10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the Quarterly Period Ended May 31, 2016.

or

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

For the Transition Period From                      to                     

Commission File Number 0-13394

VIDEO DISPLAY CORPORATION

(Exact name of registrant as specified on its charter)

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

1868 TUCKER INDUSTRIAL ROAD, TUCKER, GEORGIA 30084

(Address of principal executive offices)

770-938-2080

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 31, 2016, the registrant had 5,890,748 shares of Common Stock outstanding.

Video Display Corporation and Subsidiaries

Index

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Interim Condensed Consolidated Balance Sheets – May 31, 2016 (unaudited) and February 29, 2016		3
	Interim Condensed Consolidated Income Statements - Three months ended May 31, 2016 and 2015 (unaudited)		5
	Interim Condensed Consolidated Statement of Shareholders’ Equity - Three months ended May 31, 2016 (unaudited)		6
	Interim Condensed Consolidated Statements of Cash Flows – Three months ended May 31, 2016 and 2015 (unaudited)		7
	Notes to Interim Condensed Consolidated Financial Statements - May 31, 2016 (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		16
Item 3.	Quantitative and Qualitative Disclosure About Market Risk.		23
Item 4.	Controls and Procedures.		23
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.		25
Item 1A.	Risk Factors.		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		25
Item 3.	Defaults upon Senior Securities.		25
Item 4.	Submission of Matters to a Vote of Security Holders.		25
Item 5.	Other Information.		25
Item 6.	Exhibits.		25
SIGNATURES			26
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.

2

ITEM 1 – FINANCIAL STATEMENTS

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

	May 31, 2016			February 29, 2016
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	648		$	491
Trading investments, at fair value		189			145
Accounts receivable, less allowance for doubtful accounts of $10 and $16		644			1,072
Note receivable		163			200
Inventories, net		4,206			4,476
Income taxes refundable		3			—
Prepaid expenses and other		614			104
Assets of discontinued operations		3,424			3,361
Total current assets		9,891			9,849
Property, plant, and equipment
Land		154			154
Buildings		2,486			2,614
Machinery and equipment		3,465			3,507
Construction in process		253			94
		6,358			6,639
Accumulated depreciation and amortization		(4,958	)		(5,073	)
Net property, plant, and equipment		1,400			1,296
Note receivable		723			728
Other assets		29			29
Assets of discontinued operations		37			42
Total assets	$	12,080		$	11,944

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

3

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Balance Sheets (unaudited) (continued)

(in thousands)

	May 31,			February 29,
	2016			2016
	(unaudited)
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	283		$	720
Accrued liabilities		502			616
Current maturities of long-term debt		53			52
Customer deposits		734			—
Current maturities of note payable to officer		163			85
Billings in excess of cost		—			160
Liabilities of discontinued operations		1,165			1,420
Total current liabilities		2,900			3,053
Long-term debt, less current maturities		117			131
Note payable to officer, less current maturities		723			—
Deferred rent		270			300
Total liabilities		4,010			3,484
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 5,891 outstanding at May 31, 2016 and February 29, 2016		7,293			7,293
Additional paid-in capital		184			182
Retained earnings		16,861			17,253
Treasury stock, shares at cost; 3,841 at May 31, 2016 and February 29, 2016		(16,268	)		(16,268	)
Total shareholders’ equity		8,070			8,460
Total liabilities and shareholders’ equity	$	12,080		$	11,944

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

4

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Income Statements (unaudited)

(in thousands, except per share data)

	Three Months Ended May 31,
	2016			2015
Net sales	$	1,860		$	2,360
Cost of goods sold		1,828			2,296
Gross profit		32			64
Operating expenses
Selling and delivery		214			239
General and administrative		639			834
		853			1,073
Operating loss		(821	)		(1,009	)
Other income (expense)
Interest income		3			3
Other, net		79			(364	)
		82			(361	)
Loss from continuing operations before income taxes		(739	)		(1,370	)
Income tax expense		—			—
Net income (loss) from continuing operations		(739	)		(1,370	)
Income (loss) from discontinued operations, net of income tax effects		347			(199	)
Net income (loss)	$	(392	)	$	(1,569	)
Net income (loss) per share:
From continuing operations-basic	$	(0.13	)	$	(0.23	)
From continuing operations-diluted	$	(0.13	)	$	(0.23	)
From discontinued operations-basic	$	0.06		$	(0.03	)
From discontinued operations-diluted	$	0.06		$	(0.03	)
Basic weighted average shares outstanding		5,891			5,957
Diluted weighted average shares outstanding		5,891			5,957

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

5

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Statement of Shareholders’ Equity

Three Months Ended May 31, 2016 (unaudited)

(in thousands)

	Common Shares		Share Amount		Additional Paid-in Capital		Retained Earnings			Treasury Stock
Balance, February 29, 2016		5,891	$	7,293	$	182	$	17,253		$	(16,268	)
Net loss		—		—		—		(392	)		—
Share based compensation		—		—		2		—			—
Balance, May 31, 2016		5,891	$	7,293	$	184	$	16,861		$	(16,268	)

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

6

Video Display Corporation and Subsidiaries

Interim Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Three Months Ended May 31,
	2016			2015
Operating Activities
Net loss	$	(392	)	$	(1,569	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Income)/loss from discontinued operations, net of tax		(347	)		199
Depreciation and amortization		55			86
Provision for doubtful accounts		4			23
Provision for inventory reserve		92			92
Non-cash charge for share based compensation		2			3
Deferred rental income		(30	)		(30	)
Realized/unrealized (gain) loss on investments		(42	)		610
Changes in working capital items:
Accounts receivable		424			237
Note receivable		16			(25	)
Inventories		179			569
Prepaid expenses and other assets		(510	)		(12	)
Customer deposits		734			—
Accounts payable and accrued liabilities		(548	)		(352	)
Cost, estimated earnings and billings on uncompleted contracts		(160	)		184
Income taxes refundable/payable		(6	)		609
Net cash provided by (used in) operating activities		(529	)		624
Investing Activities
Capital expenditures		(158	)		(26	)
Cash repayment from discontinued operations		35			188
Purchases of investments		(488	)		(3,890	)
Sales of investments		527			3,752
Net cash provided by (used in) investing activities		(84	)		24
Financing Activities
Proceeds from related party loans		912			80
Repayment of loans from related parties		(85	)		—
Repayments of long-term debt		(13	)		(12	)
Purchase of treasury stock		—			(112	)
Payments to marginal float		(41	)		(24	)
Net cash provided by (used in) financing activities		773			(68	)
Discontinued Operations
Operating activities		276			129
Investing activities		(35	)		(188	)
Net cash provided by (used in) discontinued operations		241			(59	)
Net change in cash and cash equivalents		401			521
Cash and cash equivalents, beginning of year		595			172
Cash and cash equivalents, end of period		996			693
Cash and cash equivalents, discontinued operations		348			51
Cash and cash equivalents, continuing operations	$	648		$	642

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

7

Video Display Corporation and Subsidiaries

May 31, 2016

Note 1. – Summary of Significant Accounting Policies

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

As contemplated by the Securities and Exchange Commission (the “SEC” or “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual consolidated financial statements. Reference should be made to the Company’s year-end consolidated financial statements and notes thereto, including a description of the accounting policies followed by the Company, contained in its Annual Report on Form 10-K as of and for the fiscal year ended February 29, 2016, as filed with the Commission. There are no material changes in accounting policy during the three months ended May 31, 2016.

The consolidated financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the interim condensed consolidated financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The February 29, 2016 consolidated balance sheet data was derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP).

Note 2. – Banking & Liquidity

The accompanying 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 has sustained losses for each of the last two years and has seen a decline in both its working capital and liquid assets during this time. These losses were a combination of low revenues at all divisions without a commensurate reduction of expenses. During the year ended February 29, 2016, the Company operated using cash from operations of $0.8 million, which was primarily generated from a $0.7 million tax refund that was non-recurring in nature. During the quarter ended May 31, 2016 operational cash flows used $0.5 million. Related to these operational results the Company’s working capital and liquid asset position are presented below (in thousands) as of the quarter ended May 31, 2016 and the year-ended February 29, 2016:

	May 31, 2016		February 29, 2016
Working capital	$	4,732	$	4,855
Liquid assets	$	837	$	636

Management has implemented a plan to improve the liquidity of the Company. The Company has been implementing a plan to increase revenues at all the divisions, each structured to the particular division with an increase in the current backlog and growth in revenues. The Company has a plan to reduce expenses at the divisions, as well as at the corporate location with the expectation that expenses will be decreased by more than $1.7 million per year. Management continues to explore options to monetize certain long-term assets of the business, including current negotiations to sell its Lexel Imaging subsidiary, presented as discontinued operations, where a final sale is expected during fiscal year ending February 28, 2017. 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.

