Common Stock
) and our issued and outstanding Series B Convertible Preferred Stock, par value $0.001 per share (the
Series B Preferred
), as of the record date of December [__], 2018 (the
Record Date
), by written consent in lieu of a special meeting (the
Written Consent
). No action is requested or required on your part.
This Information Statement is being mailed on or about December [__], 2018 to holders of the Companys Common Stock and Series B Preferred as of the Record Date.
NOTICE OF ACTION BY WRITTEN CONSENT
The following actions were approved by the written consent of a majority of holders of our Common Stock and Series B Preferred entitled to cast votes on all matters submitted to our stockholders for approval (the
Majority Stockholders
), of as more fully described in this Information Statement (the
Actions
):
1. An amendment to the Corporations Amended and Restated Certificate of Incorporation, as amended (the
Charter
), increasing the total number of authorized shares of the Corporation from (i) 10,500,000 shares (the
Existing Authorized Capital Stock
) of which (A) 10,000,000 shares are designated as Common Stock; and (B) 500,000 shares are designated as Preferred Stock (
Preferred Stock
) which may be issued in such series or classes, and with such rights, preferences and limitations, as the Board of Directors may determine in its sole discretion (and includes the Series B Preferred), to (ii) to 32,500,000 shares (the
Capital Increase Amendment
), of which (A) 30,000,000 shares shall be designated as Common Stock; and (B) 2,500,000 shares shall be designated as Preferred Stock, which Preferred Stock may be issued in such series or classes, and with such rights, preferences and limitations, as the Board of Directors shall determine in its sole discretion (inclusive of the Series A Preferred and the Series B Preferred).
2. The Amended and Restated Certificate of Designations of Series B Convertible Preferred Stock (the
Amended Series B Certificate
), to (i) amend and restate the definition of Conversion Price as set forth in the Amended Series B Certificate to reduce the conversion price of the Series B Preferred to $2.00, (iii) increase the number of votes per share of Series B Preferred pursuant to Section 4 of the Amended Series B Certificate from 20 to 100 votes per share and (iii) update the notice address of the Corporation to 135 East 57th Street, 14th Floor, New York, New York 10022.
1
FREQUENTLY ASKED QUESTIONS
The following questions and answers are intended to respond to frequently asked questions concerning the actions approved by our Board of Directors and the persons entitled to vote a majority of our outstanding shares of Common Stock and Series B Preferred. These questions do not, and are not intended to, address all the questions that may be important to you. You should carefully read the entire Information Statement, as well as its appendices and the documents incorporated by reference in this Information Statement.
Why am I receiving this Information Statement?
We are required under the Exchange Act and the DGCL to deliver a Notice of Written Action of our stockholders without a meeting and this Information Statement to our stockholders in order to inform them that our Board of Directors and the Majority Stockholders have approved the Capital Increase Amendment and the Amended Series B Certificate without a meeting of our stockholders. You are receiving the Notice and this Information Statement because you were a stockholder of record on [__________], 2018, the
Record Date
.
Why did we not hold a meeting of stockholders?
Under the DGCL, our Charter and our Amended and Restated Bylaws, the changes to our Charter to be implemented by the Capital Increase Amendment and the Amended Series B Certificate may be approved by written consent of a majority of our stockholders without a meeting of our Common Stock and Series B Preferred holders. Our Board of Directors has already approved the Capital Increase Amendment and the Amended Series B Certificate and has obtained the written consent of holders of the Majority Stockholders. A meeting is therefore not necessary and represents a substantial and avoidable expense.
Who Is Entitled to Notice?
All holders of shares of our Common Stock and our Series B Preferred as of the close of business on the Record Date are entitled to notice of the Actions. As of the Record Date, there were 3,652,813 shares of Common Stock issued and 3,624,973 shares of Common Stock outstanding, each of which is entitled to one vote per share, and 16,512 shares of Series B Preferred outstanding, each of which is entitled to 20 votes per share. Except with respect to certain specified actions, holders of Series B Preferred generally do not have a right to vote on any matter other than those prescribed by Delaware law and vote together with the holders of record of Common Stock on all matters submitted to holders of our Common Stock.
What Vote Was Required to Approve the Capital Increase Amendment and the Amended Series B Certificate?
The approval of the Capital Increase Amendment without a meeting of stockholders required the vote of the holders of a majority of the outstanding shares of Common Stock, voting separately as a single class, as well as the affirmative vote of a majority of the voting power of the outstanding Common Stock and Series B Preferred, voting together as a single class. The approval of the Amended Series B Certificate without a meeting of stockholders required the vote of the holders of a majority of the outstanding shares of Series B Preferred, voting separately as a single class, as well as the affirmative vote of a majority of the voting power of the outstanding Common Stock and Series B Preferred, voting together as a single class. Each outstanding share of our Common Stock was entitled to one vote on each Action. The holders of our Series B Preferred were entitled to 20 votes for each share of Series B Preferred when voting together with the Common Stock. Because principal stockholders (including the holder of all of the issued and outstanding shares of Series B Preferred) entitled to cast a number of votes equal to a majority of our total voting stock approved the Actions, no action by the other stockholders is required to approve the Actions.
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When will the Capital Increase Amendment and the Amended Series B Certificate become effective?
Pursuant to Rule 14c-2 promulgated under the Exchange Act, the earliest date that the corporate action being taken pursuant to the Written Consent can become effective is 20 days after the first mailing or other delivery of this Information Statement. After the foregoing 20-day period, we will file the Capital Increase Amendment and the Amended Series B Certificate with the Secretary of State of the State of Delaware, which filings will result in each of the Capital Increase Amendment and the Amended Series B Certificate becoming effective. We recommend that you read this Information Statement in its entirety for a full description of the Actions approved by the Majority Stockholders.
