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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

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FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934

|For Quarter EndedMay 31, 2003 |  | Commission File Number0-13394
|----------------------------- |  | -----------------------------

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VIDEO DISPLAY CORPORATION(Exact name of registrant as specified on its charter)

|Georgia(State or other jurisdiction
of incorporation or organization)                       |  | 58-1217564(I.R.S.Employer Identification No.)
|------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|1868 Tucker Industrial Drive, Tucker, Georgia 30084(Address of principal executive offices)
|Registrant's telephone number including area code:770-938-2080                             

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by section 13 of the Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:

|Class                      |  | Outstanding at May 31, 2003
|-------------------------- |  | ---------------------------
|Common Stock, No Par Value |  | 4,574,000                  

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Video Display Corporation and Subsidiaries  Index

|                                                                        |                       |                                                                                                                                                                              |  | Page 
|----------------------------------------------------------------------- | --------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I.                                                                 | FINANCIAL INFORMATION |                                                                                                                                                                              | 
|                                                                        | Item 1.               | Financial Statements                                                                                                                                                         |  |      
|                                                                        |                       | Consolidated balance sheetsMay 31, 2003 (unaudited) and February 28, 2003 (audited)                                                                                         |  | 3    
|                                                                        |                       | Consolidated statements of incomeThree months ended May 31, 2003 and 2002 (unaudited)                                                                                       |  | 4    
|                                                                        |                       | Consolidated statements of shareholders' equity and comprehensive incomeTwelve months ended February 28, 2003 (audited) and the three months ended May 31, 2003 (unaudited) |  | 5    
|                                                                        |                       | Consolidated statements of cash flowsThree months ended May 31, 2003 and 2002 (unaudited)                                                                                   |  | 6    
|                                                                        |                       | Notes to consolidated financial statementsMay 31, 2003 (unaudited)                                                                                                          |  | 7-11 
|                                                                        | Item 2.               | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                        |  | 12-16
|                                                                        | Item 3.               | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                    |  | 17   
|                                                                        | Item 4.               | Controls and Procedures                                                                                                                                                      |  | 17   
|PART II.                                                                | OTHER INFORMATION     |                                                                                                                                                                              | 
|                                                                        | Item 1.               | Legal Proceedings                                                                                                                                                            |  | 18   
|                                                                        | Item 2.               | Changes in Securities and Use of Proceeds                                                                                                                                    |  | 18   
|                                                                        | Item 3.               | Defaults upon its Senior Securities                                                                                                                                          |  | 18   
|                                                                        | Item 4.               | Submission of Matters to a Vote of Security Holders                                                                                                                          |  | 18   
|                                                                        | Item 5.               | Other Information                                                                                                                                                            |  | 18   
|                                                                        | Item 6.               | Exhibits and Reports on Form 8-K                                                                                                                                             |  | 18   
|SIGNATURES                                                              |                       | 19                                                                                                                                                                          
|CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |                       | 20-21                                                                                                                                                                       
|CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                       | 22                                                                                                                                                                          

2

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Video Display Corporation and Subsidiaries  Consolidated Balance Sheets