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, to liquidate the subsidiary noted above, 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.

8

Video Display Corporation and Subsidiaries

May 31, 2016

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, 2016 and February 29, 2016 (in thousands):

	May 31, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		545			545			—		—
Total value of investments	$	545		$	545			—		—
Current Liabilities:
Margin balance		(356	)		(356	)		—		—
Total value of liabilities		(356	)		(356	)		—		—
Total	$	189		$	189			—		—
	February 29, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		542			542			—		—
Total value of investments	$	542		$	542			—		—
Current Liabilities:
Margin balance		(397	)		(397	)
Total value of liabilities		(397	)		(397	)
Total	$	145		$	145			—		—

9

Video Display Corporation and Subsidiaries

May 31, 2016

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 were determined using Level 2 inputs and 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 interest rates that fluctuate with the market or are otherwise commensurate with the current market.

Note 4. – Recent Accounting Pronouncements

In May, 2014, the FASB issued Accounting Standards Update No. (ASU) 2014-09 “Revenue with Contracts from Customers”. ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance (i) removes inconsistencies, and weaknesses in revenue requirements, (ii) provides a more robust framework for addressing revenue issues, (iii) improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, (iv) provides more useful information to users of financial statements through improved disclosure requirements, and (v) simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.

The guidance is effective for annual reporting periods beginning after December 15, 2016 including interim periods within that reporting period; however, a one year delay has been approved with the issuance of ASU 2015-14, “Revenue with Contracts from customers”. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements. Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern”. Prior to its effective date there was no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. This update requires that an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable.) This update is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial position.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The guidance is effective for annual reporting periods beginning after December 15, 2016 and related interim periods. Early adoption is permitted. The Company does not believe this standard will have a material effect on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as noncurrent on the balance sheet. Each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the adoption of this update to have a material effect on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”. ASU 2016-02 increases transparency and comparability among organizations by requiring entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about the lease arrangements. The guidance is effective for annual reporting periods

10

Video Display Corporation and Subsidiaries

May 31, 2016

beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements.

Note 5. - Inventories

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

	May 31, 2016			February 29, 2016
Raw materials	$	3,637		$	3,878
Work-in-process		240			199
Finished goods		1,586			1,669
		5,463			5,746
Reserves for obsolescence		(1,257	)		(1,270	)
	$	4,206		$	4,476

Note 6. – Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Information relative to contracts in progress consisted of the following:

	May 31, 2016		February 29, 2016
Costs incurred to date on uncompleted contracts	$	—	$	912
Estimated earnings recognized to date on these contracts		—		724
		—		1,636
Billings to date		—		(1,796	)
Costs and estimated earnings in excess of billings, net	$	—	$	(160	)
Costs and estimated earnings in excess of billings	$	—	$	—
Billings in excess of costs and estimated earnings		—		(160	)
	$	—	$	(160	)

Costs and estimated earnings in excess of billings are the results of contracts in progress (jobs) in completing orders to customers’ specifications on contracts accounted for under FASB Accounting Standards Codification (ASC) Topic No. 605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.” Costs included are material, labor, and overhead. These jobs require design and engineering effort for a specific customer purchasing a unique product. The Company records revenue on these fixed-price and cost-plus contracts on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are

11

Video Display Corporation and Subsidiaries

May 31, 2016

only included in contract value when they can be reliably estimated and realization is probable. Billings are generated based on specific contract terms, which might be a progress payment schedule, specific shipments, etc. None of the above contracts in progress contain post-shipment obligations.

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

As of May 31, 2016 and February 29, 2016, there were no production costs that exceeded the aggregate estimated cost of all in process and delivered units relating to long-term contracts. Additionally, there were no claims outstanding that would affect the ultimate realization of full contract values. As of May 31, 2016 and February 29, 2016, there were no progress payments that had been netted against inventory.

Note 7. – Long-Term Debt and Other Obligations

Long-term debt consisted of the following (in thousands):

	May 31,			February 29,
	2016			2016
Mortgage payable to bank; interest rate at BB&T Bank base rate plus 0.5% (4.00% as of May 31, 2016); monthly principal and interest payments of $5 thousand payable through October 2021; collateralized by land and building of Teltron Technologies, Inc.		170			183
		170			183
Less current maturities		(53	)		(52	)
	$	117		$	131

The Company had outstanding margin account borrowing of $0.3 million as of May 31, 2016 and $0.4 million as of February 29, 2016. 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 $0.5 million leaving net investments of $0.2 million after the margin account borrowings of $0.3 million and $0.5 million leaving net investments of $0.1 million after the margin account borrowings of $0.4 million for the periods ending May 31, 2016 and February 29, 2016, respectively. The margin interest rate is 2%.

Note 8. – Related Party Transactions

The Company owed the Company’s Chief Executive Officer $85 thousand as of February 29, 2016. This money was borrowed during the Company’s fiscal year ended February 29, 2016 at an eight percent interest rate. The Company repaid the funds during the first quarter ending May 31, 2016. Interest paid on this loan during the quarter was $1 thousand. The Company borrowed $80 thousand from the Company’s Chief Financial Officer in May 2015 with a zero interest rate. This was borrowed on a short term basis and repaid in June 2015. The balance of this loan at May 31, 2015 was $80 thousand.

On March 30, 2016, the Company entered into an assignment with recourse 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

12

Video Display Corporation and Subsidiaries

May 31, 2016

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 secured borrowing in accordance with the provisions of ASC 860-10. 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 at May 31, 2016 was $886 thousand.

Note 9. – Supplemental Cash Flow Information

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

	Three Months Ended May 31,
	2016			2015
Cash paid for:
Interest	$	5		$	22
Income taxes, net of refunds	$	6		$	(609	)
Non-cash activity:
Note receivable paid directly to officer	$	26			—
Note payable to officer	$	(26	)		—
Imputed interest expense	$	17			—
Imputed interest income	$	(17	)		—

Note 10. – Shareholder’s 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.

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three-month periods ended May 31, 2016 and 2015 (in thousands, except per share data):

	Net Income (Loss)			Weighted Average Common Shares Outstanding		Earnings (Loss) Per Share
Three months ended May 31, 2016
Basic-continuing operations	$	(739	)		5,891	$	(0.13	)
Basic-discontinued operations		347			5,891		0.06
Effect of dilution:
Diluted-continuing operations
Diluted-discontinued operations		—			—		—
Diluted	$	(392	)		5,891	$	(0.07	)
Three months ended May 31, 2015
Basic-continuing operations	$	(1,370	)		5,957	$	(0.23	)
Basic-discontinued operations		(199	)		5,957		(0.03	)
Effect of dilution:
Diluted-continuing operations		—
Diluted-discontinued operations		—			—		—
Diluted	$	(1,569	)		5,957	$	(0.26	)

13

Video Display Corporation and Subsidiaries

May 31, 2016

Stock-Based Compensation Plans

For the three-month period ended May 31, 2016 and 2015, the Company recognized general and administrative expenses of $1.5 thousand and $3.2 thousand, respectively, related to share-based compensation. The liability for the share-based compensation recognized is presented in the consolidated balance sheet as part of additional paid in capital. As of May 31, 2016, and May 31, 2015 total unrecognized compensation costs related to stock options granted was $3.3 thousand and $7.9 thousand, respectively. The unrecognized stock option compensation cost is expected to be recognized over a period of approximately 1 year.

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

No options were granted during the three month periods ended May 31, 2016 and 2015.

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 ended May 31, 2016, the Company did not purchase any shares of the Video Display Corporation stock. For the quarter ended May 31, 2015, the Company purchased 68,531 shares. Under the Company’s stock repurchase program, an additional 502,644 shares remain authorized to be repurchased by the Company at May 31, 2016.