How do the Actions affect my ownership interest?
The Capital Increase Amendment does not change the number of outstanding shares of Common Stock or otherwise modify the rights of the outstanding stockholders. When issued, the additional shares of Common Stock authorized by the Capital Increase Amendment will have the same rights and privileges as our currently authorized, issued and outstanding shares of Common Stock. Our Common Stock does not contain any pre-emptive rights and our Board of Directors will have the authority to authorize additional shares of Common Stock without requiring future approval from the holders of Common Stock, except as may be required by applicable law. The issuance of additional shares of Common Stock in the future will dilute the equity ownership interest of our existing holders of Common Stock and, depending upon the price at which such shares of Common Stock are issued, the issuance of additional shares could be significantly dilutive to the existing Common Stock holders. Any such issuance of additional shares of Common Stock could have the effect of diluting the earnings per share and book value per share of our outstanding shares of Common Stock.
In addition, our Board of Directors is authorized to adopt resolutions in its discretion, and without any further action or vote by our Common Stock holders, to issue shares of Preferred Stock in classes or series by filing a certificate pursuant to the DGCL to establish the number of shares included in any such class or series, and to designate and fix the preferences, limitations, and rights of the shares of each class or series of Preferred Stock and any qualifications, limitations or restrictions thereof; in each case subject to the limitations prescribed by the DGCL, our Charter and our Amended and Restated Bylaws. If additional shares of Preferred Stock are issued, holders of those shares would be entitled to the number of votes, preferences and rights determined by the certificate of designation establishing such class or series, and such shares of Preferred Stock may have a priority over your shares of Common Stock and/or Series B Preferred with respect to the payment of dividends, redemption payments and rights upon liquidation, dissolution or winding-up of the affairs of the Company.
The Amended Series B Certificate without further action does not change the number of outstanding shares of Common Stock or Preferred Stock or otherwise modify the rights of the outstanding stockholders. However, the Amended Series B Certificate could result in the issuance of five times as many shares of Common Stock upon the conversion of the Series B Preferred, because the Amended Series B Certificate reduces from $10.00 to $2.00 the conversion price of the Series B Preferred into shares of Common Stock. In the event the Company consummates a currently contemplated rights offering for gross proceeds to the Company of at least $2,500,000 and at least 90% of the Series B Preferred is converted into Common Stock, the holder (
Unilumin
) of a warrant to purchase 5,670,103 shares of our Common Stock at an exercise price of $0.97 per share will be required to exercise the warrant, resulting in significant dilution of our current Common Stock holders and Unilumin becoming a holder of a majority of our Common Stock.
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How many shares consented to the Actions?
Prior to the filing of the Notice and this Information Statement, our Board of Directors obtained the approval of the Capital Increase Amendment from holders of [_____________] shares of Common Stock representing approximately [___]% of our issued and outstanding Common Stock and obtained the approval of the Amended Series B Certificate from holders of [_________] shares of Series B Preferred, representing [_____]% of the issued and outstanding Series B Preferred. As a single class voting together [____]% of the Common Stock and Series B Preferred (on an as converted basis) approved the Actions. Company executives, employees, affiliates and members of the Board of Directors own [____]% of the shares of Common Stock and Series B Preferred that approved the Actions.
How do the Actions affect my voting interest?
The Capital Increase Amendment approved by the Majority Stockholders does not affect your voting interest in the Company. The Amended Series B Certificate will increase from 20 to 100 the number of votes each share of Series B Preferred is entitled to vote on matters in which such stock is entitled to vote, and the Series B Preferred votes as a single class with the Common Stock, so the Series B Preferred will have greater influence over matters on which it is entitled to vote, thereby reducing the voting power of the Common Stock. In addition, the issuance of additional shares of Common Stock in the future would reduce the voting interest of current holders of Common Stock.
What are some of the risks associated with effecting the Capital Increase Amendment and the Amended Series B Certificate?
Each of the Capital Increase Amendment and the Amended Series B Certificate could have an anti-takeover effect because additional shares of Common Stock could be issued (within the limits imposed by applicable law) in one or more transactions (including the conversion of the Series B Preferred for more shares of Common Stock than currently would be issuable upon conversion), which could make it more difficult to effect a change in control or takeover of the Company. Our Board of Directors is not aware of any attempt, or contemplated attempt, to acquire control of the Company, and the Actions to amend our Charter are not being taken with the intent that it be utilized as a type of anti-takeover device. However, in the event the Company consummates a currently contemplated rights offering for gross proceeds to the Company of at least $2,500,000 and at least 90% of the Series B Preferred is converted into Common Stock, Unilumin will be required to exercise its warrant to purchase 5,670,103 shares of our Common Stock at an exercise price of $0.97 per share, resulting in significant dilution of our current Common Stock holders and Unilumin becoming a holder of a majority of our Common Stock.
To the extent that additional authorized shares of Common Stock are issued in the future, they will decrease the equity ownership interest of our existing holders of Common Stock and, depending upon the price at which such shares of Common Stock are issued, could be significantly dilutive to the existing Common Stock holders. Any such issuance of additional shares of Common Stock could have the effect of diluting the earnings per share and book value per share of our outstanding shares of Common Stock.
Is it necessary for me to do anything to approve the actions?
