UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

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

For the Quarterly Period Ended May 31, ~~2020.~~

2021.

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

For the Transition Period From
to

Commission File Number

0-13394

VIDEO DISPLAY CORPORATION

(Exact name of registrant as specified on its charter)


~~GEORGIA~~ GEORGIA		58-1217564
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~1868 TUCKER INDUSTRIAL ROAD, TUCKER, GEORGIA 30084~~

5155 KING STREET, COCOA, FLORIDA 32926

(Address of principal executive offices)

~~770-938-2080~~

800-241-5005

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	VIDE	OTCMKTS

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, 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 is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ ~~No ☒~~

As of May 31, ~~2020,~~2021, the registrant had 5,878,290 shares of Common Stock outstanding.

Table of Contents

Video Display Corporation and Subsidiaries

Index


PART I.	FINANCIAL INFORMATION			Page	~~Page~~
~~PART I. FINANCIAL INFORMATION~~

	Item 1.	Financial Statements.

		Interim Condensed Consolidated Balance Sheets – May 31, ~~2020~~2021 (unaudited) and February ~~29, 2020~~28, 2021		3

		Interim Condensed Consolidated Statements of Operations –- Three months ended May 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)		5

		Interim Condensed Consolidated Statements of Shareholders’ Equity –- Three months ended May 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)		6

		Interim Condensed Consolidated Statements of Cash Flows – Three months ended May 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)		7

		Notes to Interim Condensed Consolidated Financial Statements –- (unaudited)		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15	14

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk.	21	20

	Item 4.	Controls and Procedures.	21	20

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings.	22	21

	Item 1A.	Risk Factors.	22	21

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22	21

	Item 3.	Defaults upon Senior Securities.	22	21

	Item 4.	Submission of Matters to a Vote of Security Holders.	22	21

	Item 5.	Other Information.	22	21

	Item 6.	Exhibits.	22	21

	SIGNATURES		23	22


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

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

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

Table of Contents

ITEM 1 – FINANCIAL STATEMENTS

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

   May 31, February 29,
   2020 2020
   (unaudited)
Assets

Current assets

Cash and cash equivalents
   $ 1,225 $ 844
Trading investments, at fair value
   12 —
Accounts receivable, less allowance for doubtful accounts of $5 and $9
   654 1,305
Notes receivable due from officers and directors (Note 8)
   134 189
Inventories, net
   4,009 4,480
Contract assets
   655 —
Prepaid expenses and other current assets
   478 411


Total current assets
   7,167 7,229


Property, plant, and equipment

Land
   154 154
Buildings
   2,756 2,756
Construction in progress
   110 106
Machinery and equipment
   4,875 4,861


   7,895 7,877
Accumulated depreciation
   (6,666 ) (6,607 )


Net property, plant, and equipment
   1,229 1,270
Right of use assets under operating leases
   1,508 1,631
Intangible assets, net
   344 387
Other noncurrent assets
   2 2


Total assets
   $ 10,250 $ 10,519


	May 31, 2021			February 28, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	842		$	293
Accounts receivable, less allowance for doubtful accounts of $6 and $12		434			1,314
Inventories, net		3,929			4,027
Contract assets		1,021			1,534
Prepaid expenses and other current assets		320			279

Total current assets		6,546			7,447

Property, plant, and equipment
Buildings		772			766
Construction in progress		—			130
Machinery and equipment		5,309			5,162

		6,081			6,058
Accumulated depreciation		(5,042	)		(4,979	)

Net property, plant, and equipment		1,039			1,079
Right of use assets under operating leases		996			1,127
Intangible assets, net		215			247
Other noncurrent assets		2			2

Total assets	$	8,798		$	9,902

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

Table of Contents

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Balance Sheets (unaudited) (continued)

(in thousands)

   May 31, February 29,
   2020 2020
   (unaudited)
Liabilities and Shareholders’ Equity

Current liabilities

Accounts payable
   $ 895 $ 1,256
Accrued liabilities
   440 499
Customer deposits
   1,719 2,338
Notes payable to officers and directors (Note 8)
   1,126 1,216
Note payable
   100 100
PPP related loans, current
   385 —
Current operating lease liabilities
   557 557


Total current liabilities
   5,222 5,966
PPP related loans, noncurrent
   603 —
Long-term operating lease liabilities
   971 1,091


Total liabilities
   6,796 7,057


Shareholders’ Equity

Preferred stock, no par value – 10,000 shares authorized; none issued and outstanding
   —   —
Common stock, no par value – 50,000 shares authorized; 9,732 issued and 5,878 outstanding at May 31, 2020, and at February 29, 2020
   7,293 7,293
Additional paid-in capital
   281 281
Retained earnings
   12,162 12,170
Treasury stock, shares at cost; 3,854 at May 31, 2020 and February 29, 2020
   (16,282 ) (16,282 )


Total shareholders’ equity
   3,454 3,462


Total liabilities and shareholders’ equity
   $ 10,250 $ 10,519


	May 31, 2021			February 28, 2021
	(unaudited)
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	528		$	602
Accrued liabilities		652			728
Customer deposits		1,667			1,717
Note payable		86			100
Current maturities of financing lease obligations		98			98
Current operating lease liabilities		573			601

Total current liabilities		3,604			3,846
PPP related loans, noncurrent		1,084			1,084
Finance lease obligations less current maturities		124			142
Long-term operating lease liabilities		457			556

Total liabilities		5,269			5,628

Shareholders’ Equity
Preferred stock, 0 par value – 10,000 shares authorized; NaN issued and outstanding		0—			0—
Common stock, 0 par value – 50,000 shares authorized; 9,732 issued and 5,878 outstanding at May 31, 2021, and at February 28, 2021		7,293			7,293
Additional paid-in capital		281			281
Retained earnings		12,237			12,982
Treasury stock, shares at cost; 3,854 at May 31, 2021 and February 28, 2021		(16,282	)		(16,282	)

Total shareholders’ equity		3,529			4,274

Total liabilities and shareholders’ equity	$	8,798		$	9,902

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

Table of Contents

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

   Three Months Ended
May 31,
   2020 2019
Net sales
   $ 3,705 $ 2,709
Cost of goods sold
   2,727 2,284


Gross profit
   978 425


Operating expenses

Selling and delivery
   206 165
General and administrative
   997 869


   1,203 1,034


Operating loss
   (225 ) (609 )


Other income (expense)

Interest (expense) income, net
   (15 ) —
Investment (loss) gains, net
   (10 ) 2
Other, net
   242 281


   217 283


Loss before income taxes
   (8 ) (326 )
Income tax expense
   —   —


Net loss
   $ (8 ) $ (326 )


Net loss per share:

Net loss per share-basic
   $ (0.00 ) $ (0.06 )


Net loss per share-diluted
   $ (0.00 ) $ (0.06 )


Basic weighted average shares outstanding
   5,878 5,878


Diluted weighted average shares outstanding
   5,878 5,878


	Three Months Ended May 31,
	2021			2020
Net sales	$	1,857		$	3,705
Cost of goods sold		1,490			2,727

Gross profit		367			978

Operating expenses
Selling and delivery		158			206
General and administrative		993			997

		1,151			1,203

Operating loss		(784	)		(225	)

Other income (expense)
Interest (expense) income, net		(10	)		(15	)
Investment (loss) gains, net		—			(10	)
Other, net		49			242

