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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended February 29, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from _____________to______________
 Commission file number 0-13394
 
 VIDEO DISPLAY CORPORATION
  Georgia
(State of Incorporation)
    
    58-1217564
(IRS Employer Identification No.)1868 Tucker Industrial Road, Tucker Georgia
(Address of principal executive offices)
    
    30084
(Zip code)
 (770) 938-2080
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, no par value
    
    NASDAQ/NMS
  o þ
 
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller reporting company þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



VIDEO DISPLAY CORPORATION
TABLE OF CONTENTS
 ITEM
    
    
    
    PAGENUMBER
    
    
    
    NUMBERPART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    12Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
    
    
    14Issuer Purchases of Equity Securities
    
    
    15Item 6.
    
    Selected Financial Data
    
    
    15Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 8.
    
    Financial Statements and Supplementary Data
    
    
    28Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    55Item 9A(T).
    
    Controls and Procedures
    
    
    55Item 9B.
    
    Other Information
    
    
    58PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    58Item 11.
    
    Executive Compensation
    
    
    58Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    58Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    58Item 14.
    
    Principal Accounting Fees and Services
    
    
    59PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    59Signatures
    
    
    61EX-21 SUBSIDIARY COMPANIESEX-23.1 CONSENT OF CARR, RIGGS & INGRAM, LLCEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO




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PART I
 
 Item 1.
    
    Business.
 General
  Description of Principal Business
          2




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Segment Information
  Principal Products In Display Segment
 Monitors
   ®
   3




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Data Display CRTs and Entertainment CRTs
       Component Parts
   4




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Principal Products in Wholesale Distribution Segment
  Patents and Trademarks
  Seasonal Variations in Business
  Working Capital Practices
  Concentration of Customers
  5




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Backlog
  Government Contracts
  Environmental Matters
  Research and Development
  6




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Employees
  Competition
       7




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Item 1A. Risk Factors.
 Forward looking statements and risk factors
   Our industry is highly competitive and competitive conditions may adversely affect our business.
   Competitors or third parties may infringe on our intellectual property.
  8




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Migration to flat panel and other technology may negatively impact our CRT business.
   Future acquisitions may not provide benefits to the Company.
  Changes in government priorities may impact military spending, and our financial condition and
results of operations could suffer if their purchases decline.
  If we are unable to retain certain key personnel and hire new highly skilled personnel, we may not
be able to execute our business plan.
  Our business operations could be disrupted if our information technology systems fail to perform
adequately.
  9




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Changes to accounting rules or regulations may adversely affect our results of operations.
  The Companys stock price may be negatively affected by a variety of factors.
  Changes to estimates related to long term assets, or operating results that are lower than our
current estimates, may cause us to incur impairment charges.
  International factors could negatively affect our business.
  
    
    Economic downturns;
    
    Currency exchange rate and interest rate fluctuations;
    
    Changes in governmental policy, including, among others, those relating to taxation;
    
    International military, political, diplomatic and terrorist incidents;
    
    Government instability;
    
    Nationalization of foreign assets; and
    
    Tariffs and governmental trade policies.
  Our level of indebtedness could adversely affect the future operation of our business.
  
    
    making it more difficult for us to make payments on the
debt, as our business may not be able to generate sufficient
cash flows from operating activities to meet our debt
service obligations;
    
    increasing our vulnerability to general economic and industry conditions;
 10




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
    
    requiring a substantial portion of cash flow from operating
activities to be dedicated to the payment of our outstanding
lines of credit and long-term debt, and as a result reducing
our ability to use our cash flow to fund our operations and
capital expenditures, capitalize on future business
opportunities and expand our business and execute our
strategy;
    
    exposing us to the risk of increased interest rates since much of our borrowings are at variable rates of interest;
    
    causing us to make non-strategic divestitures;
    
    limiting our ability to obtain additional financing for
working capital, capital expenditures, debt service
requirements and other general corporate purposes; and
    
    limiting our ability to adjust to changing market conditions
and to react to competitive pressure and placing us at a
competitive disadvantage compared to our competitors who may
have lower debt leverage.
 Our debt agreements contain covenants that limit our flexibility in operating our business.
  
    
    incur additional indebtedness;
    
    make certain investments, loans or advances;
    
    transfer and sell certain assets;
    
    create or permit liens on assets;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
    
    engage in any business activity substantially different from our current businesses;
    
    pay dividends; and
    
    cause, permit or suffer a change in capital ownership.
  11




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Item 1B. Unresolved Staff Comments.
  
 Item 2.
Properties.
  Location
    
    Square Feet
    
    Lease ExpiresCRT, Monitor and Electron Gun  Manufacturing and Warehouse FacilitiesTucker, Georgia
    
    
    59,000
    
    
    October 31, 2008Stone Mountain, Georgia
    
    
    45,000
    
    
    December 31, 2007White Mills, Pennsylvania
    
    
    110,000
    
    
    Company OwnedBossier City, Louisiana
    
    
    26,000
    
    
    Company OwnedLye, England
    
    
    1,500
    
    
    October 1, 2008Birdsboro, Pennsylvania
    
    
    40,000
    
    
    Company Owned (a)Phelps, New York
    
    
    32,000
    
    
    Company OwnedCape Canaveral, Florida
    
    
    30,000
    
    
    January 17, 2009Lexington, Kentucky
    
    
    80,000
    
    
    March 31, 2010Wholesale Electronic Parts DistributionBedford Heights, Ohio
    
    
    60,000
    
    
    Company OwnedBedford Heights, Ohio
    
    
    40,000
    
    
    January 31, 2011Beachwood, Ohio
    
    
    16,000
    
    
    July 31, 2010Richardson, Texas
    
    
    13,000
    
    
    April 30, 2012Buffalo, New York
    
    
    30,000
    
    
    November 30, 2009
 
 (a)
    
    The Birdsboro, Pennsylvania property secures mortgage loans from a bank with
a principal balance of $0.5 million as of February 29, 2008. This mortgage loan
bears an interest rate of approximately 7.3%. Monthly principal and interest
payments of approximately $5,000 are payable through October 2021. 
 Item 3.
    
