VIDEO DISPLAY CORP - Annual Report: 2023 (Form 10-K)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

10-K

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number

0-13394

VIDEO DISPLAY CORPORATION

(Exact name of registrant as specified in its charter)


Georgia		58-1217564
(State of Incorporation)		(IRS Employer Identification No.)

5155 King Street, Cocoa, Florida		32926
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (321)

784-4427

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock, no par value		OTCMKTS

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark if 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

☒

NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to

§240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Securities Exchange Act of 1934). YES ☐ NO ☒

As of August 31, 2022, the aggregate market value of the voting and

non-voting

common equity held by

non-affiliates

based upon the closing sales price for the Registrant’s common stock as reported in the Over the Counter Markets “OTCMKTS” was $616,263.

The number of shares outstanding of the registrant’s Common Stock as of May 1, 2023 was 5,878,290.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be delivered to stockholders in connection with our 2023 Annual Meeting of Stockholders are incorporated by reference in Part III of this

Form 10-K.

In addition, certain exhibits previously filed with the registrant’s prior

Forms 10-K,

Forms 8-K,

Form S-18

and Schedule 14A are incorporated by reference in Part IV of this

Form 10-K.

VIDEO DISPLAY CORPORATION

TABLE OF CONTENTS


ITEM NUMBER		PAGE NUMBER

	PART I

Item 1.	Business		1
Item 1A.	Risk Factors		5
Item 1B.	Unresolved Staff Comments		8
Item 2.	Properties		8
Item 3.	Legal Proceedings		9
Item 4.	Submission of Matters to a Vote of Security Holders		9

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		10
Item 6.	Selected Financial Data		10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		16
Item 8.	Financial Statements and Supplementary Data		17
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		38
Item 9A.	Controls and Procedures		38
Item 9B.	Other Information		39

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance		40
Item 11.	Executive Compensation		40
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		40
Item 13.	Certain Relationships and Related Transactions, and Director Independence		40
Item 14.	Principal Accounting Fees and Services		40

	PART IV

Item 15.	Exhibits, Financial Statement Schedules		41
	Signatures		42

PART I

Item 1. Business.

General

Video Display Corporation and subsidiaries (the “Company”, ”us”, “we” or “VDC”) is a provider and manufacturer of video products, components, and systems for visual display and presentation of electronic information media in a variety of requirements and environments. The Company designs, engineers, manufactures, markets, distributes and installs technologically advanced display products and systems, from basic components to turnkey systems, for government, military, aerospace, medical, industrial, and commercial organizations. The Company markets its products worldwide primarily from facilities located in the United States. Please read the comments under the caption “Forward looking statements and risk factors” in Item 1A Risk Factors of this Annual Report on Form 10-K.

Description of Principal Business

The Company generates revenues from the manufacturing and distribution of displays and display components. The Company operates primarily in four divisions: simulation, training and display products, cyber secure products and services, Data display CRTs, and other computer products.

Consolidated Net Sales by division for fiscal 2023 are comprised of the following:

Simulation, Training and Display Products (62%)

Cyber Secure Products (7%)

Data Display CRTs (20%)

Other Computer Products (11%)

A more detailed discussion of sales by category of product is included under the section entitled “Principal Products by Division.”

The Company’s manufacturing and distribution facilities are located in Kentucky and Florida.

The Company continues to explore opportunities to expand its product offerings in the display industry. The Company anticipates that this expansion will be achieved by adding new products or by acquiring existing companies that would enhance the Company’s position in the display industry. Management continually evaluates product trends externally in the industry and internally in the divisions in which the Company operates.

Segment Information

We operate and manage our business as one segment. The four divisions have similarities such as the types of products and markets served. Therefore, we believe they meet the criteria for aggregation under the applicable authoritative guidance and, as such, are reported as one segment within the Consolidated Financial Statements.

Principal Products by Division

Simulation, Training and Display Products

The Company’s simulation, training and display products operations are conducted in the VDC’s Cocoa, Florida location. Product lines include:

•

Dome Aircraft Simulator Display Systems

•

Multi-Faceted Aircraft Simulator Display Systems

•

Video Walls for Broadcast and Control Centers

•

Rugged Video Walls for Combat Information Center (CIC)

•

Rugged Flat Panel Displays and Computers

•

TEMPEST Products

•

TEMPEST Services

•

Projector and Monitor Upgrades

•

Projection Screens

These product lines are used by the military branches such as the Navy and Air Force and various government agencies such as the Department of Defense and the Department of Energy. VDC also supplies direct view video walls into both the Command and Control and Broadcast markets.

This portion of the Company’s operations, which contributed approximately 62% of fiscal 2023 consolidated net sales, involves the design, engineering, and manufacturing of digital projector display units. The Company customizes these units for specific applications, including ruggedization for military uses or size reduction due to space limitations in industrial and medical applications. Because of the Company’s flexible and cost-efficient manufacturing, it is able to handle low volume orders that generate higher margins.

This portion of the Company’s operations targets niche markets where competition from major multinational electronics companies tends to be lower. The prime customers for these products include defense, security, training, and simulation areas of the United States of America (U.S.) and foreign militaries as well as the major defense contractors such as the Boeing Company, L-3 Communications Corporation, DRS Laurel Technologies, and others. Flight simulator displays are produced to provide a full range of flight training simulations for military and commercial applications.

Cyber Secure Products

The Company acquired the AYON Cyber Security (“ACS”) division in March 2012. ACS was formerly known as Hetra Products and most recently as StingRay56 before becoming part of Video Display Corporation. ACS specializes in advanced TEMPEST technology, also known as Emanation Security (EMSEC), products and custom engineering solutions to include extreme environmental performance and survivability technologies (MIL-STD-810 and DO-160) in support of military forces, intelligence agencies, prime contractors and niche commercial sectors worldwide. ACS has a long history of specializing in TEMPEST technology. In addition to its TEMPEST products and services, the business also provides various contract services to government agencies and prime contractors. Services performed include design and testing solutions for defense and niche commercial uses worldwide. This division represented approximately 7% of fiscal 2023 consolidated net sales.

CRTs and Phosphor Products

Since its organization in 1975, the Company has been engaged in the distribution and original equipment manufacturers (OEMs) of Cathode ray tubes (CRTs) using new and recycled CRT glass bulbs, primarily in the replacement market, for use in data display screens, including computer terminal monitors, medical monitor equipment and various other data display applications and in television sets.

The Company’s CRT manufacturing operation of new and recycled CRTs is conducted at a facility located in Lexington, Kentucky (Lexel). The Company offers CRTs from other manufacturers at this facility as well. This division represented approximately 20% of fiscal 2023 consolidated net sales.

The Company maintains the capability of manufacturing and remanufacturing monochrome CRTs for Flight Simulators and Medical Monitors. In addition, our Lexel operation manufactures highly specialized CRTs called a Direct-View Storage Tubes (DVSTs) for military radar applications. All CRTs manufactured by the Company pass rigorous testing and quality requirements. The Medical Monitors are tested in accordance with standards from Underwriters Laboratories. Major customers for our CRT products include GE Healthcare, Leonardo DRS, Richardson Electronics, Flight Safety and many more.

The Company also distributes new CRTs and other electronic tubes purchased from OEMs. The Company sells CRTs into the replacement market which sometimes takes five to seven years to develop; these purchased inventories sometimes do not sell as quickly as other inventories. Bulk CRT purchases have declined over the past few years as the Company is managing current inventory levels against the anticipated reduction in future CRT demand due to the growth of flat panel technology.

The Company’s Lexel operation also provides a wide variety of products for the scientific community in the way of phosphor coated substrates. This is an area of potential growth for the Company as advances in the scientific community are made and the demand for phosphor coated substrates increase worldwide. These products are used in many applications including CCD imaging, RHEED/LEED view ports, Digital X-Ray Imaging, Electron Microscopy, Alpha detectors for Neutron generators, and Spectrometry to name a few. Some of our major customers for these products include Bruker, Photonis, and all the US National Laboratories.

Other Computer Products

The Company acquired a small keyboard company on October 23, 2017. The Company’s long term plans are to use this as a platform to manufacture cyber-secure keyboards as part of the cyber security division. This division was 11% of the 2023 consolidated net sales.

Patents and Trademarks

The Company holds patents with respect to certain products and services. The Company also sells products under various trademarks and trade names. The Company believes that success in its industry primarily will be dependent upon incorporating emerging technology into new product line introductions, frequent product enhancements, and customer support and service.

Seasonal Variations in Business

Historically, there has not been seasonal variability in the Company’s business.

Working Capital Practices

The accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained losses for four of the last five years. The accumulated losses reported has resulted from a combination of lower revenues at certain divisions without a commensurate reduction of expenses. The Company’s working capital and liquid asset position is presented as follows:


	February 28, 2023			February 28, 2022
Working capital	$	(1,297	)	$	509
Liquid assets	$	400		$	245

Management’s plans with regard to improving working capital includes increasing marketing efforts in its ruggedized displays, and small specialty displays. The Company is developing new products for customers in the ruggedized display section of its business. The Company has orders for ruggedized display products which are being engineered by the Company’s engineering department which will be delivered in the Company’s next fiscal year. The Company is also entertaining a letter of intent to sell the TEMPEST business to supply working capital for the expanding ruggedized display business. The Company sees the ruggedized display business as repeatable business and a source of a steady income stream. The Company is working towards streamlining its two business units in Kentucky, Lexel Imaging and Unicomp. The Company is moving from being a manufacturer of CRT products to a distributor of CRT products, while working with customers on last time buys of certain specialty products. Unicomp, the keyboard division has completed a redesign of one of its better selling keyboards, forced by the lack of availability of certain computer chips used in the production of the previous model.