|                                                                                            |                                                                                                         | May 31,
2003 |            | February 28,
2003 |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ----------------- | -
|
|Assets                                                                                      |                                                                                                         |              |            |                   |  
|Current Assets                                                                              |                                                                                                         |              |            |                   |  
|                                                                                            | Cash and cash equivalents                                                                               |              | $          | 2,559,000         |  
|                                                                                            | Accounts receivable, less allowance for possible losses of $530,000 and $502,000                        |              |            | 10,494,000        |  
|                                                                                            | Inventories (Notes C and F)                                                                             |              |            | 28,716,000        |  
|                                                                                            | Prepaid expenses and other                                                                              |              |            | 4,038,000         |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total current assets                                                                        |                                                                                                         |              | 45,807,000 |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Property, plant and equipment:                                                              |                                                                                                         |              |            |                   |  
|                                                                                            | Land                                                                                                    |              |            | 540,000           |  
|                                                                                            | Buildings                                                                                               |              |            | 6,918,000         |  
|                                                                                            | Machinery and equipment                                                                                 |              |            | 18,002,000        |  
|                                                                                            |                                                                                                         |              |            |                   |  
|                                                                                            |                                                                                                         |              | 25,460,000 |                   |  
|                                                                                            | Accumulated depreciation and amortization                                                               |              |            | (17,477,000       | )
|                                                                                            |                                                                                                         |              |            |                   |  
|Net property, plant, and equipment                                                          |                                                                                                         |              | 7,983,000  |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Other assets                                                                                |                                                                                                         |              | 2,500,000  |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total assets                                                                                |                                                                                                         | $            | 56,290,000 |                   | $
|                                                                                            |                                                                                                         |              |            |                   |  
|Liabilities and Shareholders' Equity                                                        |                                                                                                         |              |            |                   |  
|Current liabilities                                                                         |                                                                                                         |              |            |                   |  
|                                                                                            | Accounts payable                                                                                        |              | $          | 3,457,000         |  
|                                                                                            | Accrued liabilities                                                                                     |              |            | 4,388,000         |  
|                                                                                            | Line of credit (Note E)                                                                                 |              |            | 8,801,000         |  
|                                                                                            | Notes payable to shareholders                                                                           |              |            | 60,000            |  
|                                                                                            | Current maturities of long-term debt (Note D)                                                           |              |            | 2,714,000         |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total current liabilities                                                                   |                                                                                                         |              | 19,420,000 |                   |  
|Convertible subordinated debentures                                                         |                                                                                                         |              | 1,000,000  |                   |  
|Long-term debt, less current maturities (Note D)                                            |                                                                                                         |              | 4,607,000  |                   |  
|Notes payable to shareholders, less current maturities                                      |                                                                                                         |              | 8,481,000  |                   |  
|Deferred income taxes                                                                       |                                                                                                         |              | 554,000    |                   |  
|Other                                                                                       |                                                                                                         |              | 123,000    |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total liabilities                                                                           |                                                                                                         |              | 34,185,000 |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Redeemable common stock; 15,000 shares issued and outstanding at February 28, 2003 (Note F) |                                                                                                         |              |           |                   |  
|Commitments                                                                                 |                                                                                                         |              |           |                   |  
|Shareholders' Equity (Note G)                                                               |                                                                                                         |              |            |                   |  
|                                                                                            | Preferred stock, no par value2,000,000 shares authorized; none issued and outstanding                  |              |            |                  |  
|                                                                                            | Common stock, no par value10,000,000 shares authorized; 4,574,000 and 4,700,000 issued and outstanding |              |            | 5,150,000         |  
|Additional paid in capital                                                                  |                                                                                                         |              | 92,000     |                   |  
|Retained earnings                                                                           |                                                                                                         |              | 17,116,000 |                   |  
|Accumulated other comprehensive loss                                                        |                                                                                                         |              | (253,000   | )                 |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total shareholders' equity                                                                  |                                                                                                         |              | 22,105,000 |                   |  
|                                                                                            |                                                                                                         |              |            |                   |  
|Total liabilities and shareholders' equity                                                  |                                                                                                         | $            | 56,290,000 |                   | $
|                                                                                            |                                                                                                         |              |            |                   |  

The accompanying notes are an integral part of these statements.

3

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Video Display Corporation and Subsidiaries  Consolidated Statements of Income (unaudited)

|                                                    |                            | Three Months Ended
May 31, |           
|--------------------------------------------------- | -------------------------- | -------------------------- | ----------
|
|Net sales                                           |                            | $                          | 19,013,000
|Cost of goods sold                                  |                            |                            | 12,782,000
|                                                    |                            |                            |           
|                                                    | Gross profit               |                            |           
|                                                    |                            |                            |           
|Operating expenses                                  |                            |                            |           
|                                                    | Selling and delivery       |                            |           
|                                                    | General and administrative |                            |           
|                                                    |                            |                            |           
|                                                    |                            |                            | 4,696,000 
|                                                    |                            |                            |           
|                                                    | Operating profit           |                            |           
|                                                    |                            |                            |           
|Other income (expense)                              |                            |                            |           
|                                                    | Interest expense           |                            |           
|                                                    | Other, net                 |                            |           
|                                                    |                            |                            |           
|                                                    |                            |                            | (275,000  
|                                                    |                            |                            |           
|                                                    | Income before income taxes |                            |           
|Income tax expense                                  |                            |                            | 479,000   
|                                                    |                            |                            |           
|Net income                                          |                            | $                          | 781,000   
|                                                    |                            |                            |           
|Basic earnings per share of common stock (Note G)   |                            | $                          | 0.17      
|                                                    |                            |                            |           
|Diluted earnings per share of common stock (Note G) |                            | $                          | 0.16      
|                                                    |                            |                            |           
|Basic weighted average shares outstanding           |                            |                            | 4,640,000 
|                                                    |                            |                            |           
|Diluted weighted average shares outstanding         |                            |                            | 4,968,000 
|                                                    |                            |                            |           