		39			217

Loss before income taxes		(745	)		(8	)
Income tax expense		0—			0—

Net loss	$	(745	)	$	(8	)

Net loss per share:
Net loss per share-basic	$	(0.13	)	$	(0.00	)

Net loss per share-diluted	$	(0.13	)	$	(0.00	)

Basic weighted average shares outstanding		5,878			5,878

Diluted weighted average shares outstanding		5,878			5,878

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

Table of Contents

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Statements of Shareholders’ Equity

Three Months Ended May 31, 2021 and 2020 ~~and 2019~~ (unaudited)

(in thousands)

   Common
Shares    Share
Amount    Additional
Paid-in
Capital    Retained
Earnings Treasury
Stock Total
Shareholders’
Equity
Balance, February 29, 2020
   5,878    $ 7,293    $ 281    $ 12,170 $ (16,282 ) $ 3,462
Net loss
   —      —      —      (8 ) —   (8 )








Balance, May 31, 2020 (unaudited)
   5,878    $ 7,293    $ 281    $ 12,162 $ (16,282 ) $ 3,454








   Common
Shares    Share
Amount    Additional
Paid-in
Capital    Retained
Earnings Treasury
Stock Total
Shareholders’
Equity
Balance, February 28, 2019
   5,878    $ 7,293    $ 274    $ 13,376 $ (16,282 ) $ 4,661
Net loss
      —      —      (326 ) —   (326 )
Share based compensation
   —      —      2    —   —   2








Balance, May 31, 2019 (unaudited)
   5,878    $ 7,293    $ 276    $ 13,050 $ (16,282 ) $ 4,337


	Common Shares*		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance, February 28, 2021		5,878	$	7,293	$	281	$	12,982		$	(16,282	)	$	4,274
Net loss		—		—		—		(745	)		—			(745	)

Balance, May 31, 2021 (unaudited)		5,878	$	7,293	$	281	$	12,237		$	(16,282	)	$	3,529


	Common Shares*		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance, February 29, 2020		5,878	$	7,293	$	281	$	12,170		$	(16,282	)	$	3,462
Net loss		—		—		—		(8	)		—			(8	)

Balance, May 31, 2020 (unaudited)		5,878	$	7,293	$	281	$	12,162		$	(16,282	)	$	3,454

*	Common Shares are shown net of Treasury Shares

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

Table of Contents

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

   Three Months Ended
May 31,
   2020 2019
Operating Activities

Net loss
   $ (8 ) $ (326 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation expense
   60 56
Amortization of intangible assets
   43 —
Provision for doubtful accounts
   (4 ) (9 )
Provision for inventory reserve
   15 15
Non-cash charge for share based compensation
   —   2
Realized/unrealized loss (gain) on investments
   10 (2 )
Other
   4 (2 )
Changes in working capital items:

Accounts receivable
   655 398
Inventories
   456 179
Prepaid expenses and other assets
   (68 ) (395 )
Contract assets
   (655 ) —
Customer deposits
   (619 ) 335
Accounts payable and accrued liabilities
   (420 ) 68


Net cash (used in) provided by operating activities
   (531 ) 319


Investing Activities

Capital expenditures
   (19 ) (88 )
Purchases of investments
   (43 ) (9 )
Proceeds from sale of investments
   18 —


Net cash used in investing activities
   (44 ) (97 )


Financing Activities

Repayments of notes payable to officers and directors
   (35 ) —
Repayments of long-term debt
   —   (23 )
Proceeds from PPP related loans
   988 —
Marginal float borrowings
   3 —


Net cash provided by (used in) financing activities
   956 (23 )


Net change in cash and cash equivalents
   381 199
Cash and cash equivalents, beginning of year
   844 410


Cash and cash equivalents, end of period
   $ 1,225 $ 609


	Three Months Ended May 31,
	2021			2020
Operating Activities
Net loss	$	(745	)	$	(8	)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation expense		63			60
Amortization of intangible assets		32			43
Provision for doubtful accounts		(6	)		(4	)
Provision for inventory reserve		15			15
Realized/unrealized loss on investments		—			10
Other		4			4
Changes in working capital items:
Accounts receivable		886			655
Inventories		83			456
Prepaid expenses and other assets		(41	)		(68	)
Contract assets		513			(655	)
Customer deposits		(50	)		(619	)
Accounts payable and accrued liabilities		(150	)		(420	)

Net cash provided by (used in) operating activities		604			(531	)

Investing Activities
Capital expenditures		(23	)		(19	)
Purchases of investments		—			(43	)
Proceeds from sale of investments		—			18

Net cash used in investing activities		(23	)		(44	)

Financing Activities
Repayments of notes payable to officers and directors		—			(35	)
Repayments of long-term debt		(14	)		—
Repayments on lease financing		(18	)		—
Proceeds from PPP related loans		—			988
Marginal float borrowings		—			3

Net cash (used in) provided by financing activities		(32	)		956

Net change in cash and cash equivalents		549			381
Cash and cash equivalents, beginning of year		293			844

Cash and cash equivalents, end of period	$	842		$	1,225

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

Table of Contents

Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021

Note 1. – Basis of Presentation of Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Video Display Corporation, Inc. and its subsidiaries (“Video Display,” the “Company,” “we,” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated balance sheet as of February ~~29, 2020~~28, 2021 has been derived from audited financial statements. The accompanying unaudited condensed consolidated financial statements as of, and for the three months ended, May 31, ~~2020~~2021 and ~~2019~~2020 have been prepared in accordance with (i) accounting principles generally accepted in the U.S. for interim financial information and (ii) the instructions to Form

10-Q

and Rule

10-01

of Regulation

S-X

of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, such statements do not include all of the information and disclosures required by accounting principles generally accepted in the U.S. for a complete presentation of financial statements. In the opinion of management, all adjustments (including those of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three months ended May 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending February 28, ~~2021.~~2022. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Video Display’s Annual Report on Form

10-K

for the year ended February ~~29, 2020~~28, 2021 filed with the SEC on May ~~29, 2020.~~

28, 2021.

Note 2. – Going Concern, Banking & Liquidity

The accompanying unaudited interim condensed 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 reported a net loss and a decrease in working capital for the three month period ending May 31, ~~2020 but had~~2021 primarily due to a decrease in revenues in three of four divisions. The Company did have an increase in ~~working capital and~~ liquid assets for the three month period primarily as a result of ~~$988 thousand in Paycheck Protection Promissory related funds received in April 2020.~~tight management of its resources. The Company has sustained losses for the last ~~four~~three of five fiscal years and has seen overall a decline in working capital and liquid assets during this five year period. Annual losses over this time are due to a combination of decreasing revenues across certain divisions without a commensurate reduction of expenses. The ~~Company has seen a rise in the backlog for customer orders and increased activity within the markets it serves. The~~ Company’s working capital and liquid asset position are presented below (in thousands) as of May 31, ~~2020~~2021 and February ~~29, 2020:~~

   May 31,
2020    February 29,
2020
Working capital
   $ 1,945    $ 1,263
Liquid assets
   $ 1,237    $ 844

~~Management~~28, 2021:


	May 31, 2021		February 28, 2021
Working capital	$	2,942	$	3,601
Liquid assets	$	842	$	293

