Summary of Significant Accounting Policies (Policies)

12 Months Ended

Feb. 28, 2018

Principles of Consolidation

Principles of Consolidation

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

Fiscal Year

Fiscal Year

All references herein to “2018” and “2017” mean the fiscal years ended February 28, 2018 and February 28, 2017, respectively.

Use of Estimates

Use of Estimates

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

Banking and Liquidity

Banking and Liquidity

The accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained losses for each of the last three 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. Related to these operational results the Company’s working capital and liquid asset position deteriorated during the year ended February 28, 2018 as presented below:

	February 28, 2018		February 28, 2017
Working capital	$	2,762	$	6,408
Liquid assets	$	261	$	503

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 subsequent to February 28, 2018. The Company implemented a plan to reduce expenses at the divisions, as well as at the corporate location during the fiscal year ending February 28, 2018 with the expectation that expenses will be decreased by more than $0.7 million. The Company moved two of its plants in an effort to reduce expenses and increase efficiencies. The plant move at its subsidiary in Lexington, Kentucky, took longer than anticipated and negatively affected cash flow. The plant move at the Florida operations was successful as the Company merged two businesses and was able to keep production on schedule. Management continues to explore options to monetize certain long-term assets of the business, including the possible sale of a building in Pennsylvania. If additional and more permanent capital is required to fund the operations of the Company, no assurance can be given that the Company will be able to obtain the capital on terms favorable to the Company, if at all.

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

Revenue Recognition

Revenue Recognition

Revenues are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collect-ability can be reasonably assured. The Company’s delivery term typically is F.O.B. shipping point.

Shipping and handling fees billed to customers are classified in net sales in the consolidated statements of operations. Shipping costs of $0.1 million were included in the fiscal years ended 2018 and 2017, respectively.

A portion of the Company’s revenue is derived from contracts to manufacture display systems to a buyer’s specification. 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. 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.

Research and Development

Research and Development

The Company includes research and development expenditures in the consolidated financial statements as a part of general and administrative expenses. The Company did not incur any research and development costs in the fiscal year ended 2018 and $0.1 in the fiscal year ended 2017.

Cash and Cash Equivalents and Investments

Cash and Cash Equivalents and Investments

Highly liquid investments with a maturity date of three months or less at the date of purchase are considered to be cash equivalents. Investment securities that are held by the Company, are bought and held principally for the purpose of selling them in the near term, are classified as “trading” and principally consist of equity securities and mutual funds. These trading investments are carried at fair value with realized gains or losses and changes in fair value included in operations. Realized and unrealized gains/ (losses) on trading securities held were approximated $0.0 million for the year ended February 28, 2018 and $0.2 million for the year ended February 28, 2017 respectively.

Fair Value Measurements and Financial Instruments

Fair Value Measurements and Financial Instruments

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

Level 1	Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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 our financial assets and liabilities that were accounted for at fair value on a recurring basis as of February 28, 2018 and February 28, 2017 (in thousands):

	February 28,2018			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Stocks, options, and ETF (long)		291			291			—		—
Stocks, options, and ETF (short)		(5	)		(5	)
Total value of investments		286			286			—		—
Current liabilities:
Margin balance		(106	)		(106	)		—		—
Total value of liabilities		(106	)		(106	)		—		—
Total		180			180			—		—

	February 28,2017			Level 1 Assets and Liabilities			Level 2 Assets and Liabilities		Level 3 Assets and Liabilities
Current trading investments:
Stocks, options, and ETF (long)	$	484		$	484			—		—
Stocks, options, and ETF (short)		(2	)		(2	)
Total value of investments		482			482			—		—
Current liabilities:
Margin balance		(114	)		(114	)		—		—
Total value of liabilities		(114	)		(114	)		—		—
Total	$	368		$	368			—		—

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

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are customer obligations due under normal trade terms. The Company sells its products primarily to general contractors, government agencies, manufacturers, and consumers of video displays and CRTs. Management performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, letters of credit may be required from its customers in certain circumstances, such as foreign sales. The allowance for doubtful accounts is determined by reviewing all accounts receivable and applying credit loss experience to the current receivable portfolio with consideration given to the current condition of the economy, assessment of the financial position of the creditors as well as payment history and overall trends in past due accounts compared to established thresholds. The Company monitors credit exposure and assesses the adequacy of the allowance for doubtful accounts on a regular basis. Historically, the Company’s allowance has been sufficient for any customer write-offs. Management believes accounts receivable are stated at amounts expected to be collected.

