VIDEO DISPLAY CORP - Quarter Report: 2012 May (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 May 31, 2012.

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to

Commission File Number 0-13394

VIDEO DISPLAY CORPORATION

(Exact name of registrant as specified on its charter)

GEORGIA

58-1217564

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1868 TUCKER INDUSTRIAL ROAD, TUCKER, GEORGIA 30084

(Address of principal executive offices)

770-938-2080

(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 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

As of May 31, 2012, the registrant had 7,567,052 shares of Common Stock outstanding.

Video Display Corporation and Subsidiaries

Index


	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets – May 31, 2012 (unaudited) and February 29, 2012		3

Condensed Consolidated Income Statements –Three months ended May 31, 2012 and 2011 (unaudited)		5

Condensed Consolidated Statement of Shareholders’ Equity – Three months ended May 31, 2012 (unaudited)		6

Condensed Consolidated Statements of Cash Flows – Three months ended May 31, 2012 and 2011 (unaudited)		7

Notes to Condensed Consolidated Financial Statements – May 31, 2012 (unaudited)		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosure About Market Risk		23

Item 4. Controls and Procedures		23

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25

Item 3. Defaults upon Senior Securities		25

Item 4. Submission of Matters to a Vote of Security Holders		25

Item 5. Other Information		25

Item 6. Exhibits		26

SIGNATURES		27

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

ITEM 1 – FINANCIAL STATEMENTS

Video Display Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)


	May 31,			February 29,
	2012			2012
	(unaudited)
Assets
Current assets
Cash	$	—		$	148
Accounts receivable, less allowance for doubtful accounts of $156 and $176		6,700			7,193
Inventories, net		31,706			29,736
Cost and estimated earnings in excess of billings on uncompleted contracts		3,173			3,236
Deferred income taxes		2,222			1,936
Income taxes refundable		554			680
Prepaid expenses and other		747			842

Total current assets		45,102			43,771

Property, plant, and equipment
Land		336			336
Buildings		6,739			6,659
Machinery and equipment		18,276			17,884

		25,351			24,879
Accumulated depreciation and amortization		(20,669	)		(20,463	)

Net property, plant, and equipment		4,682			4,416

Note receivable		—			250
Goodwill		1,291			1,291
Intangible assets, net		1,162			1,221
Deferred income taxes		671			648
Other assets		32			6

Total assets	$	52,940		$	51,603

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

Video Display Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (continued)

(in thousands)


	May 31,			February 29,
	2012			2012
	(unaudited)
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	3,291		$	3,237
Accrued liabilities		2,098			1,945
Billings in excess of cost and estimated earnings on uncompleted contracts		178			342
Current maturities of long-term debt		945			945

Total current liabilities		6,512			6,469
Lines of credit		12,457			11,057
Long-term debt, less current maturities		4,641			4,878
Other long term liabilities		272			246

Total liabilities		23,882			22,650

Shareholders’ Equity
Preferred stock, no par value – 10,000 shares authorized; none issued and outstanding		—			—
Common stock, no par value – 50,000 shares authorized; 9,732 issued and 7,567 outstanding at May 31, 2012 and 9,732 issued and 7,581 outstanding at February 29, 2012		7,293			7,293
Additional paid-in capital		121			114
Retained earnings		32,224			32,065
Treasury stock, shares at cost; 2,165 at May 31, 2012 and 2,151 at February 29, 2012		(10,580	)		(10,519	)

Total shareholders’ equity		29,058			28,953

Total liabilities and shareholders’ equity	$	52,940		$	51,603

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

Video Display Corporation and Subsidiaries

Condensed Consolidated Income Statements

(in thousands, except per share data)


	Three Months Ended May 31,
	2012			2011
Net sales	$	12,560		$	17,025
Cost of goods sold		8,950			11,695

Gross profit		3,610			5,330

Operating expenses
Selling and delivery		1,409			1,223
General and administrative		2,028			2,057

		3,437			3,280

Operating profit		173			2,050

Other income (expense)
Interest expense		(182	)		(234	)
Other, net		198			(10	)

		16			(244	)

Income from operations before income taxes		189			1,806
Income tax expense		30			568

Net income	$	159		$	1,238

Basic earnings per share of common stock	$	.02		$	.16

Diluted earnings per share of common stock	$	.02		$	.16

Basic weighted average shares outstanding		7,580			7,609

Diluted weighted average shares outstanding		7,605			7,944

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

Video Display Corporation and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity

Three Months Ended May 31, 2012 (unaudited)

(in thousands)


	Common Shares			Share Amount		Additional Paid-in Capital		Retained Earnings		Treasury Stock
Balance, February 29, 2012		7,581		$	7,293	$	114	$	32,065	$	(10,519	)
Net income		—			—		—		159		—
Purchase of Treasury Stock		(14	)		—		—		—		(61	)
Share based compensation		—			—		7		—		—

Balance, May 31, 2012		7,567		$	7,293	$	121	$	32,224	$	(10,580	)

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

Video Display Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Three Months Ended May 31,
	2012			2011
Operating Activities
Net income	$	159		$	1,238
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		267			288
Provision for doubtful accounts		(13	)		66
Provision for inventory reserve		334			364
Non-cash charge for share based compensation		7			53
Deferred income taxes		(309	)		(18	)
Loss on disposal of equipment		1			—
Unrealized loss on investments		2			13
Changes in working capital:
Accounts receivable		506			849
Inventories		(2,304	)		(1,317	)
Note receivable for StingRay56		250			—
Prepaid expenses and other current assets		67			(63	)
Accounts payable and accrued liabilities		233			(335	)
Cost, estimated earnings and billings, net, on uncompleted contracts		(101	)		(1,155	)
Income taxes refundable		126			520