The
accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries  Consolidated Statements of Shareholders' Equity and Comprehensive Income  for the Twelve Months Ended February 28, 2003 (audited) and  the Three Months Ended
May 31, 2003 (unaudited)

|                             |                                                                                                                   | Common
Stock               |           | Additional
Paid In
Capital |   | Accumulated
Other
Comprehensive
Income |   | Retained
Earnings |            | Current
Period
Comprehensive
Income |  
|---------------------------- | ----------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | -------------------------- | - | -------------------------------------- | - | ----------------- | ---------- | ----------------------------------- | -
|Balance at February 28, 2002 |                                                                                                                   | $                          | 5,325,000 |                            | $ | 92,000                                 |   | $                 | (1,393,000 | )                                   | $
|                             | Net loss for the year                                                                                             |                            |           |                           |   |                                        |  |                   |            |                                    |  
|                             | Unrealized loss on marketable equity securities                                                                   |                            |           |                           |   |                                        |  |                   |            | (4,000                              | )
|                             | Foreign currency translation adjustment                                                                           |                            |           |                           |   |                                        |  |                   |            | (132,000                            | )
|                             | Foreign currency translation adjustment recognized in operations resulting from liquidation of foreign subsidiary |                            |           |                           |   |                                        |  |                   |            | 1,296,000                           |  
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|                             |                                                                                                                   | Total comprehensive loss   |           |                            |   |                                        |   |                   |            |                                     |  
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|                             | Issuance of common stock under stock option plan                                                                  |                            |           | 37,000                     |   |                                        |  |                   |            |                                    |  
|                             | Repurchase of common stock                                                                                        |                            |           | (69,000                    | ) |                                        |  |                   |            |                                    |  
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|Balance at February 28, 2003 |                                                                                                                   |                            | 5,293,000 |                            |   | 92,000                                 |   |                   | (233,000   | )                                   |  
|                             | Net income for the period                                                                                         |                            |           |                           |   |                                        |  |                   |            |                                    |  
|                             | Unrealized gains on marketable equity securities                                                                  |                            |           |                           |   |                                        |  |                   |            | 6,000                               |  
|                             | Foreign currency translation adjustment                                                                           |                            |           |                           |   |                                        |  |                   |            | (26,000                             | )
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|                             |                                                                                                                   | Total comprehensive income |           |                            |   |                                        |   |                   |            |                                     |  
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|                             | Repurchase of common stock                                                                                        |                            |           | (143,000                   | ) |                                        |  |                   |            |                                    |  
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  
|Balance at May 31, 2003      |                                                                                                                   | $                          | 5,150,000 |                            | $ | 92,000                                 |   | $                 | (253,000   | )                                   | $
|                             |                                                                                                                   |                            |           |                            |   |                                        |   |                   |            |                                     |  

The accompanying notes are an integral part of these statements.

5

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Video Display Corporation and Subsidiaries  Consolidated Statements of Cash Flows (unaudited)

|                                                                                  |  | Three Months Ended
May 31, |           
|--------------------------------------------------------------------------------- |  | -------------------------- | ----------
|
|Operating Activities                                                              |  |                            |           
|Net income                                                                        |  | $                          | 781,000   
|Adjustments to reconcile net income to net cash provided by (used in) operations: |  |                            |           
|Depreciation and amortization                                                     |  |                            | 291,000   
|Provision for bad debts                                                           |  |                            | 63,000    
|Changes in working capital, net of effects from acquisitions:                     |  |                            |           
|Accounts receivable                                                               |  |                            | 563,000   
|Inventories                                                                       |  |                            | 105,000   
|Prepaid expenses                                                                  |  |                            | 250,000   
|Accounts payable and accrued liabilities                                          |  |                            | (41,000   
|                                                                                  |  |                            |           
|Net cash provided by (used in) operating activities                               |  |                            | 2,012,000 
|                                                                                  |  |                            |           
|Investing activities                                                              |  |                            |           
|Capital expenditures                                                              |  |                            | (112,000  
|Other investing activities                                                        |  |                            | 4,000     
|                                                                                  |  |                            |           
|Net cash (used in) provided by investing activities                               |  |                            | (108,000  
|                                                                                  |  |                            |           
|Financing activities                                                              |  |                            |           
|Proceeds from long-term debt and lines of credit                                  |  |                            | 6,472,000 
|Proceeds from exercise of stock option                                            |  |                            |          
|Purchase of common stock under repurchase program                                 |  |                            | (812,000  
|Redemption of common stock                                                        |  |                            | (100,000  
|Payments on long-term debt and lines of credit                                    |  |                            | (7,271,000
|                                                                                  |  |                            |           
|Net cash used in financing activities                                             |  |                            | (1,711,000
|                                                                                  |  |                            |           
|Effect of exchange rates on cash                                                  |  |                            | (26,000   
|                                                                                  |  |                            |           
|Net change in cash                                                                |  |                            | 167,000   
|Cash, beginning of period                                                         |  |                            | 2,392,000 
|                                                                                  |  |                            |           
|Cash, end of period                                                               |  | $                          | 2,559,000 
|                                                                                  |  |                            |           

The
accompanying notes are an integral part of these statements.