No. No other votes are necessary or required. Pursuant to Rule 14c-2 under the Exchange Act, the actions described herein will not be effective and we will not file each of the Capital Increase Amendment and the Amended Series B Certificate with the Secretary of State for the State of Delaware until 20 days after the date the Definitive Information Statement is filed with the Securities and Exchange Commission and a copy thereof is mailed to our stockholders. We anticipate that the actions contemplated herein will be effected on or about the close of business on December [__], 2018.
4
Am I entitled to dissenters rights?
No. The DGCL does not provide for dissenters rights for the Capital Increase Amendment or the Amended Series B Certificate.
Who is paying the cost of this Information Statement and the implementation of the actions?
We will pay all of the costs relating to the Capital Increase Amendment and the Amended Series B Certificate, including distributing this Information Statement. We may also pay brokerage firms and other custodians for their reasonable expenses for forwarding information materials to the beneficial owners of our Common Stock and Series B Preferred. We are not soliciting any proxies and will not contract for other services in connection with the stockholder action approving the Amendment.
5
ACTIONS TO BE TAKEN
With respect to each action described in this Information Statement, the Board of Directors reserves the right, notwithstanding that the Majority Stockholders have approved each action, to elect not to proceed with one or more actions if the Board of Directors, in its sole discretion, determines that it is no longer in the Companys best interests and the best interests of the Companys stockholders to consummate any one or more of the actions.
Background
On November 2, 2018, the Company entered into a Securities Purchase Agreement (the
SPA
) with Unilumin North America Inc., pursuant to which Unilumin purchased 1,315,789 shares of our Common Stock, for a purchase price of $1,500,000 (the
Unilumin Investment
), or a per share purchase price of $1.14. In connection with the SPA, the Company issued a warrant (the
Unilumin Warrant
) to purchase 5,670,103 shares of Common Stock to Unilumin at an exercise price of $0.97 per share. The exercise price of the Unilumin Warrant is automatically adjusted to $0.75 per share if the Company is unable to complete a rights offering for gross proceeds of at least $2,500,000 by June 1, 2019 (the
Rights Offering
). The Rights Offering is anticipated to be consummated after the distribution of this Information Statement.
The Unilumin Warrant is exercisable until November 2, 2020, provided that it is mandatorily exercisable upon completion of the Rights Offering if in excess of 90% of the Companys currently issued and outstanding Series B Preferred converts into Common Stock. In connection with any such Series B Preferred conversion, Unilumin acknowledged that the conversion price of the Series B Preferred may be decreased, subject to stockholder approval, which was obtained. If all or a significant portion of the Unilumin Warrant is exercised, Unilumin would own in excess of fifty percent of the Companys outstanding Common Stock on a fully diluted basis, even if the Rights Offering is completed. The Company currently has sufficient authorized capital for the exercise of the Unilumin Warrant.
The Capital Increase Amendment is intended to provide the Company with enough authorized Common Stock to accommodate the Rights Offering and the conversion of the Series B Preferred once the Capital Increase Amendment and the Amended Series B Certificate are effective. The Amended Series B Certificate is intended to incentivize the Series B Preferred holders to convert their Series B Preferred for Common Stock, thereby helping to facilitate the conditions necessary to require Unilumin to exercise the Unilumin Warrant upon the consummation of the Rights Offering. The Company needs the proceeds of both the exercise of the Unilumin Warrant and the Rights Offering to continue as a going concern.
Description of Securities
General
The Company is currently authorized to issue 10,000,000 shares of Common Stock having a par value of $0.001 per share, of which 3,652,813 are issued and 3,624,973 are outstanding, and 500,000 shares of preferred stock, par value $0.001 per share (
Preferred Stock
), of which 416,500 shares are designated as Series A Convertible Preferred Stock (none of which were issued and outstanding as of December [__], 2018), and
51,000
shares are designated as Series B Convertible Preferred Stock, of which
16,512
were issued and outstanding as of December [__], 2018. As described herein, the Company is in the process of seeking to amend the Charter to increase its authorized capital stock to 30,000,000 shares of Common Stock and 2,500,000 shares of Preferred Stock.
6
Common Stock
Voting
The shares of Common Stock are entitled to one vote per share on all matters submitted to stockholders. Holders of Common Stock do not have preemptive rights or cumulative voting rights.
Dividends and Other Distributions
Dividends on the Common Stock will be paid if and when declared. Dividends may be paid in cash, in property or in shares of Common Stock, unless otherwise provided by applicable law. The Company does not currently pay cash dividends on its Common Stock and payment of such dividends is not contemplated in the foreseeable future.
Other Distributions
The holders of Common Stock are entitled to receive the same consideration per share in the event of any liquidation, dissolution or winding-up of the Company.
Mergers and Acquisitions
The holders of Common Stock are entitled to receive the same per share consideration, if any, received in a merger or consolidation of the Company (whether or not the Company is the surviving corporation).
Series A Convertible Preferred Stock
The Company has designated 416,500 shares of Preferred Stock as Series A Convertible Preferred Stock (
Series A Preferred
), which has a par value of $1.00 per share and a stated value of $20.00 per share. The complete terms of the Series A Preferred are contained in the Charter, which is incorporated herein by reference. No shares of Series A Preferred were issued and outstanding as of December [__], 2018, and the Company no longer has the ability to issue Series A Preferred.
Series B Convertible Preferred Stock
The Company has designated 51,000 shares of Preferred Stock as Series B Convertible Preferred Stock (which is referred to herein as the Series B Preferred) with the material terms summarized below. The complete terms are contained in the Certificate of Designations of the Series B Preferred, which was filed as an exhibit to the Companys Current Report filed on Form 8-K dated October 14, 2015.