The Company’s efforts to increase revenues by upgrading its sales and marketing efforts are showing results with an increase in the Company’s backlog, especially in ruggedized products. These efforts have increased revenues from last year and will increase them even more in the upcoming fiscal year as the Company’s business typically has longer lead times from initial contact to a sale and the including the amount of time to develop the products by engineering. The pandemic has also slowed down the process of obtaining new business as many of our customers and potential customers are still working from home. Furthermore, supply chain challenges have slowed down production of certain products due to long lead times on critical items of production, impacting cash flow.

The Company moved the corporate accounting functions to the Cocoa, Florida location which allows the Company to become more efficient and save money on reducing redundant operations. The Company has not automatically replaced employees who have left the Company while it works to increase business. The Company reduced expenses further by closing the Tucker, Georgia facility on March 31, 2022.

If additional and more permanent capital is required to fund the operations of the Company, no assurance can be given that the Company will be able to obtain the capital on terms favorable to the Company, if at all.

Concentration of Customers

The Company sells to a variety of domestic and international customers on an open-unsecured account basis. These customers principally operate in the medical, military, industrial and avionics industries. The Company had direct and indirect net sales to the U.S. government, primarily the Department of Defense for training and simulation programs that comprised approximately 51% and 43% of consolidated net sales for fiscal 2023 and 2022, respectively. Sales to foreign customers were approximately 8% and 11% of consolidated net sales for fiscal 2023 and 2022, respectively. The Company had two customers, Naval Air Warfare and DRS Laurel Technologies with 14% and 10% of the Company’s consolidated net sales in fiscal 2023. The Company attempts to minimize credit risk by reviewing customers’ credit history before extending credit, and by monitoring customers’ credit exposure on a daily basis. The Company establishes an allowance for doubtful accounts receivable based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Backlog

The Company’s backlog is comprised of undelivered, firm customer orders, which are scheduled to ship within twelve months. The Company’s backlog was approximately $9.9 million at February 28, 2023 and $5.2 million at February 28, 2022. It is anticipated that more than 90% of the February 28, 2023 backlog will ship during fiscal 2024.

Environmental Matters

The Company’s operations are subject to federal, state, and local laws and regulations relating to the generation, storage, handling, emission, transportation, and discharge of materials into the environment. The costs of complying with environmental protection laws and regulations have not had a material adverse impact on the Company’s consolidated financial condition, results of operations, or cash flow in the past and are not expected to have a material adverse impact in the foreseeable future.

Research and Development

The objectives of the Company’s research and development activities are to increase efficiency and quality in its manufacturing and assembly operations and to enhance its existing product line by developing alternative product applications to existing display systems and electron optic technology.

Employees

As of February 28, 2023, the Company employed 58 persons on a full-time basis. Of these, 10 were employed in executive, administrative, and clerical positions, 3 were employed in sales and distribution, 14 in engineering, and 31 were employed in manufacturing operations. The Company believes its employee relations to be satisfactory. No employees are under collective bargaining agreements.

Competition

The Company believes that it has a competitive advantage in the display industry due to its ability to engineer custom display solutions for a variety of industrial, military and commercial applications, its ability to provide internally produced component parts, and its manufacturing flexibility. As a result, the Company can offer more customization in the design and engineering of new products. With the operations of VDC Display Systems, Jaco Display Solutions and AYON Cyber Security, the Company believes it has become one of the leading suppliers within each of these specialty display markets.

The Company now operates in several markets in the areas of custom electronic solutions. The Company has reentered the ruggedized display business and is actively looking to grow this business. The Company’s VDC Display Systems division specializes in projector design and video solutions, and the Company’s AYON Cyber Security division specializes in making electronic devices cyber secure. The Company specializes in the design and installation of video walls focusing on configurable visual solutions for command and control and other large format visuals in the energy, utility, transportation, industrial and security markets.

The Company is a wholesale distributor and manufacturer of OEM CRTs. The Company believes it is the only company that offers complete service in replacement markets with its manufacturing and recycling capabilities. The Company’s ability to compete effectively in this market is dependent upon its continued ability to respond promptly to customer orders and to offer competitive pricing.

Item 1A. Risk Factors.

Forward looking statements and risk factors

All statements other than statements of historical facts included in this report, including, without limitation, those statements contained in Item 1, are statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934. The words “expect”, “estimate”, “anticipate”, “predict”, “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company’s consolidated financial condition, results of operations or cash flows; (ii) the Company’s financing plans; (iii) the Company’s business and growth strategies, including potential acquisitions; and (iv) other plans and objectives for future operations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those predicted in the forward-looking statements or which may be anticipated from historical results or trends.

Our Company operates in technology-based markets that involve a number of risks, some of which are beyond our control. The following discussion highlights some risks and uncertainties that investors should consider, in conjunction with all other information in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to the Company may impair the Company’s business and operations. If any of the following risks actually occur, the Company’s business, consolidated financial condition, cash flows, or results of operations could be materially affected.

History of losses and declining liquidity

Declining liquidity and lack of credit availability could have important consequences, including:

•

generating insufficient cash flows from operating activities to meet our payment obligations;

•

increasing our vulnerability to general economic and industry conditions;

•

requiring a substantial portion of cash flow for operating activities and as a result reducing our ability to use our cash flow to fund capital expenditures, capitalize on future business opportunities and expand our business and execute our strategy;

•

causing us to make non-strategic divestitures;

•

limiting our ability to adjust to changing market conditions and to react to competitive pressure and placing us at a competitive disadvantage compared to our competitors who may have access to a line of credit.

Changes in government priorities may affect military spending, and our consolidated financial condition and results of operations or cash flows could suffer if their purchases decline.

We currently derive a portion of our net sales (51% in fiscal 2023) from direct and indirect sales to the U.S. government. If we are unable to replace expiring contracts, which are typically less than twelve months in duration, with contracts for new business, our sales could decline, which would have a material adverse effect on our business, consolidated financial condition, results of operations, or cash flows. We expect that direct and indirect sales to the U.S. government will continue to account for a substantial portion of our sales in the foreseeable future. We have no assurance that these government-related sales will continue to reach or exceed historical levels in future periods.

Our inability to secure financing could negatively affect the future of our business.

•

Our inability to secure financing with our current bank or others, if necessary, could expose us to the risk of losing business; and

•

Our inability to secure financing with a commercial bank could expose us to the risk of increased interest rates.

Our industry is highly competitive and competitive conditions may adversely affect our business.

Our success depends on our ability to compete in markets that are highly competitive, with rapid technological advances and products that require constant improvement in both price and performance. In most of our markets, we are experiencing increased competition, and we expect this trend to continue. This environment may result in changes in relationships with customers or vendors, the ability to develop new relationships, or the business failure of customers or vendors, which may negatively affect our business. If our competitors are more successful than we are in developing new technology and products, our business may be adversely affected.

Competitive pressures may increase or change through industry consolidation, entry of new competitors, marketing changes or otherwise. There can be no assurance that the Company will be able to continue to compete effectively with existing or potential competitors.

Competitors or third-parties may infringe on our intellectual property.

The Company holds patents with respect to certain products and services. The Company also sells products under various trademarks and trade names. Should competitors or third-parties infringe on these rights, costly legal processes may be required to defend our intellectual property rights, which could adversely affect our business.

Migration to flat panel and other technology may negatively affect our CRT business.

The Company acquires CRT inventory when the replacement market appears to demonstrate adequate future demand and the purchase price allows a reasonable profit for the risk. Due to the extended time frame for the replacement market to develop (five to seven years), these purchased inventories may not sell as quickly as other inventories. If the Company is unable to manage CRT inventory levels in coordination with reduced future CRT demand due to the growth of flat panel technology, the marketability of inventory on hand may be affected and the Company may incur significant costs in the disposal of excess inventory.

The Company anticipates that flat panel and other technology products, due to their lower space and power requirements, has become the display of choice in many display applications. Given this shift, the Company has focused its efforts and its acquisition strategy toward flat panel technologies. If the Company is unable to replace any future declines in CRT sales with products based on other technologies, our business may be adversely affected.

Future acquisitions may not provide benefits to the Company.

The Company’s growth strategy includes expansion through acquisitions that enhance the profitability and shareholder value of the Company. The Company continues to seek new products through acquisitions and internal development that complement existing profitable product lines. There can be no assurance that the Company will be able to complete further acquisitions or that past or future acquisitions will not have a material adverse impact on the Company’s consolidated operations.

If we are unable to retain certain key personnel and hire new, highly-skilled personnel, we may not be able to execute our business plan.

Our future success depends on the skills, experience, and efforts of our senior managers. The loss of services of any of these individuals, or our inability to attract and retain qualified individuals for key management positions, could negatively affect our business.

Our business operations could be disrupted if our information technology systems fail to perform adequately.

We depend upon our information technology systems in the conduct of our operations and financial reporting. If our major information systems fail to perform as anticipated, we could experience difficulties in maintaining normal business operations. Such systems-related problems could adversely affect product development, sales, and profitability.

Our business operations could be adversely impacted by the effects of the novel Coronavirus (COVID-19) or any other related adverse public health developments.

The risk of the Coronavirus to our employees, customers and supply chain could negatively impact our ability to conduct our business due to threat of illness, quarantines, restrictions of movement and closures of key customers and suppliers.

Changes to accounting rules or regulations may adversely affect our results of operations.

New accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. Future changes to accounting rules or regulations or the questioning of current accounting practices may adversely affect our consolidated financial condition or results of operations.

The Company’s stock price may be negatively affected by a variety of factors.

In addition to any impact the Company’s operating performance, potential future Company sales or repurchases of common stock, the Company’s dividend policies or possible anti-takeover measures available to the Company may have, changes in securities markets caused by general foreign or domestic economic, consumer or business trends, the impact of interest rate policies by the federal reserve board, and other factors outside the Company’s control may negatively affect our stock price.

Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid price if you need to sell your shares.

Our stock is quoted on the OTC Markets and the shares of our common stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our common stock or to sell his or her shares at or near bid prices, if at all.

Changes to estimates, or operating results that are lower than our current estimates, may cause us to incur impairment charges.

We make certain estimates and projections in connection with our impairment analyses for other long-term assets. If these estimates or projections change or prove incorrect, we may be required to record impairment charges. If these impairment charges were significant, our consolidated financial position or results of operations would be adversely affected.

International factors could negatively affect our business.

A small portion of our consolidated net sales (8% in fiscal 2023) is made to foreign customers. We also receive certain raw materials from foreign vendors. We are subject to the risks inherent in conducting our business across national boundaries, many of which are outside of our control. These risks include the following:

•

Economic downturns;

•

Currency exchange rate and interest rate fluctuations;

•

Changes in governmental policy or laws including, among others, those relating to taxation;

•

International military, political, diplomatic and terrorist incidents;

•

Government instability;

•

Nationalization of foreign assets;

•

Natural disasters; and supply chain issues

•

Tariffs and governmental trade policies.

We cannot ensure that one or more of these factors will not negatively affect our international customers and, as a result, our business and consolidated financial performance.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The Company has two locations, Cocoa, Florida and Lexington, Kentucky. The Florida location is leased from a related party at current market rates with the Cocoa, Florida space currently serving as the Corporate headquarters location. See Part III, Item 13 Certain Relationships and Related Transactions in this Annual Report on Form 10-K. Management believes the facilities to be adequate for its needs.

The following table details manufacturing, warehouse, and administrative facilities:


Location	Square Feet		Lease Expires
Cocoa, Florida		34,500	February 19, 2025
Lexington, Kentucky		41,055	July 30, 2023

Item 3. Legal Proceedings.

The Company is involved in various legal proceedings relating to claims arising in the ordinary course of business.

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

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Annual Report.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

The Company’s common stock is traded on the Over-the-Counter Market (OTCMKTS) under the symbol VIDE. The Company had previously traded on National Association of Securities Dealers Automated Quotation System (“NASDAQ”) national market system under the symbol VIDE until April 30, 2015.

The following table shows the range of prices for the Company’s common stock as reported by the OTCMKTS for each quarterly period beginning on March 1, 2021. The prices reflect inter-dealer prices, without mark-up, mark-down, or commission, and may not necessarily represent actual transactions.


	For Fiscal Years Ended
	February 28, 2023				February 28, 2022
Quarter Ended	High		Low		High		Low
May		1.19		0.91		2.70		1.13
August		1.82		0.93		1.40		1.12
November		2.50		0.72		1.22		1.02
February		2.55		1.09		1.27		0.83

There were approximately 120 holders of record of the Company’s common stock as of May 13, 2023.

Payment of cash dividends in the future will be dependent upon the consolidated earnings and financial condition of the Company and other factors that the Board of Directors may deem appropriate.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of February 28, 2023 regarding compensation plans (including individual compensation arrangements) under which common stock of the Company is authorized for issuance.


Stock Option Plan	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders		200,000	$	0.82		614,000

Issuer Purchases of Equity Securities

The Company has a stock repurchase program, pursuant to which it had been authorized to repurchase up to 2,632,500 shares of the Company’s common stock in the open market. On January 20, 2014, the Board of Directors of the Company approved a continuation of the stock repurchase program, and authorized the Company to repurchase up to 1,500,000 additional shares of the Company’s common stock in the open market. There is no minimum number of shares required to be repurchased under the program. During fiscal 2023 and 2022, the Company did not repurchase any shares of the Company’s stock. Under this program, an additional 490,186 shares remain authorized to be repurchased by the Company at February 28, 2023.

Item 6. Selected Financial Data

N/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company manufactures and distributes a wide range of display devices, encompassing, among others, industrial, military, medical, and simulation display solutions. The Company is organized into the following four interrelated divisions that have similar products and markets served and therefore are aggregated into one reportable segment:

•

Simulation and Training Products– offers a wide range of projection display systems for use in training, simulation, military, medical, industrial applications, video walls and command and control centers including ruggedized displays.

•

Cyber Secure Products – provides advanced TEMPEST technology and (EMSEC) products. This business also provides various contract services including the design and testing solutions for defense and niche commercial uses worldwide.

•

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

•

Other Computer Products – offers keyboard products with a plan to manufacture and offer cyber-secure keyboards as part of the cyber secure products division.

During fiscal 2023, management of the Company focused key resources on strategic efforts to support the efforts of operations to increase market share. The Company also seeks to look for acquisition opportunities that enhance the profitability and shareholder value of the Company. 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 - Management regularly reviews the Company’s investment in inventories for declines in value and writes down the cost when it is apparent that the expected net realizable value of the inventory falls below its carrying amount. The Company operates in an environment of constantly changing technologies and retains a certain amount of inventory for legacy products for maintenance and replacement capabilities for its customers. The Company also inventories product to ensure it has adequate inventory to fulfill orders for transitioning product lines. 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.

Impact of COVID-19 – The Company has been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally. Financial results for fiscal 2023 were impacted by COVID-19 due to delayed orders and/or the fulfillment of the related orders. However, the Company currently does not expect any material impact on our financial results for fiscal 2024. Management continues to operate normally with the exception of restrictions issued by federal and local governments and supply chain issues as a result of the pandemic. If a reoccurrence of the COVID-19 pandemic occurs, the Company may experience other disruptions that could severely impact the business, results of operations and prospects.

Sales generation – Although the Company increased sales this year, it was unable to reduce operating expenses at the needed level to reach profitability. In order to improve revenue generating activities, management is focused on increasing marketing efforts in its ruggedized displays business. The company has recently entered into an agreement with a prominent military manufacturing representative and added sales personnel to focus efforts on winning major multi-year military programs for ruggedized displays, computers, and other ancillary military products. The company is already seeing positive results with a number of recent awards and increased sales pipeline and backlog.

Operations

The following table sets forth, for the fiscal years indicated, the percentages that selected items in the Company’s consolidated statements of operations bear to total revenues (amounts in thousands):

(See Item 1. Business – Description of Principal Business and Principal Products for discussion about the Company’s Products and Divisions.)


	2023					2022
	Amount		%			Amount		%
Net Sales
Simulation and Training		5,035		62.1	%		4,088		58.4	%
Data Display CRTs		1,566		19.3			992		14.2
Cyber Secure Products		589		7.3			612		8.7
Other Computer Products		912		11.3			1,309		18.7

Total net sales		8,102		100.0			7,001		100.0


Costs and expenses
Cost of goods sold		6,930			85.5	%		7,324			103.7	%
Selling and delivery		446			5.5			555			7.9
General and administrative		3,505			43.3			3,753			53.6

	10,881			134.3			11,632			165.2
Loss from operations		(2,779	)		(34.3	)		(4,631	)		(65.2	)
Interest expense, net		(15	)		(0.2	)		(25	)		(0.4	)
Employee retention credit income		31			0.4			796			11.4
Gain on extinguishment of PPP loans		—			0.0			1,084			15.5
Gain on disposal of assets		5			0.1			—			0.0
Other income, net		765			9.4			216			3.1

(Loss) income before income taxes		(1,993	)		(24.6	)		(2,560	)		(35.6	)
Income tax expense		—			0.0			—			0.0

Net (loss) income		(1,993	)		(24.6	)		(2,560	)		(35.6	)

Fiscal 2023 Compared to Fiscal 2022

Net Sales

Consolidated net sales increased 15.7% for year ended February 28, 2023 compared to the year ended February 28, 2022 and decreased 1.0% for the three months ended February 28, 2023 compared to the comparable three months last year. The Company’s AYON Cyber Security (ACS) division is down 3.8% for the year ended February 28, 2023 compared to fiscal year ended February 28, 2022 and increased 305.9% for the three months ended February 28, 2023 compared to the same three months last year. The business relied on primarily service business with not much in product sales. Product sales picked up in the fourth quarter leading to the large increase versus prior year quarter’s sales. The Display Systems division increased by 23.2% for the year ended February 28, 2023 compared to last year and was down 18.8% for the quarter ended February 28, 2023 compared to the same three months last year. The division sales increased due to new customers for ruggedized products and steady sales in specialty displays. The Company is currently developing new products for the ruggedized display markets which it already has orders for. The Data Display division sales were up 57.8% for the year ended February 28, 2023 due to last time buy orders from customers. The division sells a specialty product, a direct view storage tube (DVST) to two customers in Asia. Orders are expected from both customers, but due to the pandemic, the funds which would have been used for these products were diverted to other priorities. The division also sells replacement CRTS for flight simulators. Because of changing technology, the demand for these products has decreased. The Lexel division will be dependent on continued sales of the DVST products and steady sales of its cathode ray tube products (CRTs) to increase their sales. Lexel had an increase of 22.9% for three months ended February 28, 2023 compared to the three months ended February 28, 2022. The Company’s keyboard division, posted sales of $0.9 million and $0.2 million for the year and three months ended February 28, 2023 compared to $1.3 million and $0.3 million for the comparable periods last year, respectively. Sales were down due to the availability of one of the products due to a chip shortage forcing the Company to redesign one of the products.

Gross Margins

Consolidated gross margins increased to 14% for fiscal 2023 from (3.7)% for fiscal 2022. Overall gross margin dollars increased by $1.4 million versus the prior fiscal year due to increased revenues and decreased costs. The gross margins were impacted by the changes in technology which led the Company to charging off approximately $500 thousand in inventory in fiscal 2023 compared to $919 thousand in inventory charges recorded to cost of goods sold during fiscal 2022.