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May 31, 2016

Note 11. – Income Taxes

The effective tax rate for the three months ended May 31, 2016 and 2015 was 0%. The Company lost $0.4 and $1.5 million dollars for the quarter ending May 31, 2016 and May31, 2015, respectively, which resulted in a tax benefit of approximately $0.1 and $0.6 million, respectively. Due to the losses by the Company, a full valuation allowance was allocated to the deferred tax asset created by the loss. The net effect of this allowance was to have zero tax expense for the quarter.

Note 12. – Discontinued Operations

On March 26, 2014 with an effective date of February 28, 2014, the Company completed the sale of the Company’s wholly-owned subsidiary, Lexel Imaging, Inc. to Citadal Partners, LLC for approximately $3.9 million, consisting of $1.0 million cash payable over 180 days and included in current assets as a note and a guarantee to purchase $2.9 million in inventory over a five year period. The Company recognized a loss on the sale of $4.4 million pre-tax during the year ended February 28, 2014.

On November 17, 2014 Video Display reacquired Lexel Imaging, Inc. when Citadal Partners, LLC defaulted on two notes payable to Video Display Corporation owed as financing on the original sale of the Lexel Imaging. Lexel Imaging is still presented as discontinued operations as Video Display Corporation is still considering offers for the sale of the entity.

This subsidiary’s net sales, expenses and net profits are being shown as discontinued operations per ASC 205-20-45 “Reporting Discontinued Operations” for all periods presented. Accordingly, assets and liabilities of this subsidiary are presented as discontinued operations on the interim condensed consolidated balance sheet.

The summarized financial information for discontinued operations for the three months ended May 31, 2016, is as follows:

	Three Months Ending:
	May 31, 2016		May 31, 2015
Net sales	$	1,850	$	1,095
Cost of goods sold		1,466		1,084
Gross profit		384		11
Operating expenses
Selling and delivery		18		—
General and administrative		190		239
Total operating expenses		208		239
Operating profit from discontinued operations		176		(228	)
Other income		181		29
Income (loss) from discontinued operations before income taxes		357		(199	)
Income tax expense		10		—
Income (loss) from discontinued operations	$	347	$	(199	)

15

Video Display Corporation and Subsidiaries

May 31, 2016

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

The following discussion should be read in conjunction with the attached interim condensed consolidated financial statements and with the Company’s 2016 Annual Report to Shareholders, which included audited condensed consolidated financial statements and notes thereto as of and for the fiscal year ended February 29, 2016, 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 - the manufacturing and distribution of displays and display components. The Company is organized into 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) 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.

• Broadcast and Control Center Products – offers high-end visual display products for use in video walls and command and control centers.

During fiscal 2017, 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. One of these areas is the merger of its two Florida businesses which is expected to be completed in the second quarter of this fiscal year. Challenges facing the Company during these efforts include:

Liquidity- The accompanying 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 has sustained losses for each of the last two years and has seen a decline in both its working capital and liquid assets during this time. These losses were a combination of low revenues at all divisions without a commensurate reduction of expenses. During the year ended February 29, 2016 the Company operated using cash from operations of $0.8 million, which was primarily generated from a $0.7 million tax refund that was non-recurring in nature. During the quarter ended May 31, 2016 operational cash flows used $0.5 million. Related to these operational results the Company’s working capital and liquid asset position are presented below (in thousands) as of the quarter ended May 31, 2016 and the year-ended February 29, 2016:

	May 31, 2016		February 29, 2016
Working capital	$	4,732	$	4,855
Liquid assets	$	837	$	636

Management has implemented a plan to improve the liquidity of the Company. The Company has been implementing a plan to increase revenues at all the divisions, each structured to the particular division with an increase in the current backlog and growth in revenues. The Company has a plan to reduce expenses at the divisions, as well as at the

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Video Display Corporation and Subsidiaries

May 31, 2016

corporate location with the expectation that expenses will be decreased by more than $1.7 million per year. Management continues to explore options to monetize certain long-term assets of the business, including current negotiations to sell its Lexel Imaging subsidiary, which is presented as discontinued operations, where a final sale is expected during fiscal year ending February 28, 2017. 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.

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, to liquidate the subsidiary noted above, 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.

Inventory management – The Company’s business units utilize different inventory components than the divisions had in the past. The Company has a monthly 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, 2016 and February 29, 2016 are adequate.

Results of Operations

The following table sets forth, for the three months ended May 31, 2016 and 2015, the percentages that selected items in the Interim Condensed Consolidated Income Statements bear to total sales:

	Three Months
(in thousands)	Ended May 31
	2016					2015
	Dollars					Dollars
Sales
Simulation and Training (VDC Display Systems)		877		47.1	%		1,334		56.5	%
Data Display CRT		343		18.4			556		23.6
Broadcast and Control Centers (AYON Visual)		220		11.9			30		1.3
Cyber Secure Products (AYON Cyber Security)		420		22.6			439		18.6
Total Company		1,860		100.0	%		2,360		100.0	%
Costs and expenses
Cost of goods sold		1,828		98.3	%		2,296		97.3	%
Selling and delivery		214		11.5			239		10.1
General and administrative		639		34.3			834		35.4
		2,681		144.1	%		3,369		142.8	%
Operating loss		(821	)	(44.1	)%		(1,009	)	(42.8	)%
Interest income		3		0.2	%		3		0.1	%
Other income, net		79		4.2			(364	)	(15.4	)
Income/(loss) before income taxes		(739	)	(39.7	)%		(1,370	)	(15.3	)%
Income tax expense/ (benefit)		—		—			—		—
Net income/ (loss) from continuing operations		(739	)	(39.7	)		(1,370	)	(58.1	)
Income from discontinued operations, net of income tax		347		18.6			(199	)	(8.4	)
Net income/ (loss)		(392	)	(21.1	)%		(1,569	)	(66.5	)%

17

Video Display Corporation and Subsidiaries

May 31, 2016

Net sales

Consolidated net sales were down 21.2% for the three months ended May 31, 2016 compared to the three months ended May 31, 2015. The Company’s AYON Visual Solutions division was up 633.3% for the quarter from last year’s quarter. Their business is project driven and they completed a couple of projects in the first quarter. They currently have a backlog of $2.5 million which is anticipated to be completed this fiscal year in addition to many other open quotes. We expect this division to improve over last year’s results by the end of the fiscal year. The Display Systems division was down by 34.3% for the quarter or $0.5 million, due primarily to supply programs with major customers who are refreshing the projects with new enhancements and had no orders this quarter. These new enhanced projects are expected to begin shipping in third and fourth quarter this year. The Data Display division showed a decrease of 38.3% due to decreases throughout their customer base. AYON Cyber Security’s sales decreased by 4.2% or $19 thousand. This division is expected to exceed last year’s results due to the increases from the current customer base and addition of new customers.

Gross margins

Consolidated gross margins decreased to 1.7% for the three months ended May 31, 2016 from 2.7% for the three months ended May 31, 2015.

Three of the divisions showed an increase in their gross margin percentage. VDC Display Systems gross margins increased to 26.5% compared to 15.6% for the same three months last year. They had some lower margin sales for the same period last year which did not occur this year. Two of the Company’s divisions, AYON Visual Systems and AYON Cyber Security, had higher gross margins than last year. AYON Visual Solutions surpassed last year’s same quarter gross margins due to a few profitable jobs netting $41 thousand in gross margins compared to last year when gross margins were negative $3 thousand. Fixed expenses for obsolesce inventory with the low sales volume lead to the negative gross margins last year. AYON Cyber Security gross margins increased due to decreased labor costs emanating from efficiencies in the production process. The division is working to improve its efficiencies and cut costs in the manufacturing area of its business. As its revenues increase, they hope to improve on their economies of scale and generate more gross profit dollars. The Company is moving this operation and merging it with VDC Display Systems to control costs. Each of these divisions are expected to improve their results as the year progresses due to upcoming orders they have been pursuing. The Data Display division gross margins decreased to 12.8% for the three months ended May 31, 2016 from 49.5% for the three months ended May 31, 2015, due to lower sales and product mix. They expect to have steady margins with their flight simulator customers, although the business is down 27% for the quarter compared to the same quarter last year. We would expect to see the margins remain above last year’s levels.