    Legal Proceedings.
  Barco Federal Systems, LLC and
Barco N.V., a Belgian corporation Aydin Displays, Inc. a Pennsylvania corporation
 12




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Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  13




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
   For Fiscal Years EndedFebruary 29, 2008
    
    
    February 28, 2007Quarter Ended
    
    High
    
    
    Low
    
    
    High
    
    
    LowMay
    
    $
    8.31
    
    
    $
    7.19
    
    
    $
    9.60
    
    
    $
    8.68August
    
    
    8.12
    
    
    
    7.45
    
    
    
    8.90
    
    
    
    7.69November
    
    
    8.72
    
    
    
    7.64
    
    
    
    8.73
    
    
    
    7.41February
    
    
    8.00
    
    
    
    6.28
    
    
    
    8.21
    
    
    
    7.16
   Securities Authorized for Issuance Under Equity Compensation Plans
  Number of securitiesNumber of
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    future issuance underissued upon exercise
    
    Weighted-average
    
    equity compensationof outstanding
    
    exercise price of
    
    plans (excludingoptions, warrants
    
    outstanding options,
    
    securities reflected inStock Option Plan
    
    and rights
    
    warrants and rights
    
    first column)Equity
compensation plans approved by security holders
    
    
    124,000
    
    
    $
    3.13
    
    
    
    710,000
 Recent Sales of Unregistered Securities
  14




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Issuer Purchases of Equity Securities
   Maximum Numberof Shares thatTotal
    
    
    
    
    
    Total Number of
    
    
    May Yet BeNumber
    
    
    Average
    
    
    Shares Purchased
    
    
    Purchased Underof
    
    
    Price
    
    
    as Part of Publicly
    
    
    the Plans orShares
    
    
    Paid Per
    
    
    Announced Plans
    
    
    Programs atFiscal Period
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    Period EndDecember 1, 2007 through
December 31, 2007
    
    
    15,920
    
    
    $
    7.43
    
    
    
    15,920
    
    
    
    438,351January 1, 2008 through
January 31, 2008
    
    
    47,935
    
    
    
    6.96
    
    
    
    47,935
    
    
    
    390,416February 1, 2008 through
February 29, 2008
    
    
    15,084
    
    
    
    7.42
    
    
    
    15,084
    
    
    
    375,332Total Fourth Quarter Fiscal 2008
    
    
    78,939
    
    
    $
    7.14
    
    
    
    78,939
    
    
    
    375,332
 
 Item 6.
    
    Selected Financial Data
  15




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 Disclosures about Segments of an Enterprise and Related Information.
 
    
    Monitor offers a wide range of CRT, flat panel and projection display systems for use
in training and simulation, military, medical and industrial applications.
    
    Data Display CRTs offers a wide range of CRTs for use in data display screens,
including computer terminal monitors and medical monitoring equipment.
    
    Entertainment CRTs offers a wide range of CRTs and projection tubes for television
and home theater equipment.
    
    Component Parts provides replacement electron guns and other components for CRTs
primarily for servicing the Companys internal needs.
  Inventory management
  16




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Interest rate exposure
 Operations
   2008
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %Net SalesDisplay SegmentMonitors
    
    $
    44,331
    
    
    
    50.3
    %
    
    $
    45,072
    
    
    
    55.0
    %Data Display CRTs
    
    
    11,285
    
    
    
    12.8
    
    
    
    9,839
    
    
    
    12.0Entertainment CRTs
    
    
    2,217
    
    
    
    2.5
    
    
    
    2,578
    
    
    
    3.2Component Parts
    
    
    454
    
    
    
    0.5
    
    
    
    397
    
    
    
    0.5Total Display Segment
    
    
    58,287
    
    
    
    66.1
    
    
    
    57,886
    
    
    
    70.7Wholesale Distribution Segment
    
    
    29,914
    
    
    
    33.9
    
    
    
    24,053
    
    
    
    29.3$
    88,201
    
    
    
    100.0
    %
    
    $
    81,939
    
    
    
    100.0
    %Costs and expensesCost of goods sold
    
    $
    59,706
    
    
    
    67.7
    %
    
    $
    54,347
    
    
    
    66.3
    %Selling and delivery
    
    
    7,725
    
    
    
    8.8
    
    
    
    7,880
    
    
    
    9.6General and administrative
    
    
    15,565
    
    
    
    17.6
    
    
    
    14,860
    
    
    
    18.182,996
    
    
    
    94.1
    
    
    
    77,087
    
    
    
    94.0Income from operations
    
    
    5,205
    
    
    
    5.9
    
    
    
    4,852
    
    
    
    5.9Interest expense
    
    
    (1,771
    )
    
    
    (2.0
    )
    
    
    (2,086
    )
    
    
    (2.5
    )Other income, net
    
    
    500
    
    
    
    0.6
    
    
    
    17
    
    
    