Net cash provided by (used in) operating activities		(775	)		503

Investing Activities
Capital expenditures		(475	)		(148	)
Proceeds from sale of Fox International, Ltd.		—			51
Use of letter of credit/CD		—			1,388

Net cash provided by (used in) investing activities		(475	)		1,291

Financing Activities
Proceeds from long-term debt, lines of credit		6,915			—
Payments on long-term debt, lines of credit		(5,752	)		(986	)
Purchase of treasury stock		(61	)		—
Repayments of notes payable to officers and directors		—			(109	)

Net cash provided by (used in) financing activities		1,102			(1,095	)

Net change in cash		(148	)		699

Cash, beginning of year		148			1,399

Cash, end of period	$	—		$	2,098

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

Video Display Corporation and Subsidiaries

May 31, 2012

Note 1. – Summary of Significant Accounting Policies

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after elimination of all significant intercompany accounts and transactions.

As contemplated by the Securities and Exchange Commission (the “SEC” or “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual consolidated financial statements. Reference should be made to the Company’s year-end consolidated financial statements and notes thereto, including a description of the accounting policies followed by the Company, contained in its Annual Report on Form 10-K for the fiscal year ended February 29, 2012, as filed with the Commission. There are no material changes in accounting policy during the three months ended May 31, 2012.

The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the condensed consolidated financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The February 29, 2012 consolidated balance sheet data was derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Note 2. – Liquidity

On December 23, 2010, the Company and its subsidiaries executed a new Credit Agreement with RBC Bank and Community & Southern Bank (collectively, the “Banks”) to provide new financing to the Company to replace the existing credit agreement with RBC Bank that terminated in conjunction with this Agreement. The new Agreement provided for a line of credit of up to $17.5 million and two term loans of $3.5 million and $3.0 million.

•

1^st Amendment: On May 26, 2011, the Banks amended the Credit Agreement to reduce the revolver commitment to $15.0 million, restate the covenants to pertain to only continuing operations of the Company and to adjust the targets for the senior funded debt to EBITDA covenant for the Company’s quarters ending May 31, 2011 and August 31, 2011.

•

2^nd Amendment: On July 26, 2011, the Banks again amended the Credit Agreement to include a swing-line promissory note of $1.0 million that is included in the revised $15.0 million revolver commitment.

•

3^rd Amendment: On September 1, 2011, the Banks amended the Credit Agreement to allow the Company to repurchase a limited amount of the Company’s common stock, equal to ten percent of the Company’s net earnings after taxes, subject to meeting certain share repurchase conditions and revised the definition of the fixed charge coverage ratio and total liabilities to tangible net worth to exclude such repurchases.

•

4^th Amendment: On January 17, 2012, the Banks amended the Credit Agreement to allow the Company to purchase a promissory note, dated July 23, 2010, held by Hetra Secure Solutions Corporation on StingRay56.

•

5^th Amendment: Additionally, on March 5, 2012, the Banks amended the Credit Agreement to allow the Company to acquire StingRay56, Inc.

The outstanding balance of the line of credit at May 31, 2012 was $12.5 million and the balances of the term loans were $2.5 million and $2.7 million, respectively. These loans are secured by all assets and personal property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million. The $3.0 million term loan is secured by real estate property of the Company and a building owned by Southeastern Metro Savings, LLC, a company in which the Company’s Chief Executive Officer is a minority owner. The building will continue to be in the collateral pool until such time as the note is sufficiently paid down or it is replaced by other collateral.

Video Display Corporation and Subsidiaries

May 31, 2012

The Agreement contains three covenants: a fixed charge coverage ratio, ratio of senior funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA), and total liabilities to tangible net worth. The Agreement also includes restrictions on the incurrence of additional debt or liens, investments (including Company stock), divestitures and certain other changes in the business. The Agreement expires on December 1, 2013. The interest rate on these loans is a floating LIBOR rate based on a fixed charge coverage ratio, minimum 4.0%, as defined in the loan documents.

As of May 31, 2012, the Company was not in compliance with the senior funded debt to EBITDA ratio and permitted share repurchases covenants as defined by the Banks credit line agreements. The Company subsequently received a waiver of these covenant violations from the Banks through the October 15, 2012 reporting of the next measurement of these covenants as of the Company’s second quarter end. The senior funded debt to EBITDA covenant was deemed to be the most restrictive by the Company and the Banks.

Note 3. – Recent Accounting Pronouncements

In September 2011, the FASB issued revised guidance FASB ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350) — Testing Goodwill for Impairment” to allow entities to use a qualitative approach to test goodwill for impairment. The amendment permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted and the Company has chosen early adoption. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Note 4. – Inventories

Inventories are stated at the lower of cost (first in, first out) or market.