16,512
shares of Series B Preferred were issued and outstanding as of December [__], 2018.
Ranking
With respect to the payment of dividends and distribution of amounts of the Companys net assets upon a dissolution, liquidation or winding up of the Company, the Series B Preferred ranks senior to the Common Stock and any other class or series of the Companys stock over which the Series B Preferred has preference or priority in the payment of dividends or in the distribution of assets on liquidation, as the case may be, to which is referred to herein as
Junior Stock
, equally with any other class or series of Company stock that ranks on a par with the Series B Preferred in the payment of dividends or in the distribution of assets on liquidation, as the case may be, which is referred to herein as
Parity Stock
, and junior, in all matters expressly provided, to any class or series of Preferred Stock specifically ranking by its terms senior to the Series B Preferred in the payment of dividends or in the distribution of assets on liquidation, as the case may be, which is referred to herein as
Senior Stock
. The Company currently does not have any Senior Stock or Parity Stock. Among other things, no dividends or other distributions may be made in respect of shares of Junior Stock, other than dividends payable solely in Common Stock with respect to which an adjustment to the Series B Preferred conversion price is made (as described below), unless and until all accrued and unpaid dividends on the Series B Preferred (including any semi-annual dividend for the then-current period, as described below) have been paid or provided for and an equivalent dividend has been paid in respect of each share of Series B Preferred on an as converted to Common Stock basis.
7
Dividends
Subject to the prior payment in full of any dividends to which any Senior Stock is entitled by its terms, the holders of the Series B Preferred will be entitled to receive, out of funds legally available therefor, semi-annual dividends payable, at the Companys election, in cash, shares of Common Stock, or a combination thereof. Such dividends are cumulative and non-compounding and accrue on a daily basis from the date of issuance of the Series B Preferred at an annual rate equal to 6.0% of the stated value per share of $200.00 (subject to adjustment). If the Company elects to pay this dividend in shares of Common Stock, such shares will be valued at an amount equal to the volume-weighted 30-day average trading price of the Common Stock on its principal trading market.
Liquidation Preference
Upon any liquidation, dissolution or winding up (a
Liquidation
), after the satisfaction in full of the debts of the Company and the payment of any priority liquidation preference owed to the holders of shares of Senior Stock, the holders of Series B Preferred are entitled to receive out of the assets of the Company an amount equal to the dividends accrued and unpaid thereon, whether or not declared, without interest, plus a sum in cash or property at its fair market value as determined by the Companys Board of Directors equal to the greater of (a) the stated value per share of the Series B Preferred and (b) such amount per share as would have been payable had all shares of Series B Preferred been converted into Common Stock immediately before the Liquidation, before any payment may be made or assets distributed to the holders of Junior Stock. For this purpose a Liquidation does not include any consolidation of the Company with, or merger of the Company into, any other entity, any merger of another entity into the Company, any sale or transfer of assets of the Company or any exchange of securities of the Company.
Voting
Except as otherwise expressly required by law, holders of shares of Series B Preferred are entitled to vote, together with the holders of the Common Stock and not as a separate class, on all matters submitted to holders of our Common Stock. Holders of shares of Series B Preferred are currently entitled to 20 votes for each share of Series B Preferred owned at the record date for the determination of stockholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited.
Conversion
Optional Conversion by Holder
. Each share of Series B Preferred is convertible at the election of the holder into shares of Common Stock by dividing the Stated Value per share by a conversion price of $10.00.
Currently, the Series B Preferred is convertible into 330,240 shares of Common Stock. The Company has received stockholder approval by written consent to an amendment of the Certificate of Designations to lower the conversion price of the Series B Preferred from $10.00 to $2.00, and this amendment will become effective following the distribution of this Information Statement to the non-consenting stockholders in accordance with Schedule 14C of the Exchange Act. Once this amendment is implemented, the number of shares issuable upon conversion of the Series B Preferred will increase to 1,651,200 shares.
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Mandatory Conversion by the Company.
At any time after the third anniversary of the initial issue date of the Series B Preferred, the Company will has the right, in its sole discretion, to cause all (but not less than all) outstanding shares of Series B Preferred to be automatically converted into shares of Common Stock.
Conversion Price Adjustment
. The conversion price and, therefore, the conversion rate, will be adjusted to reflect any dividend or distribution in shares of Common Stock made on any other class or series of the Companys capital stock (other than on shares of Series B Preferred) or any subdivision, combination or reclassification of the outstanding shares of Common Stock (including through a merger of the Company with another entity) so that each holder of shares of Series B Preferred thereafter surrendered for conversion will be entitled to receive the number of shares of Common Stock that such holder would have owned or have been entitled to receive immediately after such action had such shares of Series B Preferred been converted immediately before such action.
Warrants
BFI Warrants
On April 23, 2015, in connection with the Companys entry into a credit agreement with BFI Capital Fund II, LLC (
BFI
), the Company issued to BFI a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share. This warrant expires on April 23, 2020.
SM Investors Warrants
In connection with a Subordinated Secured Promissory Note with SM Investors, L.P. (
SMI
), the Company issued SMI a three-year warrant to purchase 82,500 shares of Common Stock 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 is being treated as a debt discount amortized over the two-year term of the loan.
In connection with a Subordinated Secured Promissory Note with SM Investors II, L.P. (
SMII
), the Company issued SMII a three-year warrant to purchase 167,500 shares of Common Stock 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 is being treated as a debt discount amortized over the two-year term of the loan.