ACS gross margin percentage were 17.8% compared to 21.1% and the gross margin dollars were $105 thousand compared to $129 thousand for the year ended February 28, 2023 compared to the year ended February 28, 2022. For the three months ended February 28, 2023 compared to the same period last year, ACS gross margin percentage were 13.4% compared to a negative 48.8% and gross margin dollars were $33 thousand compared to a negative $29 thousand.

VDC Display Systems (VDCDS) gross margin percentage was 29.4% compared to 14.3% in the prior year and the gross margin dollars were $1,478 thousand compared to $584 thousand for the year ended February 28, 2023 compared to the year ended February 28, 2022. For the three months ended February 28, 2023 compared to the same period last year, VDCDS gross margin percentage was 8.4% compared to 12.6%. Gross margin dollars were $66 thousand compared to $123 thousand.

The keyboard division, Unicomp, had $80 thousand of gross margin dollars or 8.7% to sales for the year ended February 28, 2023 and $363 thousand of gross margin dollars or 27.7% for the year ended February 28, 2022. For the quarter ended February 28, 2022, Unicomp had a negative $49 thousand of gross profit or a negative 22.9% compared to $48 thousand or 15.7%.

The Data Display division had a negative $490 thousand in gross margin dollars for the year ended February 28, 2023 compared to a negative $1,337 thousand for the year ended February 28, 2022. The Data Display division for Lexel had a negative $392 thousand in gross margin dollars for the three months ended February 28, 2023 compared to a negative $265 thousand for the three months ended February 28, 2022. The division is in the process of curtailing much of its manufacturing in displays and moving to become a distributor.

Operating Expenses

Operating expenses as a percentage of sales decreased to 48.8% for fiscal 2023 from 61.5% in fiscal 2022. Operating expenses as a percentage of sales were lower for fiscal 2023 when compared to fiscal 2022 due to the increase in sales in fiscal 2023 with a corresponding decrease in operating expenses. Actual operating expenses decreased by $357 thousand.

The Company is working to reduce costs in all areas of the business to bring its cost structure in line with the current size of the business. The Company closed the corporate headquarters in Georgia and has merged it into the Florida location, which is saving considerable operating expenses. The Company is expanding its product offerings, primarily in ruggedized displays and in doing so, is adding costs strategically to support those businesses. The keyboard and CRT divisions are making changes to maximize profitability including reducing the size of their operating facility and streamlining their product offerings.

Interest Expense

Interest expense was $15 thousand in fiscal 2023 and $25 thousand for fiscal 2022 related to the Company’s obligations. The interest expense is primarily from the financing lease on the TEMPEST equipment for the cyber security business.

Other Income

In fiscal 2023, the Company received $498 thousand in proceeds from a class action lawsuit, $274 thousand in royalties, $19 thousand in rental income, $31 thousand in retention credit revenue, $5 thousand on the sale of assets, $11 thousand in interest income and $2 thousand in miscellaneous other. Other expense netted against other income was $31 thousand for the payout of a lawsuit and $8 thousand in settlement of another dispute.

In fiscal 2022, the Company had $1,084 thousand in gain on extinguishment of PPP loans, $796 thousand in employee retention credit income, net rental income of $210 thousand and $4 thousand in bad debt recovery.

Income Taxes

The Company had a net loss before taxes of approximately $2.0 million in fiscal 2023 and $2.6 million in fiscal 2022 which a full valuation allowance was provided due to historical losses resulting in an effective tax rate of 0%.

Liquidity and Capital Resources


	February 28, 2023			February 28, 2022
Working capital	$	(1,297	)	$	509
Liquid assets	$	400		$	245

Cash used in operations was $0.6 million in fiscal 2023 compared to the use of 0.1 million in fiscal 2022. During fiscal 2023, the net loss from operations was $2.0 million and adjustments to reconcile net loss to net cash were $0.3 million with $0.5 million in inventory related charges, $0.2 million in depreciation and $0.1 million in amortization of intangible assets. Working capital related accounts provided $0.5 million in cash with retention credit receivables providing $0.8 million, contract assets of $0.2 million, reduction in inventories $0.9 million, and accounts payable and accrued liabilities providing $0.4 million, offset by a decrease in contract liabilities of $0.9 million and an increase in an accounts receivable receivables of $0.4 million.

Investing activities used $40 thousand for capital expenditures in fiscal 2023 compared to using $79 thousand in fiscal 2022.

Financing activities provided $0.8 million in fiscal 2023. The Company received $0.9 million in a related party loan and paid $0.1 million in equipment financing. Financing activities provided $0.1 million for the year ended February 28, 2022.

The Company has a stock repurchase program, pursuant to which it has been authorized to repurchase up to 2,632,500 shares of the Company’s common stock in the open market. On January 20, 2014, 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 1,500,000 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. During fiscal years 2023 and 2022, the Company did not repurchase any of the Company’s stock. Under this program, an additional 490,186 shares remain authorized to be repurchased by the Company at February 28, 2023.

Transactions with Related Parties and Contractual Obligations

The Company leases a building in Cocoa, Florida, from an entity that is controlled by the Company’s CEO and leased another building for part of the year in Lexington, KY. The building in Lexington, KY serves as the manufacturing operations for the CRT division and the keyboard division. The Company now leases the building from a third party. The building in Cocoa, Florida is the new operational site for both VDC Display Systems, AYON Cyber Security and the corporate office. See Note 10.

The Company borrows money from the Chief Executive Officer from time to time to support operations. In fiscal 2023, the Company borrowed approximately $926 thousand bringing the total of the note payable to $1,384 thousand and owes another $256 thousand in rent, bringing the total rent owed to $616 thousand. There are no repayment terms related to the amounts owed but the Company intends to pay back the CEO when funds are available in fiscal 2024. These amounts are included in the Company’s consolidated balance sheet.

Contractual Obligations

Future contractual maturities due under operating and finance leases and other obligations at February 28, 2023 are as follows (in thousands):


	Payments due by period
	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Finance lease obligations	$	78	$	78	$	—	$	—	$	—
Operating lease obligations		511		321		190		—		—
Note payable -related party		1,384		1,384		—		—		—
Warranty reserve obligations		18		18		—		—		—

Total	$	1,991	$	1,801	$	190	$	—	$	—

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations are based upon the Company’s consolidated financial statements. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and related notes. The accounting policies that may involve a higher degree of judgments, estimates, and complexity include inventory valuation, contract revenue recognition as well as profitability or loss recognition estimates, and the sufficiency of the valuation reserve relating to deferred tax assets. The Company uses the following methods and assumptions in determining its estimates:

Inventory valuation

Management regularly reviews the Company’s investment in inventories for declines in value and writes down the cost when it is apparent that the expected net realizable value of the inventory falls below its carrying amount. The Company operates in an environment of constantly changing technologies and retains a certain amount of inventory for legacy products for maintenance and replacement capabilities for its customers. The Company maintains inventory on certain products to ensure it has adequate inventory to fulfill orders for transitioning product lines. 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.

Revenue recognition

The Company recognizes revenue upon transfer of control of the promised products or services to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. VDC derives revenue primarily from sales of simulation and video wall systems, cyber secure products, data displays, and keyboards. The Company excludes sales and usage-based taxes from revenue.

The Company’s simulation and video wall systems are custom-built (using commercial off-the-shelf products) to customer specifications under fixed price contracts. Judgment is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. Generally, these contracts contain one performance obligation (the installation of a fully functional system). The Company recognizes revenue for these systems over time as control is transferred based on labor hours incurred on each project based on the percentage of completion method.

The Company recognizes revenue related to its cyber secure products, data displays, and keyboards at a point in time when control is transferred to the customer (generally upon shipment of the product to the customer).

Timing of invoicing to customers may differ from timing of revenue recognition; however, the Company’s contracts do not include a significant financing component as substantially all invoices have terms of 30 days or less. The Company is applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less and does not offer terms extending beyond one year.

Income taxes

Deferred income taxes are provided to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has established a valuation allowance of $6 million on the Company’s deferred tax assets.

The Company accounts for uncertain tax positions under the provisions of ASC Topic 740, which contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company’s tax positions and tax benefits, which may require periodic adjustments. At February 28, 2023, the Company did not record any liabilities for uncertain tax positions.

Off-Balance Sheet Arrangements

The Company does not have during the periods presented, and the Company does not currently have, any off-balance sheet arrangements, as defined under SEC rules.

Recent Accounting Pronouncements

Refer to Note 1, “Summary of Significant Accounting Policies” for a discussion of recent accounting pronouncements and their effect on the Company.

Impact of Inflation

Inflation has not had a material effect on the Company’s results of operations to date.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s primary market risks include changes in technology and government spending. The rapid advances in video and projection technology present a challenge for the Company’s management and engineers to be able to meet the ever-changing demands in the markets in which it operates. The Company did a significant amount of business with the government (51% of revenues) in fiscal 2023. Failure of the government to continue to fund programs in the Company’s markets could have a detrimental effect on the Company.

Item 8. Financial Statements and Supplementary Data.

Video Display Corporation and Subsidiaries

Index to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm (PCAOB: 794)		18
Consolidated Balance Sheets as of February 28, 2023 and February 28, 2022		20
Consolidated Statements of Operations for the years ended February 28, 2023 and February 28, 2022		22
Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended February 28, 2023 and February 28, 2022		23
Consolidated Statements of Cash Flows for the years ended February 28, 2023 and February 28, 2022		24
Notes to Consolidated Financial Statements		25

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

Video Display Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Video Display Corporation and subsidiaries (the Company) as of February 28, 2023 and 2022, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the

two-year

period ended February 28, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the

two-year

period ended February 28, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has historically reported net losses or breakeven results along with reporting low levels of working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Board of Directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involve especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Table of Contents

Inventories

Description of the Matter

As described in Note 2 to the consolidated financial statements, the Company’s consolidated inventory balance was $2,458,000 as of February 28, 2023. Management values inventories at the lower of cost or net realizable value. Costs include materials, labor and manufacturing overhead and is computed on a

first-in-first-out

basis. Management evaluates the carrying value of its inventories taking into consideration such factors as historical and anticipated future sales compared to quantities on hand and the prices management expects to obtain for products in its various markets. Management adjusts excess and obsolete inventories to net realizable value and write-downs of excess and obsolete inventories are recorded as a component of cost of goods sold.