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Video Display Corporation and Subsidiaries  Notes to Consolidated Financial Statements (unaudited)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and in accordance with instructions for Form 10-Q as found in Article 10 of Regulation S-X. Accordingly, such consolidated financial statements
do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of the results of operations for the periods covered have been reflected in the statements. The accompanying consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto for the year ended February 28, 2003 included in the Company's Annual Report on Form 10-K.

The
consolidated financial statements included the accounts of the Company and its majority owned subsidiaries after elimination of all significant intercompany accounts and
transactions. Certain prior period balances have been reclassified to conform to the current period presentation.

Assets
and liabilities of foreign subsidiaries are translated using the exchange rate in effect at the end of the period. Revenues and expenses are translated using the average of the
exchange rates in effect during the period. Translation adjustments and transaction gains and losses related to long-term intercompany transactions are accumulated as a separate component
of shareholders' equity. The Company has a subsidiary in the U.K., which is not material, and uses the British pound as its functional currency.

The
Company reported its Mexican subsidiary on the basis of the functional currency being the U.S. dollar, effective January 1, 1997, as over 90% of the subsidiary's sales and
purchases were with the parent with accounts receivable and accounts payable settled in U.S. dollars. The Mexican operations
were substantially shut down in the third quarter of fiscal 2003 and the cumulative translation losses were recognized as a charge against income in that fiscal year.

NOTE BADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees and Indebtedness of Others". FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002; while the
provisions of the disclosure requirements are effective for financial statements of interim or annual reports ending after December 15, 2002. The Company adopted the disclosure provisions of
FIN 45 during the fourth quarter of fiscal 2003 and such adoption did not have a material impact on the Company's consolidated financial statements. The recognition provisions of FIN 45 are not
expected to have a material adverse impact on the Company's consolidated results of operations or financial position.

In
January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities". In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors
that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires certain variable interest entities to be consolidated by the

7

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primary
beneficiary of the entity if the investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003.
The consolidation requirements apply to other entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable interest entity was established. Since the Company currently has identified no variable interest entities, management
expects that the adoption of the provisions of FIN 46 will not have a material impact on the Company's consolidated results of operations or financial position.

In
May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
requires three types of freestanding financial instruments to be classified as liabilities in statements of financial position. One type is mandatorily redeemable shares, which the issuing company is
obligated to buy back in exchange for cash or other assets. A second type, which includes put options and forward purchase contracts, involves instruments that do or may require the issuer to buy back
some of its shares in exchange for
cash or other assets. The third type of instruments are obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominately to a variable such as a market
index, or varies inversely with the value of the issuer's shares. The majority of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. In accordance with SFAS No. 150, the Company plans to adopt
this standard on September 1, 2003. Adoption of SFAS No. 150 by the Company on September 1, 2003 is not expected to have a material impact on the Company's consolidated financial
position and results of operations. During fiscal 2003, the Company issued $100,000 of redeemable common stock in exchange for inventory. During the first quarter ended May 31, 2003, the stock
was redeemed at the option of the holder for $100,000 cash.

There
were no other recently issued accounting pronouncements with delayed effective dates that would currently have a material impact on the Company's consolidated financial position
and results of operations.

NOTE CINVENTORIES

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

Inventories
consisted of the following:

May 31,
2003

February 28,
2003Raw materials and work-in-process

$
16,759,000

$
14,947,000Finished goods


14,607,000


16,213,00031,366,000


31,160,000Reserves for obsolescence


(2,650,000
)

(2,339,000
)$
28,716,000

$
28,821,000


8

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NOTE DLONG-TERM DEBT

Long-term debt consisted of the following:

|                                                                                                                                                                                                                                                                                 |  | May 31,
2003 |            | February 28,
2003 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ----------------- | -
|Term loan facility, floating interest rate based on an adjusted LIBOR rate (4.25% as of May 31, 2003), quarterly principal payments commenced November 1999 and maturing November 2005; collateralized by assets of Aydin
Display, Inc.                                          |  | $            | 2,813,000  |                   | $
|Term loan facility, interest rate of prime (4.25% as of May 31, 2003) plus 1.75%; monthly principal payments of $57,000 payable through July 2004 with a final balance due July 31, 2004 of $1,441,000; collateralized by inventories and receivables of
Fox International, Inc. |  |              | 2,238,000  |                   |  
|Note payable to bank; interest rate of prime plus 1.5%; monthly principal payments of $9,000 payable through May 2010; collateralized by assets of XKD Corporation.                                                                                                              |  |              | 576,000    |                   |  
|Mortgage payable to bank; interest not to exceed 7.5% and maturing December 2003; collateralized by land and building of Fox International, Inc.                                                                                                                                 |  |              | 578,000    |                   |  
|Mortgage payable to bank; interest rate of prime plus 0.5%; monthly principal and interest payments of $5,000 payable through October 2021; collateralized by land and building of Teltron Technologies, Inc.                                                                    |  |              | 584,000    |                   |  
|Other                                                                                                                                                                                                                                                                            |  |              | 532,000    |                   |  
|                                                                                                                                                                                                                                                                                 |  |              |            |                   |  
|                                                                                                                                                                                                                                                                                 |  |              | 7,321,000  |                   |  
|Less current portion                                                                                                                                                                                                                                                             |  |              | (2,714,000 | )                 |  
|                                                                                                                                                                                                                                                                                 |  |              |            |                   |  
|                                                                                                                                                                                                                                                                                 |  | $            | 4,607,000  |                   | $
|                                                                                                                                                                                                                                                                                 |  |              |            |                   |  

NOTE ELINE OF CREDIT

At May 31, 2003, the Company has a $9,500,000 credit facility with a bank. The interest rate on the line of credit is a floating LIBOR rate (3.8% at May 31, 2003)
based on a ratio of debt to EBITDA, as defined. The weighted average interest rate during the quarter ended May 31, 2003 and the year ended February 28, 2003 was 3.8% and 3.4%. The average amount and
maximum amount outstanding were $8,483,000 and $9,248,000, respectively, during the quarter ended March 31, 2003, and $8,801,000 and $9,524,000, respectively, during fiscal year 2003. The line of
credit expired on July 1, 2003 but was extended for 90 days until October 31, 2003. The outstanding amount under this line is classified as a current liability in the accompanying consolidated balance
sheets. Management is currently negotiating with its lender and expects to renew this line under terms that are no less favorable as those currently in place. A scheduled reduction of $500,000 has
been extended indefinitely while the Company negotiated changes to the line of credit. Borrowings under the line of credit are limited by eligible accounts receivable, inventory and real estate, as
defined, and includes a commitment fee of 0.25% for the unused portion. As of May 31, 2003, the outstanding balance on the line of credit was $8,801,000 and the available amount for borrowing was
$699,000.

The
line of credit agreement contains affirmative and negative covenants, including requirements related to tangible net worth and debt service coverage. Additionally, dividend payments,
capital expenditures and acquisitions have certain restrictions. Substantially all of the Company's retained earnings are restricted based upon these covenants. As of February 28, 2003, the Company
was not in

9

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compliance
with the minimum debt service ratio, the senior funded debt to EBITDA ratio (due to the third quarter adjustment and write-off of inventories, equipment and other assets as a result of the
internal reorganization and closure of three facilities) and additional indebtedness. Subsequent to February 28, 2003, the bank waived those covenant violations. As of May 31, 2003 subject to the
waivers, the Company is in compliance with its loan covenants.

NOTE FSUPPLEMENTAL CASH FLOW INFORMATION

|                                                              |  | Three Months
Ended
|------------------------------------------------------------- |  | ------------------
|
|Cash Paid for:                                                |  |                   
|Interest                                                      |  | $                 
|                                                              |  |                   
|Income taxes, net of refunds                                  |  | $                 
|                                                              |  |                   
|Non-cash Transactions:                                        |  |                   
|Issuance of redeemable common stock for purchase of inventory |  | $                 
|                                                              |  |                   

NOTE GSHAREHOLDERS' EQUITY

Earnings Per Share

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

The
following is a reconciliation from basic earnings per share to diluted earnings per share for each of the periods presented.

|                           |                  | Net Income |         | Weighted
Average Shares
Outstanding |           | Earnings Per Share
|-------------------------- | ---------------- | ---------- | ------- | ----------------------------------- | --------- | ------------------
|Quarter ended May 31, 2003 |                  |            |         |                                     |           |                   
|Basic                      |                  | $          | 781,000 |                                     | 4,640,000 |                   
|Effect of dilution:        |                  |            |         |                                     |           |                   
|                           | Options          |            |         |                                    |           | 84,000            
|                           | Convertible debt |            |         | 13,000                              |           | 244,000           
|                           |                  |            |         |                                     |           |                   
|Diluted                    |                  | $          | 794,000 |                                     | 4,968,000 |                   
|                           |                  |            |         |                                     |           |                   
|Quarter ended May 31, 2002 |                  |            |         |                                     |           |                   
|Basic                      |                  | $          | 339,000 |                                     | 4,756,000 |                   
|Effect of dilution:        |                  |            |         |                                     |           |                   
|                           | Options          |            |         |                                    |           | 111,000           
|                           | Convertible debt |            |         | 12,000                              |           | 240,000           
|                           |                  |            |         |                                     |           |                   
|Diluted                    |                  | $          | 351,000 |                                     | 5,107,000 |                   
|                           |                  |            |         |                                     |           |                   