Unilumin Warrants
On November 2, 2018, in connection with the Unilumin Investment, the Company issued to Unilumin a warrant to purchase 5,670,103 shares of Common Stock at an exercise price of $0.97 per share. The exercise price of the Unilumin Warrant is automatically adjusted to $0.75 per share if the Company is unable to complete the Rights Offering. The Unilumin Warrant is exercisable until November 2, 2020, provided that it is mandatorily exercisable upon completion of the Rights Offering and if in excess of 90% of the Companys issued and outstanding Series B Preferred converts into Common Stock. If all or a significant portion of the Unilumin Warrant is exercised, Unilumin would own in excess of fifty percent of the Companys outstanding Common Stock on a fully diluted basis, even if the Rights Offering is completed.
Anti-Takeover Effects of Our Certificate of Incorporation
The Companys Charter contains certain provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of the Companys Common Stock, thus making it less likely that a stockholder will receive a premium on any sale of shares. The Companys Board of Directors is divided into three classes, each of which serves for a staggered three-year term, making it more difficult for a third party to gain control of the Board of Directors. The Charter also contains a provision that requires a four-fifths vote on any merger, consolidation or sale of assets with or to an Interested Person or Acquiring Person.
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Additionally, the Company is authorized to issue 500,000 shares of Preferred Stock, of which 416,500 shares are designated as Series A Convertible Preferred Stock (none of which were issued and outstanding as of December [__], 2018), and
51,000
shares are designated as Series B Preferred, of which
16,512
were issued and outstanding as of December [__], 2018. The Preferred Stock may contain such rights, preferences, privileges and restrictions as may be fixed by the Board of Directors, which may adversely affect the voting power or other rights of the holders of Common Stock or delay, defer or prevent a change in control of the Company, or discourage bids for the Common Stock at a premium over its market price or otherwise adversely affect the market price of the Common Stock.
1. AMENDMENT TO OUR CHARTER
TO INCREASE OUR AUTHORIZED CAPITAL STOCK
General
The Companys Board of Directors and the Majority Stockholders have approved the action to authorize the Board of Directors to amend our Charter to increase the total number of authorized shares of the Companys capital stock from (i) 10,500,000 shares, of which (A) 10,000,000 shares are designated as Common Stock; and (B) 500,000 shares are designated as Preferred Stock, which Preferred Stock may be issued in such series or classes, and with such rights, preferences and limitations, as the Board of Directors may determine in its sole discretion (and includes the Series B Preferred), to (ii) to 32,500,000 shares), of which (A) 30,000,000 shares shall be designated as Common Stock; and (B) 2,500,000 shares shall be designated as Preferred Stock, which Preferred Stock may be issued in such series or classes, and with such rights, preferences and limitations, as the Board of Directors shall determine in its sole discretion (inclusive of the Series A Preferred and the Series B Preferred). The approval of the Capital Increase Amendment without a meeting of stockholders required the vote of the holders of a majority of the outstanding shares of Common Stock, voting separately as a single class, as well as the affirmative vote of a majority of the voting power of the outstanding Common Stock and Series B Preferred, voting together as a single class.
The Company is currently authorized to issue 10,000,000 shares of Common Stock having a par value of $0.001 per share, of which 3,652,813 are issued and 3,624,973 are outstanding, and 500,000 shares of Preferred Stock, of which 416,500 shares are designated as Series A Convertible Preferred Stock (none of which were issued and outstanding as of December [__], 2018), and
51,000
shares are designated as Series B Convertible Preferred Stock, of which
16,512
were issued and outstanding as of December [__], 2018. Upon the filing of the Capital Increase Amendment, the Company will be authorized to issue a total of 30,000,000 shares of Common Stock, and will be authorized to issue a total of 2,500,000 shares of Preferred Stock in such series or classes, and with such rights, preferences and limitations, as the Board of Directors shall determine in its sole discretion (inclusive of the Series A Preferred and the Series B Preferred).
Commitments to Issue Common Stock
Except as discussed herein, we do not currently have any plans, proposals, agreements or understandings, written or otherwise, for any transaction that would require the issuance of additional shares of Common Stock or Preferred Stock. Under Delaware law, stockholders have no appraisal or dissenters rights in connection with the Capital Increase Amendment.
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Purpose and Effects of Increasing the Number of Our Authorized Shares of Common Stock and Preferred Stock
The relative rights and limitations of the shares of Common Stock and Preferred Stock would remain unchanged by the Capital Increase Amendment. The Capital Increase Amendment will allow for the consummation of the Rights Offering and the conversion of the Series B Preferred, including following effectiveness of the Amended Series B Certificate. In addition, the Board of Directors believes that an increase of our authorized Common Stock and Preferred Stock will enhance our ability to finance the development and operation of our business, as well as general corporate purposes, including financing activities, without the requirement of further action by our stockholders. Potential uses of the additional authorized shares of Common Stock and Preferred Stock may include public or private offerings, conversions of convertible securities, issuance of options pursuant to employee benefit plans, acquisition transactions and other general corporate purposes. Increasing the authorized number of shares of Common Stock and Preferred Stock will give us greater flexibility and will allow us to issue such shares in most cases without the expense of delay of seeking stockholder approval. The Company is at all times investigating additional sources of financing which the Companys Board of Directors believes will be in its best interests and in the best interests of its stockholders.