The Company has ~~implemented~~increased marketing efforts in its ruggedized displays, TEMPEST products and services and small specialty displays. In addition, the Company has streamlined its operations and is focusing on increasing revenues by executing initiatives such as upgrading its sales and marketing efforts including a ~~plan~~more user friendly website, hiring of an experienced Rugged Display Business Development Manager, increasing customer visits and trade shows post pandemic to ~~improve~~market all the ~~liquidity of~~product lines it sells. The Company was able to increase its fiscal revenue over the ~~Company. The Company~~prior fiscal year and has been implementing a plan to increase revenues at all the divisions, each structured to the particular division. The fiscal year ended February 29, 2020 was a transition year for the Company. Many of the legacy programs the Company serviced were heading into new phases or the next generation of the product line. This caused delays in the normal flow of the orders for these programs. The Company is working with these customers and expects these programs to be placing orders to be fulfilled in this fiscal year. For example, the Company received a $2.8 million order for one of these legacy programs in the current quarter. The Company has expanded its cyber security business by adding an additional test chamber and a ~~second testing chamber~~new test equipment to provide additional TEMPEST service capabilities and for ~~testing tempest~~qualifying TEMPEST products ~~in fiscal 2020~~ allowing it to increase the business in cyber testing services to supplement the product side of the business. The Company is also now involved in ruggedized displays, recently bringing on engineering familiar with these products and acquiring a small specialized display company in January 2020. The Company did $648 thousand in specialized displays in the quarter with an additional backlog of $1.2 million in these products. With the acquisition of the display company, the Company completed the transfer of the remaining CRT operations in Florida to its Lexel Imaging facility in Lexington, KY in order to make room for the new business in its Cocoa facility. This will also reduce expenses in the CRT operation by having that business all under one roof. The Company ~~also~~ moved the corporate accounting functions to the Cocoa, Florida location ~~in fiscal 2020~~ which allows the Company to become more efficient and save money on reducing redundant operations. The ~~plant move of its subsidiary in Lexington, Kentucky~~plan is ~~completed and inventory from~~to further reduce expenses by closing the Tucker, Georgia and Cocoa, Florida have been moved to the Kentucky operation. This subsidiary saw a turn -around in the recently completed fiscal year, being the only division to have a profitable year. The plant move at the Florida operations was successfulfacility as soon as the ~~Company completed~~lease expires in 2022. There is 0 line of credit outstanding or other financing currently in place other than the ~~merger~~remaining PPP loans and a $86,000 note payable balance.

Table of its two Florida businesses and absorbed the acquisition of the specialized display company. Management continues to explore options to monetize certain long-term assets of the business, including the possible sale of a building in Pennsylvania. 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.

Contents

Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021

The ability of the Company to continue as a going concern is dependent upon the success of management’s plans to improve revenues, the operational effectiveness of continuing 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.

Note 3. ~~– Fair Value Measurements and Financial Instruments~~

The Financial Accounting Standards Board’s (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.~~

Assets measured at fair value on a recurring basis by the Company consist of investment securities held for trading using Level 1 inputs. The following table sets forth financial assets and liabilities that were accounted for at fair value on a recurring basis as of May 31, 2020 (in thousands):

   May 31, 2020    Level 1 Assets
and Liabilities    Level 2 Assets
and Liabilities    Level 3 Assets
and Liabilities
Current trading investments:

Stocks, options and ETF (long)
   $ 15    $ 15








Total value of investments
   15    15    —      —
Current liabilities:

Margin balance
   (3 )    (3 )








Total value of liabilities
   (3 )    (3 )








Total
   $ 12    $ 12    —      —

The Company had $2.9 thousand outstanding margin account borrowing as of May 31, 2020 and none as of February 29, 2020. The margin account borrowings are used to purchase marketable equity securities and are netted against the investments in the balance sheet to show net trading investments. The gross investments were $14.6 thousand leaving net investments of $11.7 thousand after the margin account borrowings of $2.9 thousand at May 31, 2020. The margin interest rate is 4.25% at May 31, 2020.

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

The Company’s financial instruments which are not measured at fair value on the condensed 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.

~~Note 4.~~ – Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

~~Effective March 1, 2020 we adopted Accounting Standards Update (“ASU”)~~ ~~No. 2018-13,~~ ~~Fair Value Measurement. In August 2018, the FASB issued ASU~~ ~~2018-13, Fair~~ ~~Value Measurement (Topic~~ ~~820-10):~~ ~~Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU~~ ~~2018-13”),~~ which changes the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures. Under this ASU, certain disclosure requirements for fair value measurements are eliminated, amended or added. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The guidance is effective for the Company beginning on March 1, 2020 and prescribes different transition methods for the various provisions. The adoption of ASU ~~2018-13~~ ~~did not have a material impact on the Company’s financial statements and disclosures.~~

~~Recent Accounting Pronouncements Not Yet Adopted~~

In December 2019, the FASB issued ASU

2019-12, Income

Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU

2019-12”),

which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The guidance is effective for the Company beginning on March 1, 2021 and prescribes different transition methods for the various provisions. ~~The Company does not expect the adoption of~~Effective March 1, 2021, we adopted ASU

2019-12 ~~to have a~~

with no material impact on ~~its~~the Company’s financial statements ~~and~~or related disclosures.

Recent Accounting Pronouncements Not Yet 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.

Note 5.4. – Inventories

Inventories are stated at the lower of cost (first in, first out) or market and consisted of the following (in thousands):

   May 31,
2020    February 29,
2020
Raw materials
   $ 3,536    $ 3,497
Work-in-process
   363    773
Finished goods
   921    1,006




   4,820    5,276
Reserves for obsolescence
   (811 )    (796 )




   $ 4,009    $ 4,480


	May 31, 2021			February 28, 2021
Raw materials	$	2,880		$	2,888
Work-in-process		933			1,166
Finished goods		929			771

		4,742			4,825
Reserves for obsolescence		(813	)		(798	)

	$	3,929		$	4,027

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Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021

Note 6.5. – Paycheck Protection Promissory (“PPP”) Related Loans

On April 13, 2020 our Lexel Imaging subsidiary entered into a ~~$216,200~~ Paycheck Protection Promissory Note (the “PPP Loan”) with the Central Bank 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 with the Renasant ~~Bank.~~Bank and on February 11, 2021, entered into a second round PPP Loan with Central Bank for $780,112. The PPP Loans were made under, and are 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. The ~~current~~ terms of the two outstanding loans are ~~two~~five years with maturity dates of ~~April 13, 2022~~January 27, 2026 and ~~April 23, 2022~~February 11, 2026 and they contain a ~~favorable~~ fixed annual interest rate of 1.00%. Payments of principle and interest on the PPP Loans ~~will be~~are deferred for the first ~~six~~sixteen months of the term of the PPP Loans until ~~October 13, 2020~~July 27, 2022 and ~~October 23, 2020,~~August 11, 2022, respectively. Principle and interest are payable monthly and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. 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 will be determined, subject to limitations, 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 believes it has ~~been using~~used the proceeds of the PPP Loans for Qualifying Expenses. ~~However, no assurance is provided that~~In fiscal 2021, the Company ~~will be able to obtain~~received forgiveness ofon the first round $216,200 Lexel Imaging PPP ~~Loans~~Loan in ~~whole or~~November 2020 and on the first round $772,000 Video Display PPP Loan in ~~part.~~ December 2020.