    0.0Income before income taxes
    
    
    3,934
    
    
    
    4.5
    
    
    
    2,783
    
    
    
    3.4Provision for income taxes
    
    
    1,163
    
    
    
    1.3
    
    
    
    1,160
    
    
    
    1.4Net income
    
    $
    2,771
    
    
    
    3.2
    %
    
    $
    1,623
    
    
    
    2.0
    %
 17




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Fiscal 2008 Compared to Fiscal 2007
         18




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Fiscal 2007 Compared to Fiscal 2006
   19




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20




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Managements Discussion of Liquidity and Capital Resources
    21




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22




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Transactions with Related Parties, Contractual Obligations and Commitments
   23




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Contractual Obligations
  Payments due by periodLess than
    
    
    1 - 3
    
    
    3 - 5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsLong-term debt obligations
    
    $
    20,746
    
    
    $
    1,276
    
    
    $
    17,205
    
    
    $
    1,099
    
    
    $
    1,166Capital lease obligations
    
    
    473
    
    
    
    164
    
    
    
    309
    
    
    
    
    
    
    
    Interest obligations on
long-term debt and capital
lease obligations (a)
    
    
    3,590
    
    
    
    1,622
    
    
    
    1,222
    
    
    
    358
    
    
    
    388Operating lease obligations
    
    
    4,079
    
    
    
    1,980
    
    
    
    1,834
    
    
    
    252
    
    
    
    13Purchase obligations
    
    
    2,851
    
    
    
    2,851
    
    
    
    
    
    
    
    
    
    
    
    Warranty reserve obligations
    
    
    576
    
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    32,315
    
    
    $
    8,469
    
    
    $
    20,570
    
    
    $
    1,709
    
    
    $
    1,567
 
 (a)
    
    This line item was calculated by utilizing the effective rate on outstanding debt as of
February 29, 2008. Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Reserves on inventories
  24




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Revenue and profit or loss recognition
     Allowance for bad debts
  Warranty reserves
  25




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Other loss contingencies
  Recent Accounting Pronouncements
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That is, Gross versus Net Presentation)
 Accounting for Uncertainty
in Income Taxes Accounting for Income Taxes
 Fair Value Measurements
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 26




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Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
 The Fair Value Option for Financial
Assets and Financial Liabilities.
 Business Combinations. purchase method
 Noncontrolling Interest in Consolidated Financial
Statements.
 27




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Impact of Inflation
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
    
 
 Item 8.
    
    Financial Statements and Supplementary Data.
   Report of Independent Registered Public Accounting Firm
    
    
    29Consolidated Balance Sheets as of February 29, 2008 and February 28, 2007
    
    
    30Consolidated Statements of Operations for the years ended
February 29, 2008 and February 28, 2007
    
    
    32Consolidated Statements of Shareholders Equity and Comprehensive Income for the
years ended February 29, 2008 and February 28, 2007
    
    
    33Consolidated Statements of Cash Flows for the years ended
February 29, 2008 and February 28, 2007
    
    
    34Notes to Consolidated Financial Statements
    
    
    35
 28




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Report of Independent Registered Public Accounting Firm
 
     
 29




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February 29,
    
    
    February 28,2008
    
    
    2007AssetsCurrent AssetsCash
    
    $
    1,636
    
    
    $
    1,226Accounts receivable, less allowance for
bad debts of $201 and $458, respectively
    
    
    10,373
    
    
    
    10,497Inventories, net
    
    
    34,550
    
    
    
    33,344Cost and estimated earnings in excess of
billings on uncompleted contracts
    
    
    2,225
    
    
    
    2,963Deferred income taxes
    
    
    2,998
    
    
    
    3,042Income taxes refundable
    
    
    672
    
    
    
    Prepaid expenses and other current assets
    
    
    367
    
    
    
    737Total current assets
    
    
    52,821
    
    
    
    51,809Property, plant and equipment:Land
    
    
    585
    
    
    
    585Buildings
    
    
    8,258
    
    
    
    8,223Machinery and equipment
    
    
    20,943
    
    
    
    20,19629,786
    
    
    
    29,004Accumulated depreciation
    
    
    (22,470
    )
    
    
    (21,084
    )Net property, plant and equipment
    
    
    7,316
    
    
    
    7,920Goodwill
    
    
    1,343
    
    
    
    1,343Intangible assets, net
    
    
    2,954
    
    
    
    3,894Deferred income taxes
    
    
    192
    
    
    
    Other assets
    
    
    74
    
    
    
    121Total assets
    
    $
    64,700
    
    
    $
    65,087
  30




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February 29,
    
    
    February 28,2008
    
    
    2007Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    7,334
    
    
    $
    6,325Accrued liabilities
    
    
    5,074
    
    
    
    4,054Billings in excess of cost and estimated
earnings on uncompleted contracts
    
    
    
    
    
    
    34Current maturities of notes payable to officers and directors
    
    
    648
    
    
    
    446Convertible notes payable, net of discount
of $75
    
    
    
    
    
    
    1,175Income taxes payable
    
    
    
    
    
    
    61Current maturities of long-term debt
and financing lease obligations
    
    
    789
    
    
    
    726Total current liabilities
    
    
    13,845
    
    
    
    12,821Lines of credit
    
    
    15,164
    
    
    
    13,593Long-term debt, less current maturities
    
    
    1,928
    
    
    
    2,550Financing lease obligations, less current maturities
    
    
    313
    
    
    