Except as described herein, management has neither entered into any arrangements by which it would raise additional capital through an equity or convertible debt issuance that would result in us committing to issue or reserve shares of Common Stock or Preferred Stock or that would cause the Company to exceed its current authorized share capital, nor has it entered into any discussions to use shares of Common Stock to acquire assets of, merge with or otherwise exchange securities with another entity. The Common Stock and Preferred Stock have no preemptive rights to purchase additional shares. The Capital Increase Amendment will not will not have any immediate effect on the rights of the Companys existing stockholders or, by itself, cause any changes in the Companys capital accounts. However, the Companys Board of Directors will have the authority to issue authorized Common Stock and Preferred Stock from time to time without requiring future stockholder approval of such issuances, except as may be required by applicable law or exchange regulations, which the Companys Board of Directors and management believes will place the Company in a better position to raise additional capital on a timely basis, or to effect other transactions, if and to the extent deemed necessary or appropriate. To the extent that additional authorized shares of Common Stock and/or Preferred Stock are issued in the future, they will decrease the existing stockholders percentage equity ownership and, depending upon the price at which they are issued, could be dilutive to the Companys existing stockholders.
As of the date of this Information Statement, the Company had outstanding 3,624,973 shares of Common Stock outstanding and 16,512 shares of Series B Preferred, with 330,240 shares of Common Stock underlying the Series B Preferred. The number of shares of Common Stock outstanding immediately as of the date of this Information Statement excludes 800 shares of Common Stock reserved for issuance under the Companys Non-Employee Director Stock Option Plan, 5,670,103 shares of Common Stock underlying the Unilumin Warrant and 260,000 shares of Common Stock underlying other outstanding warrants of the Company which were not issued in connection with the Unilumin Investment. Upon the effectiveness of the Actions and the Capital Increase Amendment and the Amended Series B Certificate, the conversion price of the Series B Preferred will be reduced from $10.00 to $2.00, which will result in the number of shares of Common Stock underlying the Series B Preferred to increase to 1,651,200 shares.
Accordingly, the Capital Increase Amendment is being effected to (1) enable us to satisfy our obligations to issue shares of Common Stock in connection with the Rights Offering, the conversion of the Series B Preferred and upon exercise of other outstanding warrants to purchase shares of Common Stock; and (2) authorize additional shares of Common Stock and Preferred Stock for issuance in connection with future financing activities, acquisitions or other corporate purposes, without the requirement of further action by the holders of our Common Stock or Preferred Stock. Our Board of Directors has considered potential uses of the additional authorized shares of Common Stock, which may include the seeking of additional equity financing through public or private offerings, establishing additional employee or director equity compensation plans or arrangements, as consideration in connection with an acquisition or other strategic transaction or for other general corporate purposes. Increasing the authorized number of shares of the Common Stock and Preferred Stock will allow the Company to issue additional shares of Common Stock and/or Preferred Stock in most cases without the expense or delay of seeking further approval from the holders of Common Stock and/or Preferred Stock and will facilitate the Companys ability to raise capital when and as the Board of Directors determines that it is in the Companys best interests and in the best interests of the stockholders of the Company.
11
2. THE AMENDED SERIES B CERTIFICATE
The Amended Series B Certificate (i) amends and restates the definition of Conversion Price as set forth in the Amended Series B Certificate to reduce the conversion price of the Series B Preferred to $2.00, (iii) increases the number of votes per share of Series B Preferred pursuant to Section 4 of the Amended Series B Certificate from 20 to 100 votes per share and (iii) updates the notice address of the Corporation to 135 East 57th Street, 14th Floor, New York, New York 10022.
The approval of the Amended Series B Certificate is necessary in order to incentivize holders of the Series B Preferred to convert such stock to Common Stock in order to facilitate the mandatory exercise of the Unilumin Warrant. The approval of the Amended Series B Certificate will also facilitate ongoing financing transactions and allow for future financing transactions essential to the Company.
The Majority Stockholders have approved the Amended Series B Certificate, attached hereto as
Appendix B
. The approval of the Amended Series B Certificate without a meeting of stockholders required the vote of the holders of a majority of the outstanding shares of Series B Preferred, voting separately as a single class, as well as the affirmative vote of a majority of the voting power of the outstanding Common Stock and Series B Preferred, voting together as a single class. Each outstanding share of our Common Stock was entitled to one vote on each Action. The holders of our Series B Preferred were entitled to 20 votes for each share of Series B Preferred when voting together with the Common Stock.
Interest of Certain Persons In Favor of or Opposition to Matters Acted Upon
Two of the Companys directors, Nicholas J. Fazio and Yang Liu, are affiliates of Unilumin and were appointed to the Companys Board of Directors in connection with the Unilumin Investment. While Messrs. Liu and Fazio disclaim any interest in the shares of the Company held by Unilumin, as affiliates of Unilumin, Messrs. Liu and Fazio may be able to exercise control over the shares of the Company held by Unilumin.
Except as indicated above and under the heading Security Ownership of Certain Beneficial Owners and Management relating to warrants or shares of Series B Preferred that currently may be held by them, none of our directors or executive officers has any substantial interest resulting from the increase in the Capital Increase Amendment or the adoption of the Amended Series B Certificate that is not shared by all other stockholders on a
pro rata
basis, and in accordance with their respective interests.
Procedure to Effect the Capital Increase Amendment and Amended Series B Certificate
In order to effect the Capital Increase Amendment and Amended Series B Certificate, we will file the Capital Increase Amendment and Amended Series B Certificate with the Secretary of State of Delaware of to amend our existing Charter and Certificate of Designations for the Series B Preferred, respectively. The Capital Increase Amendment and Amended Series B Certificate will each become effective upon filing with the Delaware Secretary of State, which is referred to below as the effective time. We intend to file the Capital Increase Amendment and Amended Series B Certificate as soon as practicable, but not less than twenty (20) calendar days after the definitive Information Statement relating to the Written Consent is first mailed to our stockholders.