As of May 31, ~~2020, $385~~2021 and February 28, 2021, the Company had a long-term liability of $1,084 thousand ofrelated to the ~~total $988 thousand in~~second round outstanding PPP ~~related loans is classified as a current liability~~Loans on the condensed consolidated balances sheets.

Note 7.6. – Leases

Operating Leases

The Company leases its office space and manufacturing facilities under operating lease agreements. The base lease terms expire at various dates from 2022 to 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 does not have any finance leases.~~

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

   May 31, 2020
Assets

Operating lease right-of-use assets
   $ 1,508


Liabilities

Current portion of operating lease liabilities
   $ 557
Noncurrent portion of operating lease liabilities
   971


Total operating lease liabilities
   $ 1,528


	May 31, 2021
Assets

Operating lease right-of-use assets	$	996

Liabilities

Current portion of operating lease liabilities	$	573
Noncurrent portion of operating lease liabilities		457

Total operating lease liabilities	$	1,030

Operating lease costs are included in Cost of goods sold in the Company’s condensed consolidated statements of operations and totaled approximately $149 thousand for the three months ended May 31, 2021 and $157 thousand for the three months ended May 31, 2020. ~~The Company did have $10 thousand of short term lease costs for the three months ended May 31, 2020. Operating lease costs were $147 thousand for the three months ended May 31, 2019.~~

Cash paid for amounts included in the measurement of operating lease liabilities was approximately ~~$143~~$145 thousand ~~during~~for the three months ended May 31, ~~2020~~2021 and ~~2019.~~$143 thousand for the three months ended May 31, 2020. The Company did not modify any existing leases or execute any new leases during the three months ended May 31, ~~2020.~~

2021.

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Video Display Corporation and Subsidiaries

May 31, 2021

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


	May 31, ~~2020~~2021
Weighted average remaining lease term		~~2.8~~1.8 years
Weighted average discount rate		6	%

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

The following table summarizes the maturity of the Company’s operating lease liabilities as of May 31, ~~2020~~2021 (in thousands):

FY2021
   $ 430
FY2022
   618
FY2023
   263
FY2024
   190
FY2025
   185


Total operating lease payments
   1,685
Less imputed interest
   (157 )


Total operating lease liabilities
   $ 1,528


FY2022	$	432
FY2023		263
FY2024		190
FY2025		185

Total operating lease payments		1,070
Less imputed interest		(40	)

Total operating lease liabilities	$	1,030

Included 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 and Ordway Properties, LLC (an entity in which the chief executive officer has an ownership interest in)~~officer) under operating leases expiring at various dates through 2025. Lease costs under these leases totaled approximately $97 thousand for the three months ended May 31, ~~2020 (which is included in the total lease costs of $157 thousand noted above).~~2021. Lease costs were also $97 thousand for the three months ended May 31, ~~2019.~~

2020.

The Company subleases certain of its warehousing space in its Tucker and ~~also leases a building that it owns in Pennsylvania.~~Kentucky locations. The Tucker sublease expires concurrently with the head lease in March ~~2022. The Pennsylvania~~2022 and the Kentucky lease expires ~~in August 2023.~~

November 30, 2021.

Sublease income and lease income are included in Other, ~~income,~~ net in the Company’s condensed consolidated statements of operations and totaled approximately $51,000 for the three months ended May 31, 2021 and $90,000 for the three months ended May 31, ~~2020 and 2019.~~2020. Future remaining lease payments expected to be received as of May 31, ~~2020~~2021 are as follows (in thousands):

FY2021
   $ 274
FY2022
   370
FY2023
   238
FY2024
   113


Total
   $ 995

~~Note 8. – Notes Receivable and Payable to Officers and Directors (Related Party Transactions)~~

~~On March 30, 2016, the~~


FY2022	$	138
FY2023		12

Total	$	150

Financing Leases

The Company has one financing lease entered into ~~an assignment with recourse~~on November 23, 2020 for Tempest testing equipment for $277,000. The lease expires on December 1, 2023 and the incremental borrowing rate on the lease is 12.5%.

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


	May 31, 2021
Financing lease right-of-use assets	$	237

Current portion of financing lease liabilities	$	98
Noncurrent portion of financing lease liabilities		124

Total financing lease liabilities	$	222

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Video Display Corporation and Subsidiaries

May 31, 2021

The following table summarizes the maturity of the ~~note receivable from~~ ~~Z-Axis~~ ~~Inc.~~ ~~(Z-Axis)~~ ~~with Ronald D. Ordway, CEO, and Jonathan R. Ordway, related parties, for the sum of $912 thousand. The note receivable is collateralized by a security interest in the shares of~~ ~~Z-Axis~~ ~~as well as a personal guaranty of its majority shareholder.~~ ~~Z-Axis~~ is current on all scheduled payments regarding this note. The Company retains the right to repurchase the note at any time for 80% of the outstanding principle balance. Also, in the event of default by ~~Z-Axis,~~ the Company is obligated to repurchase the note for 80% of the remaining principle balance plus any accrued interest. Accordingly, the Company has recognized this transaction as a secured borrowing. The $ 0.9 million, 9% interest rate, note originated on March 30, 2016, with payments beginning on April 16, 2016 and continuing for 56 months thereafter. The balance of the note was $134 thousand, all classified as current (related party note receivable and related party note payable)Company’s finance lease liabilities as of May 31, ~~2020 and $189 thousand, all classified as current as of February 29, 2020, respectively.~~

In January 2020, to assist the Company in funding the debt assumed resulting from the acquisition of Jaco Displays, LLC, the Company borrowed $505,180 from Ronald D. Ordway, CEO, comprised of cash proceeds received of $148,330 with the remaining $356,850 in debt assumed as the CEO personally funded certain liabilities resulting from the acquisition. The Company combined this amount borrowed with another $438,832 owed to Mr. Ordway in back rent along with $82,838 from previous borrowings, and signed a promissory note for the aggregate balance of $1,026,850 at a six percent interest rate due on or before July 24, 2020 with Mr. Ordway. The Company made a $35,000 payment to Mr. Ordway in March, 2020, leaving a balance of $991,850. This note balance is therefore classified as a current liability on the consolidated balance sheet.

2021 (in thousands):

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

~~See~~


Fiscal Year	Amount
2022	$	78
2023		104
2024		78

Total finance lease payments	$	260
Less imputed interest		(38	)

Total finance lease liabilities	$	222

Note 7 ~~for a discussion of leases with related parties.~~

~~Note 9.~~. – Supplemental Cash Flow Information

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

   Three Months Ended
May 31,
   2020    2019
Non-cash activity:

Note receivable paid directly to officer (Z-Axis; Note 8)
   $ 55    $ 51




Note payable to officer (Z-Axis; Note 8)
   $ 55    $ 51




Imputed interest expense
   $ 4    $ 6




Imputed interest income
   $ 4    $ 6


	Three Months Ended May 31,
	2021		2020
Cash paid for:
Interest	$	7	$	—

Non-cash activity:
Note receivable paid directly to officer	$	—	$	55

Note payable to officer	$	—	$	55


Imputed interest expense	$	—	$	4

Imputed interest income	$	—	$	4

Note ~~10.~~8. – Shareholders’ Equity

Earnings (Loss) Per Share

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

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Video Display Corporation and Subsidiaries