Inventories consisted of the following (in thousands):


	May 31,			February 29,
	2012			2012
Raw materials	$	21,579		$	19,106
Work-in-process		6,873			6,853
Finished goods		6,821			7,027

		35,273			32,986
Reserves for obsolescence		(3,567	)		(3,250	)

	$	31,706		$	29,736

Video Display Corporation and Subsidiaries

May 31, 2012

Note 5. – Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Information relative to contracts in progress consisted of the following:


	May 31,			February 29,
	2012			2012
Costs incurred to date on uncompleted contracts	$	9,901		$	7,499
Estimated earnings recognized to date on these contracts		5,526			4,373

		15,427			11,872
Billings to date		(12,432	)		(8,978	)

Costs and estimated earnings in excess of billings, net	$	2,995		$	2,894

Costs and estimated earnings in excess of billings	$	3,173		$	3,236
Billings in excess of costs and estimated earnings		(178	)		(342	)

	$	2,995		$	2,894

Costs and estimated earnings in excess of billings are the results of contracts in progress (jobs) in completing orders to customers’ specifications on contracts accounted for under FASB ASC 605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.” Costs included are material, labor, and overhead. These jobs require design and engineering effort for a specific customer purchasing a unique product. The Company records revenue on these fixed-price and cost-plus contracts on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable. Billings are generated based on specific contract terms, which might be a progress payment schedule, specific shipments, etc. None of the above contracts in progress contain post-shipment obligations.

Changes in job performance, manufacturing efficiency, final contract settlements, and other factors affecting estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

As of May 31, 2012 and February 29, 2012, there were no production costs that exceeded the aggregate estimated cost of all in process and delivered units relating to long-term contracts. Additionally, there were no claims outstanding that would affect the ultimate realization of full contract values. As of May 31, 2012 and February 29, 2012, there were no progress payments that had been netted against inventory.

Note 6. – Intangible Assets

Intangible assets consist primarily of the unamortized value of purchased patents, customer lists, non-compete agreements and other intangible assets. Intangible assets are amortized over the period of their expected lives, generally ranging from 5 to 15 years. Amortization expense related to intangible assets was approximately $60 thousand and $81 thousand for the three months ended May 31, 2012 and 2011, respectively.

Video Display Corporation and Subsidiaries

May 31, 2012

The cost and accumulated amortization of intangible assets was as follows (in thousands).


	May 31, 2012				February 29, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Customer lists	$	3,611	$	2,730	$	3,611	$	2,701
Non-compete agreements		1,245		1,245		1,245		1,245
Patents		777		697		777		692
Other intangibles		649		448		649		423

	$	6,282	$	5,120	$	6,282	$	5,061

Note 7. – Long-term Debt and Financing Lease Obligations

Long-term debt and financing lease obligations consisted of the following (in thousands):


	May 31,			February 29,
	2012			2012
Note payable to RBC Bank and Community & Southern Bank; interest rate at LIBOR plus applicable margin as defined per the loan agreement, minimum 4.00% (2.51% combined rate as of May 31, 2012; therefore, minimum 4% rate applied.); monthly principal payments of $58 plus accrued interest, payable through December 2015; collateralized by all assets of the Company.	$	2,508		$	2,683

Note payable to RBC Bank and Community & Southern Bank; interest rate at LIBOR plus applicable margin as defined per the loan agreement, minimum 4.00% (2.51% combined rate as of May 31, 2012; therefore minimum 4% rate applied.); monthly principal payments of $17 plus accrued interest, payable through December 2025; collateralized by three properties of the Company and one property owned by the Chief Executive Officer.		2,717			2,767

Mortgage payable to bank; interest rate at Federal Home Loan Bank Board Index rate plus 1.95% (3.75% as of May 31, 2012); monthly principal and interest payments of $5 payable through October 2021; collateralized by land and building of Aydin Display Systems, Inc.		361			373

		5,586			5,823
Less current maturities		(945	)		(945	)

	$	4,641		$	4,878

Video Display Corporation and Subsidiaries

May 31, 2012

Note 8. – Lines of Credit

•

5^th Amendment: Additionally, on March 5, 2012, the Banks amended the Credit Agreement to allow the Company to acquire StingRay56, Inc.

The outstanding balance of the line of credit at May 31, 2012 was $12.5 million and the balances of the term loans were $2.5 million and $2.7 million, respectively. These loans are secured by all assets and personal property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million. The $3.0 million term loan is secured by real estate property of the Company and a building owned by Southeastern Metro Savings, LLC, a company in which the Company’s Chief Executive Officer is a minority officer. The building will continue to be in the collateral pool until such time as the note is sufficiently paid down or it is replaced by other collateral.

Video Display Corporation and Subsidiaries

May 31, 2012

Note 9. – Supplemental Cash Flow Information

Supplemental cash flow information is as follows (in thousands):


	Three Months
	Ended May 31,
	2012		2011
Cash paid for:
Interest	$	176	$	231

Income taxes, net of refunds	$	213	$	66

Non-cash activity:
Reduction of notes receivable for acquisition of StingRay56	$	250		—


Receipt of treasury stock in conjunction with the sale of Fox International, Ltd.	$	—	$	3,272

Reduction of notes payable to officers and directors in conjunction with the sale of Fox International, Ltd.	$	—	$	199

Note 10. – Shareholder’s Equity

Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during each period. Shares issued during the period are weighted for the portion of the period that they were outstanding. Diluted earnings per share is calculated in a manner consistent with that of basic earnings per share while giving effect to all dilutive potential common shares that were outstanding during the period.