Auditing management’s estimate of inventory valuation was complex and judgmental as the value estimate was sensitive to significant assumptions, such as changes in technology and aging of the inventory, costing of inventory, and near-term revenue and operating margin projections, which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding of the Company’s inventory estimation process. To test the value of inventory, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions and the underlying data used by the Company in its analysis. For example, these procedures included, among others, performing procedures to test the existence of inventory, evaluating and testing management’s process for determining the valuation of inventory and testing the classification of inventory.

Revenue Recognition –

Percentage-of-Completion

Method

Description of the Matter

As described in Note 1 of the consolidated financial statements, for those long-term fixed-price contracts for which control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company generally accounts for these contracts using the

cost-to-cost

measure of progress. Under the

cost-to-cost

measure of progress, the estimation of progress toward completion is subject to assumptions and variables and requires significant judgment.

Auditing the Company’s estimate of total contract costs at completion is especially challenging due to the judgmental and subjective nature of the estimation of remaining costs to complete, including material, labor and subcontracting costs, among others, unique to each revenue arrangement. In particular, the significant estimation related to management’s judgment in estimating contract costs and evaluating changes in the estimates of costs at completion as circumstances change and as new information is received. The revisions in contract estimates can materially affect the Company’s operating results.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the Company’s revenue recognition review process. To test the estimate of contract costs to complete, our audit procedures included, among others, testing significant components of the estimate noted above, assessing the completeness of the cost estimates, reviewing changes in the estimates from previous periods and testing underlying data used by management. For example, our procedures included discussing project status with business personnel responsible for managing the contractual arrangements, inspecting evidence to support the assumptions made by management, and evaluating the key assumptions utilized in development of the remaining contract costs to complete the arrangement. We also reviewed documentation of management’s estimates through the reporting date for evidence of changes that would impact estimates as of the balance sheet date.

/s/ Hancock Askew & Co., LLP

We have served as the Company’s auditor since 2017.

Peachtree Corners, Georgia

May 30, 2023

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Video Display Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands)


	February 28, 2023			February 28, 2022
Assets
Current assets
Cash and cash equivalents	$	400		$	245
Accounts receivable, less allowance for bad debts of $6 and $3		829			390
Employee retention credit refund receivable		—			796
Inventories, net		2,458			3,342
Contract assets		280			444
Prepaid expenses and other current assets		206			297

Total current assets		4,173			5,514

Property, plant and equipment:
Buildings		789			778
Construction in progress		9			—
Machinery and equipment		5,384			5,359

		6,182			6,137
Accumulated depreciation		(5,479	)		(5,247	)

Net property, plant and equipment		703			890

Right of use assets under operating leases		482			592
Intangible assets, net		—			118
Other noncurrent assets		2			2

Total assets	$	5,360		$	7,116

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

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	February 28,			February 28,
	2023			2022
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities
Accounts payable (including related party payables of ($616 and $360; Note 5)	$	1,629		$	1,465
Accrued liabilities		1,096			855
Contract liabilities		974			1,872
Current maturities of financing lease obligations		74			98
Current operating lease liabilities		313			257
Note payable to officers and directors, current (Note 5)		1,384			458

Total current liabilities		5,470			5,005
Long-term operating lease liabilities		169			333
Finance lease obligations less current maturities		—			64

Total liabilities		5,639			5,402

Shareholders’ Equity (Deficit)
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; 5,878 outstanding at February 28, 2023 and 2022		7,293			7,293
Additional paid-in capital		281			281
Retained earnings		8,429			10,422
Treasury stock, 3,854 shares, at cost		(16,282	)		(16,282	)

Total shareholders’ equity (deficit)		(279	)		1,714

Total liabilities and shareholders’ equity (deficit)	$	5,360		$	7,116

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

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Video Display Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)


	February 28, 2023			February 28, 2022
Net sales	$	8,102		$	7,001
Cost of goods sold		6,930			7,324

Gross profit (loss)		1,172			(323	)

Operating expenses
Selling and delivery		446			555
General and administrative		3,505			3,753

	3,951			4,308

Operating loss		(2,779	)		(4,631	)

Other income (expense)
Interest expense, net		(15	)		(25	)
Gain on extinguishment of PPP loans		—			1,084
Employee retention credit income		31			796
Gain on disposal of assets		5			—
Other income, net		765			216

Total other income, net		786			2,071

(Loss) income before income taxes		(1,993	)		(2,560	)
Income tax expense		—			—

Net (loss) income	$	(1,993	)	$	(2,560	)

Net (loss) income per share-basic	$	(0.34	)	$	(0.44	)

Net (loss) income per share-diluted	$	(0.34	)	$	(0.44	)

Average shares outstanding – basic		5,878			5,878

Average shares outstanding – diluted		5,878			5,878

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

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Video Display Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Defict)

(in thousands)


	Common Shares*		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Total Shareholders’ Equity (Deficit)
Balance, March 1, 2021		5,878	$	7,293	$	281	$	12,982		$	(16,282	)	$	4,274
Net loss		—		—		—		(2,560	)		—			(2,560	)

Balance, February 28, 2022		5,878	$	7,293	$	281	$	10,422		$	(16,282	)	$	1,714
Net loss		—		—		—		(1,993	)		—			(1,993	)

Balance, February 28, 2023		5,878	$	7,293	$	281	$	8,429		$	(16,282	)	$	(279	)

*	Common Shares are shown net of Treasury Shares

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

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Video Display Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)


	February 28, 2023			February 28, 2022
Operating Activities
Net (loss) income	$	(1,993	)	$	(2,560	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation expense		231			268
Amortization of intangible assets		118			129
Provision for doubtful accounts		3			14
Inventory related charges		455			919
Non cash lease cost		110			535
Gain on extinguishment of PPP loans		—			(1,084	)
Gain on disposal of assets		(5	)		—
Changes in working capital items:
Accounts receivable		(442	)		910
Employee retention credit refund receivable		796			(796	)
Inventories		429			(234	)
Prepaid expenses and other assets		91			165
Accounts payable and accrued liabilities		405			990
Operating lease liabilities		(108	)		(567	)
Contract assets		164			1,090
Contract liabilities		(898	)		155

Net cash used in operating activities		(644	)		(66	)

Investing Activities
Capital expenditures		(45	)		(79	)
Proceeds from sale of assets		5			—

Net cash used in investing activities		(40	)		(79	)

Financing Activities
Proceeds from related party loans		926			275
Repayments of lease financing		(87	)		(78	)
Repayments of notes payable		—			(100	)
Net cash provided by financing activities		839			97
Net change in cash and cash equivalents		155			(48	)
Cash and cash equivalents, beginning of year		245			293

Cash and cash equivalents, end of year		400			245

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

See Note 12 for supplemental cash flow information.

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Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Nature of Business

Video Display Corporation and subsidiaries (the “Company”, “our” or “we”) is a provider and manufacturer of video products, components, and systems for data display and presentation of electronic information media in various requirements and environments. The Company designs, engineers, manufactures, markets, distributes and installs technologically advanced display products and systems, from basic components to turnkey systems for government, military, aerospace, medical and commercial organizations. The Company serves the simulation, ruggedized displays, video wall design and installation, tempest products, tempest services, cathode ray tubes (CRTS) and keyboard manufacturing industries.

Principles of Consolidation

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

Fiscal Year

All references herein to “2023” and “2022” mean the fiscal years ended February 28, 2023 and February 28, 2022, respectively.

Basis of Accounting

“The FASB Accounting Standards Codification” (“FASB ASC”) establishes the source of authoritative accounting standards generally accepted in the United States of America (“U.S. GAAP”) recognized by the Financial Accounting Standards Board (“FASB”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The FASB amends the FASB ASC through Accounting Standards Updates (“ASUs”). ASCs and ASUs are referred to throughout these consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Examples include provisions for returns, warranty reserves, bad debts, valuations on deferred income tax assets, inventory valuation, other intangible assets, accounting for percentage of completion contracts and the length of product life cycles and fixed asset lives. Actual results could vary from these estimates.

Going Concern, Banking and Liquidity


	February 28, 2023			February 28, 2022
Working capital	$	(1,297	)	$	509
Liquid assets	$	400		$	245

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Company is also entertaining a letter of intent to sell the TEMPEST business to supply working capital for the expanding ruggedized display business. The Company sees the ruggedized display business as repeatable business and a source of a steady income stream. The Company is working towards streamlining its two business units in Kentucky, Lexel Imaging and Unicomp. The Company is moving from being a manufacturer of CRT products to a distributor of CRT products, while working with customers on last time buys of certain specialty products. Unicomp, the keyboard division has completed a redesign of one of its better selling keyboards, forced by the lack of availability of certain computer chips used in the production of the previous model.

The ability of the Company to continue as a going concern is dependent upon the success of management’s plans to improve the operational effectiveness of the operations, the procurement of suitable financing, or a combination of these. The uncertainty regarding the potential success of management’s plan create substantial doubt about the ability of the Company to continue as a going concern.

Revenue Recognition

We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue primarily from sales of simulation and video wall systems, cyber secure products, rugged displays, and keyboards. We exclude sales and usage-based taxes from revenue.

Our simulation and video wall systems are custom-built (using commercial

off-the-shelf

products) to customer specifications under fixed price contracts. Judgment is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. Generally, these contracts contain one performance obligation (the installation of a fully functional system). We recognize revenue for these systems over time based on labor hours incurred on each project based on the percentage of completion method. 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. 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.