12
A copy of the form of the Capital Increase Amendment is attached to this Information Statement as
Appendix A
. A copy of the Amended Series B Certificate is attached to this Information Statement as
Appendix B
.
Both the Capital Increase Amendment and Amended Series B Certificate have received the unanimous approval of our Board of Directors and have also been approved by the Majority Stockholders. The text of each form of the Capital Increase Amendment and Amended Series B Certificate is subject to modification to include such changes as may be required by the office of the Secretary of State of Delaware and as the Board of Directors deems necessarily and advisable to effect the changes contemplated by each amendment document, including the insertion of the effective time determined by the Board of Directors. As soon as practicable after the effective time, stockholders will be notified that the Capital Increase Amendment and the Amended Series B Certificate has been effected through the filing of a Current Report on Form 8-K with the SEC.
Possible Anti-Takeover Effects of the Proposed Actions
The Capital Increase Amendment and the Amended Series B Certificate and the subsequent issuance of additional shares of Common Stock in connection therewith could have the effect of delaying or preventing a change in control of the Company without further action by its stockholders. Authorized and unissued shares of Common Stock could be issued (within the limits imposed by applicable law) in one or more transactions (including the conversion of the Series B Preferred for more shares of Common Stock than currently would be issuable upon conversion), which could make it more difficult to effect a change in control or takeover of the Company. Any such issuance of additional shares of Common Stock could have the effect of diluting the earnings per share and book value per share of outstanding shares of Common Stock, and such additional shares could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of us. Our Board of Directors acknowledges that the issuance of Preferred Stock may have the effect of discouraging or thwarting persons seeking to take control of us through a corporation transaction, tender offer or a proxy fight or otherwise seeking to bring about the removal of our incumbent management. Because the authorization of blank check Preferred Stock could be used by our Board of Directors for the adoption of a stockholder rights plan or poison pill, the Preferred Stock may be viewed as having the effect of discouraging an attempt by another person or entity to acquire control of us through the acquisition of a substantial numbers of shares of Common Stock. While the Capital Increase Amendment and Amended Series B Certificate may have anti-takeover ramifications, our Board of Directors believes that the reasons for such amendments as set forth above outweigh any disadvantages. To the extent that such amendments may have anti-takeover effects, such amendments may encourage persons seeking to acquire the Company to negotiate directly with the Board of Directors, enabling the Board of Directors to consider the proposed transaction in a manner that best serves our stockholders interests. Neither the Capital Increase Amendment nor the Amended Series B Certificate is to be effected in response to, nor is either being presented to deter, any effort to obtain control of us. However, in the event the Company consummates the Rights Offering for gross proceeds to the Company of at least $2,500,000 and at least 90% of the Series B Preferred is converted into Common Stock, Unilumin will be required to exercise its warrant to purchase 5,670,103 shares of our Common Stock at an exercise price of $0.97 per share, resulting in significant dilution of our current Common Stock holders and Unilumin becoming a holder of a majority of our Common Stock. The Company currently has sufficient authorized capital for the exercise of the Unilumin Warrant.
13
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF
EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS
The following table presents information known to us about the beneficial ownership of Common Stock as of the Record Date by: (1) each of our current directors; (2) each of our executive officers and directors; (3) all of our current executive officers and directors as a group; and (4) each person who is known to us to be the beneficial owner of more than 5% of our outstanding Common Stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or dispositive power with respect to securities. Except as otherwise indicated, the address for each beneficial owner is c/o Trans-Lux Corporation, 135 East 57th Street, 14th Floor, New York, NY 10022. The applicable percentage ownership of Common Stock is based on 3,624,973 shares of Common Stock issued and outstanding along with 16,512 shares of Series B Preferred convertible into 330,240 shares of Common Stock as of the Record Date, plus, on an individual basis, the right of that individual to obtain Common Stock upon exercise of stock options or warrants or the conversion of Series B Preferred within 60 days of the Record Date. Except as indicated by footnote, and subject to the community property laws where applicable, the persons or entities named in the following table have sole voting and dispositive power with respect to all shares of Common Stock shown as beneficially owned by them.
|
|
Number of Shares
Beneficially Owned
|
|
|
Percent
Of Class (%)
|
Name, Status and Mailing Address
|
|
|
|
5% Stockholders
:
|
|
|
|
| |
Gabelli Funds, LLC
|
|
855,047
|
(1)
|
|
21.8
|
GAMCO Asset Management Inc.
Teton Advisors, Inc.
One Corporate Center
|
|
|
|
|
|
Rye, NY 10580-1434
|
|
|
|
|
|
|
|
|
|
| |
Transtech LED Company Limited
|
|
333,333
|
(2)
|
|
9.2
|
Unit 27, 13/F Shing Yip Industrial Building
|
|
|
|
|
|
19-21 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong
|
|
|
|
|
|
|
|
|
|
| |
Unilumin North America Inc.
|
|
6,985,892
|
(3)
|
|
75.2
|
c/o Unilumin LED Technology FL LLC
|
|
|
|
|
|
254 West 31st Street
|
|
|
|
|
|
New York, NY 10001
|
|
|
|
|
|
|
|
|
|
| |
Non-Employee Directors
:
|
|
|
|
|
|
Marco Elser
|
|
241,189
|
(4)
|
|
6.7
|
Nicholas Fazio
|
|
-
|
(5)
|
|
*
|
Alan K. Greene
|
|
45,311
|
(6)
|
|
1.2
|
Yang Liu
|
|
-
|
(5)
|
|
*
|
George W. Schiele
|
|
88,210
|
(7)
|
|
2.4
|
Yaozhong Shi
|
|
335,333
|
(8)
|
|
9.3
|
Salvatore J. Zizza
|
|
62,500
|
(9)
|
|
1.7
|
|
|
|
|
| |
Named Executive Officers
:
|
|
|
|
|
|
Alberto Shaio
|
|
95,311
|
(6)
|
|
2.6
|
Alexandro Gomez
|
|
25,000
|
|
|
*
|
Todd Dupee
|
|
20,000
|
|
|
*
|
All directors and executive officers as a group
|
|
912,854
|
(10)
|
|
25.1
|
14
*Represents less than 1% of total number of outstanding shares.