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

Description	Balance at Beginning of Period		Additions: Charged to Costs and Expenses		Deductions			Balance at End of Period
February 28, 2018	$	20	$	—	$	(1	)	$	19
February 28, 2017	$	16	$	24	$	(20	)	$	20

Warranty Reserves

Warranty Reserves

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

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

Inventories

Inventories

Inventories consist primarily of CRTs, electron guns, monitors, digital projectors, video components and electronic parts. Inventories are stated at the lower of cost (primarily first-in, first-out) or market.

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. The Company provides for an obsolescence 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, although it believes the inventory will be sold in the future, will continue to reserve for any additional obsolescence. The reserve for inventory obsolescence was approximately $1.4 million and $1.9 million at February 28, 2018 and February 28, 2017, respectively.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant, and equipment are stated at cost. Depreciation is computed principally by the straight-line method for financial reporting purposes over the following estimated useful lives: Buildings – ten to twenty-five years; Machinery and Equipment – five to ten years. Depreciation expense totaled approximately $261 thousand and $237 thousand for the fiscal years ended 2018 and 2017, respectively. Substantial betterments to property, plant, and equipment are capitalized and routine repairs and maintenance are expensed as incurred. The Company is expected to invest an additional $0.1 million to upgrade the Cocoa, Florida location to accommodate the merger of the two Florida businesses into one facility. The Company does not anticipate any additional significant investments in capital assets for fiscal 2019.

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

Stock-Based Compensation Plans

Stock-Based Compensation Plans

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

Income Taxes

Income Taxes

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

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

Deferred income taxes as of February 28, 2018 and February 28, 2017 reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.

The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of February 28, 2018 and February 28, 2017 the Company did not have any material unrecognized tax benefits.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income. The Company did not have any interest and penalties accrued as of February 28, 2018 and February 28, 2017.

The Company’s tax years ended February 28, 2017, 2016 and 2015 remain open to examination by the Internal Revenue Service (“IRS”).

Earnings (Loss) per Share

Earnings (Loss) per Share

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

The following is a reconciliation of basic earnings (loss) per share to diluted earnings (loss) per share for 2018 and 2017, (in thousands, except for per share data):

	Net Income (loss)			Average Shares Outstanding		Net Income(loss) Per Share
2018
Basic		(2,938	)		5,890		(0.50	)
Effect of dilution:
Options		—			—
Diluted earnings per share		(2,938	)		5,890		(0.50	)
2017
Basic	$	(1,006	)		5,891	$	(0.17	)
Effect of dilution:
Options		—					—
Diluted earnings per share	$	(1,006	)		5,891	$	(0.17	)

Stock options, debentures, and other liabilities convertible into 200,000 and 69,000 shares, respectively, of the Company’s common stock were anti-dilutive and, therefore, were excluded from the fiscal 2018 and 2017 diluted earnings (loss) per share calculation.

Segment Reporting

Segment Reporting

We operate and manage our business as one reportable segment. All of our divisions have similarities such as products and markets served; therefore, we believe they meet the criteria for aggregation under the applicable authoritative guidance and, as such, these operations are reported as one segment within the Consolidated Financial Statements.

Sales to foreign customers were 16% of consolidated net sales for fiscal 2018 and 21% for fiscal 2017.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. (ASU 2014-09), “Revenue from Contracts with Customers”. This guidance modifies how an entity will determine the measurement of revenue and timing of when it is recognized. The guidance provides for a five-step approach in applying the standard: 1) identifying the contract with the customer, 2) identifying separate performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to separate performance obligations, and 5) recognizing the revenue when the performance obligation has been satisfied. The new guidance requires enhanced disclosures for the nature, amount, timing, and uncertainty of revenue that is being recognized. The guidance is effective for public companies for interim and annual reporting periods beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. We are in the process of assessing the impact of the new standard and anticipate no material impact from adopting ASU 2014-09 in how we recognize revenue. We will adopt ASU 2014-09 using the modified retrospective approach in the first quarter of fiscal year 2019.

In July 2015, the FASB issued Accounting Standards Update No. (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 adopted ASU 2015-11 and it did not have a material effect on the consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Update No. (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 adoption of this update did not have an impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. (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.