Operating expenses

Operating expenses decreased by 20.5% for the three months ended May 31, 2016 compared to the three months ended May 31, 2015 or $220 thousand. The primary reductions were from administrative expenses including professional fees, $87 thousand, salaries $66 thousand, and bad debts, $53 thousand. Overall general and administrative expenses decreased by $199 thousand. The Company expects to continue to contain these costs while increasing revenues.

Interest expense

Interest expense was $22.3 thousand for the quarter ending May 31, 2016 and $22.3 thousand for the quarter ending May 31, 2015. The Company also earned $8.7 thousand in interest income for quarter ending May 31, 2016. The interest expense (approximately $1.0 thousand per month) is related to the balance owed on a building the Company owns in Pennsylvania and the interest on the margin balance in the Company’s investment account, which is a 2% rate.

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Video Display Corporation and Subsidiaries

May 31, 2016

Other expense

For the three months ended May 31, 2016, the Company experienced a gain of $0.1 million due primarily to unrealized gains in the investment account of $45 thousand, rental income of $30 thousand and $4 thousand of dividends. For the three months ended May 31, 2015, the Company lost $0.4 million due to investment losses of $0.6 million, offset by dividend income totaling $0.2 million.

Income taxes

The effective tax rate for the three months ended May 31, 2016 and 2015 was 0%. The Company lost $0.4 million and $1.5 million dollars for the quarter ending May 31, 2016 and May 31, 2015 respectively which resulted in a tax benefit of approximately $0.1 million and $0.6 million, respectively. Due to the recent losses by the Company, a full valuation allowance was allocated to the deferred tax asset created by the loss. The net effect of this allowance was to have zero tax expense for the quarter.

Discontinued operations

On March 26, 2014 with an effective date of February 28, 2014, the Company completed the sale of the Company’s wholly-owned subsidiary, Lexel Imaging, Inc. to Citadal Partners, LLC for approximately $3.9 million, consisting of $1.0 million cash payable over 180 days in the form of a note receivable and a guarantee to purchase $2.9 million in inventory over a five-year period. The Company recognized a loss on the sale of $4.4 million pre-tax during the year ended February 28, 2014.

On November 17, 2014 Video Display reacquired Lexel Imaging, Inc. when Citadal Partners, LLC defaulted on two notes payable to Video Display Corporation owed as financing on the original sale of the Lexel Imaging. Lexel Imaging is still presented as discontinued operations as Video Display Corporation is still considering offers for the sale of the entity.

Lexel Imaging earned $0.3 million for the quarter ending May 31, 2016 compared to a $0.2 million loss for the quarter ended May 31, 2015 primarily due to a 69% increase in revenues. Management believes they can continue to exceed last year’s results. The subsidiary has a backlog in excess of $5.9 million.

Liquidity and Capital Resources

The Company has sustained losses for each of the last two years and has seen a decline in both its working capital and liquid assets during this time. These losses were a combination of low revenues at all divisions without a commensurate reduction of expenses. During the year ended February 29, 2016 the Company operated using cash from operations of $0.8 million, which was primarily generated from a $0.7 million tax refund that was non-recurring in nature. During the quarter ended May 31, 2016, operational cash flows used $0.5 million. Related to these operational results the Company’s working capital and liquid asset position are presented below (in thousands) as of the quarter ended May 31, 2016 and the year-ended February 29, 2016:

	May 31, 2016		February 29, 2016
Working capital	$	4,732	$	4,855
Liquid assets	$	837	$	636

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Video Display Corporation and Subsidiaries

May 31, 2016

Management has implemented a plan to improve the liquidity of the Company. The Company has been implementing a plan to increase revenues at all the divisions, each structured to the particular division with an increase in the current backlog and growth in revenues. The Company has a plan to reduce expenses at the divisions, as well as at the corporate location with the expectation that expenses will be decreased by more than $1.7 million per year. Management continues to explore options to monetize certain long-term assets of the business, including current negotiations to sell its Lexel Imaging subsidiary where a final sale is expected during fiscal year ending February 28, 2017. 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.

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, to liquidate the subsidiary noted above, 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 used in operations for the three months ended May 31, 2016 was $0.5 million. The net loss from operations was $0.4 million and adjustments to reconcile net loss to net cash were $0.1 million including realized and unrealized loss on investments and deferred rental income of $0.1 million, income from discontinued operations of $0.4 million and depreciation and reserves change of $0.2 million. Changes in working capital provided $0.1 million, primarily due to an increase in customer deposits of $0.7 million, a decrease in accounts receivable of $0.4 million and a decrease in inventories of $0.2 million, offset by an increase in prepaid expenses of $0.5 million, a decrease in payables of $0.5 million and smaller adjustments totaling $0.2 million. Cash provided by operations for the three months ended May 31, 2015 was $0.6 million.

Investing activities used cash of $0.1 million due to the capital expenditures for the Cocoa building during the three months ended May 31, 2016, compared to providing $24 thousand due to the net purchases of $0.1 million from the purchases of investments and cash advance repayment from discontinued operations of $0.2 million during the three months ended May 31, 2015.

Financing activities provided $0.8 million primarily due to the proceeds from related party loan of $0.9 million offset by the repayment of $0.1 million to the CEO for the three months ended May 31, 2016. Financing activities used cash of $0.1 million, primarily from the repurchase of treasury stock for the three months ended May 31, 2015.

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 ended May 31, 2016, the Company did not repurchase any shares. For the quarter ended May 31, 2015, the Company repurchased 68,531 shares at an average price of $1.63 per share. Under the Company’s stock repurchase program, an additional 502,644 shares remain authorized to be repurchased by the Company at May 31, 2016.

Critical Accounting 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

20

Video Display Corporation and Subsidiaries

May 31, 2016

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:

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, 2016 and February 29, 2016 are adequate.

Revenue Recognition

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

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

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

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, 2016 and February 29, 2016 the Company has established a valuation allowance of $7.0 million and $6.9 million, respectively on the Company’s current and non-current deferred tax assets.

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Video Display Corporation and Subsidiaries

May 31, 2016

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, 2016, the Company did not record any liabilities for uncertain tax positions.

Recent Accounting Pronouncements

In May, 2014, the FASB issued ASU 2014-09 “Revenue with Contracts from Customers”. ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and IFRS. The new guidance (i) removes inconsistencies, and weaknesses in revenue requirements, (ii) provides a more robust framework for addressing revenue issues, (iii) improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, (iv) provides more useful information to users of financial statements through improved disclosure requirements, and (v) simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.

The guidance is effective for annual reporting periods beginning after December 15, 2016 including interim periods within that reporting period; however, a one year delay has been approved with the issuance of ASU 2015-14, “Revenue with Contracts from customers”. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements. Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern”. Prior to its effective date there was no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. This update requires that an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable.) This update is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial position.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The guidance is effective for annual reporting periods beginning after December 15, 2016 and related interim periods. Early adoption is permitted. The Company does not believe this standard will have a material effect on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as noncurrent on the balance sheet. Each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the adoption of this update to have a significant effect on the Company’s consolidated financial statements.

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Video Display Corporation and Subsidiaries

May 31, 2016

In February 2016, the FASB issued ASU 2016-02, “Leases”. ASU 2016-02 increases transparency and comparability among organizations by requiring entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about the lease arrangements. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements.

Subsequent Events

The Company performs a review of events between the balance sheet date and the issuance of the 10-Q report. If any event occurs that has a material impact on the financials or an event which would have significant impact on the business then the Company would report the event in a footnote to the financial statements. There were none to report in this report.

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, 2016 could cause actual results to differ materially.

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

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, 2016. 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, 2016.