    269Notes payable to officers and directors,
less current maturities
    
    
    2,377
    
    
    
    5,619Other long-term liabilities
    
    
    123
    
    
    
    623Deferred income taxes
    
    
    
    
    
    
    71Total liabilities
    
    
    33,750
    
    
    
    35,546Commitments and contingencies (See Note 15)Shareholders EquityPreferred
stock, no par value  10,000 shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, no par value  50,000 shares
authorized; 9,707 issued and 9,491 outstanding
at February 29, 2008, and 9,707 issued and 9,600
outstanding at February 28, 2007
    
    
    7,293
    
    
    
    7,284Additional paid-in capital
    
    
    127
    
    
    
    171Retained earnings
    
    
    26,147
    
    
    
    23,376Accumulated other comprehensive income
    
    
    85
    
    
    
    95Treasury stock, 275 shares at February 29, 2008 and 166 shares at
February 28, 2007 at cost
    
    
    (2,702
    )
    
    
    (1,385
    )Total shareholders equity
    
    
    30,950
    
    
    
    29,541Total liabilities and shareholders equity
    
    $
    64,700
    
    
    $
    65,087
  31




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February 29,
    
    
    February 28,2008
    
    
    2007Net sales
    
    $
    88,201
    
    
    $
    81,939Cost of goods sold
    
    
    59,706
    
    
    
    54,347Gross profit
    
    
    28,495
    
    
    
    27,592Operating expensesSelling and delivery
    
    
    7,725
    
    
    
    7,880General and administrative
    
    
    15,565
    
    
    
    14,86023,290
    
    
    
    22,740Operating income
    
    
    5,205
    
    
    
    4,852Other income (expense)Interest expense
    
    
    (1,771
    )
    
    
    (2,086
    )Other, net
    
    
    500
    
    
    
    17(1,271
    )
    
    
    (2,069
    )Income before income taxes
    
    
    3,934
    
    
    
    2,783Provision for income taxes
    
    
    1,163
    
    
    
    1,160Net income
    
    $
    2,771
    
    
    $
    1,623Net income per share  basic
    
    $
    0.29
    
    
    $
    0.17Net income per share  diluted
    
    $
    0.29
    
    
    $
    0.16Average shares outstanding  basic
    
    
    9,583
    
    
    
    9,648Average shares outstanding  diluted
    
    
    9,664
    
    
    
    9,838
  32




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##### Table of Contents



Accumulated
    
    
    
    
    
    
    CurrentAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    YearCommon
    
    
    Share
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    IncomeBalance, February 28, 2006
    
    
    9,628
    
    
    
    7,198
    
    
    
    92
    
    
    
    21,771
    
    
    
    (172
    )
    
    
    (859
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,623
    
    
    
    
    
    
    
    
    
    
    $
    1,623Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    267Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,890Issuance of common stock
under stock option plan
    
    
    52
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
from treasury
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    268Repurchase of treasury stock
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (794
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    Balance, February 28, 2007
    
    
    9,600
    
    
    
    7,284
    
    
    
    171
    
    
    
    23,376
    
    
    
    95
    
    
    
    (1,385
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,771
    
    
    
    
    
    
    
    
    
    
    $
    2,771Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,761Issuance of common stock
under stock option plan
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
from treasury
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of treasury stock
    
    
    (176
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,317
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    Balance, February 29, 2008
    
    
    9,491
    
    
    $
    7,293
    
    
    $
    127
    
    
    $
    26,147
    
    
    $
    85
    
    
    $
    (2,702
    )
  33




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##### Table of Contents



February 29,
    
    
    February 28,2008
    
    
    2007Operating ActivitiesNet income
    
    $
    2,771
    
    
    $
    1,623Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    2,354
    
    
    
    2,250Allowance for bad debts
    
    
    (257
    )
    
    
    98Reserves on inventories
    
    
    1,875
    
    
    
    1,748Non-cash charge for share based compensation
    
    
    (44
    )
    
    
    79Deferred income taxes
    
    
    (219
    )
    
    
    (252
    )Interest on convertible note
    
    
    
    
    
    
    38Loss on disposal of property, plant and equipment
    
    
    29
    
    
    
    9Changes in working capital items, net of effect of
acquisitions:Accounts receivable
    
    
    380
    
    
    
    (992
    )Inventories
    
    
    (3,081
    )
    
    
    2,120Cost,
estimated earnings and billings, net on uncompleted contracts
    
    
    705
    
    
    
    (2,926
    )Prepaid expenses and other assets
    
    
    (816
    )
    
    
    848Accounts payable and accrued liabilities
    
    
    2,028
    
    
    
    (417
    )Net cash provided by operating activities
    
    
    5,725
    
    
    
    4,226Investing ActivitiesCapital expenditures
    
    
    (839
    )
    
    
    (445
    )Cash paid for acquisition
    
    
    
    
    
    
    (550
    )Cash received from sale of property, plant and
equipment
    
    
    
    
    
    
    159Net cash used in investing activities
    
    
    (839
    )
    
    
    (836
    )Financing ActivitiesProceeds from long-term debt, lines of credit
and financing lease obligations
    
    
    22,749
    
    
    
    48,773Repayments of long-term debt, lines of credit
and financing lease obligations
    
    
    (22,867
    )
    
    
    (51,191
    )Proceeds on notes payable from officers and
directors
    
    
    1,103
    
    
    
    3,220Repayments of notes payable to officers and directors
    
    
    (4,143
    )
    
    
    (4,102
    )Proceeds from stock option exercises
    
    
    9
    
    
    