May 31, 2021

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three-month periods ended May 31, ~~2020~~2021 and ~~2019~~2020 (in thousands, except per share data):

   Net Loss    Weighted
Average
Common Shares
Outstanding    Loss
Per Share
Three months ended May 31, 2020

Basic
   $ (8 )    5,878    $ (0.00 )
Effect of dilution:

Options
   —      —      —






Diluted
   $ (8 )    5,878    $ (0.00 )






Three months ended May 31, 2019

Basic
   $ (326 )    5,878    $ (0.06 )
Effect of dilution:

Options
   —      —      —






Diluted
   $ (326 )    5,878    $ (0.06 )

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~


	Net Loss			Weighted Average Common Shares Outstanding		Loss Per Share
Three months ended May 31, 2021
Basic	$	(745	)		5,878	$	(0.13	)
Effect of dilution:
Options		0—			0—		0—

Diluted	$	(745	)		5,878	$	(0.13	)


Three months ended May 31, 2020
Basic	$	(8	)		5,878	$	(0.00	)
Effect of dilution:
Options		0—			0—		0—

Diluted	$	(8	)		5,878	$	(0.00	)

Stock options, debentures, and other liabilities convertible into 200,000 shares, of the Company’s common stock were anti-dilutive and, therefore, were excluded from the May 31, ~~2020~~2021 and ~~2019~~2020 diluted earnings (loss) per share calculations.

~~Stock-Based Compensation Plans~~

For the three-month period ended May 31, 2021 and May 31, 2020, there was no0 expense related to share-based compensation as all options were fully vested. ~~For the period ended May 31, 2019, the Company recognized general and administrative expenses of $2 thousand related to share-based compensation.~~

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

NoNaN options were granted for the three month period ending May 31, ~~2020~~2021 or for the three month period ended May 31, ~~2019.~~

2020.

Stock Repurchase Program

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

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.

For the quarter ending May 31, ~~2020~~2021 and May 31, ~~2019,~~2020, the Company did ~~not~~0t purchase any shares of the Video Display Corporation stock. Under the Company’s stock repurchase program, an additional 490,186 shares remain authorized to be repurchased by the Company at May 31, ~~2020.~~

2021.

Note ~~11.~~9. – Income Taxes

Due to the Company’s overall and historical net loss position, no income tax expense was reported for the three month period ending May 31, ~~2020~~2021 and May 31, ~~2019.~~2020. Due to continued losses reported by the Company, a full valuation allowance was allocated to the deferred tax asset created by these losses.

Note ~~12.~~10. – Legal Proceedings

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

The Company is not currently party to any legal proceedings the result of which management believes is likely to have a material adverse impact on its business, financial position, results of operations or cash flows.

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Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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

The following discussion should be read in conjunction with the attached unaudited interim condensed consolidated financial statements and with the Company’s ~~2020~~2021 Annual Report to Shareholders, which included audited consolidated financial statements and notes thereto as of and for the fiscal year ended February ~~29, 2020,~~28, 2021, as well as 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 comprised of one ~~segment—~~segment - the manufacturing and distribution of displays and display components. The Company is organized into ~~five~~four interrelated operations aggregated into one reportable segment.

Simulation and Training Products

– offers a wide range of projection display systems for use in training and simulation, military, medical, entertainment and industrial applications.

Cyber Secure Products –

offers advanced TEMPEST technology, and ~~(EMSEC)~~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 –~~

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 a variety of keyboard products.

During fiscal ~~2021,~~2022, management of the Company is focusing key resources on strategic efforts to grow its business through internal sales of the Company’s more profitable product lines and reduce expenses in all areas of the business to bring its cost structure in line with the current size of the business. Challenges facing the Company during these efforts include:

Liquidity -

The accompanying unaudited interim condensed 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 reported a net loss and a decrease in working capital for the three month period ending May 31, ~~2020 but had~~2021 primarily due to a decrease in revenues in three of the four divisions. The Company did have an increase in ~~working capital and~~ liquid assets for the three month period primarily as a result of ~~$988 thousand in Paycheck Protection Promissory related funds received in April 2020.~~tight management of its resources. The Company has sustained losses for the last ~~four~~three of five fiscal years and has seen overall a decline in working capital and liquid assets during this ~~four~~five year period. Annual losses over this time are due to a combination of decreasing revenues across certain divisions without a commensurate reduction of expenses. The ~~Company has seen a rise in the backlog for customer orders and increased activity within the markets it serves. The~~ Company’s working capital and liquid asset position are presented below (in thousands) as of May 31, ~~2020~~2021 and February ~~29, 2020:~~

   May 31,
2020    February 29,
2020
Working capital
   $ 1,945    $ 1,263
Liquid assets
   $ 1,237    $ 844

~~Management~~28, 2021:


	May 31, 2021		February 28, 2021
Working capital	$	2,942	$	3,601
Liquid assets	$	842	$	293

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Video Display Corporation and Subsidiaries

May 31, 2021

executing initiatives such as upgrading its sales and marketing efforts including a ~~plan~~more user friendly website, hiring of an experienced Rugged Display Business Development Manager, increasing customer visits and trade shows post pandemic to ~~improve~~market all the ~~liquidity of~~product lines it sells. The Company was able to increase its fiscal revenue over the ~~Company. The Company~~prior fiscal year and has been implementing a plan to increase revenues at all the divisions, each structured to the particular division. The fiscal year ended February 29, 2020 was a transition year for the Company. Many of the legacy programs the Company serviced were heading into new phases or the next generation of the product line. This caused delays in the normal flow of the orders for these programs. The Company is working with these customers and expects these programs to be placing orders to be fulfilled in this fiscal year. For example, the Company received a $2.8 million order for one of these legacy programs in the current quarter. The Company has expanded its cyber security business by adding an additional test chamber and a ~~second testing chamber~~new test equipment to provide additional TEMPEST service capabilities and for ~~testing tempest~~qualifying TEMPEST products ~~in fiscal 2020~~ allowing it to increase the business in cyber testing services to supplement the product side of the business. The Company is also now involved in ruggedized displays, recently bringing on engineering familiar with these products and acquiring a small specialized display company in January 2020. The Company did $648 thousand in specialized displays in the quarter with an additional backlog of $1.2 million in these products. With the acquisition

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

~~of the display company, the Company~~ completed the transfer of the remaining CRT operations in Florida to its Lexel Imaging facility in Lexington, KY in order to make room for the new business in its Cocoa facility. This will also reduce expenses in the CRT operation by having that business all under one roof. The Company ~~also~~ moved the corporate accounting functions to the Cocoa, Florida location ~~in fiscal 2020~~ which allows the Company to become more efficient and save money on reducing redundant operations. The ~~plant move of its subsidiary in Lexington, Kentucky~~plan is ~~completed and inventory from~~to further reduce expenses by closing the Tucker, Georgia and Cocoa, Florida have been moved to the Kentucky operation. This subsidiary saw a turn -around in the recently completed fiscal year, being the only division to have a profitable year. The plant move at the Florida operations was successfulfacility as soon as the ~~Company completed~~lease expires in 2022. There is no line of credit outstanding or other financing currently in place other than the ~~merger of its two Florida businesses~~remaining PPP loans and ~~absorbed the acquisition of the specialized display company. Management continues to explore options to monetize certain long-term assets of the business, including the possible sale of~~ a building in Pennsylvania. 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.