We recognize revenue related to our cyber secure products, rugged displays, and keyboards at a point in time when control is transferred to the customer (generally upon shipment of the product to the customer).

Timing of invoicing to customers may differ from timing of revenue recognition; however, our contracts do not include a significant financing component as substantially all of our invoices have terms of 30 days or less. We are applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less and we never offer terms extending beyond one year.

Contract assets represents revenue recognized in excess of amounts billed. Contract liabilities represents amounts collected prior to having completed performance on certain of our simulation or video wall system projects.

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The change in contract liabilities is due to the timing of customer deposits for orders offset by customer deposits recognized as revenue during the period. We expect to recognize revenue for any performance obligations within a twelve-month period and have elected not to provide disclosures regarding remaining performance obligations for contracts with a term of 1 year or less.

The following table presents the Company’s revenue disaggregated by division (in thousands):


	2023		2022
Simulation and training (including video walls)	$	5,035	$	4,088
Cyber security		589		612
Data displays		1,566		992
Other computer products (keyboards)		912		1,309

Total revenue	$	8,102	$	7,001

Cash and Cash Equivalents and Investments

We consider all highly liquid investments purchased with original maturities of three months or less to be cash or cash equivalents. Investment securities that are held by the Company, are bought and held principally for the purpose of selling them in the near term, and principally consist of equity securities and mutual funds. These equity investments are carried at fair value with realized gains or losses and changes in fair value included in operations.

Fair Value Measurements and Financial Instruments

The FASB’s fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:


Level 1		Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments which are not measured at fair value on the consolidated balance sheets include cash, accounts receivable, short-term liabilities, and debt. The estimated fair value of these financial instruments approximate cost due to the short period of time to maturity. Recorded amounts of long-term debt are considered to approximate fair value due to either rates that fluctuate with the market or are otherwise commensurate with the current market.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are customer obligations due under normal trade terms. The Company sells its products primarily to general contractors, government agencies, manufacturers, and consumers of video displays and CRTs. Management performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, letters of credit may be required from its customers in certain circumstances, such as foreign sales. 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 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. Management believes accounts receivable are stated at amounts expected to be collected.

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The following is a roll-forward of the allowance for doubtful accounts (in thousands):


Description	Balance at Beginning of Period		Additions: Charged to Costs and Expenses		Deductions			Balance at End of Period
February 28, 2023	$	3	$	3	$	—		$	6
February 28, 2022	$	12	$	14	$	(23	)	$	3

Warranty Reserves

The Company records a liability for estimated warranty obligations at the date products are sold. Adjustments are made as new information becomes available.

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 historically its procedures have been adequate and does not anticipate that its assumptions are reasonably likely to materially change in the future.

Inventories

Inventories consist primarily of CRTs, electron guns, monitors, digital projectors, video components and electronic parts. Inventories are stated at the lower of cost

(first-in,

first-out)

or market. The Company periodically reviews inventories for excess or obsolescence and writes down or records a reserve based on current economic conditions, historical sales quantities or patterns, and in some cases, specific risk of loss on specifically identified inventory. Such inventories are recorded at estimated realizable value net of the costs of disposal.

Property, Plant and Equipment

Property, plant, and equipment are stated at cost. Depreciation is computed principally by the straight-line method for financial reporting purposes over the following estimated useful lives: Buildings –

ten

twenty-five

years; Machinery and Equipment –

five

to ten years. In addition, leasehold improvements are amortized over the shorter of the useful life of the asset or the related lease term. Depreciation expense totaled approximately $231 thousand and $268 thousand for the fiscal years ended 2023 and 2022, respectively. Substantial betterments to property, plant, and equipment are capitalized and routine repairs and maintenance are expensed as incurred.

Business Combinations

When the Company acquires businesses, it applies the acquisition method of accounting and recognizes the identifiable assets acquired, the liabilities assumed, and any

non-controlling

interests in an acquiree at their fair values on the acquisition date, which requires significant estimates and assumptions. Goodwill, if any, would be measured as the excess of the fair value of the consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method requires the Company to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period. The Company must complete the accounting during the measurement period, which cannot exceed one year. Adjustments made during the measurement period could have a material impact on the Company’s financial condition and results of operations.

The Company typically measures customer relationship and other intangible assets using an income approach. Significant estimates and assumptions used in this approach include discount rates and certain assumptions that form the basis of the forecasted cash flows expected to be generated from the asset (e.g., future revenue growth rates, operating margins and attrition rates). If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could record impairment charges. In addition, the Company has estimated the economic lives of certain acquired tangible and intangible assets and these lives are used to calculate depreciation and amortization expense. If the Company’s estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

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Impairment of Long-lived Assets

Management reviews and assesses long-lived assets, which includes property, plant, and equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, management estimates the future cash flows expected to result from the use of the asset. If the sum of the undiscounted expected cash flows is less than the carrying amount of the asset, an impairment loss is recognized based upon the estimated fair value of the asset. The Company did not recognize any impairment charges associated with its long-lived or intangible assets.

Share-Based Compensation Plans

The Company accounts for employee share-based compensation under the fair value method and uses an option pricing model for estimating the fair value of stock options at the date of grant.

Share Repurchase Program

The Company has a share repurchase program, pursuant to which it had been authorized to repurchase up to 2,632,500 shares of the Company’s common stock in the open market. On January 20, 2014 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 1,500,000 additional shares of the Company’s common stock in the open market. There is no minimum number of shares required to be repurchased under the program. During the fiscal years ended February 28, 2023 and February 28, 2022, the Company did not repurchase any of its shares. Under this program, an additional 490,186 shares remain authorized to be repurchased by the Company at February 28, 2023.

Income Taxes

The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than possible enactments of changes in the tax laws or rates.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.

The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of February 28, 2023 and February 28, 2022, the Company did not have any material unrecognized tax benefits.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income. The Company did not have any interest and penalties accrued as of February 28, 2023 and February 28, 2022.

The Company’s tax years ended back to fiscal 2020 remain open to examination by the Internal Revenue Service (“IRS”).

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Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during each year. Shares issued or repurchased during the year are weighted for the portion of the year 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 potentially dilutive common shares that were outstanding during the period.

The following is a reconciliation of basic earnings (loss) per share to diluted earnings (loss) per share for 2023 and 2022, (in thousands, except for per share data):


	Net Income (Loss)			Average Shares Outstanding		Net (Loss) Income Per Share
2023
Basic		(1,993	)		5,878		(0.34	)
Effect of dilution:
Options		—			—		—

Diluted loss per share		(1,993	)		5,878		(0.34	)

2022
Basic		(2,560	)		5,878		(0.44	)
Effect of dilution:
Options		—			—		—

Diluted earnings per share		(2,560	)		5,878		(0.44	)

Stock options convertible into 200,000 shares of the Company’s common stock were anti-dilutive in fiscal 2023 due to the net loss position and therefore, were excluded from the fiscal 2023 diluted earnings (loss) per share calculation.

Segment Reporting

An operating segment is defined as a component that engages in business activities, whose operating results are reviewed by the chief operating decision maker in order to make decisions about allocating resources, and for which discrete financial information is available. We operate and manage our business as one reportable segment. All of our divisions have similarities such as products and markets served; therefore, we believe they meet the criteria for aggregation under the applicable authoritative guidance and, as such, these operations are reported as one segment within the consolidated financial statements.

Sales to foreign customers were 8% of consolidated net sales for fiscal 2023 and 11% of consolidated net sales for fiscal 2022.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In June 2016, the FASB issued

ASU 2016-13, Financial

Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables.

ASU 2016-13 replaces

the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. This guidance is effective for annual reporting periods beginning after December 15, 2022 for smaller reporting companies, with early adoption permitted. Entities will apply the amendments using a modified retrospective approach. The Company does not expect the adoption of ASU

2016-13

to have a material impact on its financial statements and related disclosures.

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Note 2. Inventories

Inventories consisted of the following (in thousands):


	February 28, 2023		February 28, 2022
Raw materials	$	1,179	$	2,037
Work-in-process		762		846
Finished goods		517		459

		2,458		3,342
Reserves for obsolescence		—		—

	$	2,458	$	3,342

The following is a roll forward of the inventory reserves (in thousands):


Description	Balance at Beginning of Period		Additions: Charged to Costs and Expenses		Deductions			Balance at End of Period
February 28, 2023	$	—	$	—	$	—		$	—
February 28, 2022	$	798	$	30	$	(828	)	$	—

The Company has maintained inventory on hand to support discontinued products and has made purchases to have product available for its customers while they transitioned to newer technologies. Products the Company maintains lasts many years and the timeframe for possible replacement has been difficult to estimate. As a result, the Company has historically recorded an inventory reserve to offset any obsolescence or slow moving inventory concerns related to CRT inventory and component parts for legacy products. Although management believes that the inventory may be sold in the future, a reserve has been historically recorded due to the uniqueness and age of the related inventory. In fiscal 2022, management continued to challenge the valuation and salability of its inventory while considering current market conditions and recent sales activity and made the determination to write off the inventory reserve against the related inventory as the associated inventory realizable value was deemed nominal. Also, due to depressed sales and the market trends for certain products, an additional $889 thousand inventory charge was recorded to cost of goods sold. These adjustments were required in order to properly state the inventory value at the lower of cost or market at estimated realizable value.

During fiscal 2023 and 2022, the Company wrote off or disposed of inventories of $0.5 million and $1.7 million, respectively, of which $0.8 million was previously reserved for through inclusion in the inventory reserve in fiscal 2022.