    86Purchases and retirements of common stock and
purchases of treasury stock
    
    
    (1,317
    )
    
    
    (794
    )Net cash used in financing activities
    
    
    (4,466
    )
    
    
    (4,008
    )Effect of exchange rates on cash
    
    
    (10
    )
    
    
    267Net change in cash
    
    
    410
    
    
    
    (351
    )Cash, beginning of year
    
    
    1,226
    
    
    
    1,577Cash, end of year
    
    $
    1,636
    
    
    $
    1,226
 
 34




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##### Table of Contents



Note 1. Summary of Significant Accounting Policies
 Fiscal Year
  Nature of Business
  Principles of Consolidation
  Reclassifications
  Use of Estimates
  Revenue Recognition
  35




---



##### Table of Contents



Research and Development
  Financial Instruments
  Accounts Receivable and Allowance for Doubtful Accounts
  36




---



##### Table of Contents



Warranty Reserves
  Inventories
   Property, Plant and Equipment
   Goodwill and Other Intangibles
   37




---



##### Table of Contents



Stock-Based Compensation Plans
 Share-Based Payment Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
   Comprehensive Income
  Stock Repurchase Program
  38




---



##### Table of Contents



Taxes on Income
 Accounting for Income Taxes,
 Accounting for Uncertainty
in Income Taxes
   Foreign Currency Translations
  Earnings Per Share
  39




---



##### Table of Contents



AverageShares
    
    
    Net IncomeNet Income
    
    
    Outstanding
    
    
    Per Share2008Basic
    
    $
    2,771
    
    
    
    9,583
    
    
    $
    0.29Effect of dilution:Options
    
    
    
    
    
    
    81Diluted
    
    $
    2,771
    
    
    
    9,664
    
    
    $
    0.292007Basic
    
    $
    1,623
    
    
    
    9,648
    
    
    $
    0.17Effect of dilution:Options
    
    
    
    
    
    
    190Diluted
    
    $
    1,623
    
    
    
    9,838
    
    
    $
    0.16
  Segment Reporting
 Disclosures about Segments of an Enterprise and Related
Information
 Recent Accounting Pronouncements
 How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net
Presentation).
 Fair Values Measurements.
 40




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##### Table of Contents



Employers Accounting for Defined
Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
 The Fair Value Option for Financial
Assets and Financial Liabilities.
 Business Combinations. purchase method
 41




---



##### Table of Contents



Noncontrolling Interest in Consolidated
Financial Statements.
 Note 2. Costs and Estimated Earnings Related to Billings on Uncompleted Contracts
  February 29,
    
    
    February 28,2008
    
    
    2007Costs incurred to date on uncompleted contracts
    
    $
    7,325
    
    
    $
    4,127Estimated earnings recognized to date on these contracts
    
    
    1,617
    
    
    
    1,2038,942
    
    
    
    5,330Billings to date
    
    
    (6,717
    )
    
    
    (2,401
    )Costs and estimated earnings in excess of billings, net
    
    $
    2,225
    
    
    $
    2,929Costs and estimated earnings in excess of billings
    
    $
    2,225
    
    
    $
    2,963Billings in excess of costs and estimated earnings
    
    
    
    
    
    
    (34
    )$
    2,225
    
    
    $
    2,929
   42




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##### Table of Contents



Note 3. Intangible Assets
  February 29, 2008
    
    
    February 28, 2007Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer lists
    
    $
    3,611
    
    
    $
    1,635
    
    
    $
    3,611
    
    
    $
    1,089Non-compete agreements
    
    
    1,245
    
    
    
    803
    
    
    
    1,245
    
    
    
    552Patents/designs
    
    
    765
    
    
    
    274
    
    
    
    765
    
    
    
    154Other intangibles
    
    
    149
    
    
    
    104
    
    
    
    149
    
    
    
    81$
    5,770
    
    
    $
    2,816
    
    
    $
    5,770
    
    
    $
    1,876
  Year
    
    Amort. Exp.2009
    
    $
    8832010
    
    $
    6642011
    
    $
    2382012
    
    $
    1822013
    
    $
    138Thereafter
    
    $
    849
 Note 4. Business Acquisitions
  43




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##### Table of Contents



Note 5. Inventories
  February 29,
    
    
    February 28,2008
    
    
    2007Raw materials
    
    $
    19,028
    
    
    $
    19,540Work-in-process
    
    
    6,699
    
    
    
    4,210Finished goods
    
    
    14,374
    
    
    
    14,98040,101
    
    
    
    38,730Reserves for obsolescence
    
    
    (5,551
    )
    
    
    (5,386
    )$
    34,550
    
    
    $
    33,344
 44




---



##### Table of Contents



Note 6. Long-Term Debt
  February 29,
    
    
    February 28,2008
    
    
    2007Note payable to bank syndicate (RBC
Centura and Regions Bank); interest
rate at LIBOR plus applicable margin as
defined per the loan agreement, (5.11%
combined rate as of February 29, 2008);
monthly principal payments of $50 plus
accrued interest, payable through July
2011; collateralized by all assets of
the Company.
    
    $
    2,050
    
    
    $
    2,650Mortgage payable to bank; interest rate
at Federal Home Loan Bank Board Index
rate plus 1.95% (7.25% as of February
29, 2008); monthly principal and
interest payments of $5 payable through
October 2021; collateralized by land
and building of Teltron Technologies,
Inc.
    