$86,000 note payable balance.

Inventory management

– The Company’s business units utilize different inventory components than the divisions ~~had~~have in the past. The Company has a reserve at each of its divisions to offset any obsolescence although most purchases are for current orders, which should reduce the amount of obsolescence in the future. The Company still has CRT inventory in stock and component parts for legacy products, although it believes the inventory will be sold in the future, will continue to reserve for any additional obsolescence. Management believes its inventory reserves at May 31, ~~2020~~2021 and February ~~29,~~28, 2021 are adequate.

Impact of

COVID-19

– The Company has been actively monitoring the novel

coronavirus, or COVID-19, situation and

its impact globally. Financial results for the three months ended May 31, 2021 and 2020 ~~are adequate.~~

have been

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 the remainder of fiscal 2022. Management continues to operate normally with the exception of enabling employees to work from home and abiding by travel restrictions issued by federal and local governments.

If the COVID-19 pandemic continues,

the Company may experience other disruptions that could severely impact the business, results of operations and prospects.

Results of Operations

The following table sets forth, for the three months ended May 31, ~~2019~~2021 and ~~2018,~~2020, the percentages that selected items in the Interim Condensed Consolidated Statements of Operations bear to total sales (amounts in thousands):

   Three Months Ended May 31
   2020 2019
Net Sales    Amount    % Amount    %
Simulation and Training (VDC Display Systems)
   1,801    48.6 % 944    34.9 %
Data Display CRT (Lexel and Data Display)
   762    20.6 643    23.7
Cyber Secure Products (AYON Cyber Security)
   865    23.3 866    32.0
Other Computer Products (Unicomp)
   277    7.5 256    9.4






Total net sales
   3,705    100.0 % 2,709    100.0 %
Costs and expenses

Cost of goods sold
   2,727    73.6 % 2,284    84.3 %
Selling and delivery
   206    5.6 165    6.1
General and administrative
   997    26.9 869    32.1






   3,930    106.1 % 3,318    122.5 %
Operating loss
   (225 )    (6.1 )% (609 )    (22.5 )%
Interest (expense) income, net
   (15 )    (0.4 )% —      —   %
Investment (loss) gains, net
   (10 )    (0.3 ) 2    0.1
Other income, net
   242    6.6 281    10.4






Loss before income taxes
   (8 )    (0.2 )% (326 )    (12.0 )%
Income tax expense
   —      —   —      —






Net loss
   (8 )    (0.2 )% (326 )    (12.0 )%


	Three Months Ended May 31
	2021					2020
Net Sales	Amount		%			Amount		%
Simulation and Training (VDC Display Systems)		1,011		54.4	%		1,801		48.6	%
Data Display CRT (Lexel and Data Display)		232		12.5			762		20.6
Cyber Secure Products (AYON Cyber Security)		204		11.0			865		23.3
Other Computer Products (Unicomp)		410		22.1			277		7.5

Total net sales		1,857		100.0	%		3,705		100.0	%
Costs and expenses
Cost of goods sold		1,490		80.2	%		2,727		73.6	%
Selling and delivery		158		8.5			206		5.6
General and administrative		993		53.5			997		26.9

		2,641		142.2	%		3,930		106.1	%

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Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021


Operating loss	(784	)	(42.2	)%	(225	)	(6.1	)%
Interest (expense) income, net	(10	)	(0.5	)%	(15	)	(0.4	)%
Investment (loss) gains, net	—		—		(10	)	(0.3	)
Other income, net	49		2.6		242		6.6

Loss before income taxes	(745	)	(40.1	)%	(8	)	(0.2	)%
Income tax expense	—		—		—		—

Net loss	(745	)	(40.1	)%	(8	)	(0.2	)%

Net sales

Consolidated net sales ~~increased 36.8%~~decreased 49.9% for the three months ended May 31, ~~2020~~2021 compared to the three months ended May 31, ~~2019.~~2020. The Display Systems division ~~increased 90.7%~~decreased 43.8% for the quarter or ~~$0.9~~$0.8 million, due primarily to ~~shipments of product~~overall decrease in activity and delayed installations for video walls and ~~projectors for a simulator upgrade for a customer in Texas and the increased sales from~~simulators. The customized displays business also had some large orders delayed until our ~~acquisition of the specialized display company in January of late fiscal year.~~next quarter. The Company’s AYON Cyber Security division ~~was flat~~decreased 76.5% for the quarter or $0.7 million compared to last year’s same ~~quarter, $0.9 million each year.~~quarter. The division has ~~completed~~TEMPEST service business, but the products area of the business has seen a large decrease. The division’s engineers are working on new ~~test chamber~~products for ~~tempest services~~the fall bidding season with the government and ~~will supplement its product line with this new business. The~~have developed and demonstrated other ~~two divisions both had increases in sales.~~products to government agencies. We are waiting for their approval of the demos to start receiving orders. The Data Display division ~~showed an increase~~had a decrease of ~~18.6%~~69.5% due to ~~increases~~delays in ordering because of COVID of a specialty product sold through its distribution channels, ultimately going to overseas customers. The Data division is expecting additional orders for the specialty product and should have steady business driven by ~~their number one customer’s orders for~~ replacement CRTs for ~~their simulators.~~simulators, medical CRTs and phosphor coating business improvements. The keyboard division had an increase in ~~sale~~sales of ~~8.1%~~47.9%, due to the launch of their new line up of keyboards and ~~is expecting~~expects sales to ~~continue at this level~~stay strong for the remaining three quarters of the year. All divisions have experienced some form of delay in new orders from customers due to the pandemic, but there are signs that businesses are finding ways to move forward.

Gross margins

Consolidated gross margins were ~~increased~~decreased both as a percentage to sales ~~(26.4%~~(19.8% to ~~15.7%~~26.4%) and actual dollars ($~~978~~367 thousand to ~~$425~~$978 thousand) for the three months ended May 31, ~~2020~~2021 compared to the three months ended May 31, ~~2019.~~

2020.

The two Florida divisions showed ~~increases~~decreases in both their gross margin percentage to sales and in actual dollars. AYON Cyber Security gross margin percentage was ~~20.6%~~11.8% compared to ~~19.0%~~20.6% and the gross margin dollars were ~~$178~~$24 thousand compared to ~~$164~~$178 thousand for the three months ended May 31, ~~2020~~2021 compared to the three months ended May 31, ~~2019.~~2020. VDC Display Systems gross margin percentage was ~~31.8%~~26.7% compared ~~24.9%~~31.8% and the gross margin dollars were ~~$573~~$270 thousand compared to ~~$235~~$573 thousand for the three months ended May 31, ~~2020~~2021 compared to the three months ended May 31, ~~2019.~~

2020.

The Data Display division had a negative gross margin of $103 thousand or a negative 44.3% compared to a positive gross margin of $106 thousand and a gross margin of 14.0% for the three months ended May 31, 2021 and May 31, 2020 respectively. The keyboard division, Unicomp, had ~~$120~~$176 thousand of gross margin dollars or ~~43.5%~~43.0% to sales for the three months ending May 31, ~~2020~~2021 compared to ~~$61~~$120 thousand or ~~23.8%~~43.5% for the three months ending May 31, ~~2019. The Data~~2020.