(1)
Based on Schedule 13D, as amended, dated November 9, 2018 by Mario J. Gabelli, Gabelli Funds, LLC, Teton Advisors, Inc., Gamco Investors, Inc., GGCP, Inc., and Gamco Asset Management Inc., which companies are parent holding companies and/or registered investment advisers. All securities are held as agent for the account of various investment company fund accounts managed by such reporting person. Except under certain conditions, Gabelli Funds, LLC has beneficial ownership of such shares. Based on such Schedule 13D amendment, Gabelli Funds, LLC beneficially owns 113,500 shares of Common Stock, GAMCO Asset Management Inc. beneficially owns 27,555 shares of Common Stock and Teton Advisors, Inc. beneficially owns 411,792 shares of Common Stock. The share amount reflected in the table includes 294,940 shares of Common Stock beneficially owned by Gabelli Funds, LLC issuable upon conversion of 14,747 shares of Series B Preferred and 7,260 shares of Common Stock beneficially owned by Teton Advisors, Inc. issuable upon conversion of 363 shares of Series B Preferred. The Series B Preferred is convertible into Common Stock at any time.
(2)
Based on a Schedule 13D filed November 13, 2015. Mr. Shi, a director of the Corporation, is a director of Transtech.
(3)
The amount includes 5,670,103 shares of Common Stock issuable upon the exercise of a warrant issued to Unilumin on November 2, 2018 as part of the Unilumin Investment.
(4)
The amount includes 190,244 shares of Common Stock owned by Carlisle, Elser & Co. and Advicorp plc, of which Mr. Elser exercises voting and dispositive power as investment manager.
(5)
Messrs. Liu and Fazio disclaim any interest in the shares held by Unilumin North America Inc. and as set forth in footnote 3 above.
(6)
The amount includes 5,040 shares of Common Stock issuable upon conversion of 252 shares of Series B Preferred.
(7)
The amount includes 5,000 shares of Common Stock issuable upon conversion of 250 shares of Series B Preferred.
(8)
Based on a Schedule 13D filed November 13, 2015. The amount includes 333,333 shares of Common Stock owned by Transtech. Mr. Shi is a director of Transtech.
(9)
Mr. Zizza disclaims any interest in the shares set forth in footnote 1 above.
(10)
The amount includes 15,080 shares of Common Stock, as set forth in footnotes above, which members of the group have the right to acquire upon conversion of Series B Preferred or exercise of vested warrants.
Upon the consummation of the Rights Offering, assuming that all of the rights offered thereby are exercised for 2,500,000 shares of Common Stock, all of the Companys outstanding warrants are exercised and all Series B Preferred is converted for Common Stock, then Unilumin North America Inc. will own 51.0% of the Companys Common Stock. In addition, Gabelli Funds, LLC and its affiliated entities will own a significant percentage of the Companys Common Stock.
15
INTERESTS OF CERTAIN PARTIES IN THE MATTERS TO BE ACTED UPON
Two of the Companys directors, Nicholas J. Fazio and Yang Liu, are affiliates of Unilumin and were appointed to the Companys Board of Directors in connection with the Unilumin Investment. While Messrs. Liu and Fazio disclaim any interest in the shares of the Company held by Unilumin, as affiliates of Unilumin, Messrs. Liu and Fazio may be able to exercise control over the shares of the Company held by Unilumin.
Except as indicated above and under the heading Security Ownership of Certain Beneficial Owners and Management relating to warrants or shares of Series B Preferred that currently may be held by them, none of our directors or executive officers has any substantial interest resulting from the Capital Increase Amendment or the adoption of the Amended Series B Certificate that is not shared by all other stockholders on a
pro rata
basis, and in accordance with their respective interests.
EXPENSE OF INFORMATION STATEMENT
The expenses of mailing this Information Statement will be borne by us, including expenses in connection with the preparation and mailing of this Information Statement and all documents that now accompany or may after supplement it. It is contemplated that brokerage houses, custodians, nominees, and fiduciaries will be requested to forward the Information Statement to the beneficial owners of our Common Stock and Series B Preferred held of record by such persons and that we will reimburse them for their reasonable expenses incurred in connection therewith.
MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS
In accordance with Rule 14a-3(e)(1) promulgated pursuant to the Exchange Act, one Information Statement may be delivered to two or more stockholders who share an address, unless we have received contrary instructions from one or more of the stockholders. We will deliver promptly upon written or oral request a separate copy of this Information Statement to a stockholder at a shared address to which a single copy of this Information Statement was delivered. Requests for additional copies of this Information Statement, and requests that in the future separate communications be sent to stockholders who share an address, should be directed to Trans-Lux Corporation, 135 East 57th Street, 14th Floor, New York, New York 10022, Attn: Corporate Secretary, or by calling telephone number (800) 243-5544.