    
    500
    
    
    
    521Other
    
    
    6
    
    
    
    162,556
    
    
    
    3,187Financing lease obligations
    
    
    474
    
    
    
    3583,030
    
    
    
    3,545Less current maturities
    
    
    (789
    )
    
    
    (726
    )$
    2,241
    
    
    $
    2,819
  Year
    
    Amount2009
    
    $
    7892010
    
    
    7992011
    
    
    7602012
    
    
    2782013
    
    
    30Thereafter
    
    
    374$
    3,030
 Note 7. Lines of Credit
  45




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##### Table of Contents



Note 8. Notes Payable to Officers and Directors
   Note 9. Convertible Notes Payable
   Note 10. Accrued Expenses and Warranty Obligations
  46




---



##### Table of Contents



2008
    
    
    2007Balance at beginning of year
    
    $
    363
    
    
    $
    510Provision for current year sales
    
    
    941
    
    
    
    769Warranty costs incurred
    
    
    (728
    )
    
    
    (916
    )Balance at end of year
    
    $
    576
    
    
    $
    363
  February 29, 2008
    
    
    February 28, 2007Accrued compensation and benefits
    
    $
    1,219
    
    
    $
    1,261Accrued liability to issue stock
    
    
    1,625
    
    
    
    1,125Accrued warranty
    
    
    576
    
    
    
    363Accrued customer advances
    
    
    173
    
    
    
    338Accrued other
    
    
    1,481
    
    
    
    967$
    5,074
    
    
    $
    4,054
 Note 11. Stock Options
   47




---



##### Table of Contents



Number of
    
    
    Average ExerciseShares
    
    
    Price(in thousands)
    
    
    Per ShareOutstanding at February 28, 2006
    
    
    310
    
    
    $
    4.24Granted
    
    
    
    
    
    
    Exercised
    
    
    (52
    )
    
    
    1.67Forfeited or expired
    
    
    (24
    )
    
    
    3.13Outstanding at February 28, 2007
    
    
    234
    
    
    $
    5.52Granted
    
    
    41
    
    
    
    7.74Exercised
    
    
    (67
    )
    
    
    1.45Forfeited or expired
    
    
    (84
    )
    
    
    10.23Outstanding at February 29, 2008
    
    
    124
    
    
    $
    5.31Options exercisableFebruary 29, 2008
    
    
    89
    
    
    $
    4.37February 28, 2007
    
    
    184
    
    
    
    3.53February 28, 2006
    
    
    260
    
    
    
    2.98
 Options Outstanding
    
    Options ExercisableNumber
    
    Weighted Average
    
    
    
    
    
    NumberOutstanding at
    
    Remaining
    
    Weighted
    
    Exercisable at
    
    WeightedRange
    
    February 29, 2008
    
    Contractual Life
    
    Average
    
    February 29, 2008
    
    Averageof Exercise Prices
    
    (in thousands)
    
    (in years)
    
    Exercise Price
    
    (in thousands)
    
    Exercise Price$2.20-3.25
    
    
    52
    
    
    
    2.4
    
    
    $
    2.71
    
    
    
    52
    
    
    $
    2.713.38-4.22
    
    
    22
    
    
    
    0.3
    
    
    
    3.84
    
    
    
    22
    
    
    
    3.847.71-7.91
    
    
    41
    
    
    
    8.5
    
    
    
    7.74
    
    
    
    6
    
    
    
    7.9112.85-13.30
    
    
    9
    
    
    
    0.5
    
    
    
    12.87
    
    
    
    9
    
    
    
    12.87124
    
    
    
    4.1
    
    
    $
    5.31
    
    
    
    89
    
    
    $
    4.37
   48




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##### Table of Contents



Note 12. Taxes on Income
  Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Current:Federal
    
    
    
    
    
    
    1,311
    
    
    $
    1,230State
    
    
    
    
    
    
    (22
    )
    
    
    151Foreign
    
    
    
    
    
    
    93
    
    
    
    311,382
    
    
    
    1,412Deferred:Federal
    
    
    
    
    
    
    (190
    )
    
    
    (207
    )State
    
    
    
    
    
    
    (29
    )
    
    
    (45
    )(219
    )
    
    
    (252
    )Total
    
    
    
    
    
    $
    1,163
    
    
    $
    1,160
  Fiscal Year EndedFebruary 29,
    
    February 28,2008
    
    2007U.S. operations
Foreign operations
    
    
    
    $
    3,627
307
    
    
    $
    2,706
77$
    3,934
    
    
    $
    2,783
  Fiscal Year EndedFebruary 29, 2008
    
    February 28, 2007Statutory U.S. federal income tax rate
    
    $
    1,338
    
    
    $
    936State income taxes, net of federal benefit
    
    
    (76
    )
    
    
    106Foreign operating income (loss)
    
    
    (12
    )
    
    
    36Non-deductible expenses
    
    
    3
    
    
    
    37Domestic production activities deduction
    
    
    (84
    )
    
    
    (40
    )Other
    
    
    (6
    )
    
    
    85Taxes at effective income tax rate
    
    $
    1,163
    
    
    $
    1,160
    Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Deferred tax assets:Investment capital loss carryforwards
    
    $
    41
    
    
    $
    41Uniform capitalization costs
    
    
    362
    
    
    
    446
 49




---



##### Table of Contents



Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Inventory reserves
    
    
    2,075
    
    
    
    2,047Accrued liabilities
    
    
    793
    
    
    
    420Allowance for doubtful accounts
    
    
    77
    
    
    
    174Amortization of intangibles
    
    
    401
    
    
    