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Video Display Corporation and Subsidiaries

May 31, 2016

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

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PART II

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Information regarding risk factors appears under the caption Forward-Looking Statements and Risk Factors in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 29, 2016. 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).
3(b)	By-Laws of the Company (incorporated by reference to Exhibit 3B to the Company’s Registration Statement on Form S-18 filed January 15, 1985).
10(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)	Purchase Agreement dated March 26, 2014 by and between the Company and Citidal Partners, LLC, with respect to the sale of the Company’s Lexel Imaging, Inc. subsidiary. (incorporated by reference to Exhibit 10(f) to the Company’s Current Report on Form 8-K dated April 1, 2014.)
10(c)	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(e)	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

25

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, 2016	By:	/s/ Ronald D. Ordway
		Ronald D. Ordway
		Chief Executive Officer
July 15, 2016	By:	/s/ Gregory L. Osborn
		Gregory L. Osborn
		Chief Financial Officer

26

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald D. Ordway, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Video Display Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	July 15, 2016	/s/ Ronald D. Ordway
		Ronald D. Ordway
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory L. Osborn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Video Display Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	July 15, 2016	/s/ Gregory L. Osborn
		Gregory L. Osborn
		Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO SECTION 906

OF

THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C SECTION 1350)

The undersigned, as the Chief Executive Officer of Video Display Corporation, certifies that, to the best of his knowledge and belief, the Quarterly Report on Form 10-Q for the quarter ended May 31, 2016 (the “Report”), which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Video Display Corporation at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not be relied upon for any other purpose.

This 15th day of July, 2016	/s/ Ronald D. Ordway
	Ronald D. Ordway
	Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Video Display Corporation and will be retained by Video Display Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION

PURSUANT TO SECTION 906

OF

THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C SECTION 1350)

The undersigned, as the Chief Financial Officer of Video Display Corporation, certifies that, to the best of his knowledge and belief, the Quarterly Report on Form 10-Q for the quarter ended May 31, 2016 (the “Report”), which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Video Display Corporation at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not be relied upon for any other purpose.

This 15th day of July, 2016	/s/ Gregory L. Osborn
	Gregory L. Osborn
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Video Display Corporation and will be retained by Video Display Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The information in this Exhibit 32 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

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Document and Entity Information	3 Months Ended
	May 31, 2016 shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	VIDE
Entity Registrant Name	VIDEO DISPLAY CORP
Entity Central Index Key	0000758743
Current Fiscal Year End Date	--02-28
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	5,890,748

XML

Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Current assets
Cash and cash equivalents	$ 648	$ 491
Trading investments, at fair value	189	145
Accounts receivable, less allowance for doubtful accounts of $10 and $16	644	1,072
Note receivable	163	200
Inventories, net	4,206	4,476
Income taxes refundable	3
Prepaid expenses and other	614	104
Assets of discontinued operations	3,424	3,361
Total current assets	9,891	9,849
Property, plant, and equipment
Land	154	154
Buildings	2,486	2,614
Machinery and equipment	3,465	3,507
Construction in process	253	94
Total property, plant and equipment	6,358	6,639
Accumulated depreciation and amortization	(4,958)	(5,073)
Net property, plant, and equipment	1,400	1,296
Note receivable	723	728
Other assets	29	29
Assets of discontinued operations	37	42
Total assets	12,080	11,944
Current liabilities
Accounts payable	283	720
Accrued liabilities	502	616
Current maturities of long-term debt	53	52
Customer deposits	734
Current maturities of note payable to officer	163	85
Billings in excess of cost		160
Liabilities of discontinued operations	1,165	1,420
Total current liabilities	2,900	3,053
Long-term debt, less current maturities	117	131
Note payable to officer, less current maturities	723
Deferred rent	270	300
Total liabilities	4,010	3,484
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 5,891 outstanding at May 31, 2016 and February 29, 2016	7,293	7,293
Additional paid-in capital	184	182
Retained earnings	16,861	17,253
Treasury stock, shares at cost; 3,841 at May 31, 2016 and February 29, 2016	(16,268)	(16,268)
Total shareholders' equity	8,070	8,460
Total liabilities and shareholders' equity	$ 12,080	$ 11,944

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Interim Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Accounts receivable, allowance for doubtful accounts	$ 10	$ 16
Preferred stock, par value
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	9,732,000	9,732,000
Common stock, shares outstanding	5,891,000	5,891,000
Treasury stock, shares	3,841,000	3,841,000

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Interim Condensed Consolidated Income Statements - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	May 31, 2016	May 31, 2015
Net sales	$ 1,860	$ 2,360
Cost of goods sold	1,828	2,296
Gross profit	32	64
Operating expenses
Selling and delivery	214	239
General and administrative	639	834
Operating Expenses, Total	853	1,073
Operating loss	(821)	(1,009)
Other income (expense)
Interest income	3	3
Other, net	79	(364)
Total other income (expense)	82	(361)
Loss from continuing operations before income taxes	(739)	(1,370)
Income tax expense	0	0
Net income (loss) from continuing operations	(739)	(1,370)
Income (loss) from discontinued operations, net of income tax effects	347	(199)
Net income (loss)	$ (392)	$ (1,569)
Net income (loss) per share:
From continuing operations-basic	$ (0.13)	$ (0.23)
From continuing operations-diluted	(0.13)	(0.23)
From discontinued operations-basic	0.06	(0.03)
From discontinued operations-diluted	$ 0.06	$ (0.03)
Basic weighted average shares outstanding	5,891	5,957
Diluted weighted average shares outstanding	5,891	5,957

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Interim Condensed Consolidated Statements of Shareholders' Equity - 3 months ended May 31, 2016 - USD ($) shares in Thousands, $ in Thousands	Total	Common Shares	Additional Paid-in Capital	Retained Earnings	Treasury Stock
Beginning Balance (in shares) at Feb. 29, 2016		5,891
Beginning Balance at Feb. 29, 2016	$ 8,460	$ 7,293	$ 182	$ 17,253	$ (16,268)
Net loss	(392)			(392)
Share based compensation			2
Ending Balance (in shares) at May. 31, 2016		5,891
Ending Balance at May. 31, 2016	$ 8,070	$ 7,293	$ 184	$ 16,861	$ (16,268)

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Interim Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	May 31, 2016	May 31, 2015	Feb. 29, 2016
Operating Activities
Net loss	$ (392)	$ (1,569)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Income)/loss from discontinued operations, net of tax	(347)	199
Depreciation and amortization	55	86
Provision for doubtful accounts	4	23
Provision for inventory reserve	92	92
Non-cash charge for share based compensation	2	3
Deferred rental income	(30)	(30)
Realized/unrealized (gain) loss on investments	(42)	610
Changes in working capital items:
Accounts receivable	424	237
Note receivable	16	(25)
Inventories	179	569
Prepaid expenses and other assets	(510)	(12)
Customer deposits	734
Accounts payable and accrued liabilities	(548)	(352)
Cost, estimated earnings and billings on uncompleted contracts	(160)	184
Income taxes refundable/payable	(6)	609
Net cash provided by (used in) operating activities	(529)	624	$ 800
Investing Activities
Capital expenditures	(158)	(26)
Cash repayment from discontinued operations	35	188
Purchases of investments	(488)	(3,890)
Sales of investments	527	3,752
Net cash provided by (used in) investing activities	(84)	24
Financing Activities
Proceeds from related party loans	912	80
Repayment of loans from related parties	(85)
Repayments of long-term debt	(13)	(12)
Purchase of treasury stock		(112)
Payments to marginal float	(41)	(24)
Net cash provided by (used in) financing activities	773	(68)
Discontinued Operations
Operating activities	276	129
Investing activities	(35)	(188)
Net cash provided by (used in) discontinued operations	241	(59)
Net change in cash and cash equivalents	401	521
Cash and cash equivalents, beginning of year	595	172	172
Cash and cash equivalents, end of period	996	693
Cash and cash equivalents, discontinued operations	348	51
Cash and cash equivalents, continuing operations	$ 648	$ 642	$ 595

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Summary of Significant Accounting Policies

3 Months Ended

May 31, 2016

Summary of Significant Accounting Policies

Note 1. – Summary of Significant Accounting Policies

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

As contemplated by the Securities and Exchange Commission (the “SEC” or “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual consolidated financial statements. Reference should be made to the Company’s year-end consolidated financial statements and notes thereto, including a description of the accounting policies followed by the Company, contained in its Annual Report on Form 10-K as of and for the fiscal year ended February 29, 2016, as filed with the Commission. There are no material changes in accounting policy during the three months ended May 31, 2016.

The consolidated financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the interim condensed consolidated financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The February 29, 2016 consolidated balance sheet data was derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP).