10

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Stock-Based Compensation Plans

The Company has an incentive stock option plan whereby total options to purchase 600,000 shares may be granted to key employees at a price not less than fair
market value at the time the options are granted and are exercisable beginning on the first anniversary of the grant date for a period not to exceed ten years. Statement of Financial Accounting
Standards No. 123 encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock. The option price of all the Company's stock options is equal to the market value of the stock at the grant date. No stock options were granted during the quarters ended May 31, 2003
and 2002, respectively, and, as such, no related compensation expense is recorded in the accompanying consolidated financial statements.

Had
compensation cost been determined based upon the fair value at the grant date for awards under the stock option plan consistent with the methodology prescribed under SFAS No. 123,
the effect on the Company's pro forma net income and net income per share would have been as follows:

Three Months
EndedMay 31,
2003

May 31,
2002Net income, as reported

$
781,000

$
339,000Stock-based employee compensation expense determined under fair value basis, net of tax


(12,000
)

(8,000
)Pro forma net income

$
769,000

$
331,000Net (loss) earnings per share:Basicas reported

$
0.17

$
0.07Basicpro forma

$
0.17

$
0.07Dilutedas reported

$
0.16

$
0.07Dilutedpro forma

$
0.16

$
0.07


Stock Repurchase Program

The Company has a stock repurchase program, pursuant to which it is authorized to repurchase up to 462,500 shares of the Company's common stock in the open
market. As part of this program, the Company repurchased 125,000 shares of common stock for $812,000 during the quarter ended May 31, 2003. No shares were repurchased in the first quarter of the prior
fiscal year.

11

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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 consolidated financial statements and with the Company's 2003 Annual Report to
Stockholders, which included audited financial statements and notes thereto for the fiscal year ended February 28, 2003, as well as Management's Discussion and Analysis of Financial Condition
and Results of Operations.

Results of Operations

The following table sets forth, for the three months ended May 31, 2003 and 2002, the percentages which selected items in the Statements of Income bear to
total sales:

Three Months Ended
May 31,2003

2002SalesCRT SegmentMonitors

58.4
%
56.6
%Data Display CRT's

9.9

12.5Entertainment CRT's

8.0

9.3Electron Guns and Components

2.1

1.6Wholesale Consumer Parts Segment

21.6

20.0100.0
%
100.0
%Costs and expensesCost of goods sold

67.2
%
67.6
%Selling and delivery

9.4

10.8General and administrative

15.3

17.891.9
%
96.2
%Income from Operations

8.1

3.8Interest expense

(1.7
)
(1.3
)Other income (expense)

0.2

0.5Income before income taxes

6.6

3.0Provision for income taxes

(2.5
)
(1.2
)Net income

4.1
%
1.8
%


Net sales

Consolidated net sales increased $194,000 for the quarter ended May 31, 2003 as compared to the quarter ended May 31, 2002. CRT division sales
decreased $135,000 while wholesale division sales increased $329,000 for the comparative periods.

CRT
segment sales included increases within the monitor and component parts divisions of $487,000 and $97,000 respectively for the comparative periods. Offsetting declines were posted to
the data display and entertainment divisions of $482,000 and $237,000, respectively, for the same comparative periods.

Increases
in the monitor division were experienced by Display Systems (projection simulation), Lexel (radar displays) and XKD (cockpit displays). These revenues are the continuation of
contracts started in third and fourth quarters of fiscal 2003.

12

---

Offsetting
declines in the data display division reflect the sluggish replacement market for cathode ray tubes. These declines are not attributed to the loss of any particular customers,
but rather a reflection of customer decisions to purchase new monitors with updated products and technologies instead of repairing older tubes.

The
entertainment sales division declines continue to reflect the declines of in-warranty replacement tubes to major television set distributors. Projection tube sales for
in-home theater and commercial applications increased slightly for the comparable periods.

The
increase in sales of the wholesale parts segment of $329,000 includes increases of $284,000 related to the distribution agreements Fox International, Inc. has with Applica
(Black and Decker) and Norelco. The remainder of the increase was with a major national distributor with slight offsetting declines from retail consumers.