    554Other
    
    
    27
    
    
    
    93,776
    
    
    
    3,691Valuation allowance
    
    
    (38
    )
    
    
    (38
    )Deferred tax liabilities:Basis difference of property, plant and equipment
    
    
    (531
    )
    
    
    (630
    )Other
    
    
    (17
    )
    
    
    (52
    )Net deferred tax assets
    
    $
    3,190
    
    
    $
    2,971Current asset
    
    $
    2,998
    
    
    $
    3,042Non-current asset
    
    
    192Non-current liability
    
    
    
    
    
    
    (71
    )$
    3,190
    
    
    $
    2,971
   Note 13. Segment Information
 Disclosures about segments of an Enterprise and Related
Information,
   50




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##### Table of Contents



Fiscal Year EndedFebruary 29,
    
    
    February 29,2008
    
    
    2008Net SalesDisplay SegmentMonitors
    
    $
    44,331
    
    
    $
    45,072Data display CRTs
    
    
    11,285
    
    
    
    9,839Entertainment CRTs
    
    
    2,217
    
    
    
    2,578Component parts
    
    
    454
    
    
    
    39758,287
    
    
    
    57,886Wholesale Distribution Segment
    
    
    29,914
    
    
    
    24,053$
    88,201
    
    
    $
    81,939Income (loss) before income taxesDisplay SegmentMonitors
    
    $
    3,826
    
    
    $
    4,847Data display CRTs
    
    
    1,320
    
    
    
    (16
    )Entertainment CRTs
    
    
    481
    
    
    
    155Component parts
    
    
    188
    
    
    
    (130
    )5,815
    
    
    
    4,856Wholesale Distribution Segment
    
    
    (610
    )
    
    
    (4
    )5,205
    
    
    
    4,852Other income (expense)Interest expense
    
    
    (1,771
    )
    
    
    (2,086
    )Other, net
    
    
    500
    
    
    
    17$
    3,934
    
    
    $
    2,783Depreciation and amortizationDisplay SegmentMonitors
    
    $
    1,815
    
    
    $
    1,798Data display CRTs
    
    
    176
    
    
    
    77Entertainment CRTs
    
    
    35
    
    
    
    35Component parts
    
    
    6
    
    
    
    132,032
    
    
    
    1,923Wholesale Distribution Segment
    
    
    322
    
    
    
    327$
    2,354
    
    
    $
    2,250
 51




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##### Table of Contents



Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Capital Expenditures**Display SegmentMonitors
    
    
    
    
    
    $
    417
    
    
    $
    344Data display CRTs
    
    
    
    
    
    
    16
    
    
    
    271Entertainment CRTs
    
    
    
    
    
    
    
    
    
    
    Component parts
    
    
    
    
    
    
    13
    
    
    
    12446
    
    
    
    627Wholesale Distribution Segment
    
    
    
    
    
    
    393
    
    
    
    136$
    839
    
    
    $
    763
 
 **
    
    Includes non-cash additions and additions to fixed assets through business
acquisitions. Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Identifiable AssetsDisplay SegmentMonitors
    
    $
    47,866
    
    
    $
    44,066Data display CRTs
    
    
    4,235
    
    
    
    9,559Entertainment CRTs
    
    
    2,356
    
    
    
    1,900Component parts
    
    
    811
    
    
    
    48255,268
    
    
    
    56,007Wholesale Distribution Segment
    
    
    10,009
    
    
    
    9,080$
    65,277
    
    
    $
    65,087
 Fiscal Year EndedFebruary 29,
    
    
    February 28,2008
    
    
    2007Geographic sales informationUnited States
    
    $
    76,310
    
    
    $
    71,641All other
    
    
    11,891
    
    
    
    10,298$
    88,201
    
    
    $
    81,939
 Note 14. Benefit Plan
  Note 15. Commitments and Contingencies
 Operating Leases
  52




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##### Table of Contents



Fiscal Year
    
    Amount2009
    
    $
    1,3862010
    
    
    8432011
    
    
    2892012
    
    
    2052013
    
    
    127$
    2,850
 Related Party Leases
   Fiscal Year
    
    Amount2009
    
    $
    129$
    129
  Legal Proceedings
 Barco Federal Systems, LLC and
Barco N.V., a Belgian corporation Aydin Displays, Inc. a Pennsylvania corporation
  Note 16. Concentrations of Risk and Major Customers
   53




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##### Table of Contents



Note 17. Supplemental Cash Flow Information
 Fiscal Year Ended(in thousands)February 29,
    
    
    February 28,2008
    
    
    2007Cash paid for:Interest
    
    $
    1,833
    
    
    $
    2,098Income taxes, net of refunds
    
    $
    2,118
    
    
    $
    109
 Non-cash investing and financing activities:
    54




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##### Table of Contents



Note 18. Selected Quarterly Financial Data (unaudited)
  2008First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    21,465
    
    
    $
    22,864
    
    
    $
    21,272
    
    
    $
    22,537Gross profit
    
    
    7,540
    
    
    
    7,656
    
    
    
    7,051
    
    
    
    6,247Net income
    
    
    853
    
    
    
    1,238
    
    
    
    654
    
    
    
    26Basic net income per share
    
    $
    0.09
    
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    0.00Diluted net income per share
    
    $
    0.09
    
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    0.00
 2007First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands, except per share amounts)Net Sales
    
    $
    18,598
    
    
    $
    19,832
    
    
    $
    22,298
    
    
    $
    21,211Gross profit
    
    
    5,564
    
    
    
    6,810
    
    
    
    7,985
    
    
    
    7,233Net income (loss)
    
    
    (235
    )
    
    
    385
    
    
    
    1,016
    
    
    
    457Basic net income (loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    0.11
    
    
    $
    0.05Diluted net income (loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.04
 Note 19. Subsequent Events
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T).
    