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Banking & Liquidity

3 Months Ended

May 31, 2016

Banking & Liquidity

Note 2. – Banking & Liquidity

The accompanying 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 has sustained losses for each of the last two years and has seen a decline in both its working capital and liquid assets during this time. These losses were a combination of low revenues at all divisions without a commensurate reduction of expenses. During the year ended February 29, 2016, the Company operated using cash from operations of $0.8 million, which was primarily generated from a $0.7 million tax refund that was non-recurring in nature. During the quarter ended May 31, 2016 operational cash flows used $0.5 million. Related to these operational results the Company’s working capital and liquid asset position are presented below (in thousands) as of the quarter ended May 31, 2016 and the year-ended February 29, 2016:

	May 31, 2016		February 29, 2016
Working capital	$	4,732	$	4,855
Liquid assets	$	837	$	636

Management has implemented a plan to improve the liquidity of the Company. The Company has been implementing a plan to increase revenues at all the divisions, each structured to the particular division with an increase in the current backlog and growth in revenues. The Company has a plan to reduce expenses at the divisions, as well as at the corporate location with the expectation that expenses will be decreased by more than $1.7 million per year. Management continues to explore options to monetize certain long-term assets of the business, including current negotiations to sell its Lexel Imaging subsidiary, presented as discontinued operations, where a final sale is expected during fiscal year ending February 28, 2017. 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.

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, to liquidate the subsidiary noted above, 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.

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Fair Value Measurements and Financial Instruments

3 Months Ended

May 31, 2016

Fair Value Measurements and Financial Instruments

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, 2016 and February 29, 2016 (in thousands):

	May 31, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		545			545			—		—
Total value of investments	$	545		$	545			—		—
Current Liabilities:
Margin balance		(356	)		(356	)		—		—
Total value of liabilities		(356	)		(356	)		—		—
Total	$	189		$	189			—		—
	February 29, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		542			542			—		—
Total value of investments	$	542		$	542			—		—
Current Liabilities:
Margin balance		(397	)		(397	)
Total value of liabilities		(397	)		(397	)
Total	$	145		$	145			—		—

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 were determined using Level 2 inputs and 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 interest rates that fluctuate with the market or are otherwise commensurate with the current market.

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Recent Accounting Pronouncements

3 Months Ended

May 31, 2016

Recent Accounting Pronouncements

Note 4. – Recent Accounting Pronouncements

In May, 2014, the FASB issued Accounting Standards Update No. (ASU) 2014-09 “Revenue with Contracts from Customers”. ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new guidance (i) removes inconsistencies, and weaknesses in revenue requirements, (ii) provides a more robust framework for addressing revenue issues, (iii) improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, (iv) provides more useful information to users of financial statements through improved disclosure requirements, and (v) simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.

The guidance is effective for annual reporting periods beginning after December 15, 2016 including interim periods within that reporting period; however, a one year delay has been approved with the issuance of ASU 2015-14, “Revenue with Contracts from customers”. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements. Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern”. Prior to its effective date there was no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. This update requires that an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable.) This update is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is still evaluating the effects that the adoption of this update will have on the Company’s consolidated financial position.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The guidance is effective for annual reporting periods beginning after December 15, 2016 and related interim periods. Early adoption is permitted. The Company does not believe this standard will have a material effect on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as noncurrent on the balance sheet. Each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the adoption of this update to have a material effect on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”. ASU 2016-02 increases transparency and comparability among organizations by requiring entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about the lease arrangements. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements.

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Inventories

3 Months Ended

May 31, 2016

Inventories

Note 5. - Inventories

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

	May 31, 2016			February 29, 2016
Raw materials	$	3,637		$	3,878
Work-in-process		240			199
Finished goods		1,586			1,669
		5,463			5,746
Reserves for obsolescence		(1,257	)		(1,270	)
	$	4,206		$	4,476

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Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

3 Months Ended

May 31, 2016

Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Note 6. – Costs and Estimated Earnings Related to Billings on Uncompleted Contracts

Information relative to contracts in progress consisted of the following:

	May 31, 2016		February 29, 2016
Costs incurred to date on uncompleted contracts	$	—	$	912
Estimated earnings recognized to date on these contracts		—		724
		—		1,636
Billings to date		—		(1,796	)
Costs and estimated earnings in excess of billings, net	$	—	$	(160	)
Costs and estimated earnings in excess of billings	$	—	$	—
Billings in excess of costs and estimated earnings		—		(160	)
	$	—	$	(160	)

Costs and estimated earnings in excess of billings are the results of contracts in progress (jobs) in completing orders to customers’ specifications on contracts accounted for under FASB Accounting Standards Codification (ASC) Topic No. 605-35, “Revenue Recognition: Construction-Type and Production-Type Contracts.” Costs included are material, labor, and overhead. These jobs require design and engineering effort for a specific customer purchasing a unique product. The Company records revenue on these fixed-price and cost-plus contracts on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable. Billings are generated based on specific contract terms, which might be a progress payment schedule, specific shipments, etc. None of the above contracts in progress contain post-shipment obligations.

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

As of May 31, 2016 and February 29, 2016, there were no production costs that exceeded the aggregate estimated cost of all in process and delivered units relating to long-term contracts. Additionally, there were no claims outstanding that would affect the ultimate realization of full contract values. As of May 31, 2016 and February 29, 2016, there were no progress payments that had been netted against inventory.

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Long-Term Debt and Other Obligations

3 Months Ended

May 31, 2016

Long-Term Debt and Other Obligations

Note 7. – Long-Term Debt and Other Obligations

Long-term debt consisted of the following (in thousands):

	May 31,			February 29,
	2016			2016
Mortgage payable to bank; interest rate at BB&T Bank base rate plus 0.5% (4.00% as of May 31, 2016); monthly principal and interest payments of $5 thousand payable through October 2021; collateralized by land and building of Teltron Technologies, Inc.		170			183
		170			183
Less current maturities		(53	)		(52	)
	$	117		$	131

The Company had outstanding margin account borrowing of $0.3 million as of May 31, 2016 and $0.4 million as of February 29, 2016. 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 $0.5 million leaving net investments of $0.2 million after the margin account borrowings of $0.3 million and $0.5 million leaving net investments of $0.1 million after the margin account borrowings of $0.4 million for the periods ending May 31, 2016 and February 29, 2016, respectively. The margin interest rate is 2%.

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Related Party Transactions

3 Months Ended

May 31, 2016

Related Party Transactions

Note 8. – Related Party Transactions

The Company owed the Company’s Chief Executive Officer $85 thousand as of February 29, 2016. This money was borrowed during the Company’s fiscal year ended February 29, 2016 at an eight percent interest rate. The Company repaid the funds during the first quarter ending May 31, 2016. Interest paid on this loan during the quarter was $1 thousand. The Company borrowed $80 thousand from the Company’s Chief Financial Officer in May 2015 with a zero interest rate. This was borrowed on a short term basis and repaid in June 2015. The balance of this loan at May 31, 2015 was $80 thousand.

On March 30, 2016, the Company entered into an assignment with recourse 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 secured borrowing in accordance with the provisions of ASC 860-10. 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 at May 31, 2016 was $886 thousand.

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Supplemental Cash Flow Information

3 Months Ended

May 31, 2016

Supplemental Cash Flow Information

Note 9. – Supplemental Cash Flow Information

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

	Three Months Ended May 31,
	2016			2015
Cash paid for:
Interest	$	5		$	22
Income taxes, net of refunds	$	6		$	(609	)
Non-cash activity:
Note receivable paid directly to officer	$	26			—
Note payable to officer	$	(26	)		—
Imputed interest expense	$	17			—
Imputed interest income	$	(17	)		—

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Shareholder's Equity

3 Months Ended

May 31, 2016

Shareholder's Equity

Note 10. – Shareholder’s 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.

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three-month periods ended May 31, 2016 and 2015 (in thousands, except per share data):

	Net Income (Loss)			Weighted Average Common Shares Outstanding		Earnings (Loss) Per Share
Three months ended May 31, 2016
Basic-continuing operations	$	(739	)		5,891	$	(0.13	)
Basic-discontinued operations		347			5,891		0.06
Effect of dilution:
Diluted-continuing operations
Diluted-discontinued operations		—			—		—
Diluted	$	(392	)		5,891	$	(0.07	)
Three months ended May 31, 2015
Basic-continuing operations	$	(1,370	)		5,957	$	(0.23	)
Basic-discontinued operations		(199	)		5,957		(0.03	)
Effect of dilution:
Diluted-continuing operations		—
Diluted-discontinued operations		—			—		—
Diluted	$	(1,569	)		5,957	$	(0.26	)

Stock-Based Compensation Plans

For the three-month period ended May 31, 2016 and 2015, the Company recognized general and administrative expenses of $1.5 thousand and $3.2 thousand, respectively, related to share-based compensation. The liability for the share-based compensation recognized is presented in the consolidated balance sheet as part of additional paid in capital. As of May 31, 2016, and May 31, 2015 total unrecognized compensation costs related to stock options granted was $3.3 thousand and $7.9 thousand, respectively. The unrecognized stock option compensation cost is expected to be recognized over a period of approximately 1 year.