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Video Display ~~division showed improvement in its margins of $106 thousand or 14.0% for the three months ended~~ Corporation and Subsidiaries

May 31, ~~2020, compared to a negative gross margin of $35 thousand or a negative 5.5% for here months ending May 31, 2019.~~

2021

Operating expenses

Operating expenses ~~increased~~decreased by ~~16.3%~~4.3% or ~~$168~~$51 thousand for the three months ended May 31, ~~2020~~2021 compared to the three months ended May 31, ~~2019.~~2020. The ~~increase~~decrease was due primarily to the ~~increased~~decreased costs ~~of three employees that joined~~in selling expenses. The Company is focusing on reducing costs while increasing the ~~Company resulting from the acquisition of the display company in January of this year, two in engineering, one in~~ sales ~~and the amortization costs of the intangibles ($43k) related to this acquisition.~~effort. The Company expects to continue to control costs while increasing revenues ~~with the completion of the new tempest testing chamber and new revenue streams of~~in tempest services, specialized displays and ruggedized displays.

~~Video Display Corporation and Subsidiaries~~

Interest expense

Interest expense was $10 thousand for the quarter ended May 31, ~~2020~~

~~Interest~~2021. The interest expense

was on the lease of TEMPEST equipment and the PPP loans. Interest expense was $15 thousand for the quarter ended May 31, ~~2020. The~~2020 and related to interest expense is on ~~the~~a note payable to the CEO. ~~This note payable is discussed in Note 8 of~~

Other Income/ expense

For the ~~financial statements. Interest expense was negligible for the quarter ending~~three months ended May 31, ~~2019 as~~2021, the Company ~~completed~~earned $51 thousand in rental income with $2 thousand in other expense for commissions on the ~~payoff of a building it owns in Pennsylvania and did not borrow against its line of credit during the quarter.~~

~~Other Income/ expense~~

rentals. For the three months ended May 31, 2020, the Company earned $148 thousand in royalty income, $90 in rental income, $4 thousand in the sale of discontinued scrap items and had an investment loss of $10 thousand. ~~For the three months ended May 31, 2019, the Company earned $191 thousand in royalty income, rental income of $90 thousand and investment income of $2 thousand.~~

Income taxes

Liquidity and Capital Resources

The accompanying unaudited interim condensed 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 reported a net loss and a decrease in working capital for the three month period ending May 31, ~~2020 but had~~2021 primarily due to a decrease in revenues in three of four divisions. The Company did have an increase in ~~working capital and~~ liquid assets for the three month period primarily as a result of ~~$988 thousand in Paycheck Protection Promissory related funds received in April 2020.~~tight management of its resources. The Company has sustained losses for the last ~~four~~three of five fiscal years and has seen overall a decline in working capital and liquid assets during this ~~four~~five year period. Annual losses over this time are due to a combination of decreasing revenues across certain divisions without a commensurate reduction of expenses. The ~~Company has seen a rise in the backlog for customer orders and increased activity within the markets it serves. The~~ Company’s working capital and liquid asset position are presented below (in thousands) as of May 31, ~~2020~~2021 and February ~~29, 2020:~~

   May 31,
2020    February 29,
2020
Working capital
   $     1,945    $ 1,263
Liquid assets
   $ 1,237    $ 844

28, 2021:


	May 31, 2021		February 28, 2021
Working capital	$	2,942	$	3,601
Liquid assets	$	842	$	293

Management ~~has implemented a plan~~continues to implement plans to improve ~~the~~ liquidity ~~of the Company. The Company has been implementing a plan~~and to increase revenues at all the divisions, each structured to the particular division. The fiscal year ended February 29, 2020 was a transition year for the Company. Many of the legacy programs the Company serviced were heading into new phases or the next generation of the product line. This caused delays in the normal flow of the orders for these programs. The Company is working with these customers and expects these programs to be placing orders to be fulfilled this fiscal year. For example, the Company received a $2.8 million order for one of these legacy programs in the current quarter. The Company has expanded its cyber security business by adding a second testing chamber for testing tempest products in fiscal 2020 allowing it to increase the business in cyber testing services to supplement the product side of the business. The Company is also now involved in ruggedized displays, recently bringing on engineering familiar with these products and acquiring a small specialized display company in January 2020. The Company did $648 thousand in

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

specialized displays in the quarter with an additional backlog of $1.2 million in these products. With the acquisition of the display company, the Company completed the transfer of the remaining CRT operations to its Lexel Imaging facility in Lexington, KY in order to make room for the new business in its Cocoa facility. This will also reduce expenses in the CRT operation by having that business all under one roof. The Company also moved the corporate accounting functions to the Cocoa, Florida location in fiscal 2020 which allows the Company to become more efficient and save money on reducing redundant operations. The plant move of its subsidiary in Lexington, Kentucky is completed and inventory from Tucker, Georgia and Cocoa, Florida have been moved to the Kentucky operation. This subsidiary saw a turn -around in the recently completed fiscal year, being the only division to have a profitable year. The plant move at the Florida operations was successful as the Company completed the merger of its two Florida businesses and absorbed the acquisition of the specialized display company. Management continues to explore options to monetize certain long-term assets of the business, including the possible sale of a building in Pennsylvania. 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.

divisions. The ability of the Company to continue as a going concern is dependent upon the success of management’s plans to improve revenues, the operational effectiveness of continuing 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.

Cash provided by operations for the three months ended May 31, 2021 was $0.6 million. Adjustments to net loss of $0.7 million were $0.1 million for depreciation and amortization. Changes in working capital provided $1.2 million,

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Video Display Corporation and Subsidiaries

May 31, 2021

primarily $0.9 million from accounts receivable and $0.5 million from the change in contract assets offset by $0.2 million change in accounts payable and accrued liabilities. Cash used by operations for the three months ended May 31, 2020 was $0.5 million. Adjustments to net loss were $0.1 million for

non-cash

depreciation and amortization charges. Changes in working capital used $0.6 million, primarily due to cash provided by decreases in accounts receivable and inventories of $1.1 million in aggregate offset by an increase in contract assets ($655 thousand) and a decrease in customer deposits and accounts payable and accrued liabilities aggregating a use of $1.0 million. ~~Cash provided by operations~~

Investing activities used $23 thousand for the ~~three months~~period ended May 31, ~~2019~~2021 for capital equipment. There was ~~$0.3 million.~~

~~There was~~also minimal investing activities for the three months ended May 31, 2020. The Company used $19 thousand on capital assets expenditures and $43 thousand on trading security purchases offset with $18 received from sale of investments. ~~Investing~~

Financing activities used ~~cash of $0.1 million during~~$32 thousand in the ~~three months~~period ended May 31, ~~2019 resulting primarily from the purchase~~2021 for payment of ~~capital assets.~~

debt and lease payments. Financing activities provided $1.0 million for the three months ended May 31, 2020 resulting from $1.0 million proceeds received from the PPP Loan discussed in Note 65 of the interim condensed consolidated financial statements marginally offset by repayment of $35 thousand in related party loans. ~~Financing activities used $23 thousand for the quarter ended May 31, 2019 related to the final debt payments made on the Teltron Building.~~

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 on the open market, depending on the market price of the shares. There is no minimum number of shares required to be repurchased under the program.