Gross margins

Consolidated gross profit margins increased slightly to 32.8% from 32.4% for the quarter ended May 31, 2003 as compared to May 31, 2002. CRT segment
margins decreased from 29.5% to 28.4% while the wholesale consumer parts segment increased to 48.4% from 45.8% for the comparable periods.

Wholesale
parts segment margins increased primarily due to the Applica Incorporated and Norelco distribution agreements. Those revenues include a handling charge and shipping revenue,
which accounts for approximately 75% to 80% profit margin.

Operating expenses

Operating expenses as a percentage of sales decreased to 24.7% for the quarter ended May 31, 2003 as compared to 28.6% for the quarter ended May 31,
2002. CRT segment operating expenses decreased $796,000 and the wholesale segment expenses increased $109,000 from the comparative period a year ago.

CRT
expense decreases included the elimination of $371,000 of operation expenses for three locations closed by the Company in the third quarter of fiscal 2003. There was also an
approximate 10% reduction in personnel in the third and fourth quarters of fiscal 2003 resulting in a corresponding decrease in salary and wages for the comparative first quarters.

Wholesale
segment expenses include increases of $183,000 in commissions, delivery and wage expense resulting from the additional costs associated with the Applica and Norelco
distribution agreements.

Interest expense

Interest expense increased $68,000 in the first quarter of fiscal 2003 as compared to the first quarter of fiscal 2002. The Company maintains various debt
agreements with different interest rates, most of which are based on the prime rate or LIBOR. While overall debt decreased for the comparative periods, there was an increase of debt at slightly higher
interest rates for the period ended May 31, 2003 as compared to a year ago.

Income taxes

The effective tax rate for the quarter ended May 31, 2003 is 38.0% as compared to 40.8% a year ago. These rates are greater than the Federal statutory rate
primarily due to the effect of state taxes and the permanent non-deductibility of certain expenses for tax purposes.

13

---

Foreign currency translation

In the third quarter of fiscal 2003, the Company closed its Mexico operations. Prior to this, the Company's Mexican subsidiary reported on the basis of the
functional currency as being the US dollar and any exchange gains or losses due to the actual exchange of pesos and US dollars were reflected in the Company's income statement. There were no
significant transaction gains or losses related to the Mexican subsidiary for the period ended May 31, 2002.

Gains
or losses resulting from the transactions with its UK subsidiary are reported in current operations while currency translation adjustments are recognized in a separate component of
shareholders' equity. There were no significant gains or losses recognized in either period related to the UK subsidiary.

Liquidity and capital resources

As of May 31, 2003, the Company had total cash and cash equivalents of $2,559,000. The Company's working capital was $26,383,000 and $26,739,000 at
May 31, 2003 and February 28, 2003.

Cash
provided by operations for the period ended May 31, 2003 was $2,012,000 as compared to cash used in operations of $714,000 in the same period a year ago. Net income for the
first quarter ended May 31, 2003 adjusted for non-cash items provided cash of $1,135,000. Decreases in accounts receivable, inventories and prepaid expenses provided cash of
$918,000 for the quarter ended May 31, 2003. During the quarter ended May 31, 2002, operating cash flows were provided primarily by net income adjusted for non-cash items of
$825,000. Offsetting increases in accounts receivable, and accounts payables and declines in prepaids used cash of $1,531,000.

The
decrease in accounts receivable of $563,000 during the first quarter of fiscal 2003 was due primarily to improved collection efforts. The decrease in inventories of $105,000 was
primarily attributable to the timing of purchases related to contract revenues and overseas purchasing requirements. The decrease in prepaid expenses and accounts payable and accrued liabilities
reflects the net effects of tax payments in the first quarter of fiscal 2003.

Investing
activities used $108,000 in the first quarter of fiscal 2003. Included in this were acquisitions of property, plant and equipment of $112,000.

Financing
activities used $1,711,000 in the first quarter of fiscal 2003. There were no new debt agreements entered into in the first quarter of fiscal 2003. Cash generated from
operations was used to
pay down debt of $799,000 and to repurchase and redeem common stock of $912,000 during the first quarter of fiscal 2003.

The
Company's debt agreements contain affirmative and negative covenants, including requirements related to tangible net worth and debt service coverage and new loans. Additionally,
dividend payments, capital expenditures and acquisitions have certain restrictions. Substantially all of the Company's retained earnings are restricted based upon these covenants. The Company's line
of credit with its primary lender expired July 1, 2003.

Management
is negotiating the renewal of its line of credit with its current lender. Management anticipates being able to renew financing with its current lender or obtain new financing
from another lender under terms not less favorable to those that presently exist, and that such financing will be adequate to meet the Company's liquidity needs for the fiscal year ending
February 2004.