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

No options were granted during the three month periods ended May 31, 2016 and 2015.

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 ended May 31, 2016, the Company did not purchase any shares of the Video Display Corporation stock. For the quarter ended May 31, 2015, the Company purchased 68,531 shares. Under the Company’s stock repurchase program, an additional 502,644 shares remain authorized to be repurchased by the Company at May 31, 2016.

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Income Taxes

3 Months Ended

May 31, 2016

Income Taxes

Note 11. – Income Taxes

The effective tax rate for the three months ended May 31, 2016 and 2015 was 0%. The Company lost $0.4 and $1.5 million dollars for the quarter ending May 31, 2016 and May31, 2015, respectively, which resulted in a tax benefit of approximately $0.1 and $0.6 million, respectively. Due to the losses by the Company, a full valuation allowance was allocated to the deferred tax asset created by the loss. The net effect of this allowance was to have zero tax expense for the quarter.

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Discontinued Operations

3 Months Ended

May 31, 2016

Discontinued Operations

Note 12. – Discontinued Operations

On March 26, 2014 with an effective date of February 28, 2014, the Company completed the sale of the Company’s wholly-owned subsidiary, Lexel Imaging, Inc. to Citadal Partners, LLC for approximately $3.9 million, consisting of $1.0 million cash payable over 180 days and included in current assets as a note and a guarantee to purchase $2.9 million in inventory over a five year period. The Company recognized a loss on the sale of $4.4 million pre-tax during the year ended February 28, 2014.

On November 17, 2014 Video Display reacquired Lexel Imaging, Inc. when Citadal Partners, LLC defaulted on two notes payable to Video Display Corporation owed as financing on the original sale of the Lexel Imaging. Lexel Imaging is still presented as discontinued operations as Video Display Corporation is still considering offers for the sale of the entity.

This subsidiary’s net sales, expenses and net profits are being shown as discontinued operations per ASC 205-20-45 “Reporting Discontinued Operations” for all periods presented. Accordingly, assets and liabilities of this subsidiary are presented as discontinued operations on the interim condensed consolidated balance sheet.

The summarized financial information for discontinued operations for the three months ended May 31, 2016, is as follows:

	Three Months Ending:
	May 31, 2016		May 31, 2015
Net sales	$	1,850	$	1,095
Cost of goods sold		1,466		1,084
Gross profit		384		11
Operating expenses
Selling and delivery		18		—
General and administrative		190		239
Total operating expenses		208		239
Operating profit from discontinued operations		176		(228	)
Other income		181		29
Income (loss) from discontinued operations before income taxes		357		(199	)
Income tax expense		10		—
Income (loss) from discontinued operations	$	347	$	(199	)

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Banking & Liquidity (Tables)

3 Months Ended

May 31, 2016

Working Capital and Liquid Asset Position

Related to these operational results the Company’s working capital and liquid asset position are presented below (in thousands) as of the quarter ended May 31, 2016 and the year-ended February 29, 2016:

	May 31, 2016		February 29, 2016
Working capital	$	4,732	$	4,855
Liquid assets	$	837	$	636

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Fair Value Measurements and Financial Instruments (Tables)

3 Months Ended

May 31, 2016

Financial Assets and Liabilities Measured on Recurring Basis

The following table sets forth financial assets and liabilities that were accounted for at fair value on a recurring basis as of May 31, 2016 and February 29, 2016 (in thousands):

	May 31, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		545			545			—		—
Total value of investments	$	545		$	545			—		—
Current Liabilities:
Margin balance		(356	)		(356	)		—		—
Total value of liabilities		(356	)		(356	)		—		—
Total	$	189		$	189			—		—
	February 29, 2016			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Marketable equity securities		542			542			—		—
Total value of investments	$	542		$	542			—		—
Current Liabilities:
Margin balance		(397	)		(397	)
Total value of liabilities		(397	)		(397	)
Total	$	145		$	145			—		—

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Inventories (Tables)

3 Months Ended

May 31, 2016

Inventories

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

	May 31, 2016			February 29, 2016
Raw materials	$	3,637		$	3,878
Work-in-process		240			199
Finished goods		1,586			1,669
		5,463			5,746
Reserves for obsolescence		(1,257	)		(1,270	)
	$	4,206		$	4,476

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Costs and Estimated Earnings Related to Billings on Uncompleted Contracts (Tables)

3 Months Ended

May 31, 2016

Information Relative to Contracts in Progress

Information relative to contracts in progress consisted of the following:

	May 31, 2016		February 29, 2016
Costs incurred to date on uncompleted contracts	$	—	$	912
Estimated earnings recognized to date on these contracts		—		724
		—		1,636
Billings to date		—		(1,796	)
Costs and estimated earnings in excess of billings, net	$	—	$	(160	)
Costs and estimated earnings in excess of billings	$	—	$	—
Billings in excess of costs and estimated earnings		—		(160	)
	$	—	$	(160	)

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Long-Term Debt and Other Obligations (Tables)

3 Months Ended

May 31, 2016

Long- Term debt and Finance Lease Obligations

Long-term debt consisted of the following (in thousands):

	May 31,			February 29,
	2016			2016
Mortgage payable to bank; interest rate at BB&T Bank base rate plus 0.5% (4.00% as of May 31, 2016); monthly principal and interest payments of $5 thousand payable through October 2021; collateralized by land and building of Teltron Technologies, Inc.		170			183
		170			183
Less current maturities		(53	)		(52	)
	$	117		$	131

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Supplemental Cash Flow Information (Tables)

3 Months Ended

May 31, 2016

Supplemental Cash Flow Information

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

	Three Months Ended May 31,
	2016			2015
Cash paid for:
Interest	$	5		$	22
Income taxes, net of refunds	$	6		$	(609	)
Non-cash activity:
Note receivable paid directly to officer	$	26			—
Note payable to officer	$	(26	)		—
Imputed interest expense	$	17			—
Imputed interest income	$	(17	)		—

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Shareholder's Equity (Tables)

3 Months Ended

May 31, 2016

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three-month periods ended May 31, 2016 and 2015 (in thousands, except per share data):

	Net Income (Loss)			Weighted Average Common Shares Outstanding		Earnings (Loss) Per Share
Three months ended May 31, 2016
Basic-continuing operations	$	(739	)		5,891	$	(0.13	)
Basic-discontinued operations		347			5,891		0.06
Effect of dilution:
Diluted-continuing operations
Diluted-discontinued operations		—			—		—
Diluted	$	(392	)		5,891	$	(0.07	)
Three months ended May 31, 2015
Basic-continuing operations	$	(1,370	)		5,957	$	(0.23	)
Basic-discontinued operations		(199	)		5,957		(0.03	)
Effect of dilution:
Diluted-continuing operations		—
Diluted-discontinued operations		—			—		—
Diluted	$	(1,569	)		5,957	$	(0.26	)

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Discontinued Operations (Tables)

3 Months Ended

May 31, 2016

Summarized Financial Information for Discontinued Operations

The summarized financial information for discontinued operations for the three months ended May 31, 2016, is as follows:

	Three Months Ending:
	May 31, 2016		May 31, 2015
Net sales	$	1,850	$	1,095
Cost of goods sold		1,466		1,084
Gross profit		384		11
Operating expenses
Selling and delivery		18		—
General and administrative		190		239
Total operating expenses		208		239
Operating profit from discontinued operations		176		(228	)
Other income		181		29
Income (loss) from discontinued operations before income taxes		357		(199	)
Income tax expense		10		—
Income (loss) from discontinued operations	$	347	$	(199	)