The following table sets forth the computation of basic and diluted earnings per share for the three-month periods ended May 31, 2012 and 2011 (in thousands, except per share data):


			Weighted
			Average		Earnings
	Net		Common Shares		Per
	Income		Outstanding		Share
Three months ended May 31, 2012
Basic	$	159		7,580	$	0.02
Effect of dilution:
Options		—		25

Diluted	$	159		7,605	$	0.02

Three months ended May 31, 2011
Basic	$	1,238		7,609	$	0.16
Effect of dilution:
Options		—		335

Diluted	$	1,238		7,944	$	0.16

Video Display Corporation and Subsidiaries

May 31, 2012

Stock-Based Compensation Plans

For the three-month period ended May 31, 2012 and 2011, the Company recognized general and administrative expenses of $6.5 thousand and $8.8 thousand, respectively, related to share-based compensation. The liability for the share-based compensation recognized is presented in the consolidated balance sheet as part of additional paid in capital. As of May 31, 2012, total unrecognized compensation costs related to stock options granted was $2.6 thousand. The unrecognized stock option compensation cost is expected to be recognized over a period of approximately 1 year.

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model, which requires the Company to estimate the expected term of the stock option grants and expected future stock price volatility over the term. The term represents the expected period of time the Company believes the options will remain outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock, which represents the standard deviation of the differences in the weekly stock closing price, adjusted for dividends and stock splits.

No options were granted during the three month periods ended May 31, 2012 and 2011.

Stock Repurchase Program

The Company has a stock repurchase program, pursuant to which it was originally authorized to repurchase up to 1,632,500 shares of the Company’s common stock in the open market. On July 8, 2009, the Board of Directors of the Company approved a one time continuation of the stock repurchase program, and authorized the Company to repurchase up to 1,000,000 additional shares of the Company’s common stock, depending on the market price of the shares. There is no minimum number of shares required to be repurchased under the program. For the quarter ended May 31, 2012, the Company repurchased 14,469 shares at an average price of $4.20 per share. The Company did not repurchase any shares in the quarter ended May 31, 2011. Under the Company’s stock repurchase program, an additional 712,668 shares remain authorized to be repurchased by the Company at May 31, 2012. The Credit Agreement executed by the Company on December 23, 2010 included restrictions on investments that restricted further repurchases of stock under this program. On September 1, 2011, the Agreement was amended to allow the Company to repurchase a limited amount of the Company’s common stock, equal to ten percent of the Company’s net earnings after taxes subject to meeting certain share repurchase conditions.

Note 11. – Income Taxes

The effective tax rate for the three months ended May 31, 2012 and 2011 was 15.9% and 31.5%, respectively. These rates differ from the Federal statutory rate primarily due to the effect of state taxes, the permanent non-deductibility of certain expenses for tax purposes, and research and experimentation credits. The disparity of the effective rate from May 31, 2012 compared to 2011 is due largely to the difference in 263A costs of capitalizing inventory for tax purposes. The Company’s increased inventory costs created an increase in deferred tax assets lowering the effective tax rate.

Note 12. – Related Party Transactions

In conjunction with an agreement involving re-financing of the Company’s lines of credit and Loan and Security Agreement, on June 29, 2006 the Company’s CEO provided a $6.0 million subordinated term note to the Company with monthly principal payments of $33.3 thousand plus interest through July 2021. The interest rate on the note was equal to the prime rate plus one percent. The note was secured by a general lien on all assets of the Company, subordinate to the lien held by RBC Bank and Community & Southern Bank. During fiscal 2012, the Company repaid the remaining balance under this loan agreement on November 28, 2011 with consent from RBC Bank and Community & Southern Bank. The payoff was approximately $1.0 million. Interest paid on the loan in the quarter ending May 31, 2011 was $32.8 thousand.

Video Display Corporation and Subsidiaries

May 31, 2012

The Company’s CEO provides a portion of the collateral for the term loans with the consortium of RBC Bank and Community & Southern Bank. (See Note 8 – Lines of Credit)

Note 13. – Legal Proceedings

During 2007, the Company acquired the Cathode Ray Tube Manufacturing and Distribution Business and certain other assets of Clinton Electronics Corp. (“Clinton”), including inventory, fixed assets, for a total purchase price of $2,550,000, pursuant to an Asset Purchase Agreement between the parties (the “APA”). The form of consideration for the assets acquired included: (i) a $1.0 million face value Convertible Note; (ii) an agreement to deliver a stock certificate representing Company Common Shares having $1,125,000 in market value of the Company’s common stock in January of 2008; and (iii) an agreement to deliver a stock certificate representing Company Common Shares having $500,000 in market value of the Company’s common stock in January of 2009. The Company had paid the $1.0 million Note Payable in January 2008. The Company disputed certain representations made by Clinton in the APA including, but not limited to, representations concerning revenue, expenses, and inventory. As a result of this dispute, the Company did not issue the stock certificates scheduled for delivery January of 2008 and January of 2009. As such, the Company had accrued a potential liability of $1,625,000 and this accrued liability was reflected in the Company’s Balance Sheet until the settlement was reached.

On August 24, 2011, the Company and the Clinton Electronics Corporation signed a settlement agreement ending the dispute involving the purchase of certain assets by the Company, pursuant to an Asset Purchase Agreement between the two companies. Prior to the negotiated settlement, the companies had agreed to arbitrate the dispute.

The terms of the settlement were not disclosed. There was no effect to the income statement due to the settlement. The previously accrued liability covered the settlement and the write off of disputed inventory from the original agreement. The settlement did not have a material adverse effect on the Company’s business, consolidated financial condition, results of operation or cash flows.