Note 3. Uncompleted Contracts

Information relative to contracts in progress consisted of the following (in thousands):


	February 28, 2023			February 28, 2022
Costs incurred to date on uncompleted contracts	$	666		$	2,465
Estimated earnings recognized to date on these contracts		293			1,073

Total costs and estimated gross profit earned		959			3,538
Less billings to date		(1,653	)		(4,966	)

Contract liabilities, net	$	(694	)	$	(1,428	)

The following amounts are included in the accompanying consolidated balance sheets under the following captions (in thousands):


	February 28, 2023			February 28, 2022
Contract assets	$	280		$	444
Contract liabilities		(974	)		(1,872	)

Contract liabilities, net	$	(694	)	$	(1,428	)

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As of February 28, 2023 and 2022, there were no production costs that exceeded the aggregate estimated cost of all in process and delivered units relating to contracts. Additionally, there were no claims outstanding that would affect the ultimate realization of full contract values. As of February 28, 2023 and 2022, there were no progress payments that had been netted against inventory.

Note 4. Paycheck Protection Promissory (“PPP”) Related Loans

On April 13, 2020, our Lexel Imaging subsidiary entered into a PPP loan for $216,200 and on January 27, 2021, entered into a second round PPP loan for $304,442. On April 23, 2020, Video Display Corporation entered into a $772,000 first round PPP loan and on February 11, 2021, entered into a second round PPP loan for $780,112. The PPP loans were made under, and were subject to the terms and conditions of, the PPP which was established under the CARES Act and is administered by the U.S. Small Business Administration. Under the terms of the CARES Act, recipients can apply for and receive forgiveness for all, or a portion of the loans granted under the PPP. Such forgiveness was granted, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during a certain time period following the funding of the PPP loans.

The Company has used the proceeds of the PPP loans for Qualifying Expenses. In fiscal 2021, the Company received forgiveness on the first round $216,200 Lexel Imaging PPP loan in November 2020 and on the first round $772,000 Video Display PPP loan in December 2020. The Company received forgiveness on the second round of PPP loans ($1,084,554 in aggregate) in August 2021 (fiscal 2022). The forgiveness qualified as a gain on extinguishment of debt on the consolidated statements of operations and the related liability was removed from the consolidated balance sheets based on the forgiveness date of the related PPP loan.

Note 5. Notes Payable to Officers and Directors (Related Party Transactions)

In fiscal 2022, the Company borrowed $458 thousand to fund working capital needs and owes an additional $360 thousand in Company rent that is due to the CEO. The additional borrowings in the amount of $458 thousand are comprised of $275 thousand in cash and $183 thousand in payments made on the Company’s behalf related to the termination of the Tucker, Georgia lease. The $458

thousand note contains no repayment terms. The note payable and rent owed are included in the Company’s consolidated balance sheets as of February 28, 2022 as a notes payable to officers and directors and within accounts payable, respectively.

In fiscal 2023, the Company increased borrowings by $926 thousand to fund working capital needs and owes an additional $256 thousand in Company rent that is due the CEO. The $1,384 thousand note contains no repayment terms and is expected to be repaid in fiscal 2024 along with the $616 thousand rent owed. The note payable and rent owed are included in the Company’s consolidated balance sheets

of February 28,

2023 as a note payable to officers and directors and within accounts payable, respectively.

Note 6. Accrued Expenses and Warranty Obligations

The following provides a reconciliation of changes in the Company’s warranty reserve for fiscal years 2023 and 2022. The Company provides no other guarantees.


	2023			2022
Balance at beginning of year		24			41
Change in provision based on current year sales activity		—			(8	)
Warranty costs incurred		(6	)		(9	)

Balance at end of year		18			24

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Accrued liabilities consisted of the following (in thousands):


	February 28, 2023		February 28, 2022
Accrued compensation and benefits	$	672	$	416
Accrued payroll taxes		32		147
Accrued commissions		206		219
Accrued property taxes		30		2
Accrued warranty		18		24
Accrued other		138		47

	$	1,096	$	855

Note 7. Stock Options

The Video Display Corporation 2006 Stock Incentive Plan (“Plan”) provides that options to purchase

up to 500,000 shares of the Company’s common stock may be granted and up to 100,000 restricted common stock shares may be awarded. Options may not be granted at a price less than the fair market value, determined on the day the options are granted. Options granted to a participant who is the owner of ten percent or more of the common stock of the Company may not be granted at a price less than 110% of the fair market value, determined on the day the options are granted. The exercise price of each option granted is fixed and may not be

re-priced.

The life of each option granted is determined by the plan administrator, but may not exceed the lesser of seven years from the date the participant has the vested right to exercise the option, or nine years from the date of the grant. The life of an option granted to a participant who is the owner of ten percent or more of the common stock of the Company may not exceed five years from the date of grant. All full-time or part-time employees, and Directors of the Company, are eligible for participation in the Plan. In addition, any consultant or advisor who renders bona fide services to the Company, other than in connection with the offer or sale of securities in a capital-raising transaction, is eligible for participation in the Plan. The Plan may be terminated by action of the Board of Directors.

Information regarding the stock option plans is as follows:


	Number of Options (in thousands)		Average Exercise Price Per Share
Outstanding at March 1, 2021		200	$	0.82
Granted		—		—
Forfeited or expired		—		—

Outstanding at February 28, 2022		200	$	0.82
Granted		—		—
Forfeited or expired		—		—

Outstanding at February 28, 2023		200	$	0.82
Options exercisable
February 28, 2022		200	$	0.82
February 28, 2023		200	$	0.82


		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding at February 28, 2023 (in thousands)		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable at February 28, 2023 (in thousands)		Weighted Average Exercise Price
$	0.80 - $1.00		200		5.0	$	0.82		200	$	0.82

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 be outstanding based on historical information. Estimates of expected future stock price volatility are based on the historic volatility of the Company’s common stock. The Company calculates the historic volatility based on the weekly stock closing price, adjusted for dividends and stock splits. The fair value of the stock options is based on the stock price at the time the option is granted, the annualized volatility of the stock and the discount rate at the grant date. No options were granted in fiscal 2023 or 2022.

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For the fiscal year ended February 28, 2023 and February 28, 2022, there was no expense recognized on options as all options outstanding were fully vested.

Note 8. Income Taxes

The rate reconciliation related to income taxes differs from the amount computed by applying the federal statutory rate of 21% is as follows (in thousands):


	Fiscal Year Ended
	February 28, 2023			February 28, 2022
Statutory U.S. federal income tax rate	$	(409	)	$	(746	)
State income taxes, net of federal benefit		(46	)		(93	)
Valuation allowance		319			805
Other		136			34

Taxes at effective income tax rate	$	—		$	—

Significant componen

s of the Company’s net deferred income tax assets consist of the following (in thousands):


	February 28, 2023			February 28, 2022
Deferred tax assets (liabilities):
Federal net operating loss carry-forward	$	4,813		$	4,381
State net operating loss carry-forward		832			955
Federal tax credit carry-forward		318			318
Uniform capitalization costs		87			116
Accrued liabilities		40			41
Right of use assets		(116	)		(142	)
Lease liabilities		116			141
Basis difference of property, plant and equipment		(157	)		(172	)
Allowance for doubtful accounts		1			1
Amortization of intangibles		74			50
Other		(3	)		(3	)
Valuation allowance		(6,005	)		(5,686	)

Net deferred tax assets	$	—		$	—

Deferred tax assets have been reduced by a valuation allowance because, in the opinion of management, it is more likely than not that the Company’s deferred tax assets will not be realized. The Company has determined that a 100% valuation allowance is needed due to historical cumulative taxable net operating losses and the limited taxable income related to the carry back periods. The Company has available federal and state net operating loss carry forwards of $22.9 million and $22.1

million, respectively as of February 28, 2023. Net operating losses generated prior to taxable years beginning before January 1, 2018 may be carried forward and expire at various dates commencing in fiscal 2034, if not used. Net operating losses generated in taxable years beginning after December 31, 2017 and beginning before January 1, 2021 may be carried forward indefinitely. Net operating losses generated in taxable years beginning after December 31, 2020 may be carried for indefinitely but are limited to 80% of taxable income.

On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extend and expand the employee retention credit, previously enacted under the CARES Act, through December 31, 2021. For fiscal 2022, the Company has recorded an employee retention credit of $796

thousand. This credit has been recorded as an employee retention credit refund receivable on the consolidated balance sheets and as employee retention credit income on the consolidated statements of operations. The Company recorded these amounts at February 28, 2022. The entire receivable amount was received in fiscal 2023.

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Note 9. Benefit Plan

The Company maintains a defined contribution plan that is available to all employees. The Company did not make a contribution in the fiscal year ended February 28, 2023 or February 28, 2022 to the Company’s 401(k) plan.

Note 10. Leases

Operating Leases

The Company leases its office space and manufacturing facilities and equipment under operating lease agreements. The base lease terms expire at various dates through 2025. While each of the leases include renewal options, the Company has only included the base lease term in its calculation of lease assets and liabilities. The Company has one finance lease.

Balance sheet information related to operating leases is as follows (in thousands):


	February 28, 2023		February 28, 2022
Operating lease right-of-use assets	$	482	$	592

Current portion of operating lease liabilities	$	313	$	257
Noncurrent portion of operating lease liabilities		169		333

Total operating lease liabilities	$	482	$	590

Rent expense totaled approximately $0.5 million for fiscal 2023 and $0.6 million for fiscal 2022. The Company did not

have any variable lease costs or short-term lease costs for the years ended February 28, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $0.5 for fiscal 2023 and $0.6 million for fiscal 2022. On September 9, 2021, the Company exercised an option to terminate the lease on its Tucker, Georgia location effective March 31, 2022. The terms of the option to terminate included prepaying the remaining rent through March 31, 2022, an additional penalty of three month’s rent and prepaying the property taxes for 2021 and for the first three months of 2022. The Company did not modify any existing operating leases or execute any new operating leases during the fiscal year ended February 28, 2023.