The
Company has a stock repurchase program, pursuant to which it is authorized to repurchase up to 462,500 shares of the Company's common stock in the open market. As part of this
program, the Company repurchased 125,000 shares for $812,000 during the quarter ended May 31, 2003.

The
Company does not anticipate any significant investment in capital assets for fiscal 2004.

14

---

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

Critical Accounting Policies

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

Reserves on inventories

Reserves on inventories result in a charge to operations when the estimated net realizable value declines below cost. Management regularly reviews the Company's
investment in inventories for declines in value and establishes reserves when it is apparent that the expected realizable value of the inventory falls below its original cost. The age of the inventory
is not as significant as is the projected demand for CRTs. Management is able to identify consumer buying trends, such as size and application, well in advance of supplying replacement CRTs. Thus, the
Company is able to adjust inventory-stocking levels according to the projected demand. The average life of a CRT is five to seven years, at which time the Company's replacement market develops. These
reviews include observations of product development trends of the OEM's, new products being marketed, and technological advances relative to the product capabilities of the Company's existing
inventories.

Revenue Recognition

Revenue from product sales is recognized when goods are shipped. The Company does not offer rights of return to customers; however, it does offer one and
two-year limited warranties on certain products.

Revenue
from contracts that are long-term in nature is recognized by the percentage of completion method. Profit estimates are revised periodically based upon actual costs
incurred. Any expected losses identified on contracts are recognized immediately. Revenue related to short-term contracts is recognized upon shipment of product, which is typically
mandated by set delivery dates in the related contract.

Allowance for bad debts

The allowance for bad debts is determined by reviewing known customer exposures and applying historical 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 and overall trends in past due accounts compared to established thresholds. The
company monitors credit exposure and assesses the adequacy of the allowance for bad debts on a regular basis.

15

---

Warranty reserves

The warranty reserve is determined by recording a specific reserve for known warranty issues and a general reserve based on historical claims experience. Actual
claims incurred could differ from the original estimates, requiring adjustments to the reserve.

Other Accounting Policies

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

Forward-Looking Information

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. Among the factors that could cause actual results to differ materially are the following: business conditions, rapid or
unexpected technological changes, product development, inventory risks due to shifts in product demand, competition, domestic and foreign government relations, fluctuations in foreign exchange rates,
rising costs for components or unavailability of components, the timing of orders booked, lender relationships, and the risk factors listed from time to time in the Company's reports filed with the
Commission.

16

---

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's primary market risks include fluctuations in interest rates and variability in interest rate spread relationships, such as prime to LIBOR spreads.
Approximately $24,513,000 of outstanding debt
at May 31, 2003 related to long-term indebtedness under variable rate debt. Interest on the outstanding balance of this debt will be charged based on a variable rate related to the
prime rate or the LIBOR rate. Both rate bases are incremented for margins specified in their agreements. Thus, the Company's interest rate is subject to market risk in the form of fluctuations in
interest rates. The effect of a hypothetical one percentage point increase across all maturities of variable rate debt would result in an decrease of approximately $245,000 in pre-tax net
income assuming no further changes in the amount of borrowings subject to variable rate interest from amounts outstanding at May 31, 2003. The Company does not trade in derivative financial
instruments.

The
Company has a subsidiary in the U.K., which is not material, but uses the British pound as its functional currency. Due to its limited operations outside of the U.S., the Company's
exposure to changes in foreign currency exchange rates between the U.S. dollar and foreign currencies or to weakening economic conditions in foreign markets is not expected to significantly impact the
Company's financial position.

ITEM 4. CONTROLS AND PROCEDURES



17

---





PART II

Item 1. Legal Proceedings

No new legal proceedings or material changes in existing litigation occurred during the quarter ended May 31, 2003.

Item 2. Changes in 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 and Reports on Form 8-K

The Company filed one report on Form 8-K dated May 22, 2003, pertaining to its fourth quarter and annual earnings release for fiscal
2003.

18

---



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,
thereto duly authorized.

|              |  | VIDEO DISPLAY CORPORATION
|------------- |  | -------------------------
|              |  |                          
|July 15, 2003 |  | By:                      
|              |  |                          
|              |  | By:                      

19

---

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,
Ronald D. Ordway, certify that:

|Date: July 15, 2003 |  | /s/RONALD D. ORDWAYRonald D. Ordway
Chief Executive Officer
|------------------- |  | -----------------------------------------------------------

20

---

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,
Carol D. Franklin, certify that:

|Date: July 15, 2003 |  | /s/CAROL D. FRANKLINCarol D. Franklin
Chief Financial Officer
|------------------- |  | -------------------------------------------------------------

21

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