Video Display Corporation and Subsidiaries

May 31, 2012

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the attached interim condensed consolidated financial statements and with the Company’s 2012 Annual Report to Shareholders, which included audited condensed consolidated financial statements and notes thereto for the fiscal year ended February 29, 2012, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company is a worldwide leader in the manufacturing and distribution of a wide range of display devices, encompassing, among others, industrial, military, medical, and simulation display solutions. The Company is comprised of one segment—the manufacturing and distribution of displays and display components. The Company is organized into four interrelated operations aggregated into one reportable segment pursuant to the aggregation criteria of FASB ASC Topic 280 “Segment Reporting”:

•

Monitors – offers a complete range of CRT, flat panel and projection display systems for use in training and simulation, military, medical, and industrial applications.

•

Data Display CRT– offers a wide range of CRTs for use in data display screens, including computer terminal monitors and medical monitoring equipment.

•

Entertainment CRT – offers a wide range of CRTs and projection tubes for television and home theater equipment.

•

Component Parts – provides replacement electron guns and other components for CRTs primarily for servicing the Company’s internal needs.

During fiscal 2013, management of the Company is focusing key resources on strategic efforts to consolidate unprofitable operations and seek to integrate acquisition opportunities that enhance the profitability and sales growth of the Company’s more profitable product lines. The Company continues to seek new products through acquisitions and internal development that complement existing profitable product lines. Challenges facing the Company during these efforts include:

Inventory management—The Company continually monitors historical sales trends as well as projected future needs to ensure adequate on hand supplies of inventory and to mitigate the risk of overstocking slower moving, obsolete items. The Company’s inventories increased particularly in the monitor division due to new product lines it is carrying and due to requirements to fulfill contracts.

Certain of the Company’s divisions maintain significant inventories of CRTs and component parts in an effort to ensure its customers a reliable source of supply. The Company’s inventory turnover averaged over 400 days during 1Q 2013, although in many cases the Company would anticipate holding 90 to 100 days of inventory in the normal course of operations. This level of inventory is higher than some of the Company’s competitors because it sells a number of products representing older, or trailing edge, technology that may not be available from other sources. The market for these trailing edge technology products is declining and, as manufacturers for these products discontinue production or exit the business, the Company may make last time buys. In the monitor operations of the Company’s business, the market for its products is characterized by fairly rapid change as a result of the development of new technologies, particularly in the flat panel display area. If the Company fails to anticipate the changing needs of its customers and accurately forecast their requirements, it may accumulate inventories of products which its customers no longer need and which the Company will be unable to sell or return to its vendors. Because of this, the Company’s management monitors the adequacy of its inventory reserves regularly, and at May 31, 2012 and February 29, 2012, believes its reserves to be adequate.

Video Display Corporation and Subsidiaries

May 31, 2012

Interest rate exposure – The Company had outstanding debt of $18.0 million as of May 31, 2012, all of which is subject to interest rate fluctuations by the Company’s lenders. Higher rates applied by the Federal Reserve Board could have a negative affect on the Company’s earnings. It is the intent of the Company to continually monitor interest rates and consider converting portions of the Company’s debt from floating rates to fixed rates should conditions be favorable for such interest rate swaps or hedges.

Liquidity—If the Company violates a covenant or is unable to refinance with our current bank or others, if necessary, we could be exposed to the risk of the bank exercising its rights against the collateral under the terms of the loan. If the Company is unable to refinance with a commercial bank, we could be exposed to the risk of increased interest rates.

Results of Operations

The following table sets forth, for the three months ended May 31, 2012 and 2011, the percentages that selected items in the Statements of Operations bear to total sales:


	Three Months
	Ended May 31,
	2012			2011
Sales
Monitors		94.5	%		90.5	%
Data display CRT		5.0			9.0
Entertainment CRT		0.1			0.3
Components parts		0.4			0.2

Total Company		100.0	%		100.0	%
Costs and expenses
Cost of goods sold		71.3	%		68.7	%
Selling and delivery		11.2			7.2
General and administrative		16.1			12.1

		98.6	%		88.0	%
Operating profit		1.4	%		12.0	%
Interest expense		(1.5	)%		(1.4	)%
Other income, net		1.6			0.0

Income before income taxes		1.5	%		10.6	%
Income tax expense		0.2			3.3

Net income		1.3	%		7.3	%

Net sales

Consolidated net sales decreased $4.5 million for the three months ended May 31, 2012 compared to the three months ended May 31, 2011. The 26.2% decrease in sales for the Company was lead by the Monitor division, which accounted for $3.5 million of the overall decrease. The Data Display division sales decreased $0.9 million or 59.6% for the three-month comparative period.