Weighted average information associated with the measurement of the Company’s remaining operating lease obligations is as follows:


	February 28, 2023			February 28, 2022
Weighted average remaining lease term		1.6 years			2.7 years
Weighted average discount rate		6	%		6	%

The following table summarizes the maturity of the Company’s operating lease liabilities as of February 28, 2023 (in thousands):


Fiscal Year	Amount
2024	$	321
2025		190

Total operating lease payments	$	511
Less imputed interest		(29	)

Total operating lease liabilities	$	482

The Company subleases certain of its warehousing space in Lexington, KY. It is of a nominal value.

Financing Leases

The Company has one financing lease entered into on November 23, 2020 for Tempest testing equipment for $277,000. The lea

se e

xpires on December 1, 2023 and the incremental borrowing rate on the lease is 12.5%.

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Balance sh

et information related to financing lease is as follows (in thousands):


	February 28, 2023			February 28, 2022
Machinery and equipment	$	277		$	277
Less: Accumulated depreciation		(208	)		(115	)
Machinery and equipment, net	$	69		$	162
Current portion of financing lease liabilities	$	74		$	98
Noncurrent portion of financing lease liabilities		—			64

Total financing lease liabilities	$	74		$	162

Finance lease costs include depreciation expense of $92 thousand and interest expense of $15 thousand for the year ended February 28, 2023 and depreciation expense of $92 thousand and interest expense of $25 thousand for the year ended February 28, 2022. Cash paid for amounts included in the measurement of lease liabilities for finance leases include $15 thousand classified as operating cash flows and $87 thousand classified as financing cash flows for the year ended February 28, 2023. Cash paid for amounts included in the measurement of lease liabilities for finance leases include $25 thousand classified as operating cash flows and $78 thousand classified as financing cash flows for the year ended February 28, 2022.

The following table summarizes the maturity of the Company’s finance lease liabilities as of February 28, 2023 (in thousands):


Fiscal Year	Amount
2024	$	78

Total finance lease payments	$	78
Less imputed interest		(4	)

Total finance lease liabilities	$	74

Related Party Leases

Included in the operating lease section above are leases for manufacturing and warehouse facilities leased from Southeast Metro Savings, LLC and Honeyhill Properties, LLC (entities which are controlled by the Company’s chief executive officer) under operating leases expiring at various dates through 2025. Rent expense under these leases totaled approximately $0.3 million in fiscal 2023 and $0.4 million in fiscal 2022.

Future minimum rental payments due under leases with related parties are as follows (in thousands):


Fiscal Year	Amount
2024	$	190
2025		190

	$	380

Note 11. Concentrations of Risk and Major Customers

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, accounts receivable and historically investments prior to liquidation. At times, such cash in banks are in excess of the FDIC insurance limit.

The Company sells to a variety of domestic and international customers on an open-unsecured account basis, in certain cases requiring letters of credit. These customers principally operate in the medical, military, and avionics industries. The Company had direct and indirect net sales to the U.S. government, primarily the Department of Defense for training and simulation programs, which comprised approximately 51% and 43% of consolidated net sales in fiscal 2023 and 2022, respectively. Sales to foreign customers were 8% of consolidated net sales in fiscal 2023 and 11% of consolidated net sales in fiscal 2022. The Company had two customers who comprised more than 10% of the Company’s sales in fiscal year 2023 (14% and 10%). In addition, the Company had three customers that in aggregate comprised approximately 38% of consolidated accounts receivable as of February 28, 2023.

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The Company attempts to minimize credit risk by reviewing all customers’ credit history before extending credit, by monitoring customers’ credit exposure on a daily basis and requiring letters of credit for certain sales. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Note 12. Supplemental Cash Flow Information


	Fiscal Year Ended (in thousands)
	February 28, 2023		February 28, 2022
Cash paid for:
Interest	$	15	$	25

Non-cash activity:

Note payable to officer	$	—	$	183

Forgiveness of PPP loans (Note 4)	$	—	$	1,084

Selected Quarterly Financial Data (unaudited)

The following table sets forth selected quarterly consolidated financial data for the fiscal years ended February 28, 2023 and February 28, 2022, respectively. The summation of quarterly net income (loss) per share may not agree with annual net income (loss) per share due to rounding:


	2023
	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
	(in thousands, except per share amounts)
Net sales	$	2,841		$	1,966	$	1,687		$	1,608
Gross profit (loss)		711			512		295			(346	)
Net income (loss)		(295	)		65		(713	)		(1,050	)
Basic net income (loss) per share	$	(0.05	)	$	0.01	$	(0.12	)	$	(0.18	)
Diluted net income (loss) per share	$	(0.05	)	$	0.01	$	(0.12	)	$	(0.18	)


	2022
	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
	(in thousands, except per share amounts)
Net sales	$	1,857		$	1,904	$	1,616		$	1,624
Gross profit		367			51		(555	)		(186	)
Net income (loss)		(745	)		164		(806	)		(1,173	)
Basic net income (loss) per share	$	(0.13	)	$	0.03	$	(0.14	)	$	(0.20	)
Diluted net income (loss) per share	$	(0.13	)	$	0.03	$	(0.14	)	$	(0.20	)

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (February 28, 2023). Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow final decisions regarding required disclosures. Based on their evaluation of the Company’s disclosure controls and procedures as of February 28, 2023, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective.

In the prior fiscal quarter, our CEO and CFO concluded that as of November 30, 2022, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting relating to inventory. During the fourth quarter of fiscal 2023, management remediated the material weakness identified in the prior fiscal quarter related to inventory.

The Company incorporated new policies and procedures to effect stronger controls around it’s inventory In fiscal 2023. The controls included regular cycle counts including a review of the activity of the items counted to strengthen the timeliness of evaluating the inventory’s net realizable value given the changes in market conditions in the Company’s industry. Tighter controls were imposed on incoming and outgoing shipments to ensure proper timing of the recording of these shipments. These controls were audited by management to ensure compliance. Given the new procedures and the emphasis on these internal controls, the Company believes it can rely on the internal controls around the proper timing and valuation of the inventory.

The required certifications of our Chief Executive Officer and our Chief Financial Officer are included as exhibits to this Annual Report on Form 10-K. The disclosures set forth in this Item 9A contain information concerning the evaluation of our disclosure controls and procedures, internal control over financial reporting and changes to internal control referred to in those certifications. Those certifications should be read in conjunction with this Item 9A for a more complete understanding of the matters covered by the certifications.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

All internal controls, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of February 28, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 Framework) entitled “Internal Control- Integrated Framework.” Based on such assessment, our management concluded that as of February 28, 2023 our internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Change in Internal Control Over Financial Reporting

Except for the remediation of the material weakness described above, there were no changes in our internal controls over financial reporting during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent limitations on the effectiveness of controls

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information contained in Video Display Corporation’s Proxy Statement to be filed within 120 days of the Company’s 2023 fiscal year end (the “2023 Proxy Statement”), with respect to directors and executive officers of the Company under the headings “Election of Directors” and “Executive Officers”, is incorporated herein by reference in response to this item; provided, however, that the information contained in the 2023 Proxy Statement under the heading “Compensation and Stock Option Committee Report” or under the heading “Performance Graph” shall not be incorporated herein by reference.

Item 11. Executive Compensation.

The information contained in the 2023 Proxy Statement under the heading, “Executive Compensation and Other Benefits”, with respect to executive compensation, is incorporated herein by reference in response to this item.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information contained in the 2023 Proxy Statement under the headings “Common Stock Ownership” and “Executive Compensation and Other Benefits”, is incorporated herein by reference in response to this item.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information contained in the 2023 Proxy Statement under the heading, “Transactions with Affiliates”, is incorporated herein by reference in response to this item.

Item 14. Principal Accounting Fees and Services.

The information contained in the 2023 Proxy Statement under the heading, “Audit Fees and All Other Fees” is incorporated herein by reference in response to this item.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)	The following documents are filed as part of this Report:

Financial Statements:

The following consolidated financial statements of the Company and its consolidated subsidiaries and the Reports of the Independent Registered Public Accounting Firms are included in Part II, Item 8.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of February 28, 2023 and February 28, 2022.

Consolidated Statements of Operations—Fiscal Years Ended February 28, 2023 and February 28, 2022.

Consolidated Statements of Shareholders’ Equity (Deficit) – Fiscal Years Ended February 28, 2023 and February 28, 2022.

Consolidated Statements of Cash Flows—Fiscal Years Ended February 28, 2023 and February 28, 2022.

Notes to Consolidated Financial Statements

(b)

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). (P)

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). (P)

10(a)		Lease dated April 1, 2015 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 2015 Annual Report on Form 10-K.)

10(b)		Lease dated February 19, 2015 by and between Registrant (Lessee) and Ordway Properties LLC (Lessor) with respect to premises located at 5155 King Street, Cocoa, FL. (incorporated by reference to Exhibit 10(g) to the Company’s 2015 Annual Report on Form 10-K.)

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

21		Subsidiary Companies

23.1		Consent of Hancock Askew & Co., LLP

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.

32.1		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

104		Cover Page Interactive Data File (embedded within the Inline XBRL document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

POWER OF ATTORNEY

Know all men by these presents, that each person whose signature appears below constitutes and appoints Ronald D. Ordway as attorney-in-fact, with power of substitution, for him in any and all capacity, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature -Name	Capacity	Date

/s/ Ronald D. Ordway	Chief Executive Officer,	May 30, 2023
Ronald D. Ordway	Treasurer and Director
	(Principal Executive Officer)

/s/ Gregory L. Osborn	Chief Financial Officer and Director	May 30, 2023
Gregory L. Osborn	(Principal Financial Officer)