For the quarter ending May 31, ~~2020~~2021 and May 31, ~~2019,~~2020, the Company did not purchase any shares of the Video Display Corporation stock. Under the Company’s stock repurchase program, an additional 490,186 shares remain authorized to be repurchased by the Company at May 31, ~~2020.~~

2021.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon the Company’s interim condensed consolidated financial statements. These interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the interim condensed consolidated financial statements and related notes. The accounting policies that may involve a higher degree of judgments, estimates, and complexity include reserves on inventories, revenue recognition, and the sufficiency of the valuation reserve related to deferred tax assets. The Company uses the following methods and assumptions in determining its estimates:

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

Reserves on Inventories

Reserves on inventories result in a charge to operations when the estimated net realizable value declines below cost. Management regularly reviews the Company’s investment in inventories for declines in value and establishes reserves when it is apparent that the expected net realizable value of the inventory falls below its carrying amount. Management 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. Management believes its inventory reserves at May 31, ~~2020~~2021 and February ~~29, 2020~~28, 2021 are adequate.

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, data displays, and keyboards. We exclude sales and usage-based taxes from revenue.

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Video Display Corporation and Subsidiaries

May 31, 2021

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 as control is transferred based on labor hours incurred on each project.

We recognize revenue related to our 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, 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.

Other Loss Contingencies

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

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. As of May 31, ~~2020,~~2021, the Company has established a valuation allowance of ~~$6.1~~$5.2 million on the Company’s deferred tax assets.

~~Video Display Corporation and Subsidiaries~~

~~May 31, 2020~~

The Company accounts for uncertain tax positions under the provisions of ASC 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 May 31, ~~2020,~~2021, the Company did not record any liabilities for uncertain tax positions.

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Video Display Corporation and Subsidiaries

May 31, 2021

Forward-Looking Information and Risk Factors

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

10-K

for the year ended February ~~29, 2020~~28, 2021 could cause actual results to differ materially.

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company’s primary market risks include changes in technology. The Company operates in an industry which is continuously changing. Failure to adapt to the changes could have a detrimental effect on the Company.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Our disclosure controls and procedures (as defined in Exchange Act

Rule 13a-15(e))

are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, such as this quarterly report on

Form 10-Q,

is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Our chief executive officer and chief financial officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of May 31, ~~2020.~~2021. We perform this evaluation on a quarterly basis so that the conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our annual report on

Form 10-K

and quarterly reports on

Form 10-Q.

Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of May 31, ~~2020.~~

2021.

Changes in Internal Controls

There have not been any changes in our internal controls over financial reporting (as such term is defined in

Rules 13a-15(f) and

15d-15(f) under

the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Video Display Corporation and Subsidiaries

May 31, ~~2020~~

2021

PART II

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

Information regarding risk factors appears under the caption Forward-Looking ~~Statements~~Information and Risk Factors in Part I, Item 2 of this

Form 10-Q

and in Part I, Item 1A of our Annual Report on Form

10-K

for the fiscal year ended February ~~29, 2020.~~28, 2021. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form

10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other information

None.

Item 6.

Exhibits


Exhibit Number		Exhibit Description

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

	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

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SIGNATURES

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


		VIDEO DISPLAY CORPORATION

July ~~15, 2020~~ 12, 2021	By:	/s/ Ronald D. Ordway
		Ronald D. Ordway
		Chief Executive Officer

July ~~15, 2020~~ 12, 2021	By:	/s/ Gregory L. Osborn
		Gregory L. Osborn
		Chief Financial Officer


	May 31,			February 29,
	2020			2020
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,225		$	844
Trading investments, at fair value		12			—
Accounts receivable, less allowance for doubtful accounts of $5 and $9		654			1,305
Notes receivable due from officers and directors (Note 8)		134			189
Inventories, net		4,009			4,480
Contract assets		655			—
Prepaid expenses and other current assets		478			411

Total current assets		7,167			7,229

Property, plant, and equipment
Land		154			154
Buildings		2,756			2,756
Construction in progress		110			106
Machinery and equipment		4,875			4,861

		7,895			7,877
Accumulated depreciation		(6,666	)		(6,607	)

Net property, plant, and equipment		1,229			1,270

Right of use assets under operating leases		1,508			1,631
Intangible assets, net		344			387
Other noncurrent assets		2			2

Total assets	$	10,250		$	10,519


	Three Months Ended May 31,
	2020			2019
Net sales	$	3,705		$	2,709
Cost of goods sold		2,727			2,284

Gross profit		978			425

Operating expenses
Selling and delivery		206			165
General and administrative		997			869

		1,203			1,034

Operating loss		(225	)		(609	)

Other income (expense)
Interest (expense) income, net		(15	)		—
Investment (loss) gains, net		(10	)		2
Other, net		242			281

		217			283

Loss before income taxes		(8	)		(326	)
Income tax expense		—			—

Net loss	$	(8	)	$	(326	)

Net loss per share:
Net loss per share-basic	$	(0.00	)	$	(0.06	)

Net loss per share-diluted	$	(0.00	)	$	(0.06	)

Basic weighted average shares outstanding		5,878			5,878

Diluted weighted average shares outstanding		5,878			5,878


	Common Shares		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance, February 29, 2020		5,878	$	7,293	$	281	$	12,170		$	(16,282	)	$	3,462
Net loss		—		—		—		(8	)		—			(8	)

Balance, May 31, 2020 (unaudited)		5,878	$	7,293	$	281	$	12,162		$	(16,282	)	$	3,454


	Common Shares		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance, February 28, 2019		5,878	$	7,293	$	274	$	13,376		$	(16,282	)	$	4,661
Net loss				—		—		(326	)		—			(326	)
Share based compensation		—		—		2		—			—			2

Balance, May 31, 2019 (unaudited)		5,878	$	7,293	$	276	$	13,050		$	(16,282	)	$	4,337


	May 31, 2020		February 29, 2020
Working capital	$	1,945	$	1,263
Liquid assets	$	1,237	$	844


	May 31, 2020			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Stocks, options and ETF (long)	$	15		$	15

Total value of investments		15			15			—		—
Current liabilities:
Margin balance		(3	)		(3	)

Total value of liabilities		(3	)		(3	)

Total	$	12		$	12			—		—


	May 31, 2020
Assets
Operating lease right-of-use assets	$	1,508

Liabilities
Current portion of operating lease liabilities	$	557
Noncurrent portion of operating lease liabilities		971

Total operating lease liabilities	$	1,528


FY2021	$	430
FY2022		618
FY2023		263
FY2024		190
FY2025		185

Total operating lease payments		1,685
Less imputed interest		(157	)

Total operating lease liabilities	$	1,528


	Three Months Ended May 31,
	2020		2019
Non-cash activity:
Note receivable paid directly to officer (Z-Axis; Note 8)	$	55	$	51

Note payable to officer (Z-Axis; Note 8)	$	55	$	51


Imputed interest expense	$	4	$	6

Imputed interest income	$	4	$	6


	Net Loss			Weighted Average Common Shares Outstanding		Loss Per Share
Three months ended May 31, 2020
Basic	$	(8	)		5,878	$	(0.00	)
Effect of dilution:
Options		—			—		—

Diluted	$	(8	)		5,878	$	(0.00	)

Three months ended May 31, 2019
Basic	$	(326	)		5,878	$	(0.06	)
Effect of dilution:
Options		—			—		—

Diluted	$	(326	)		5,878	$	(0.06	)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company