Video Display Corporation and Subsidiaries

May 31, 2012

The decrease in the Monitor division was lead by the Company’s Display Systems division, with sales for the three-month period ending May 31, 2012 decreasing 62.2%, compared to the three months ending May 31, 2011, from $4.2 million to $1.6 million. The sales decrease was a result of completed contracts with no replacements, slow business conditions and production issues. The Company’s Aydin subsidiary decreased its sales by 28.0% for the three-month comparable period ending May 31, 2012, from $6.5 million to $4.7 million. The decrease was primarily due to the slow- down of shipments on long-term military contracts. The Lexel Imaging subsidiary was down 24.1% due to lost business due primarily to reduced requirements for spare CRTs for their foreign military customers. The Z-Axis subsidiary sales decreased by 16.2% due to a slow-down in orders from their major customer, although business was still considered strong. Two new divisions added $0.9 million in revenue for the quarter. Aydin Visual Solutions is a division started last fiscal year as the North American distributor for Eyevis, a German manufacturer of specialized displays. Aydin Cyber Security, a company Video Display acquired in March 2012, is a tempest technology company. The Company anticipates increased revenues in the upcoming quarters as business conditions improve, Display Systems resolves its production issues and Lexel ships additional orders from their foreign military customers. The Data Display division decrease was primarily in flight simulation. We expect this business to remain steady throughout fiscal 2013. Entertainment CRT and Component Parts net sales declined by a combined 29% in the quarter ending May 31, 2012 compared to fiscal 2012. The two divisions represent only 0.5% of the Company’s revenues for the quarter ending May 31, 2012. Due to the continued shift to flat screen televisions, the market for replacement CRTs in the consumer market has diminished. The Company is winding down its business in replacement CRTs for the consumer market and indeed this is a small fraction of the Company’s overall business. Component Parts sales have generally declined in recent years due to weaker demand for electron gun and stem sales. This business will continue to decline as the CRT industry moves to the new technologies. This division primarily supplies the other divisions with parts they need to complete the assembly of their products.

Gross margins

Consolidated gross margins decreased from 31.3% for the three months ended May 31, 2011 to 28.7% for the three months ended May 31, 2012.

Gross margins within the Monitor division decreased to 29.3% for the three months ended May 31, 2012 from 33.3% for the three months ended May 31, 2011. Two of the companies within the division increased their gross margin percentages against the same quarter last year, Aydin Displays and Z-Axis. The largest increase came from the Aydin Displays subsidiary, which increased from 26.5% for the three months ended May 31, 2011 to 36.7% for the three months ended May 31, 2012. The increased margins were due to the product mix. Aydin’s gross margins are expected to be approximately 32% for the year. Their actual gross margin dollars were flat for the three-month comparable period due to their decrease in revenues. The Company’s two new divisions, Aydin Visual Systems and Aydin Cyber Security, had lower gross margins than the average in the Monitor division. Aydin Visual Solutions is a distributor of specialized displays so it will consistently have lower margins than the other manufacturers in the group. The Data Display division gross margins increased from 17.6% for the three months ended May 31, 2011 to 29.1% for the three months ended May 31, 2012, due to closing the Company’s Clinton Displays facility. Clinton Displays had a negative gross margin in the comparable quarter last year due to increased scrap and production costs. Gross margins in the Entertainment CRT division were negative for the three months ended May 31, 2012 due to reduced volume and fixed overhead. The volume in this division is negligible to the overall Company gross margins. Gross margins from the Component Parts division increased, but were negligible for the three months ended May 31, 2012.

Operating expenses

Operating expenses as a percentage of sales increased from 19.3% for the three months ended May 31, 2011 to 27.3% for the three months ended May 31, 2012. This was primarily due to an increase in salaries partially offset by a decrease in commissions, an increase in research and development fees, and proposal expenses. The Company was able to control other fixed costs, such as rent and other administrative costs on lower sales volumes. Overall expenses increased by $0.2 million. The Company expects to continue to contain these costs while increasing revenues.

Video Display Corporation and Subsidiaries

May 31, 2012

Interest expense

Interest expense decreased by $52 thousand for the three months ended May 31, 2012. Interest expense as a percent to sales increased to 1.5% from 1.4% of net sales as compared to the same period a year ago, due to the decrease in sales. The Company expects to continue to lower interest costs as the outstanding debt decreases, due to increased cash flow from operations and the management of current assets. The Company maintains various debt agreements with different interest rates, most of which are based on the prime rate or LIBOR.

Income taxes

Liquidity and Capital Resources

As of May 31, 2012, the Company had zero cash due to its banking structure. The Company maintains zero balance accounts which sweep and pay down the line of credit each day. The Company’s working capital was $38.6 million and $37.3 million at May 31, 2012 and February 29, 2012, respectively. In recent years, the Company has financed its growth and cash needs primarily through income from operations, borrowings under revolving credit facilities, advances from the Company’s Chief Executive Officer and long-term debt. Liquidity provided by operating activities of the Company is reduced by working capital requirements (largely inventories and accounts receivable), debt service, capital expenditures, and product line additions.

The Company specializes in certain products representing trailing-edge technology that may not be available from other sources, and may not be currently manufactured. In many instances, the Company’s products are components of larger display systems for which immediate availability is critical for the customer. Accordingly, the Company enjoys higher gross margins on certain products, but typically has larger investments in inventories than those of its competitors.

•

Video Display Corporation and Subsidiaries

May 31, 2012

•

5^th Amendment: Additionally, on March 5, 2012, the Banks amended the Credit Agreement to allow the Company to acquire StingRay56, Inc.

The outstanding balance of the line of credit at May 31, 2012 was $12.5 million and the balances of the term loans were $2.5 million and $2.7 million, respectively. These loans are secured by all assets and personal property of the Company and a limited guarantee of the Chief Executive Officer of $3.0 million. The $3.0 million term loan is secured by real estate property of the Company and a building owned by Southeastern Metro Savings, LLC, a company in which the Company’s Chief Executive Officer is a minority officer. The building will continue to be in the collateral pool until such time as the note is sufficiently paid down or it is replaced by other collateral.