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Banking & Liquidity - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	May 31, 2016	May 31, 2015	Feb. 29, 2016
Line of Credit Facility [Line Items]
Cash from (used) in operations	$ (529)	$ 624	$ 800
Tax Refund			700
Minimum
Line of Credit Facility [Line Items]
Expected decrease in expenses per year			$ 1,700

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Working Capital and Liquid Asset Position (Detail) - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Liquidity And Capital Resources [Line Items]
Working capital	$ 4,732	$ 4,855
Liquid assets	$ 837	$ 636

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Financial Assets and Liabilities Measured on a Recurring Basis (Detail) - Recurring Basis - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Current trading investments
Total value of investments	$ 545	$ 542
Total value of investments	545	542
Current Liabilities:
Margin balance	(356)	(397)
Total value of liabilities	(356)	(397)
Total	189	145
Marketable Equity Securities
Current trading investments
Current trading investments	545	542
Level 1 Assets and Liabilities
Current trading investments
Total value of investments	545	542
Total value of investments	545	542
Current Liabilities:
Margin balance	(356)	(397)
Total value of liabilities	(356)	(397)
Total	189	145
Level 1 Assets and Liabilities | Marketable Equity Securities
Current trading investments
Current trading investments	$ 545	$ 542

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Inventories (Detail) - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Inventory [Line Items]
Raw materials	$ 3,637	$ 3,878
Work-in-process	240	199
Finished goods	1,586	1,669
Inventory, Gross	5,463	5,746
Reserves for obsolescence	(1,257)	(1,270)
Inventory, Net	$ 4,206	$ 4,476

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Information Relative to Contracts in Progress (Detail) - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Contracts [Line Items]
Costs incurred to date on uncompleted contracts		$ 912
Estimated earnings recognized to date on these contracts		724
Costs incurred and Estimated earnings of uncompleted contracts		1,636
Billings to date		(1,796)
Costs and estimated earnings in excess of billings, net		(160)
Costs and estimated earnings in excess of billings	$ 0	0
Billings in excess of costs and estimated earnings		(160)
Costs and estimated earnings in excess of billings, net		$ (160)

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Costs and Estimated Earnings Related to Billings on Uncompleted Contracts - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	May 31, 2016	Feb. 29, 2016
Uncompleted Contracts [Line Items]
Production costs that exceeded the aggregate estimated cost	$ 0	$ 0
Outstanding claims relating to contract values	0	0
Progress payments that had been netted against inventory	$ 0	$ 0

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Long-Term Debt (Detail) - USD ($) $ in Thousands	May 31, 2016	Feb. 29, 2016
Debt Instrument [Line Items]
Notes and Mortgage Payable to bank	$ 170	$ 183
Less current maturities	(53)	(52)
Long-term debt, less current maturities	117	131
Mortgage payable to bank
Debt Instrument [Line Items]
Notes and Mortgage Payable to bank	$ 170	$ 183

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Long-Term Debt (Parenthetical) (Detail) - Mortgage payable to bank $ in Thousands	3 Months Ended
	May 31, 2016 USD ($)
Debt Instrument [Line Items]
Debt Instrument, interest rate terms	Mortgage payable to bank; interest rate at BB&T Bank base rate plus 0.5% (4.00% as of May 31, 2016); monthly principal and interest payments of $5 thousand payable through October 2021; collateralized by land and building of Teltron Technologies, Inc.
Combined rate	4.00%
Mortgage Payable to bank monthly principal and interest payments payable	$ 5
Debt Instrument Maturity period	2021-10
Base Rate
Debt Instrument [Line Items]
Interest rate	0.50%

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Long Term Debt and Other Obligations - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	May 31, 2016	Feb. 29, 2016
Debt Instrument [Line Items]
Outstanding margin account borrowing	$ 300	$ 400
Gross investments	500	500
Trading investments, at fair value	$ 189	$ 145
Margin interest rate	2.00%	2.00%

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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended
	Mar. 30, 2016	May 31, 2016	May 31, 2015	Feb. 29, 2016
Related Party Transaction [Line Items]
Note payable to officer		$ 163		$ 85
Interest paid		5	$ 22
Chief Executive Officer
Related Party Transaction [Line Items]
Note payable to officer				$ 85
Debt instrument interest rate stated percentage				8.00%
Interest paid		1
Chief Financial Officer
Related Party Transaction [Line Items]
Debt instrument interest rate stated percentage			0.00%
Accounts payable to related parties, current			$ 80
Z-Axis Inc
Related Party Transaction [Line Items]
Notes receivable assigned with recourse	$ 912	$ 886
Notes repurchase right, percentage of outstanding principle balance	80.00%
Secured borrowing	$ 900
Effective interest rate	9.00%
Payment period	56 months
Date of first required payment	Apr. 16, 2016

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Supplemental Cash Flow Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2016	May 31, 2015
Cash paid for:
Interest	$ 5	$ 22
Income taxes, net of refunds	6	$ (609)
Non-cash activity:
Note receivable paid directly to officer	26
Note payable to officer	(26)
Imputed interest expense	17
Imputed interest income	$ (17)

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Reconciliation of Basic Earnings (loss) Per Share to Diluted Earnings (loss) Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	May 31, 2016	May 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net Income (Loss), Basic-continuing operations	$ (739)	$ (1,370)
Net Income (Loss), Basic-discontinued operations	347	(199)
Net Income (Loss), Diluted	$ (392)	$ (1,569)
Weighted Average Common Shares Outstanding, Basic	5,891	5,957
Weighted Average Common Shares Outstanding, Diluted earnings per share	5,891	5,957
Earnings (Loss) Per Share, Basic-continuing operations	$ (0.13)	$ (0.23)
Earnings (Loss) Per Share, Basic-discontinued operations	0.06	(0.03)
Earnings (Loss) Per Share, Diluted	$ (0.07)	$ (0.26)
Continuing Operations
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net Income (Loss), Effect of dilution:	$ 0	$ 0
Weighted Average Common Shares Outstanding, Basic	5,891	5,957
Earnings (Loss) Per Share, Effect of dilution: Diluted-operations	$ 0	$ 0
Discontinued Operations
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net Income (Loss), Effect of dilution:	$ 0	$ 0
Weighted Average Common Shares Outstanding, Basic	5,891	5,957
Weighted Average Common Shares Outstanding, Effect of dilution	0
Earnings (Loss) Per Share, Effect of dilution: Diluted-operations	$ 0	$ 0

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Shareholder's Equity - Additional Information (Detail) - USD ($)	3 Months Ended
	May 31, 2016	May 31, 2015	Jan. 20, 2014
Stock Based Compensation [Line Items]
Total unrecognized compensation costs related to stock options and shares of restricted stock granted	$ 3,300	$ 7,900
Unrecognized compensation cost is expected to be recognized over a period	1 year
Stock options granted	0	0
Authorized stock repurchase	2,632,500
Additional authorized stock repurchase			1,500,000
Repurchase of treasury stock (in shares)	0	68,531
Remaining repurchase of shares authorized	502,644
General and Administrative
Stock Based Compensation [Line Items]
Share-based compensation	$ 1,500	$ 3,200

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2016	May 31, 2015
Income Taxes [Line Items]
Effective Tax Rate	0.00%	0.00%
Net income (loss)	$ (392)	$ (1,569)
Tax benefit	100	600
Income tax expense/(benefit)	$ 0	$ 0

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Discontinued Operations - Additional Information (Detail) - Lexel Imaging, Inc. - USD ($)		12 Months Ended
	Mar. 26, 2014	Feb. 28, 2014
Schedule Of Sale And Divestiture Of Business [Line Items]
Divestiture of business	$ 3,900,000
Value of inventories guaranteed to purchase	$ 2,900,000
Purchase commitment period	5 years
Gain (loss) on sale of business		$ (4,400,000)
Collection period for receivable from divestiture of business	180 days
Amount of cash receivable from divestiture of business	$ 1,000,000

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Summarized Financial Information For Discontinued Operations (Detail) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2016	May 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales	$ 1,850	$ 1,095
Cost of goods sold	1,466	1,084
Gross profit	384	11
Operating expenses
Selling and delivery	18
General and administrative	190	239
Total operating expenses	208	239
Operating profit from discontinued operations	176	(228)
Other income	181	29
Income (loss) from discontinued operations before income taxes	357	(199)
Income tax expense	10
Income (loss) from discontinued operations	$ 347	$ (199)