    Controls and Procedures.
 Evaluation of disclosure controls and procedures.
  55




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Changes in Internal Controls
  Managements Report on Internal Control Over Financial Reporting
  56




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##### Table of Contents



Internal Control- Integrated
Framework.
   Plan for Remediation of Material Weakness
  1)
    
    A more robust, proactive tracking of cores being returned to the supplier.2)
    
    Information systems improvements for identifying cores received and returned.3)
    
    Reviews by the appropriate accounting management of the data collected and used in
recording the entries for the core accounting.
  Limitations on the effectiveness of controls.
  57




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##### Table of Contents



Item 9B. Other Information.
  
 PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
  
 Item 11.
    
    Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  58




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##### Table of Contents



Item 14.
    
    Principal Accounting Fees and Services.
  
 PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules.
  1.
    
    Financial Statements:
  Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of February 29, 2008 and February 28, 2007
Consolidated Statements of Operations  Fiscal Years EndedFebruary 29, 2008 and February 28, 2007.Consolidated Statements of Shareholders Equity and Comprehensive Income Fiscal Years Ended February 29, 2008 and February 28, 2007.Consolidated Statements of Cash Flows  Fiscal Years Ended February 29, 2008 and February
28, 2007.Notes to Consolidated Financial Statements
 2.
    
    Financial Statement Schedules
 Schedule II  Valuation and Qualifying Accounts (with auditors report)
  Exhibit Number
    
    Exhibit Description3
    (a)
    
    Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3A to the Companys Registration Statement on Form S-18 filed
January 15, 1985).3
    (b)
    
    By-Laws of the Company (incorporated by reference to Exhibit 3B to the
Companys Registration Statement on Form S-18 filed January 15, 1985).10
    (b)
    
    Lease dated January 1, 1992 by and between Registrant (Lessee) and
Ronald D. Ordway (Lessor) with respect to premises located at 4601
Lewis Road, Stone Mountain, Georgia (incorporated by reference to
Exhibit 10(i) to the Companys 1995 Annual Report on Form 10-K).
 59




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##### Table of Contents



Exhibit Number
    
    Exhibit Description10
    (c)
    
    Lease dated November 1, 2003 by and between Registrant (Lessee) and
Ronald D. Ordway (Lessor) with respect to premises located at 1868
Tucker Industrial Road, Tucker, Georgia (incorporated by reference to
Exhibit 10(c) to the Companys 2004 Annual Report on Form 10-K).10
    (h)
    
    Loan and Security Agreement and related documents, dated June 14, 2006,
among Video Display Corporation and Subsidiaries and RBC Centura Bank
and Regions Bank as lenders and RBC Centura Bank as collateral agent
(incorporated by reference to Exhibit 10(h) to the Companys Current
Report on Form 8-K dated June 29, 2006).10
    (i)
    
    $6,000,000 Subordinated Note, dated June 29, 2006, between Video
Display Corporation and Ronald D. Ordway (holder) (incorporated by
reference to Exhibit 10(i) to the Companys Current Report on Form 8-K
dated June 29, 2006).10
    (j)
    
    Video Display Corporation 2006 Stock Incentive Plan (incorporated by
reference to Appendix A to the Companys 2006 Proxy Statement on
Schedule 14A).21
    
    
    Subsidiary companies23.1
    
    
    Consent of Carr, Riggs & Ingram, LLC31.1
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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##### Table of Contents



SIGNATURES
   Date:  June 13, 2008
    VIDEO DISPLAY CORPORATIONBy:
    /s/ Ronald D. OrdwayRonald D. OrdwayChairman of the Board and
Chief Executive Officer POWER OF ATTORNEY
   Signature - Name
    
    Capacity
    
    Date/s/ Ronald D. Ordway

Ronald D. Ordway
    
    Chief Executive Officer,
Treasurer and Director
(Principal Executive Officer)
    
    June 13, 2008/s/ Gregory L. Osborn

Gregory L. Osborn
    
    Chief Financial Officer
(Principal Financial Officer)
    
    June 13, 2008/s/ Erv Kuczogi

Erv Kuczogi
    
    Director
    
    June 13, 2008/s/ Carolyn Howard

Carolyn Howard
    
    Director
    
    June 13, 2008/s/ Peter Frend

Peter Frend
    
    Director
    
    June 13, 2008/s/ Thomas D. Clinton

Thomas D Clinton
    
    Director
    
    June 13, 2008
 61




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##### Table of Contents



Report of Independent Registered Public Accounting Firm




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##### Table of Contents



Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodAllowance for
doubtful accounts:February 29, 2008
    
    $
    458
    
    
    $
    198
    
    
    $
    
    
    
    $
    455
    
    
    $
    201February 28, 2007
    
    
    381
    
    
    
    96
    
    
    
    
    
    
    
    19
    
    
    
    458Reserves for inventory:February 29, 2008
    
    $
    5,386
    
    
    $
    1,875
    
    
    $
    
    
    
    $
    1,710
    
    
    $
    5,551February 28, 2007
    
    
    4,433
    
    
    
    1,748
    
    
    
    
    
    
    
    795
    
    
    
    5,386