The Company continues to monitor its cash and financing positions, seeking to find ways to lower its interest costs and to produce positive operating cash flow. The Company examines possibilities to grow its business as opportunities present themselves, such as new sales contracts or niche acquisitions. There could be an impact on working capital requirements to fund this growth. As in the past, the intent is to finance such projects with operating cash flows or existing bank lines; however, more permanent sources of capital may be required in certain circumstances.

Cash used in operations for the three months ended May 31, 2012 was $0.8 million. Net income from operations provided $0.2 million and adjustments to reconcile net income to net cash were $0.2 million including depreciation and reserves. Changes in working capital used $1.2 million, primarily due to an increase in inventory of $2.3 million and an increase in costs on uncompleted contracts of $0.1 million. This was offset by a decrease of refundable taxes of $0.1, an increase in accrued liabilities of $0.2 million, the conversion of a Note Receivable for StingRay 56 of $0.3, decrease in accounts receivable of $0.5 million and a decrease in prepaid expenses of $0.1 million. Cash provided by operations for the three months ended May 31, 2011 was $0.5 million.

Investing activities used cash of $0.5 million for the purchase of equipment during the three months ended May 31, 2012, compared to cash provided of $1.3 million during the three months ended May 31, 2011 from the use of a letter of credit and proceeds from the sale of Fox International, Ltd offset by the purchase of equipment.

Financing activities provided cash of $1.1 million for the three months ended May 31, 2012, due to net proceeds from the line of credit of $1.2 offset by the purchase of treasury stock of $0.1, compared to cash used of $1.1 million for the three months ended May 31, 2011, reflecting repayments against the line of credit and to the Company’s Chief Executive Officer.

Video Display Corporation and Subsidiaries

May 31, 2012

The Company’s debt agreements with financial institutions contain affirmative and negative covenants, including requirements related to tangible net worth and debt service coverage and new loans. Additionally, dividend payments, capital expenditures, and acquisitions have certain restrictions. Substantially all of the Company’s retained earnings are restricted based upon these covenants.

On March 1, 2011, the Company sold its Fox International Ltd., Inc. subsidiary to FI Acquisitions, a company majority owned by the Company’s Chief Executive Officer. The Company put its Fox International Ltd. subsidiary up for auction on January 15, 2011, and gave all interested parties a thirty-day due diligence period that was later extended until March 23, 2011, to give any potential bidders more time. FI Acquisitions was the only bidder and paid the net book value, approximately $3.5 million, for Fox International Ltd. in a stock sale, satisfied by the Company’s Chief Executive Officer exchanging 800,000 shares of the Company’s stock valued at approximately $3.3 million, approximately $50 thousand in cash and a reduction in notes payable to officers and directors of approximately $200 thousand. As the sale was at net book value, no gain or loss was recorded by the Company.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon the Company’s condensed consolidated financial statements. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the condensed consolidated financial statements and related notes. The accounting policies that may involve a higher degree of judgments, estimates, and complexity include reserves on inventories, revenue recognition, the allowance for bad debts and warranty reserves. The Company uses the following methods and assumptions in determining its estimates:

Reserves on Inventories

Reserves on inventories result in a charge to operations when the estimated net realizable value declines below cost. Management regularly reviews the Company’s investment in inventories for declines in value and establishes reserves when it is apparent that the expected net realizable value of the inventory falls below its carrying amount. Management considers the projected demand for CRTs in this estimate of net realizable value. Management is able to identify consumer-buying trends, such as size and application, well in advance of supplying replacement CRTs. Thus, the Company is able to adjust inventory-stocking levels according to the projected demand. The average life of a CRT is five to seven years, at which time the Company’s replacement market develops. Management reviews inventory levels on a quarterly basis. Such reviews include observations of product development trends of the original equipment manufacturers, new products being marketed, and technological advances relative to the product capabilities of the Company’s existing inventories. There were no significant changes in management’s estimates in the first quarter of fiscal 2013 and 2012; however, the Company cannot guarantee the accuracy of future forecasts since these estimates are subject to change based on market conditions.

Video Display Corporation and Subsidiaries

May 31, 2012

Revenue Recognition

Revenue is recognized on the sale of products when the products are shipped, all significant contractual obligations have been satisfied, and the collection of the resulting receivable is reasonably assured. The Company’s delivery term typically is F.O.B. shipping point.

In accordance with FASB ASC Topic 605-45 “Revenue Recognition: Principal Agent Considerations”, shipping and handling fees billed to customers are classified in net sales in the consolidated income statements. Shipping and handling costs incurred are classified in selling and delivery in the consolidated income statements.

A portion of the Company’s revenue is derived from contracts to manufacture flat panel and CRTs to a buyers’ specification. These contracts are accounted for under the provisions of FASB ASC Topic 605-35 “Revenue Recognition: Construction-Type and Production-Type Contracts”. These contracts are fixed-price and cost-plus contracts and are recorded on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is determined by reviewing all accounts receivable and applying credit loss experience to the current receivable portfolio with consideration given to the current condition of the economy, assessment of the financial position of the creditors as well as past payment history and overall trends in past due accounts compared to established thresholds. The Company monitors credit exposure and assesses the adequacy of the allowance for doubtful accounts on a regular basis. Historically, the Company’s allowance has been sufficient for any customer write-offs. Although the Company cannot guarantee future results, management believes its policies and procedures relating to customer exposure are adequate.

Warranty Reserves

The warranty reserve is determined by recording a specific reserve for known warranty issues and a general reserve based on claims experience. The Company considers actual warranty claims compared to net sales, then adjusts its reserve liability accordingly. Actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. Management believes that its procedures historically have been adequate and does not anticipate that its assumptions are reasonably likely to change in the future.

Other Accounting Policies

Other loss contingencies are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provision. Contingent liabilities are often resolved over long time periods. Estimating probable losses requires analysis of multiple factors that often depend on judgments about potential actions by third parties.

Video Display Corporation and Subsidiaries

May 31, 2012

Recent Accounting Pronouncements

In September 2011, the FASB issued revised guidance FASB ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350)—Testing Goodwill for Impairment” to allow entities to use a qualitative approach to test goodwill for impairment. The amendment permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted and the Company has chosen early adoption. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Forward-Looking Information and Risk Factors

This report contains forward-looking statements and information that is based on management’s beliefs, as well as assumptions made by, and information currently available to management. When used in this document, the words “anticipate,” “believe,” “estimate,” “intends,” “will,” and “expect” and similar expressions are intended to identify forward-looking statements. Such statements involve a number of risks and uncertainties. These risks and uncertainties, which are included under Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended February 29, 2012 could cause actual results to differ materially.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company’s primary market risks include fluctuations in interest rates and variability in interest rate spread relationships, such as prime to LIBOR spreads. Approximately $18.0 million of outstanding debt at May 31, 2012 related to indebtedness under variable rate debt. Interest on the outstanding balance of this debt will be charged based on a variable rate related to the prime rate or the LIBOR rate. Both rate bases are incremented for margins specified in their agreements. Thus, the Company’s interest rate is subject to market risk in the form of fluctuations in interest rates. The effect of a hypothetical one-percentage point increase across all maturities of variable rate debt would result in a decrease of approximately $0.2 million in pre-tax net income assuming no further changes in the amount of borrowings subject to variable rate interest from amounts outstanding at May 31, 2012. The Company does not trade in derivative financial instruments.

ITEM 4.

CONTROLS AND PROCEDURES

Our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Our chief executive officer and chief financial officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of May 31, 2012. We perform this evaluation on a quarterly basis so that the conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our annual report on Form 10-K and quarterly reports on Form 10-Q. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of May 31, 2012.

Video Display Corporation and Subsidiaries

May 31, 2012

Changes in Internal Controls

There have not been any changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Video Display Corporation and Subsidiaries

May 31, 2012

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Information regarding risk factors appears under the caption Forward-Looking Statements and Risk Factors in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 29, 2012. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other information

None.

Video Display Corporation and Subsidiaries

May 31, 2012

Item 6.

Exhibits


Exhibit Number		Exhibit Description

3(a)		Articles of Incorporation of the Company (incorporated by reference to Exhibit 3A to the Company’s Registration Statement on Form S-18 filed January 15, 1985).

3(b)		By-Laws of the Company (incorporated by reference to Exhibit 3B to the Company’s Registration Statement on Form S-18 filed January 15, 1985).

10(b)		Lease dated June 1, 2008 by and between Registrant (Lessee) and Ronald D. Ordway (Lessor) with respect to premises located at 4601 Lewis Road, Stone Mountain, Georgia. (incorporated by reference to Exhibit 10(b) to the Company’s 2009 Annual Report on Form 10-K)

10(c)		Lease dated November 1, 2008 by and between Registrant (Lessee) and Ronald D. Ordway (Lessor) with respect to premises located at 1868 Tucker Industrial Road, Tucker, Georgia. (incorporated by reference to Exhibit 10(c) to the Company’s 2009 Annual Report on Form 10-K)

10(d)		Purchase Agreement dated March 1, 2011 by and between the Company and FI Acquisition with respect to the sale of the Company’s Fox International subsidiary. (incorporated by reference to Exhibit 10(d) to the Company’s 2011 Annual Report on Form 10-K)

10(e)		Amendment to Loan and Security Agreement dated May 26, 2011 (incorporated by reference to Exhibit 10(e) to the Company’s 2011 Annual Report on Form 10-K)

10(f)		Amendment to Loan and Security Agreement dated July 26, 2011 (incorporated by reference to Exhibit 10(f) to the Company’s Report on Form 10-Q dated January 17, 2012)

10(g)		Amendment to Loan and Security Agreement dated September 1, 2011 (incorporated by reference to Exhibit 10(g) to the Company’s Report on Form 10-Q dated January 17, 2012)

10(h)		Loan and Security Agreement and related documents, dated December 23, 2010, among Video Display Corporation and Subsidiaries and RBC Bank and Community and Southern Bank as lenders and RBC Bank as administrative agent (incorporated by reference to Exhibit 10(h) to the Company’s Report on Form 8-K dated December 30, 2010).

10(i)		$6,000,000 Subordinated Note, dated June 29, 2006, between Video Display Corporation and Ronald D. Ordway (holder) (incorporated by reference to Exhibit 10(i) to the Company’s Current Report on Form 8-K dated June 29, 2006).

10(j)		Video Display Corporation 2006 Stock Incentive Plan. (incorporated by reference to Appendix A to the Company’s 2006 Proxy Statement on Schedule 14A)

10(k)		Amendment to Loan and Security Agreement dated January 17, 2012 (incorporated by reference to Exhibit 10(k) to the Company’s Report on Form 10-K dated May 29, 2012.

10(l)		Amendment to Loan and Security Agreement dated May 22, 2012 (incorporated by reference to Exhibit 10(l) to the Company’s Report on Form 10-K dated May 29, 2012.

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.